ViaSat, Inc.

Hello, and welcome to Viasat's fourth quarter and fiscal year 2020 earnings conference call. Your host for today is Rick Baldrige, President and CEO. Sir, you may proceed.

Okay. Thanks for joining us today. I just want to point out that we released our shareholder letter shortly after market closed, and it's available on our website. We'll be referring to it throughout the call. So joining me today on the call, Mark Dankberg, our executive chairman, our CFO, Sean Duffy, Robert Blair, our general counsel, and Paul Froehlich, corporate development, Peter Lopez from industrial relations. So today's call, we'll just go through a few brief opening remarks and follow that by Q&A. So before we get started, let's have Robert provide our safe harbor.

Thanks, Rick. As you know, this discussion will contain forward-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 Form 10-K and Form 10-Q. Copies are available from the SEC or from our website. Back to you, Rick.

Okay, thanks, Robert. Fiscal 22 was a great year for Finestet. We delivered the financial results that we had targeted, previously communicated to our investors, and we continue to execute on a number of very strategic and operational fronts. For the year, we achieved record revenue of $2.8 billion and record adjusted EBITDA of $611 million. For revenue, this was a 24% year-over-year increase, and for adjusted EBITDA, it was a 15% increase, which is consistent with our guidance of double-digit revenue growth and mid-teens adjusted EBITDA growth. We had our goals for the year. While we outperformed in the first three quarters, we knew Q4 would be sequentially softer based on the factors we communicated in our last call. We had increased ground network costs for the upcoming VIAs at three Americas satellite, increased R&D investments, as well as some sudden but since-resolved supply chain issues that impacted certain government product shipments. To touch in briefly on satellite services, as anticipated, we're seeing very good growth to date in our IFC business, both aircraft returning to service and additional aircraft from new and existing customers. We also had contributions from the recent Rignet and EBI acquisitions. Next, broadband growth was a little weaker as we managed our limited bandwidth supply in the U.S. in support of high-value data plans and growing IFC demand. At IFC, we're adding new customers and increasing the telcals with existing customers. We're very proud of our agreement with Southwest Airlines, which was announced subsequent to the end of the quarter. Although we continue to be hampered by bandwidth construction, there for about 18 months, lending confidence in our ability to successfully execute retail service launches in some of the new international markets we're going after. The letter does a good job covering our government and commercial segments, so let's move on to the Biosat-3 constellation, where we've cleared several large risk reduction milestones in the last several months. The Biosat-3 America satellite complete with the vacuum chamber by the end of today, allowing us to move the spacecraft out and proceed with the rest of the integration effort. Alpha testing on the Biosat-3 ground network has gone very well. We're on track to have sufficient infrastructure in place to enable commercial services, which we were targeting for early in our fiscal fourth quarter. Within a week or so, we were planning last quarter. sometime this quarter. Based on our experience on the America satellite, the second payload was completed much faster with a more predictable schedule, the same as holding true for the third satellite, the Asia Pacific satellite. So during the day of our set, we're continuing to advance on various transaction milestones, and since the last quarterly update, we've completed an agreement with the U.K. government for certain economic undertakings, which demonstrates our long-term commitment to the U.K., And you can go to their website, too, I believe. We're targeting to complete the transaction by the end of this calendar year, with the antitrust approval processes in the U.S. and U.K. being the pacing items, just because of the nature of their process. In March, we, by effect, completed a term loan for $700 million of financing, which was used to pay down our revolver. And I'll remind everyone that we have all the remaining transaction financing in place, as this financing was fully committed at the time we signed our purchase agreements last November, and includes provisions that limit the impact of the current debt market volatility, might have had on our ability to close the transaction or achieving our financial objectives post-clothing. Turning to our outlook, the company-wide outlook remains strong. We continue to believe we'll achieve our standalone financial targets Our average annual adjusted EBITDA growth in the mid-teens for FY23 relative to FY22, just as we achieved them for our last fiscal year. The last quarterly revenue, the quarterly revenue and EBITDA trajectory for this year, our FY23 will be weighted towards the second half as we ramp up commercial airlines in service over the course of the year to an anticipated 2,400 sales fiscal quarter in our key four, normal seasonality and near-term certifications and supply chain issues we described in our letter. Longer term, we also continue to believe that we're on track to achieve more than double-digit adjusted EBITDA by FY25 relative to FY20 on a standalone basis. Of course, we're very excited about the upcoming

Thank you. Ladies and gentlemen, to ask the question, you will need to press star then 1 on your telephone. To withdraw your question, press the pound key. Again, that's star 1 to ask the question. Please stand by while we compile the Q&A roster. Our first question comes from the line of Landon Park with Morgan Stanley. Your line is open.

Thanks for taking the questions, everyone. I'm wondering if you can just confirm in terms of the actual launch timing for the Viasat-3 satellite versus the late summer window that you had given last quarter. And then beyond that, I'm wondering if you can delve a little bit more into some of the mobility markets, maybe what you're seeing out of the rig net now that we're seeing some better demand in the oil and gas industry, and maybe touch on your ambitions within the business aviation market, and where you're at with your ESA development.

Okay. On the Biosat 3 schedule, it has slipped weeks since our last call. Right now, I think we were anticipating being in service by the end of the year, and we're early into what are our expecting now. So it's been weeks, and I think what we have is a launch window, so where we fall within that window could move it a little bit to the left or to the right. But that's what we expect. We've been able to mitigate a little bit of the physical slip of the delivery for launch, just with the build-out of our ground networks and ongoing testing. So we're doing some of the testing that we would have normally done on orbit. We're being able to do that with some of our existing satellites on our ground network. So trying to mitigate a little bit of the impact, and that's kind of how we get to an early next year service launch. So that's that part. I'll talk about rig networks. I want to talk about the last part. Oil and gas part of Rignet, when we acquired Rignet, the real price here isn't really large growth in oil and gas side. It's really being able to substitute bandwidth, which we really do need the Biosat-3 satellites for how they were doing business and grow the types of offerings we can make in their market segments. customer of theirs as well. So being able to do that integration is really what drives future value with the Rignet businesses.

Can you size that in any way?

Yeah, I think we – it's kind of like – it's not really – what you don't want to do in these markets is go in and You know, on a per site basis, it could be multiples of what they have, as opposed to 10 or 20% more. So, yeah.

And in terms of the synergy number and timing?

On Rignet?

Correct.

Most of the synergies on Rignet, but we've achieved the cost synergies that we have laid out in our initial to stop paying ongoing fees to other satellite operators and replace that with our own capacity. And so those will occur as we bring on these BISAT-3 satellites.

Okay.

Business tips? Yeah, business tips. That's been growing for us. been growing for Inmarsat as well. The main things that we've been focused on are working with OEMs, because OEMs are a pretty straightforward way to get built onto aircraft and create service opportunities. And then also in working with fleet operators, again, that's a good way to grow the business. And then we're also increasing the ways in which we work make services more attractive. You know, the biggest thing on business jets is getting more coverage with Viasat 2 and having European coverage. That unlocked a fair amount of the market for us. But now as Viasat 3 comes up with EMR-SAT merger, the combination of kind of their coverage and our capacities looks really promising in the market.

And your ESA development?

Oh. Yeah, so from an ESA perspective, we already did a flight demo on that. We did it on Business Jack as the first one. What we're working on now is converting that into commercial products for both kind of the, I think it was a bid, one of the main focus for us is our commercial market is having a follow-on technologies ultimately into the business jet and the smaller jet market as well, smaller commercial jet or regional markets as well. But the main thing that we're doing right now is productizing what we demonstrated earlier.

Great. Thanks very much, Mark.

It's also directly applicable to our land mobile markets in the future, so a lot of common

Okay. And just some really quick ones for Sean. I'm just wondering if you could provide some more details in terms of the types of rates that you're locked into on the financing and maybe just anything you can say on the CapEx outlook for the fiscal year.

Yeah, sure. So, with respect to the rate, you know, we're not going to give all of the details of the underlying agreement. But the way I think you can think about it is because these were kind of UK-style deals overall. The financing that we put in place, it was committed, as Rick mentioned. And so the rates and the major terms were kind of conditioned to the market back in November. And so that gives you a little bit of a kind of a framework with respect to the kind of the protections that are built in there. And that gives us that upper limit benefit, you know, relative to the outlook. And then, oh, sorry, you asked about CapEx as well. So I think you can see that our CapEx for this year was a little bit lighter than what we were targeting. So next year, you can think of it as we're getting into the big part of the program, both this year and next year. So I think next year, thinking about around 350 or so per quarter is a good range. It might be a little thicker in the last couple quarters, but that's a good range.

Great. Thanks, Sean. Thanks, everyone. Yeah, thanks, Lou.

Thank you. Our next question comes from the line of Rick Prentice with Raymond James. Your line is open.

Hey, everyone. This is Brent on for Rick. Good afternoon. A few questions. First, I appreciate the updates on the Viasat 3 timeline. I'm also wondering what are the current expected timelines for launch as well as in service for the EMEA and APAC satellites?

Well, we've said for a while that they're kind of six months in or from the other one, but I'd say the second one hasn't slipped when we've had these last weeks, so it could be coming in just inside that. But by the end of calendar 23, our third launch is right around that year-end mark. So, I mean, it's possible it flips into early 24, calendar 24, or stays in calendar 23, but the count-up of that schedule could be a little earlier.

Okay, that's helpful. And you talked about increasing spending as you get ready for that on the OPEX side. How much did you spend in 4Q really specific to the ground systems and Viasat-3 on the OPEX side, and what's the magnitude and pacing of OPEX related to Viasat-3 preparation from here forward?

Yeah, so, and this is Sean. So, in Q4, the number was, say, 7 to 8 million, and that's going to keep increasing sequentially, you know, quarter to quarter to next year. So, you can think of next year, full year, probably across the fleet, somewhere around 60.

Great. Got it. And then you also talked about R&D spending and some exciting projects on the government and mobility side and mentioned a few projects there. Which of these projects should we be most excited about as far as near-term, mid-term, and long-term opportunities?

Probably the ones with the closest timelines are going to be the government ones. because they represent opportunities to get integrated onto new types of aircraft or to extend our, basically to extend our reach within certain types of existing customers. But the kind of the long-term ones are really both air mobility and land mobility are kind of the two big ones. The air mobile stuff We think the market is still pretty lightly penetrated. There's 30,000 commercial aircraft going to 40,000. We think the commercial air mobility market is still a really, really exciting one. Going into the general aviation markets right now, we're in kind of the largest jets, but being able to move down to the mid-tier and even lower jets, that's a really exciting market. The one that we're just getting into and we're part of some of our investments are going are in land mobile as well. And land mobile is, you know, we can see a lot of similarities to the air mobility markets. A lot of them are driven by people and passengers. But there's also some really interesting kind of broadband IoT markets. And that one I think is, that's going to be, again, a good market. But what we're really looking to do is to make sure that we have presence in all those mobility markets that we've outlined in our total addressable market, the things that head up to that trillion and a half. I think it's, you know, one of the things that we see is really important is serving a broad range of those markets, driving bandwidth consumption, and getting the revenue from that enables us to keep moving down the learning curve on the bandwidth productivity. That's what's made this possible so far. So I think it's kind of all those aggregate markets.

Okay, and last one for me. Yeah, that's helpful. And last one for me on the Inmarsat timeline. What do you think would cause you to exceed or miss the timeline of year end, and what's your biggest concern right now?

Well, it really is just the process on the antitrust reviews. So in the UK, it's the CMA, and here it's the DOJ. And we're producing tens of thousands of documents. been going quite well. The discussions have been. We went into this thing kind of understanding what all the questions would be. We think we've got a very good case. And they're two totally different processes, so they work differently. And we've made very good progress. The Undertakings is an example in the UK. With that, we've made really good progress in multi-countries for you know, working through the hurdles. And so we don't really see anything, anticipate anything negative. Haven't seen any indication of that. It's really just, you know, there's a way in which they go about your submittals and then questions and your responses and their review cycles. So if that goes slower, that could push us. If we, you know, One request goes into another request, and that's another delay. And that's what guides us. I think we still feel good about the nine- to 18-month guideline that we gave out.

Okay. Thanks, everyone. Stay well.

Thank you. Our next question comes from the line of Ron Coons with Needleman Company. Your line is open. Thank you.

I think the question, most of the questions have been answered, but I wonder if you could give us a ballpark on, you know, the magnitude of the slip-out on revenue in the government system side from these NSA approvals and such. It would be helpful. Thank you.

Yeah, hey, I can try to give you at least a feel for what we're thinking. I mean, one of the things I think it's really important to keep in mind, we talked about last quarter that we saw these pressures coming before and into the early year, and I think that's exactly what we're seeing. The other thing is, you know, Q1 is seasonally our lightest quarter in that government segment. So you've got to keep both of those things in play. I think that's going to be, when you think about the sequential performance, that will be the highlight.

I'd expected them in our December quarter. And then we said it wasn't going to happen in Q4. It could happen in Q1 or Q2 of our FY23, so June or September. We don't see it occurring in Q1. We think it's going to move into the September quarter, which means you won't start really getting deliveries of those products until Q3 and Q4. that we haven't seen any reduction in demand. These are really just getting this through the certification process so they can be delivered. So we don't see an overall reduction in terms of what the value of those are going to be. It's just the light. Got it. We also had some parts short. to start shipping. But like Sean said, we expect another sequentially down quarter in our June quarter versus the March quarter overall until that starts to come back.

Got it. Very helpful. Thanks so much. Thanks, Fred.

Thank you. Our next question comes from the line of Louis DePalmel. With Wim Blair, your line is open.

Rick and Mark, good afternoon. What drove the sequential decrease in satellite services revenue? Was it entirely driven by lower subscribers on the consumer broadband side due to the the capacity shift towards mobility, or were there any, like, one-time items in the quarter that drove that decrease?

Hey, Luis, it's Shawn. So, you know, primarily, we did have a little bit of fixed broadband pressure in the U.S. that was offset from some growth in LATAM, but the other thing is there is a little bit of seasonality that you see in Q4 from Q3 in the ISC business as well. That's something to keep in mind.

Sounds good. And with the expected launch of an entry into service of Viasat 3, I think you said for January, should that lead to a stabilization for the residential broadband revenue, or do you expect... residential broadband revenue to continue to decline in fiscal 2023 and for that to be more than offset by increases in the aviation revenue.

So overall in 23, in the first three quarters we expect residential to continue to decline as we allocate more of the bandwidth to to the in-flight, and we've talked about the number of airplanes that we expect to activate, and that's really what's going to drive the decline in the residential subscriber count. But in the fourth quarter, we're expecting that to turn around and start growing again, and we do have expectations of growing the residential subscriber count in the U.S. as well as internationally going forward from there.

So one point you should see first is in stable then we put a lot of resources towards offsetting that in the residential side. And then with RFC coming back, now you're seeing residential contract as we allocate bandwidth again. So that's one of the things we like about having multiples of these businesses so that we can allocate resources, you know, in real time around those market areas.

Great. So ultimately, you expect both U.S. consumer broadband subscribers and potentially ARPU to increase beginning, I think, towards the end of fiscal 2023? Okay.

from an ARPU perspective, we're going to look at what the market is, but one of the things that has driven our ARPU up is the fact that we didn't have very much bandwidth. So if we have a lot more bandwidth, then we'll probably be able to grow in multiple segments of the market, not just the way we've been growing, which is through higher ARPU. So I think we'll have better plans that are more valuable plans. Some of those will be higher prices than what we have now, but I think we'll also be able to introduce plans that are lower priced than what we have now because we'll have a lot more bandwidth inventory to work with. So I think our food trajectory, we'll have more clarity on that probably once we start going to market with those services.

Sounds good. And related to Inmarsat, Are there any plans to develop a KA van antenna that would be compatible with both the Viasat and the Inmarsat network such that when you're bidding on international aircraft right now and when you equip aircraft over the next two years that they would be compatible with either network? So there's increased redundancy?

Yeah. So as a matter of fact, right now, one of the things that we've done is we've tried to make our K-band terminals compatible with a large number of different K-band satellites. So for instance, we don't use all these compatibilities yet, but just talking about our own network right now. For instance, we work on NDN satellites in Australia. We work on Brazilian telegraph satellite in Brazil. We work on UNOSAT satellites. We work on other third-party satellites in Europe. And we can work on satellites in Asia. So the antenna systems can work on all those. With respect to Inmarsat satellites in particular, all of our antennas are are capable of working on the Inmarsat satellite. The Inmarsat terminals are capable of working on our satellites. There may be network or modem compatibilities that we'll have to work out, either on individual airplanes, or we also can do those things within the network gateways, which then apply to all the airplanes that connect to those gateways. So we have quite a bit of maneuvering room to be able to get that, but our objective is really to be able to get global coverage pretty much immediately between the two fleets and to have that additional redundancy that you're referring to with our own satellites and theirs as well. And we think that's going to be a really attractive feature for our customers. Just think of it as building a ROM onto networks. Yeah. All right. So, of course, that is... could roam on ours or vice versa.

Thanks. One final question. Do you have a rough estimate of your backlog for aviation, like commercial aircraft under contract? I know you said that you have 1,830 online and you expect to have 2,400 online by the end of fiscal 2023, but how much, how many more planes will you have in backlog, like, at the end, or, like, right now, or, like, at the end of fiscal 2023 to install in the future?

So, Louis, right now we have just under 1,000, and you can think that, and just to be clear, that does include the Southwest order, so... Okay. Yeah. So a good, healthy backlog.

And for that backlog, it seems interesting in that I think two years ago or three years ago, like you announced like an order for United Airlines 737 MAX. And I think it was for like a small quantity of but I think they have a very large order of MAX aircraft, and they have a lot of options. And a lot of your customers, like Delta, have options with the A321neo, and I think American Airlines has options with the A321neo. Does your backlog... contain like options or are they just for like firm orders for, for aircraft?

It's just the firm orders that they've made today. It's all in our backlog. Some of those orders include aircraft that those customers have, for instance, the Southwest order includes aircraft that Southwest that are yet to be delivered to Southwest. So it's not, you know, some of these are on new aircraft that they've got orders for, for example, uh, Our goal is to be kind of the best provider to each one of these guys so that when they do order new aircraft, those are coming with our service. And that's our mission is to make those customers very happy, provide the best available connectivity and value to the airline customers so that all their future orders have our equipment. And that's plan A.

And that's pretty much work. That's pretty much work today. The other thing, the other part of this, because we do get questions on that as well, what we want to do is make it so that the surface on the planes that are equipped with ours are so good that they're motivated to update their existing fleet as well. And that's gone well as well. So those are the ways in which we continue to grow orders with existing customers. I think all those effects are in play with pretty much all of the airlines that we serve now.

Can I ask another question actually on this topic? For a lot of your airline contracts, have you contemplated the potential transition to free Wi-Fi? And are you able to, at a high level, estimate what would be the potential impact to average revenue per aircraft in that type of transition?

Yes to both of those. I think that one of the things that's here's kind of I think the way that I would put it, what's going on in the airline industry in the last couple of years is for a while there was a focus on connecting individual planes. Let's take an individual plane, fly it on a route, show me what you can do on that plane. I think what has happened is as people, as airlines, see the value and utility of Wi-Fi, and they realize that they get some kind of customer satisfaction from passengers that use the connectivity, the notion of making it free has become more important, and then when they make it free and the usage grows, what they find is that the real issue is less connecting individual planes and more making that service reliable for their fleet as a whole, especially in the places that their hubs were, where there would be the most planes. So that's where the focus has gone, and what that means is that when airlines make Wi-Fi purchase decisions, that issue about, okay, what would it look like for us to go free? We want that as an option. And what does that mean for connectivity at our hub cities? What does that mean for service level agreements? That becomes a part of the negotiation. And I think that from our perspective, yes, it's good for us that it gets more usage. And, you know, one of the things we're working with with airlines is to make sure that it's good for them as well. So those are the two things that come with it. The way in which they do it would have some impact on the specific, you know, the revenue numbers or the output number, average revenue per airplane that we would get. But the other thing is it's certainly going to be good for us to get more usage, and we think it will be good for the airlines as well.

Sometimes it might be easier for us to describe it as, like I said, some of our competition has. But we found that to the extent that we're allowing them to communicate their strategy, that's a better partnership for us with them.

Sounds good. Thanks.

be super clear and make sure it was clear when I said it. And our backlog that I gave you coming out of the year, just under 1,000 aircraft, this definitely does not include anything from Southwest.

Okay, so with Southwest, it might be like 1,400 or so? No comment.

There are different estimates out there about what Southwest airlines purchase plans are for new planes, which is what and all those yeah you didn't you didn't use any any qualifier you just said all like future aircraft from southwest so that's that's a pretty long timeline you know well for Matt I mean they're 737 they're going to the max version yeah we just you know we'll have to continue to earn it that's that's great

Thanks, Sean, for the clarification. Thanks, Rick and Mark.

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

Thanks. I know you just said that it's better that your customers communicate their strategy, but one notable aspect of that Southwest announcement is they've historically been all KU. So do you see this as a you know, permanent forward shift by Southwest to a KA band system?

I really think it's an issue of KA or KU. I think it's an issue of Southwest. You know, our job right now is to go make Southwest, the planes that fly on our network with Southwest, such a good quality of service that they want it on the rest of their fleet. I mean, that's the challenge. And it's their job. it's really not about KA or KU.

Well, what I would say is, you know, if you design satellites and space systems to take advantage of the things that you do at KA band, they don't come automatically just because you use KA band, right? They come from having some of the features that we have in our satellites, and especially in Biosat 3. That should give us the ability to deliver better service. That's what we're aiming for, and we think that... They should and want to do the best they can with the service that they have now. But our job is to give them the option to do better.

So what we really want, Chris, is there's this concept of purchase intent, right? Somebody flies and wants to probably fly on you again within the next year. And to the extent that we can positively impact purchase intent by having our service award, that's really our mission. For every airline. Yep.

Great. Shifting gears in the commercial network segment, you've been on fire on the ground antenna segment, and I'm just looking out to the next fiscal year, and should we expect that trend to continue, or should we see it level off a bit? And can you maybe detail what you see as the factors that have been driving that growth?

Yeah, sure, Chris. So, One is part of our growth, a big part of our growth this year was ISC terminal delivery, and that's going to be a big part of our growth next year, too. So this year I think we delivered about 450, and we're going to do plus 600 next year. So we're pretty excited about that.

But keep in mind... But a little lower in Q4 and Q1.

Yeah, it's really tied to our customer demands and, you know, we're meeting their schedule.

Aircraft deliveries and also type certifications, completions, right, those are the kind of the gating drivers. And then also on the big gravity antenna business.

Yeah, it's fantastic. I mean, they had some significant wins, and I think that they're going to continue to grow into next year too. Yeah.

And, Chris, you know, I think, you know, your question just sort of highlights a point, which is, we tend to get business in lumps, whether it's government contracts or some of these big antenna contracts or airline wins. And so the timing of growth in a lot of those businesses is really dependent on the timing of those things. The one business that we have that's really not subject to that, which is the U.S. residential business, is actually the one that we're using to feed the in-flight business. So that's what's really contributing to the lumpiness that you're seeing in Q4 and going into 1 and 2 and the way that fiscal year 23 will play out. So the good thing is that we have most of the lumps in the pipeline now. But those are the things that drive the rate of growth. On an annual basis, it's pretty good. On a quarterly basis, it can be You know, it can be unpredictable a little bit.

Gotcha. And on the ground equipment side, was it mostly earth observation driven?

Yes. Yes. Great. And, you know, the other thing on that side, I think one of the things in the long run that will help with that is that this CSP, Communications Services Project Award, really intended to kind of leverage the combination of the ground antenna business that we have with space relay for both commercial and government customers. I think that those two things are pretty synergistic, and it's worth highlighting that as it relates to kind of the future prospects of our ground antenna business.

Gotcha. And I hate to keep asking antenna questions, but... Have you made any progress or do you have any prognostication on your electronically steered flat panel antenna, when that should be in the market, and where specifically you're looking to position that relative to a dozen or more competitive products that are coming to market?

Okay. So our main objective, and we think this should be what our customer's main objective, is for those antennas is to deliver services most cost effectively. I think that's what's gonna differentiate our antennas. In order to do that, you may need our network capabilities. Some of the things that we're building in are a little bit unique to our networks. So we're a lot more focused on our antennas as the delivery mechanism for our service than we are as antennas as a standalone product. And that causes us to look at some of the features or specifications of some of these competing products differently than somebody who's just in the market for an antenna might. So that's kind of the guiding principle for us. And some of those things really impact not your ability to make a connection, but the flexibility that you have in scheduling these connections among all the different services that we have. Just to build on a theme, we're very focused on this productivity measure, some of which comes from high-capacity satellites, some of it comes from our ability to move bandwidth around and deliver on these or the ability to use multiple orbits really efficiently. That's the other thing that we're putting in. Some of the first applications that you'll see for that may be in land mobile applications using some more copies of the antennas that we've flown, for instance, in business aviation. But one of the main products that we have aimed for is the commercial aviation market. We'll talk about that more as we get closer to it and give our customers an opportunity You said that. Yeah, Chris. So I think just to build on Rick's point, which is an important one, is a lot of times when people buy antennas as a product, one of the things they'll look at is what is the worst case performance of that under a particular combination of look angles or satellites that you're using. They'll look at sort of what's the worst case performance because if they go off and buy service from a third party, they're not quite sure what the attributes of the satellite that deliver that service will be. For us, knowing that we have a pretty big fleet with some very unique capabilities, what makes a lot of sense is for us to come up with an antenna specification that delivers the best weighted average performance under all operating conditions for those customers. So as an example, if we had a worst-case performance specification, but that condition arose only a very small fraction of the time and still would allow us to reliably meet our service level agreement, we would choose that as an acceptable criteria if what it did was it enabled way better performance most of the time under the operating conditions that we expect for that customer. So this difference between sort of expected or weighted average performance and worst case, can have a really big impact on your choice of antenna technology. When you're just selling third-party antennas, customers might rationally choose a different one.

So we're not doing these things so we can be able to sell a bunch of antennas and make money on antennas in mass markets, and really to enable a type of services that we're trying to own in the markets that we're addressing. Does that make sense?

Yeah, gotcha. So you're designing an antenna that's optimized for your service.

Yeah, which ultimately involves not just our own satellites, but a whole bunch of partner satellites as well, including a number of partners that haven't yet discussed, but we think are going to be really valuable in the future. And multi-orbit. Yeah, right.

Great. Do you want to elaborate on that multi-orbit strategy?

No, other than to say, you know, we think that, you know, what we're trying to do in the multi-orbit strategy is get the best of each orbit's attributes, right? So for the geosynchronous satellites, what we've got is, we think, really, really low-cost bandwidth and the ability to deliver a lot of bandwidth in these very congested places like airline hubs is one example. Ports would be another example. So you'd want to use that. To the extent that you have traffic that benefits from a lower propagation delay or lower latency, then you'd like to use non-geo for that. Or if you want coverage in places that the geo doesn't reach as well, you'd want non-geo for that. And also, depending on what customers you get and how traffic evolves, we also can have hotspots in areas that we didn't expect. to the extent that we can use partner satellites to serve those, that can let us get customers that we wouldn't otherwise be able to get because we can fill in those hot spots. So those are the main reasons for using multiple satellite partners as well as with non-geos being one set of those partners.

Gotcha. So I'll wait until next quarter so you can tell us who's non-geo. I appreciate the feedback. Thanks, guys.

Thank you. Our final question comes from the line of Landon Park, Morgan Stanley, with a follow-up. Your line is up there.

Great. Thanks for taking the follow-up, guys. I was just wondering if you could elaborate on the U.S. residential terrestrial competition that you talked about in the letter. And then just one quick one for you, Sean. The Just taking the $700 million EBITDA guidance with the $1.4 billion CapEx guidance, should we be thinking about cash burn in the $700 million range, or are there other working capital or other considerations to think about?

Yeah, I would think, you know, one thing to keep in mind, just to hit that one first, is, you know, we're going to be growing and we're going to be, you know, working to kind of see the channel for that growth, too, ahead of ISOC3. So, I've had a little bit of working capital burn in there, you know, relative on a year-over-year basis. I think what we've also said is we kind of expect next year's leverage to be around the four-and-a-half mark. So, it kind of gives you some places to triangulate around.

Male Speaker 1 Okay.

Male Speaker 2 Okay. And then, you know, the residential market probably, you know, the kind of the longer-term biggest factors are probably going to be government subsidies and kind of build out fiber and cable terrestrial networks. So that's, you know, what we're really looking at is what impact that has on the addressable market. I think others have talked about that, too. We think the addressable market will go down. But, you know, we think it creates opportunities at maybe different price points than what we've operated at now. And if you look at kind of the long-term, I think a couple years ago, we gave a pie chart that showed our expectations of what our satellite services markets or total markets would be in FY25. And that FY25 had, you know, it showed sort of modest growth in the U.S. residential market as a whole. but a much larger fraction of our total business coming from these international mobility markets. That's still the way we see it, taking into account what's going on in the build-out and subsidy in the U.S. market. I think we have room to grow by hundreds of thousands. We're not

So that's what we're anticipating.

Are you guys going to start testing those new plans before Biosafety actually enters service?

Yes. Yes, we are. And you'll see what we're doing right now, I would say one of our most promising plans is really around higher quality and more video streaming. And that's gone really, really well. But it's, you know, hundreds of subscribers that we're testing that on. But that's gotten really, really well. That'll be one of the things that we do with Viasat 3. You'll see us also begin testing on higher speed plans than we have now. Right now, we top out at 100 megabits a second. We'll probably go to meaningfully higher speed plans. I think what you'll see is us kind of moving in both directions, both the plans that are... better premium, more premium than what we have now, and then others that are more value-based, which could involve improvements in performance, but also could be at lower price points. The other point I would make on the subsidies is one of the ways in which the government is using subsidies is with what they call the ACP program, which is basically a way, it's like a voucher program for low quarter. And that will help with our kind of markets that are more price sensitive or economically stressed than we've had before.

So you didn't participate in the EBB program?

Yeah, the ATP program I think is going to be more significant than that. And it's a pretty straightforward program. People qualify for they get, I think it's like $30 a month, which is pretty meaningful. I think that's the one. I'm not sure. I think we are in the EBB one. I think the ACP one we think is going to be probably more impactful. It does appear that that will continue on. It's a pretty popular program.

You talk about fiber and cable. Are you seeing fixed wireless at all?

We do. We do. I mean, we see each of those. I think that, you know, it's kind of like a T-Mobile version. Midband is probably going to be more representative of, you know, it's a fixed wireless that rides on a mobile service. That's probably going to be more impactful than dedicated fixed wireless. I think that's probably the long-term thing. But if you look at the way T-Mobile has done it, So that is going to have an impact on geographically where it can roll out, the extent to which it can roll out, and kind of the long-term duration of that. But that's probably kind of the biggest potential impact. I think one of the things that we see repeatedly is people coming and going, especially when they're economically stressful times, people just going to a mobile plan and not having a fixed plan at all. And we actually think there's some opportunity around augmenting some of that stuff as well. So we think, you know, we never want to think it's always business as usual, only using the same tools in different markets. So, you know, whenever there's change, there's opportunity. But I think our, the main, you know, The biggest theme for us, and it did play out in the fourth quarter, one of the statistics that we put in our letter was, I think in the fourth quarter of FY22, 39% of our satellite services revenue came from mobile and international services. We definitely, you know, it's not like we're abandoning or it's going away in the residential market, but we think the real growth is in the mobility markets and a lot of growth internationally, where some of those factors that are impinging on the U.S. aren't happening and are unlikely to happen.

Okay. Thanks, everyone.

Thanks, Irene.

Thanks. I would now like to turn the call back over to Mr. Ballrich for closing remarks.

Okay, thanks. First of all, I want to say thank you guys for showing up. We know there were a bunch of conflicts right now, and people couldn't make it because of those conflicts, but we appreciate all the good questions and you guys for listening to the call. I'll make a couple points before we just finish. One is that, like we did in Q4 and this year, we constantly balance investments and EBITDA You know, we can borrow the money we're trying to borrow, finish the five, set three consolation, get it up. And to the extent that we have a little bit more room, we can put the accelerator on some of the things we think are valuable. And to the extent that we don't, we kind of constrain that. And so we're constantly doing that. I think you guys that have been around for a while know that about us. Getting really excited. to the team. Just want to thank you guys for being on the call. Another really good year, we think. Our operational momentum is really strong and very positive. On top of that, getting to that first Firesat 3 launch, which we've been waiting for, that's the capacity we sorely need regionally and allow us to improve our service offerings. This is what we've been waiting for. And while LAMARSAT gives us the global capabilities and opportunities to enhance our At the same time, our teams here remain hyper-focused on executing the plan so that that enables us to go expand the business. Don't hesitate to contact Peter or the rest of our team if you have more questions on our results or other topics today. We look forward to updating you next quarter. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now connect.