ViaSat, Inc.

Welcome to the Viasat's FY23rd Third Quarter Earnings Conference Call. Your host for today's call is Mark Dankberg, Chairman and CEO. You may proceed, Mr. Dankberg.

Okay, thanks. Thanks for joining us today. We released our shareholder letter shortly after market closed, and it's available on our website. And we'll be referring to that on this call. Joining me on the call today are Rick Baldrige, our Vice Chairman, Kevin Hartenreiter, our Chief Operating Officer, our Chief Financial Officer, Sean Duffy, Robert Blair, our General Counsel, Paul Froehlich from Corporate Development, and Peter Lopez from Investor Relations. So let's have Robert provide our safe harbor disclosure before we start.

Thanks, Mark. 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 Forms 10-K and 10-Q. Copies are available from the SEC or from our website. Back to you, Mark.

Okay. Thanks, Robert. So I'll start with a brief high-level overview, and then we'll go right into questions. So the most important point for today is that construction and tests on the BISAT-3 America satellite has been completed. We're scheduled to launch on April 8th. which follows a pair of NASA International Space Station missions that have been pushed about one to two weeks later than previously planned because of the Soyuz replacement mission to bring back cosmonauts from the ISS. Bringing that satellite into service addresses our most immediate challenge, which is bandwidth constraints in the U.S. that have caused us to steadily downsize our residential business to support the strong growth we've had in flight connectivity. The 5SAT-3 will be able to serve areas that are currently full and to introduce updated plans with higher speeds, more bandwidth, and greater value. It also supports more flight routes of our existing customers in the Americas, adds capacity to the good growth we've had in Brazil and Mexico, and opens additional new geographic and vertical markets. We're confident it'll drive growth. The satellite should reach its orbital slot just a couple weeks after launch, and we expect to start initial beta services promptly and to start scaling during the summer. The Biosat-3 EMEA, Europe, Middle East, and Africa satellite is not far behind, and it's planned for launch by ULA in September. That adds important coverage to our mobility businesses and capacity to a number of other markets. It's also the catalyst expected to enable us to reach positive free cash flow. The Asia Pacific satellite is not too far behind now. Overall, new orders are up year over year. We're making very good progress on in-flight connectivity, especially. We think one exciting example is the recent announcement by Delta Airlines making free Wi-Fi available on their full fleet. We've worked methodically with them to be sure we both understand the growth in demand and how it can deliver the service quality they expect at scale. Today, we're at about a total of around 3,000 flights a day with free Wi-Fi. Now, that's between Delta and JetBlue, and that's growing pretty rapidly. And of course, we also continue to serve all the other airlines we support, including at those same major U.S. cities. We see good opportunities in working with airline partners to scale passenger engagement with Wi-Fi affordably and in ways that best suit their business models and brands. We shipped about 240 in-flight terminals in the third quarter for commercial air and brought about 160 planes into service, which is about a 17% year-over-year growth. New orders have been very good with both new and existing customers, and we still have over about 1,200 additional planes on order. Our airline customers are seeing delays in some of their new aircraft deliveries, probably in the range of about 50 to 60 cumulative by the end of our fiscal 23. But we expect deliveries and installs will grow sequentially in the fourth quarter anyway. We've also been equipping Sichuan Airlines in China. The U.S. and China are the largest domestic air travel market. We believe the ability to serve international flights to and from China with our partners there seamlessly will be important to many global airlines as well as to the Chinese international airlines. The other major point for today is around the close of the sale of our TDL business just after the end of the third quarter. We'll net, as we expected, about $1.8 billion in cash, which greatly strengthens our balance sheet. We'll also realize a gain on the sale of over $1.5 billion. So including that gain, FY23 will actually be a very profitable year for us. The sale will ensure we can drive our satellite services businesses to have significantly greater growth potential. As we mentioned last quarter, we have some right-sizing to do as a result of the sale, and that's underway. And regarding Inmarsat, the remaining gates to close the transaction are primarily the UK, and the European community antitrust approvals. We expect to have good insight into the regulatory, the regulators' current views on the matter this quarter. So the shareholder data, the shareholder letter, also provides our financial data for our third quarter of fiscal 23 and year to date. Those results are below our expectations for the year in the quarter, with the largest factor being the significant delay in the launch of the first BISAT-3 satellite relative to the schedule we expected entering the year. We've had other challenges on supply chain, affecting cost or delivery schedule of some of our products, delayed airplane deliveries to our customers, and encryption product certification issues that are not specific to us. But the demand for our products and services is strong, and we've had good year-over-year performance on orders. With the TDL gain, we'll report our highest ever earnings for the fiscal year by a long shot. We expect to start fiscal year 24 with the launch of the first FISAT III. We think the outlook from there is very exciting, as described in the shareholder letter. So, with that, we'll open it up for questions.

The floor is now open for your questions. To ask a question this time, please press star 1 on your telephone keypad. If at any point you would like to withdraw from the queue, you can press the star 1 again. You will be provided the opportunity to ask one question and one further follow-up question. We'll take a moment to render a roster. Our first question comes from a line of Rick Prentice from Raymond Games. Please proceed.

Thanks. Good afternoon, everybody. All right. I appreciate the shareholder letter. A couple of – two questions, then. First, Mark, you talk about the Biosat – first Biosat 3 coming over the Americas. We've got a launch date. Glad to have that. How long are you anticipating – it sounds like there's pent-up demand from your letter. How long do you think it takes to fill that up, and when are you thinking that we need to be starting to think about Biosat 4 as the first question?

Okay. Well, so the way we've operated in the past, which has worked well for us, is we kind of fill it up and then we people say groom or we basically tend to evolve our service, our customers mix to kind of higher yielding customers, which is kind of what we're doing here. Think of them as we've talked multiple times about this hierarchy of value and services, difficulty to serve with government, invite, maritime, those types. So we generally have been, have filled up the satellite two to three years post-launch. That's typically what we intended to do. And then we, and then, you know, we involved that subscriber a couple years or so. The, you know, the Our approach to Biosat 4, what we've been working on is really focused on the technology, making sure that we get the performance that we expect and that we can produce it on a more predictable schedule. It's pretty much the same platform. The timing of that, we will adjust based on of our cash flow, flow rates of that, of the current satellite and our assessment of demand. So we don't, we're not going to put out a specific timetable for it yet.

Okay. Also in the shareholder letter, interesting comment about direct-to-device in that Inmarsat obviously has L-band spectrum that you're interested in. Can you, maybe high-level kind of, obviously the deal is not closed, But can you, from a high level, tell us, how do you feel that that directed device, satellite to smartphone, is going to come to pass? There's a carrier model in the marketplace. There's handset models in the marketplace or coming into the marketplace. And then a chip-backed one. So how do you see this market kind of materializing? And do you all need to have a Leo-type platform, or how would that work? So just high-level thoughts on the directed device spots.

Okay, well, first, we're interested in the direct-to-device market, which likely, I think a lot of people expect to be, to address a very large market, but with probably relatively low average revenue for a user. But we also see that a lot of the things that, a lot of the things in space and in the ground network that are done to be able to serve that market also are going to really enhance the existing mobile satellite services markets. It will enable higher speeds, more bandwidth, lower airtime pricing, all of which we expect to also benefit those existing markets for those operators that have access to mobile satellite services spectrum and the tools to address those markets. I think the big issues or uncertainties around the direct-to-satellite and direct-to-handset market are really around what are the speeds that can be delivered to each phone, how many phones can you serve in a geographic area, what will the airtime pricing be, will it be used for more than emergency services. A lot of that is really going to depend on a lot of the same factors that drive As we talked about before, it's really getting good signal, good density of bandwidth adjusted for the spectrum that it's operating in in the areas where there's going to be the highest demand. And what is interesting about the handset market is it's probably going to be even more geographically concentrated than the broadband markets will be. So we've actually... been looking at design architectures that are both geo and leo. We think they're both interesting. We think that to be able to deliver pretty comparable services from each, it will probably take cooperation among some of the spectrum holders to achieve that. And we don't think it's necessarily a geo or a LEO specific market. We do have concerns. We've been one of the ones pointing out some of the issues around sustainable space in low Earth orbit. We think that there should be concern around just the cross-sectional for this service, we're not sure that's the right, you know, that's going to be a good direction. And we, you know, what we do have ambitions to do is to be able to deliver, you know, services that are much more interesting than just emergency services and that can be scaled to very large numbers of customers. That's kind of the, you know, kind of the overview at this point.

Great. Well, I appreciate it. We will stay tuned as we watch this market unfold.

Thanks, Rick.

Our next question is from the line of Phil Cusick from J.P. Morgan. Please proceed.

Hi, this is Nick on for Phil. Thanks for taking the question. I'm wondering if you could provide an update on how churn is trending in fixed broadband and how any, like, increased competition may be playing into that, as well as what the strategy would be to return to fixed broadband growth once Viasat 3 launches, just given the competitive intensity. Thank you.

Okay. Well, we haven't broken out churn by market, you know, by specific markets. What I can tell you is Recently, you know, TURN's been subsiding for us. Probably, you know, we had some of the TURN that we saw was probably tied to the COVID timeframe when people signed on for contracts and were, you know, very dependent on broadband at their home. But since those, you know, since a lot of those are out of contract, actually TURN's moderated for us. We think... We do see that there's going to be more competition in the markets that are targeted by us. People estimate 10 to 15-ish million homes that are reasonable candidates for satellite broadband. The big issue is the value proposition of the service in terms of speed, volume, price. The other thing that's becoming more and more and that we're really focused on are the ability to stream. Because streaming is not supposed to be speed intensive, but it is very bandwidth intensive. And so it's difficult for pretty much any satellite or terrestrial wireless service to support that in an unlimited way. We think we're going to be really competitive in that aspect of the market. So I think for us, you know, The big thing BISAP3 allows us to do is to update our speeds, bandwidth, and pricing. And I think we'll continue to be able to drive churn down with these plans we expect.

Our next question. comes from the line of Landon Park from Morgan Stanley. Please proceed.

Thank you. Mark, did you get cut off there? Did you add anything else that you wanted to add to that?

No, no. I think the last thing I said was that we expect Churn to continue to improve with the new plans that we can offer. That was the last thing I said. I don't think I got cut off enough. Okay.

Okay, thanks, Mark. So, yeah, on my side, I was wondering, you know, Delta finally launching their free Wi-Fi product with you as the partner. They have a target laid out to have global, this has a global product by the end of 24. You know, what is the prospect for you to be able to gain retrofits on their international fleet or their regional jets? And then maybe can you just review, I don't know if you can talk about Delta specifically, but at a higher level potentially, what are your IFC contracts structured in terms of fixed versus variable, and how can we expect ARPA to trend, and what are the current ARPA levels, and where can those trend under a free Wi-Fi model?

Okay. Okay. So a lot in there. So on the in-flight Wi-Fi, I think we do have a very good relationship with Delta. And they supported the notion that we'll be their partner, including on the global wide bodies. I think that's part of what they're looking for is consistent service across all their fleet. So we think that they're confident in BISAT-3 as enabling us to do that on a global basis in the timeframe that they're looking for. On the business models, one of the things that we have done is we've tried to tailor the service models that we offer to different airlines to what their brand wants and the way they're trying to use invite connectivity on their flights. And it varies a little bit by type of plane or routes. like the flights or routes. But there is, like we've said before, there are fixed and variable components to it. And the variable parts are dependent on the airline's model and the way their flights are planned, or their routes are planned. So it's hard to put a specific number on it. But I think overall, revenue per plane, all things in, you know, when you consider kind of the full service model that we have are very representative of what others in the industry have had. We're not going to break out average revenue per plane in particular, but it's pretty representative of what others that are in these kind of full service models have had.

What kind of upside can you see under a free Wi-Fi model in terms of percent increases as that model matures.

I'm not going to put up a percent increase. I think that what we are seeing and what we've expected to see in other places where we've used in-flight Wi-Fi, as you can see, passenger engagement rates go from the 5% or 10% range up to the 30% and 40% range pretty easily. So I think there will be a lot more uptake, and I think that's one of the things that makes us attractive for it is the ability to support that. But we're not going to give any numbers about how that will translate into revenue per plane.

Understood. And then just one follow-up for Sean on some of the financial guidance laid out in the letter. Can you maybe just bridge for me how you're getting to the 4.0 leverage target for fiscal 24 versus the 2.0 pro forma?

Sure. So, I think it's a couple parts. First of all, keep in mind as we look forward to our EBITDA next year, you need to right-size it with respect to not having the TDL business anymore. Obviously, we'll have growth across our business in the continuing operations, but keep that in mind. And then from the capital perspective, this year was about $1.2 billion or so, a little bit over that. Next year, we'll see it about flat, tick down a tad, but the mix will change quite a bit. We'll have a lot more on the success-based CapEx for CPE relative to the satellite, which will start coming down. So it's kind of, if you kind of roll that forward on our pro forma debt as a TDL sale, that's where you get to about that mark.

And so what's the underlying cash burn that's implied by that for fiscal 24?

Well, I think if you just kind of look about to what that EBITDA inferred relative to that CapEx, you know, I'm not going to give kind of the total cash burn to that number, but I think you can kind of do the math if you triangulate that, London.

Okay, understood. And then just so I make sure I'm understanding for fiscal 23, the mid-single-digit guidance from last quarter, it's now flat, correct? So what is the annual EBITDA number going to be in the low 500s on a continued operations basis?

I think what we said is that next year's EBITDA, we expect it to grow in the low double-digit year-over-year. So I think your math is- I'm sorry.

I was asking about the base for fiscal 23.

Right. So for 23, what we said is you could think of it to 22 on a continuing operations basis to be about flat to the prior year.

And that was about, what, around 500 in fiscal 22, right? A little less than that?

It was a little shy to that.

Okay, perfect. Great. Thanks very much, Sean and Mark.

Thanks, everyone.

Our next question comes from the line of Mike Crawford from B. Reilly Securities. Please proceed.

Thank you. Can you tell us what, if any, changes there are in the timeline with the UK's Competition and Markets Authority Phase 2 review, when you expect that decision, and how soon after that, presuming it's favorable, you could close in Marset?

Hey, Mike. This is Robert Blair. So the timing for the CMA... is the end of March is when we would expect them. And what they've indicated to us is their plan to be wrapped up. If it's favorable, then we should be able to close theoretically shortly thereafter, as long as the European Commission is along the same timeline. But that could drag out potentially further after the CMA. So it really depends on how quickly the European Commission would finish their review if the CMA is done and approves at the end of March. But as soon as both of those processes are done, we would expect to be able to close pretty quickly after that.

Okay, thank you. And then the follow-up question relates to you provided your potential satellite launch timeline. Is there any similar information you can give regarding Inmarsat?

I think their launch information, One of their satellites, another I-6 satellite this month. But their follow-on satellites are probably a couple years behind. I think there's a gap for their I-789 satellites.

Okay. All right. Thank you.

Our next question comes from the line of Caleb Henley. from Colt Geek Analytics. Please proceed.

You guys, a question about the Link 16 business. So I'm just curious if, you know, even though the sale is done, if there is any opportunity for Viasat to provide any sort of space-based Link 16, or did that all go away with the sales?

went with the sale, but we do have space contracts that cover a variety of, you know, a range of communications waveforms and data links. And, you know, we can include Link 16 as one of those waveforms in a multi-waveform space system. And we're doing, as part of the... common hardware for that application.

Okay. Does that mean there's still opportunity for Biosat to participate in the Space Development Agency's constellations? I know that's supposed to use Link-16. And then do you still have the satellite that you're building with Blue Canyon, or is that something that was sold as well?

So the existing contract that we had for XDI and SDA payloads did go with that business.

Our next question comes from the line of Ryan Coons from Needham and Company. Please proceed.

Thanks for the question. You know, Mark, thinking about how the IFC business scales here, you know, apart from adding all the tremendous increase in capacity from Viasat 3, you know, what kind of key parts of the business do you think need to scale to address the global opportunity in terms of infrastructure, channel, support, you know, those sorts of things as you think about taking that business global? Thanks. Sure.

Yeah. Well, I think one of the good things about what we're doing with VICEF3 is we pretty much have all the business models for the businesses that we've already been doing well in place. So, you know, at least in residential or in rural, in the countries in which we've been operating, we've set up business models where our ability to plug in more, you know, more bandwidth is pretty straightforward. And I think that includes the in-flight connectivity space because, you know, we already have, we've done this pretty purposefully, but we have customers and Australia, Asia Pacific, Latin America, Europe, that, and Middle East, you know, already that we support with our full-service model. So I think that that's, you know, one of the things that's most exciting about getting BIOS S3 on a global basis is that it really is something that we can just plug into existing models, especially in in-flight connectivity, because that is really kind of a direct-to-airline business for us. And I think we have a good go-to-market sales force that covers airlines all over the world. And we have the support infrastructure that we can leverage for that as well.

Got it. That's great. And just a quick question about the letter. about your reallocation of capacity into IFC. How should investors think about the timeframe that it takes you to truly kind of reallocate? Are we talking months, quarters, to reallocate that capacity and move it into a particular new application?

Okay, that's a good question. So as the airline business has grown, the main thing that we've done very quickly careful and purposefully, is to understand what the traffic demand will be on a geographic basis, and then also be able to gauge not only where the airplanes are, how many seats are going to be where when, but also to match the expected bandwidth demand on each plane and each airline so that we have sufficient bandwidth that is scaled to the demand on those planes. And that When we do it, what we've had to do, I think it's a choice that we've made deliberately. I think it's going to be good for the company. It's definitely been good for our IFC customers. I think it would be good for shareholders to plan ahead. What we've done is we've used natural churn on the residential business that bandwidth in places where we may need it, and those places where we won't need it for ISC, then we can replace those customers with new customers. When we get Viasat 3, problems could be way easier because basically we'll have a lot of bandwidth everywhere, and we'll just be able to add customers on both in-flight connectivity and airlines and a few other businesses within the U.S. that we think we can start and grow as well. But think of it as the reallocation process is really something we only have to go through when we're full, right? When we have to allocate bandwidth because we don't have enough to serve all the demand we could see in all the markets that we address, right? It's really a question of making choices about what we choose to serve given all the demand that we see.

Okay. It does. Thanks, Mark. Thanks, Ryan.

Our next question comes from the line of Louis from William Blair. Please proceed.

Mark, Rick, Sean, Robert, and Peter, good afternoon.

Hello.

Following up on Landon's question, does Viasat have a product slash antenna to provide IFC on regional jet aircraft such as CRJ-700s and ERJ-175s? I know that you provide connectivity for JetBlue's larger ERJ-190s, but do you have a smaller antenna for the smaller regional jet aircraft?

Right now, a lot of it really depends on the operating model of the airline and the exact type of aircraft that they have. But I think, you know, from a commercial business, probably the E-190 is the smallest that we currently have at any kind of scale.

Okay. Okay.

Currently are you are you ruling yourself out then for for Delta's regional jets?

No, no, I think we have you know, I think we have Airline products that were developing that will go down to smaller, you know smaller planes. We certainly do that and we serve Smaller aircraft with better business jets or others. It's really a question of coming up with something that that mounts well and economically for the specific types that our customers want. And so we are working on more fuselage-mounted antennas for those smaller class of aircraft.

Sounds good. And for the government encryption business, has Viasat received the product certifications that were previously delayed? Are you out of the woods there?

Pretty close. The issue is they haven't been issuing certifications across a range of products for reasons that they know that they have, but there's customer demand, especially that demand relative to what their certification guidelines are and will be, and they've informed us that they expect to issue those certifications later this month. That's what we've been informed of.

Great. And one for Sean. How should we think about the customer premise equipment CAPEX and OPEX costs for Viasat 3 residential customers when you deploy the new terminals?

Okay. So I think what I would think about on the customer premise equipment, similar, there's a couple parts. So similar to prior years, in the early onset, right, those costs are a little higher. because it's all brand new equipment. And then as we have natural, you know, turnover in the basin, we get kind of a reef or pool, those costs tend to come down over time. You know, the ramp that we have next year when you're thinking about the quantum over the mix of CapEx, I mean, that's going to go up significantly year over year. You could think of that as about 3x what it is to this year. So that gives you just kind of, you know, we'll have significant investments in that bucket. On the Aavex side, it's primarily, I mean, we have advertising that's, you know, you'll definitely feel in the front end as we're starting to prepare for service launch and marketing of our new plans. You'll see those coming in as part of the EBITDA, you know, margins in the front end, but to OPAC, one thing just to remind people is as we look to next year, our full year of VIA.3, for example, operating expenses on the ground, we've been talking about that through this year. This year, kind of scaled to about the $50 million mark. Next year, we'll have the full weight of the VIA.3 ground, and then obviously we'll be scaling our revenues on that. We'll still be building out EMEA and APAC, so you can think of that number as growing to about $85 million. So those are kind of some components of some of the capital and op-ex terms.

Sounds good. And is there any type of, like, benchmark in terms of, like, for every customer, should there be, like, $200 of CapEx associated with the customer premise equipment or any other type of round numbers there?

Well, you know, we've had – Typically, when we go out with, as Sean said, with the new generation of satellite, I'd say $800-ish numbers for SAC. It depends on the – but it's a blend of advertising, commissions, equipment itself, installation. It's all those factors. And it won't be – it likely won't be markedly different. of those costs will depend on, you know, what the demand is and, you know, what we can support in each region. But that's kind of an opening. It could be a little. I think at the beginning, Shawn, is it a little? Is that a little higher than that?

I'll have it here on the beginning with the advertising, but I think that's it.

And then it can come down $100 to $200, right, while ARCA matures. And we get that revert pool as well.

Okay. And as it relates to the Viasat-3 EMEA launch that is targeted for September, you mentioned how it's with United Launch Alliance. Is that with their new Vulcan Centaur rocket?

No, that's an Atlas launch. It will be one of their last Atlas launches.

Okay. And one final question. This is a bit more speculative, but following up on Rick's question as it relates to satellite direct-to-device, would it be possible for you to partner with SpaceX in the future? You used to have an antagonistic relationship with Inmarsat, but now you are merging with them. things smoothed over, but is there a scenario in which you could lease a portion of Inmarsat's L-band spectrum to SpaceX and partner with them for a direct to handset effort? Or are you committed to like launching and operating your own constellation in a vertically integrated manner?

So it's a good question. I think that in general, You know, we're, you know, a lot of our value add is in the space systems that we can put together. And so that's, you know, at the end in dealing with them or any, you know, any other prospective partner, it would just be an economic trade about, you know, what's the nature of a partnership? Well, who provides which resources or capabilities? But, you know, personally, we don't rule out partnering with anybody. I think we've shown that we can really add value in the space architectures more than we could just in lease fees for Spectrum, as an example. But we never say never.

Yes. Thanks. That's all that I have. Thanks, everyone.

Sure. Thanks, Louise.

Our final question comes from the line of Landon Park for Morgan Stanley. Please proceed.

Thanks for taking the follow-up, guys. Just a quick one on the TDL proceeds. Are you guys planning to use that to pay down any debt or anything, or are you going to keep it as a buffer? Are you still planning to draw on your NMARSAT financing at the close of that transaction, or is this replacing that in some way? Just any comment on those items.

Hey, Landon. This is Shawn. You know, we definitely, when we got the proceeds and paid down on our revolver, so we did do that. You know, right now, I would say with the backdrop of the credit markets and our 2025, we think having a little extra liquidity makes sense. And with respect to, you know, the transaction, I would say it gives us a lot of agility, but we haven't made any commitments there.

Is there any reason you wouldn't want to tap that financing given the attractive rates that it was struck at?

Yeah, I mean, I definitely think that we, you know, look at the transaction and look at the fulsome, you know, lens of the capital structure and agree with you that, you know, where we are today is, you know, in a good position there. But, you know, we need to take that into consideration, you know, overall. But our intention is to be able to make sure we're in a good position with the right capital structure for the financing of the transaction.

Understood. And then just one for you, Mark, as well. On the Biosat-3, as we look forward to that, you guys in the letter talked a lot about the enhanced flexibility of that satellite's capabilities. When we think about the gross capacity of the Biosat-1 and 2, Can you comment on what the utilization rate on that gross capacity has ended up being now that those assets are stabilized and what that can look like for a VINOSAT-3 asset?

First of all, it's a really good question. It's a complicated question because different – I mean, you've probably seen sort of what they call busy hour demand curves from cable companies or others that are in a home residential business. And what you'll see, for instance, there is, let's say, from like 6 p.m. to 11 p.m. or midnight, you see very intense usage. And then it can fall off pretty significantly overnight and maybe a little peak in the morning hours and then not so much in the daytime. the low peak when kids get home from school, you'll see that's an example of a utilization curve that would be common to all the users in, let's say, a given time zone, right, and that has common applications like residential. So if you look at it in-flight, what you'll see is when you look at it, let's say when you look at it geographic, American United or, you know, other major carriers is when they have a hub, you know, if you look at sort of the same type of chart as I described at residential, what you'll see is very high usage when a lot of airplanes and people are in those geographic areas around those hub airports. And lesser usage in between certainly doesn't go to zero because different airlines have different schedules. but you'll see these pronounced peaks. And so when you think about utilization, one of the issues is if you have capacity that's not flexible, or if you have satellites that only have views or fixed coverage over specific areas and can't move it around, your utilization tends to reflect the demand in each of those areas. when you combine, you know, your weighted combination of those different markets. But, you know, when you look at those, when you look at those at times when it's not very well utilized, the thing that Viastat 3 lets us do is move that bandwidth somewhere else. That's the thing that's really, really unique and valid about it. We can move it somewhere else pretty far away, so far enough away where we take advantage of time zone effect. far enough away where we can take advantage of different connecting times at different airports, as an example. We're also looking to do similar things with other mobile markets, including land mobile and maritime. So what we think that's going to let us do is get pretty meaningful increases in utilization in these high-demand areas in the I think the way to think about it is, especially from a capital efficiency perspective, this is one of the things we try to put together and show investors is if you think of demand, the demand on the ground or in the air, it's really a property of who your customers are, not your space systems. And the failure modes or the congestion that occurs tends to be in hot spots. And so By being able to move bandwidth around, what we think is we can do a way better job of serving hotspots than other space systems. That's what we're working on. It's a really cool optimization problem, but I think the economic payoffs are going to be significant. Does that answer your question?

It certainly provides color, I guess, I mean, I'd love it if you could provide more specifics. A number?

You just want a number?

Well, no, I don't. But when you say it's a meaningful increase, I mean, what is Viasat 2 at today? I mean, I assume you guys have a sense of what the utilization on that satellite is.

Yeah, so it really varies by place, right? Because you have these follow-ups.

I guess what I'm asking is there's 240 gigs of gross capacity, and you guys provision capacity for users, and the beams on that satellite are essentially fixed. So how much of that gross capacity is essentially provisioned? You guys are saying you have capacity limitations, right? Yeah. Are you bumping into that at 70% utilization?

That's the issue, is that you run into provisioning limitations in specific places. Sometimes before the growth of our in-flight space was pretty much due to residential. As we added in-flight users, then we have to provision for the peak demand between the two markets. That's not an easy thing to do. We've gotten to be pretty good at forecasting and managing to that. And I think our provisioning levels are pretty good. You know, we're pretty efficient and efficient in that we're able to meet the service level agreements that we describe. It's a statistical process, but I think that we're pretty close to the provisioning you can get when you don't move bandwidth around. With BISAC, too, there were some opportunities to do some dynamic scheduling, and we do some of that. 5SAT-3 takes that to another really big level. The thing I would say, though, is if you look, like, one of the metrics to look at, and I think this is really important, is think of it as just what's the peak demand to the average demand in a given place or for a given airplane, and those numbers, peak to averages, can be high, especially for some of these mobility markets, like more than 10 to 1. So that just gives you a sense of, like, in key places what the potential is by doing this work.

Understood. Thanks for all the comments.

Okay.

That does conclude today's questions. I would now like to turn the call over to Mark Dankberg for closing remarks.

Okay, thanks.

Just in summary, I'd really like to reemphasize the significance of completing that first 5SAT-3 satellite and with having a launch date now in early April, just about two months away. And with Europe, Middle East, Africa, well, it's not that far behind. The bandwidth, coverage, and flexibility it provides really addresses our most immediate growth issues. And I think the last question kind of helps emphasize that. And with the sale of our TDL products business, we've got a lot of financial maneuvering room. The over $1.5 billion gain on that sale will actually make our fiscal 23 our most profitable year ever. And we think it's indicative of the value we're building in each of our businesses. We continue to believe combining the complementary nature of our business skills and resources within Marsat will be good for the companies, our people, our customers, the UK space business, and for our shareholders. So thanks a lot for joining us this afternoon. Please don't hesitate to contact Peter or anyone on our team if you have any further questions on our results or other topics. And with that, I'll hand it back to the operator.

This concludes today's call. You may now disconnect.