ViaSat, Inc.

Welcome to Viasat's fiscal year 2022 third quarter earnings conference call. Your host for today's call is Rick Baldrige, president and CEO. You may proceed, Mr. Baldrige.

Okay, thanks. Thanks for joining us today, everybody. We released our shareholder letter earlier today before the market opened, and we hope you've had a chance to take a look at that. Joining me today on the call is Mark Dankberg, our executive chairman. Sean Duffy, our CFO, Robert Blair, our General Counsel, Paul Froelich from Corporate Development, and Pierre Lopez from Investor Relations. Today's call will consist of just a couple brief opening remarks, and then we'll go into Q&A. First, let's have Robert provide us our statement.

Thanks, Rick. As you know, this discussion will contain four looking statements. This is a reminder that factors could cause actual results to differ materially. Additional information concerning these factors is contained in our SEC filings, including our most recent reports on forms 10-K and 10-Q. Copies are available from the SEC or from our website. With that, back to you, Rick.

Okay. Thanks, Robert. First, if you did have a chance to read the letter, you can see our business continues to perform well on almost every front. So today, we'll go into some of the details, talk about the BISEP III schedule a bit, and give you an update on the MRSAT transaction. We've We've tried to answer a lot of the questions that we've been getting in the letter, but also hope to answer any remaining questions here in a few minutes. With that, I'll start with a few of the important highlights for the quarter. Revenue grew by $144 million year over year to a record $720 million, while adjusted EBITDA also reached a new record of $163 million, which continues the momentum of the last several quarters. We grew year-over-year in each of our segments as well. In satellite services, year-over-year revenue growth of 40% was driven mainly by the performance in our IFC business, both aircraft return to service and new customers such as Delta coming online, as well as contributions from the Rignet and EBI acquisitions. Fixed broadband was reasonably flat as we continued to reallocate finite bandwidth resources to our growing mobility business. Overall, 37% of our satellite services revenue came from mobility in the quarter, international and other revenue underscoring the increasingly diversity of our businesses. Those businesses have the greatest growth opportunity, and we anticipate we'll continue to diversify our satellite services percent year-over-year. While we saw strong performance from Tactical SATCOM radio and Tactical DataLynx products, there have been longer than anticipated delays in processing certifications required prior to delivery of some of our security assurance product orders. In addition to the $956 million of of unawarded potential value, none of which is included in our backlog number. Commercial networks continue to deliver good results with revenues up 55% year-over-year. Increase was mostly driven by increased IFC terminal shipments and another strong contribution from our ground and test systems division and RigNet product revenue. We expect that our IFC orders and antenna systems backlog We spent our time since the announcement preparing the required filings and are progressing well on multiple fronts. We completed the required loan amendment of Viasat's $700 million revolver and Inmarsat's $700 million credit facility and $1.7 billion term loan. We're progressing well on the regulatory front, both in the US and UK. operational results consistent with what we thought. You can see further details on page 8 of the shareholder letter. It also reminds you to keep an eye out for our transaction proxy, which is expected to be filed very soon. We're very excited about the transaction, and so are our customers. A number of airlines have been reaching out to learn more about the transaction, including We think our dedication to global growth has been a big consideration in recent business activity and new orders for long-range aircraft. On our last call, we said we expect to close in nine to 18 months from signing. We continue to believe that's a good estimate, hopefully by the end of this calendar year. Regarding the Biosat-3 constellation, the Biosat-3 Americas launch is now expected to be late summer due to some workers. We've made really good progress on alpha testing of our space ground system integration using one of our one-orbit satellites. And we're working to take advantage of that to manage one-orbit testing so we can maintain the commencement of initial services by the end of the calendar year. We don't expect this, which is consistent with what we said before, so we don't expect this to materially impact our financial outlook we've previously provided. The ISAT-3 EMEA payload modules progressed very well in our TMP facility by taking advantage of the learnings from Flight 1. America's, we're now at 95% complete of the payload units have been already installed. We're in the final stages prior to shipping that to Boeing for integration with the bus. We expect learnings on the payload bus integration will benefit Flight 2 schedule at Boeing. We continue to target that launch about six months after Flight 1. Turning to the outlook briefly, our company-wide outlook remains strong. We continue to believe we'll achieve our standalone financial targets, including our average annual adjusted EBITDA growth in the mid-teens for FY22, 23, relative to FY21, as we've previously stated. We also believe we're on track to more than double adjusted EBITDA by FY25 relative to FY20 on a standalone basis. Well, of course, we're very excited about the MR-SET acquisition and bias of three. Our strong operational and financial performance demonstrates that our teams are working diligently to drive good execution. I think the same can be said for the MR-SET based on their strong performance. So with that, we'll turn it over for questions.

As a reminder, to ask a question, please press star 1 on your touchtone telephone. Again, that's star 1 on your touchtone telephone to ask a question. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. Our first question comes from the line of Rick Prentiss of Raymond James. Your line is open.

Thanks. Hey, everybody. Happy New Year, I guess, officially. Thank you.

Yeah, happy New Year.

I have a couple questions for you guys. First, obviously, BISAT 3A is slipping a little bit. 3B, you said about six months still after the first 3A. How should we think about the magnitude of costs that you need to put in for ground and other operating expenses before the revenues start generating and what kind of pacing there might be as far as costs before revenues on the satellite launches start?

You're right. This is Shawn. So, you know, we're starting to incur some of those as we speak, but they're, you know, we've been trying to pace those somewhat with the launch. You can think of those this quarter as maybe $5 million. As we get closer and closer to launch, like I said, those will start to ramp up. So maybe in the annual rate around 35, you know, right before we go into service is a good estimate.

35 million on an annual basis?

Yeah. So it kind of ramps up to that.

Makes sense. And obviously it's about a year from now that you get into service, hopefully a little sooner. How are you guys doing about maintaining flat revenue on the U.S. consumer broadband side, given the demand from in-flight connectivity? Or should we expect some declines in the revenues on consumer broadband as we look into the future?

So far, you know, so far what we've seen is kind of the ARPU growth has maintained pretty much the same pace and actually in some cases a little bit better than the sub-declining. And, you know, I think that's also kind of consistent with what's going on in the industry. So we think that's, you know, more or less kind of the trend that we'd expect between now and entering service in the US.

Okay. We saw some announcements. It looks like on the competitive front, SpaceX Starlink is starting to pivot to some more business enterprise with $500 plans, $2,500 CPE costs. How are you thinking about the competitive dynamics out there as far as your ability to grow once Biosat 3A is in the air?

Well, it's a few things. One, it's a very big market. We have seen so far sort of, I'd say, de minimis in material impact in the overall markets due to SpaceX. So certainly you can see that they're out there. But one of the points that we've made, and I think that this is turning out to be true, is that the better the services, the more value you can offer as a function of price, the bigger the market is. And so what's happening is we're seeing the market grow, and I think we're still getting a share of that market that's sufficient for our growth targets. The other point I would say is you know, if you look at what we're doing on the enterprise side, we tend to be a lot more vertically integrated into each specific market where there's quite a bit of value add besides just providing a broadband pipe. And we think that's really a good fit for us. So the types of plans that they're describing, well, you know, they're sort of interesting, but we don't really see them having Any impact on our forward-looking outlook?

Great. Thanks, everyone. Stay well.

Thank you. Our next question comes from Landon Park, Morgan Stanley. Please go ahead.

Thank you. Hello, everyone. A couple questions. So could you talk about your conversations that you've had with the UK government over the last couple of weeks and maybe some of your takeaways from those and what type of, you know, concessions or agreements you guys are thinking about as part of the deal?

Yeah, so, you know, when we announced the deal, we were actually ready to go a little earlier and they asked us to delay it. They had worked out taken this thing private. And I'd say the discussions we've had are fairly consistent with those types of things. Quite frankly, the plans that we have in the UK, in my view, are quite a bit more favorable to the UK than what's going on. We're more vertically integrated. We'll bring more R&D. I think the types of people we hired people so I think we just have a really positive story and you know you've read the things in the newspaper what they're worried about and you know I just I don't think we have that situation not every deal is the same and so those have been the discussions just talking about what our plans are and I think the discussions have gone really well there were you know there were some articles that came out that by the same three people that previously written about in a very negative way And the new articles are much more balanced. So I think that we've got a good story. We've been in the UK for 10 years, over 10 years. We have data at rest security products over there that we provide today. It actually provides most of the data at rest security across their MOD. We've previously announced a satellite operations center investment in the UK prior to this deal even getting signed. And so we just have a very good story. And they seem to be pretty receptive.

And is the deal going to be subject to the new national security oversight law that recently went into place?

It is, yes. So we expect a full review across the board. That's what we expected going in.

Great. Moving on to the broadband business, there's been some news that Facebook is going to be sort of winding down some of their, or I think most of their international Wi-Fi Express business. They partnered with you in Mexico. Could you maybe just talk about any impacts that might have on you, and maybe just a broader update on that international Wi-Fi program you guys have been running, and what type of returns you've been able to see out of that business?

I'm sorry, I missed the very first sentence about the company that you mentioned. Facebook. Oh, Facebook. Okay. On the international front, in terms of fixed services, we have two sets of initiatives. One is direct residential broadband that we're doing in several countries. For instance, acquired in Europe, the other part of the joint venture we have with Eutelsat. And the other part, which is the part that I think you're referring to, are what we call community internet or shared internet services. And we're doing that in a few different ways. The main common element is to bring bandwidth in by satellite to some central point and then distribute that bandwidth to end users. And we're doing that, actually, in multiple different ways. We're doing it by land, we're doing it by wireless, we're doing it by unlicensed Wi-Fi. And each of those, we think that each of those will have places under different circumstances. But right now, all three modes of delivery are, I think, are growing and are attractive to us The other part of it is what we're doing with Facebook was more about trying to understand where to deliver service and how effective that service was. And I think that that activity has been benefiting both companies.

Great. And the last one for me, just on the commercial network side, can you talk about some of the managed services that you guys expect to to ramp up in that business over the next couple years and maybe what the margin profile looks like for some of that and the prospects to get that segment closer to break even.

Okay, so on the communications network side, I'm going to unpack that a little bit. So one is from a managed services perspective, the main thing that we've been doing there is in what we call real-time earth. Is that what you're – so that is – That is a shared network services business primarily for Earth observation downlinks, data downlinks. Is that what you're referring to?

Yes, that is what I'm referring to.

Yeah, so that's still a relatively small business, but it's growing pretty steadily. And, you know, right now what we've been doing is working primarily with third-party partners versus we did one with indigenous people in Australia. We just recently did one in Ghana. And we have more opportunities for that. And then the other kind of really, there are two other really interesting elements of it. One of the main businesses in our communication network, it's accounted for a lot of growth for us, is building kind of the largest, most capable full motion ground antenna systems. And the reason that's valuable is a very large antenna is just a lot more efficient at getting high speed data down. So highest speed for the highest resolution sensor data. And then the other one is that makes them most effective for these new generation of very, very small satellites. So you don't need a lot of power sophistication from the spacecraft. You can focus most of your value on the sensing part. So those two things are really valuable. And the other thing that we're working to integrate with that is, think of it as Leo Geo Relay, which is a very unique mission that DOCSAT 3 Constellation can do because of the global coverage in the high capacity. So right now, they're small businesses. They're good margin businesses. will improve. On the overall issue of EBITDA, you know, turning that business EBITDA positive, you know, the main, kind of the main thing that has been a drag on EBITDA is what we think is actually a benefit, which is we're doing our own payload designs for extending some of those payload capabilities into third-party satellites. Like what area that's been good for us has been cross-links for satellites. And we have a number of government contracts for that. We have commercial contracts for cross-linking. We think that's a really attractive business. So the fact that we do that for both ourselves and others, as opposed to just Buying satellites like most other satellite operators do means that we expense the R&D as opposed to capitalizing the R&D that goes into these next generation satellite designs. And that is the single biggest, I mean it's really the only factor in the negative impact

Yeah, Landon, Sean, just to add to it, right, most of our R&D we centralize in that segment, right? It benefits across the segment, but most of it flows there. So outside of that, it's a nicely profitable segment for us.

No, I understand. I was just trying to understand if on a reported basis if there was a path over the next three years or so to get it closer to breakeven.

Yeah, I mean, I think we're – I think we'll see improvements in that. We're going to continue to have good momentum in ISC and delivery of terminals there, but we're going to continue to invest as well for next-gen and things that we think are very valuable both in commercial applications as well as government.

And R&D at 5% of revenues is still a good, right?

Yeah, this quarter we were about 5.2%, so, you know, five, five and a half, somewhere between there is a good estimate.

Great. Thanks, everyone, for all the call. Thanks, everyone.

Thank you. Our next question comes from Matthew Robillard of Barclays. Your line is open.

Good afternoon and thank you very much. I have three questions, please. The first one relates to the Inmarsat acquisition. You were mentioning in your scripted remarks that you've engaged with clients and clients are asking about what this could mean and what kind of services maybe you can provide. Could you give us a little bit more color in terms of what is their interest focused on in a combined Inmarsat-Viasat proposition?

Sure, yeah, so the main things that we've been focused on, and I'd say these are common among a lot of these mobility businesses. Number one is this issue about bandwidth density, which is how do you avoid congestion in your network so that your mobility customers get, have a reliable service even when they go into busy airports or hubs. One of the things we showed, which we thought was one of the most important slides in our presentation about the Inmarsat acquisition, was just the density of demand for commercial air. And commercial air is relatively easy to show because it's scheduled airlines. But similar situations occur in things like general aviation, maritime, and other, even in land mobile applications. So that, you know, one of the things that's really been an important factor for BioSat's growth has been our ability to deal with that, especially in the U.S., which is the largest domestic market for air travel. And the large airlines that we serve and the large airport cities, I think we've been able to demonstrate our ability to keep ahead of that issue. So that's one. Another one, that I think people are really interested in, and especially in maritime and in some of the intercontinental aviation, is the hybrid services between K-band and L-band and being able to provide that continuity of service even under the worst weather conditions, which is where, when you think of airline safety or maritime safety, where a lot of the situations are associated with bad weather. So that's, you know, being able to bundle those things into attractive systems is a really good thing. And then the other, you know, which has been kind of the main thing that airlines have been looking to buy us at for, and that we believe in March that really accelerates, is redundant global coverage. And so, you know, we'll get there faster. some of the main topics that customers have come to us to discuss first.

And is that, if I can follow up, is that also a discussion you're having with governments that may require more capacity?

Well, yes. I mean, one of the things that's also been a valuable business for us, as well as for Inmarsat, is in dealing with government applications. And, you know, the big thing with government, applications is they don't really know where their hotspots will be. They can anticipate, but they can pop up anywhere in the world. And when they do, they also have this issue about very large amounts of demand concentrated in relatively small geographic areas. So being able to deal with those issues and being able to deal with some of the unique things that we bring, for instance, with Viasat 3 or potential to deliver uplink speeds from platforms that are exceptionally good, much better than even a lot of these new NGSO systems. So those are just the attractions of the combined resources and capabilities for the companies.

Thank you. If I continue on the government and specifically service revenues, which kind of links a bit to what we just discussed, I realize service revenues and bandwidth demand for you today in government services is a small part of your revenues, but I was wondering if you're seeing any increase in demand recently. Obviously, we're in a slightly more tense geopolitical situation. and whether in the past you've seen big increases in demand linked to any deterioration on that front.

Yeah, so, I mean, I think all satellite operators tend to see increased demand for government bandwidth when there are conflicts in the world. So, you know, we're not, well, if you have bandwidth in the of that. I think more recently there's threats of conflict. It doesn't turn out to be that way. So right now we're just really seeing more I'd say inquiries about more around planning and contingency planning. What can be done? I think as we've grown I think we're in a position to be In general, though, in some places demand has gone down, and it will probably appear in new places if it does.

So overall, the services portion of our government revenue has been growing over the last few years. Yeah.

I think we've talked about that being in the 20% to 25% range of total services. That's total. That's what total government is.

Great, thanks. And if I finish with one question on the U.S. broadband market. So you do mention in your press release that the number of subscribers has come down a bit, but that's kind of voluntary to some extent as you want to use more capacity in IFCs. But I had a broader question concerning the market and the competition there because some of the telecom players are pushing a lot more, it seems, FWA solutions as a way to increase their revenues. And I was wondering if you saw that as potentially a new source of competition, a reduction of your potential addressable market in the U.S. Thank you.

Okay. No, Liz. been a material factor in, you know, in changing the market for satellite broadband in the U.S. There are other factors. I mean, so, you know, cable edge-outs, fiber, new fiber builds, those are probably more of a factor. And then the other one that I think kind of ebbs and flows depending on the economy demand and a couple other factors is people just using their mobile broadband service, and that becomes a little more tenable for people when they're going to the office and they have broadband resources at work or somewhere other than home. But those are the main factors, and that's what we see probably shaping the market over the next few years. We've done a pretty detailed micro-analysis of that region by region. region basis, and we think it will eat into the market, but it's not going to eliminate the market. What we've expected over the next five years, we talked about this a few times, is kind of modest growth on a subscriber basis in the U.S. between now and, say, 2025. Great. Thank you very much.

Thank you.

Thank you. Our next question comes from Chris Quilty of Quilty Analytics. Your line is open.

Thanks, guys. Had a question about the forgotten acquisition maybe with RigNet. We haven't talked about it in a lot of detail, but can you give us maybe a status update, now that you've had it a couple of quarters under your belt, of what you're seeing in that business in terms of both business operations, integration, cost reductions? And I guess putting Inmarsat aside for the moment, because there's a lot of changes that could come, but, like, what plans do you have now for that business in terms of growing it and migrating it with the Viasat 3 services?

Yeah, so the integration has gone very well between the two groups. There were some initial, you know, cost reductions that took place early on. We've been working on integration. The business areas have become – our global operations have all been integrated under one group. So that's gone well. We have started our initial first KA band deployment in some of the rigs where they were previously. over time. That will improve as we begin to launch these Biosat 3 satellites. That's where the real growth opportunity there is. And the Intelli part of that business has been a very positive surprise. Really strong team, has a good platform. They continue to win new business and there's other applications across Biosat where that group can help. So we're, you know, I'd say things are about as expected so far.

Gotcha. And question on that KA band rollout on the rigs. There was probably some reason in the past why RigNet was hesitant to use Inmarsat as the backup, but have you determined what the backup path will be there for those systems?

One of the things we're not doing is disclosing our execution strategy to the competition. So I think one of the things we're doing in these trials is demonstrating what's capable. And so our view is that you give a whole bunch of people a whole bunch more bandwidth and charge them a lot less, is you create things that they would have done had they been able to do and weren't. And so we're able to do that in areas where we have a footprint right now, which is limited. As those satellites roll out, and then with MRSAT, we won't be limited to that. And so we'll be able to do that across the board. So the real opportunity here is growing the type of services we deliver to all these platforms.

I understand. A different question, Mark. You mentioned cross-links. I assume you were referring to RF and not optical cross-links?

Yes, correct.

Okay. Can you name any of the programs where you're targeting business? Because I'm not aware of any offhand, at least unclassified.

Well, the largest commercial one that we've had is RIDI. so we did all of the onboard, remember Iridium's a crosslinked system, so we did all of the onboard crosslinks for Iridium. We have mostly otherwise, so far, have been mostly government programs, including, I don't really want to name them, but some name brand new multi-satellite government programs will be, we've been funded, and I think we'll be in the production version of those satellites as well. And the crosslinks that we've been doing are generally K band or much higher frequencies that have a lot more capacity. I think one of the most interesting ones where we are getting traction as well in both government and commercial programs is in the Leo to Geo crosslinks, which is a pretty unique capability. The big advantage there, if you have a very high capacity global system like Viasat 3, you can just insert the LEO crosslinks into the global coverage capability of a Viasat 3. So that's a really, really interesting opportunity. And we're getting good traction on that on both government and commercial sides.

Gotcha. And the sort of high profile government name, is that Perhaps a new effort with a generic-sounding dumb name and very high volume where the primary focus is on optical?

No, no. And, you know, that's still speculation. There's certainly a place for optical cross-links. The big advantage of RF cross-links, and, you know, let's say RF is kind of interesting in the gigabit. Doesn't require the platform stability. You can network it so you can hop the links around. A lot easier to make and break connections. Build packet networks. So there's, I know there's a lot of focus on laser cross links, but the optical one is a really interesting market and one that I think we have. RF. I mean the RF one, sorry, yeah. The RF one's really interesting and it's one where I think we have a really good competitive position.

Gotcha. And because I didn't ask Sean any questions, I'm going to follow up with one financial question, which is when you were mentioning with Rick earlier the ground equipment costs, are those capitalized costs now or are those costs that you are expending?

No, Chris, what I was trying to capture for you guys is how the op-ex will ramp ahead of the service launch. That's not the cap-ex.

Okay, and you're not, again, not able to capitalize any of the ground equipment, R&D, and build out until the satellite is operational?

No, it's part of the full project profile that we've given you guys, which includes the satellite, the launch, the insurance, all the initial ground. That stuff is capitalized. It's just not operating when you light it up, essentially. It gets expensed.

Think of power. of those types of expenses.

Great. And I know you haven't given out a specific number of, do you use the term gateway? No. What's the name you use for your?

What we call channeled access nodes. They're fetal gateways.

Yes. Okay. What percent of those are installed now, and do you light them up and keep them lit up until Viasat 3 is launched, or do you kind of light them up and turn them off just to test them?

So we probably have close to half of the initial set of SANS in the U.S. Coming over the next few months, I think, yeah. Somewhere in that range is what we'll have in them. One of the things Rick mentioned is that things are going well on space ground testing. We're able to test a lot of the integration using the new ground network in one of our existing satellites. We can test a lot of the functionality. So what we are doing is we're lighting up some of them along the way to increase the scope of that testing. But the bulk of them will be activated very close to the launch or post-launch

Gotcha. And final question for Shonda. I think the last number you gave was $2.3 billion for the VIA-SAT-3 program, just a clarification. Does that include capitalized interest or not?

That is without the capitalized interest, about that range.

Okay. Perfect. Thank you. Thanks, Jason.

Thank you. Our next question comes from Louis de Palma of William Blair. Your line is open.

Good afternoon, Rick, Mark, and Sean.

Good afternoon.

I was wondering, does the UK government have any interest in investing in the Viasat Inmarsat combination in the same way that they invested $500 million into OneWeb?

We haven't had that discussion. I think OneWeb was having those discussions. I'd say that's the big difference is they were looking for investors. I don't think the UK government is probably interested in investing in a public company.

Okay, that makes sense. And switching to Viasat 3, I was wondering, what is your degree of confidence that you will have Viasat 3 services commencing for either consumer broadband or aviation this year?

Okay. But there's uncertainties along the way. I wish we could be certain, but you can't be certain. I think we have a plan. But if you look at sort of the main thing that caused the launch schedule, it was the lack of availability of specific people. Who would have been able to forecast that? Three months ago, things looked like all COVID stuff was going away and life was coming back to normal. So I wish I could say we were certain, but we have a plan. Generally, we've been pretty good at executing plans when the assumptions behind them hold true.

Okay, thanks, Mark. And for the customer premise equipment and the terminals associated with the Viasat 3 system, How will the economics be different for new customers that want to use the Viasat 3 system versus existing customers that are currently on Viasat 1 or Viasat 2 that are looking to upgrade? And the reason I'm asking is a lot has been made about how SpaceX with Starlink takes a pretty hefty loss on their terminals. And I'm wondering... Like how does that loss compare to the economics for your geostationary type terminals?

Okay. So one is the Viasat 3 overall economics I think will be in line with what we've experienced since we did Viasat 1, which is think of it as, you know, customer lifetime value compared to customer acquisition cost. You know, the lifetime tends to be, 3X, you know, somewhere in that range, right, about lifetime value. And that's based on, you know, many, many years and good understanding of customer acquisition costs, churn statistics, ongoing customer support. And I think, you know, we have some initiatives that actually reduce costs and can improve that. So we'll see similar things with BISAP3. It's kind of what we expect. The thing I would say that maybe doesn't get as much attention as it probably should, you know, from investors to think about is really there's, you know, kind of the biggest issue in running these businesses to deliver an attractive service and to do it profitably is the amortized airtime costs. And so, you know, If you think about it, and this is kind of what we said in the past, there's kind of a rule of thumb. Think of bandwidth in space as inventory. And you're seeing that right now, right? It doesn't matter if it's GL or LEO. If you don't have enough bandwidth and you add more customers, or you're saying customers use more bandwidth, speeds can drop. And that's exactly what you're seeing, for instance, in the LEO world is speed. Speeds are dropping if you don't add more bandwidth, and the customers you already have use more bandwidth even if you don't add any new ones. So what we think about is when we bring all these systems that have big improvements in the airtime economics, well, we tend to value the bandwidth on all of our systems at the lower of cost or inventory. So we can offer, we'll be able to offer a lot of the same services that we do on Viasat 3 on the older satellites. They're capable of doing it. You don't have to necessarily switch satellite or get new CPE to be able to get the new services. That's kind of what the payoff of that. And that helps us to preserve this kind of ratio of lifetime value to customer acquisition costs. Does that answer your question? Yes.

Great. Thanks, Mark. Thanks, Rick. Sure. That's it.

Thanks, Louie. Thank you. Our next question comes from Ryan Koontz of Needham & Company. Your line is open.

Thanks for the question. On the Delta IFC business, it sounds like that's really humming here. When you expect that to peak on the commercial side as you kind of penetrate the fleet there, any outlook on timeline?

Well, we're a little over halfway through the build-out of the current backlog with Delta, and so we're still ramping there. And there's a lot of other activity, I'd say, in the commercial air marketplace.

Delta is only a fraction of our – if you look at the number of new planes that we have on order that we described in the letter –

And it's not – we don't expect it to stop. There's just a lot of new interest.

Got it. And just a housekeeping question here on the acquisitions expense popping up in the quarter there. Do you expect that to stay pretty steady into the close of the deal and kind of ramp post-integration of Inmarsat?

You know, We're still spending money. There's definitely lawyers still working on regulatory filings, and they can spend money for sure. But it's not at the rate it was in the December quarter. All right. That's it.

Thanks, Ron.

Okay. I think there's a lot of questions. So I just want to say, Operator, thank you and thanks to everybody together with Mark and the rest of the team here. We want to thank you guys for spending some time with us. Hopefully you found the letter informative and your continued feedback on that back to Pete is helpful. It makes it continue to make it better for trying to answer your questions next time. Our operational momentum is still really positive. We're excited to about the capabilities and opportunities that Inmarsat will bring. We think they have got a strong team and their performance has been excellent over the same period. But at the same time, we're focused on what we're doing. We're focused on our execution. Our leadership team and our employees are really focused on executing our plan. So again, don't hesitate to reach out to Peter with input or other questions you've got. We look forward to following up with you guys. Thanks.

And this concludes today's conference call. Thank you for participating. You may now disconnect.