ViaSat, Inc.

Please stand by. Your program is about to begin. My name is Sarah, and I will be your conference facilitator this afternoon. At this time, I would like to welcome everyone to Viasat's fourth quarter fiscal year 2024 earnings results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. I would now like to turn the call over to Ms. Lisa Curran, Vice President of Investor Relations. Ms. Curran, you may begin your conference.

Thanks, Sarah. We will present certain non-GAAP financial measures on today's call. Information required by the SEC relating to these non-GAAP financial measures is available in our fourth quarter fiscal year 24 shareholder letter investor relations section of our website. Please note that to provide a more meaningful comparison of our results of operations year over year, results for the fourth quarter and fiscal year 2024 are compared against supplemental combined results for prior year periods. These supplemental combined results are based on the combination of IFSAT's historical reported results from continuing operations with INRASAT's historical reported results for periods prior to the acquisition, with adjustments to reflect purchase price accounting, the conversion of INRASAT's results from IFRS to GAAP, and conforming changes to reflect IFSAT's presentation of its results. the supplemental combined financial information was prepared to better illustrate for investors the performance of our business following our acquisition of Inmarsat. Unless otherwise noted, the presented financial measures reflect year-over-year increases or decreases relative to the supplemental combined financial data in our fourth quarter fiscal year 2024 shareholder letter on the investor relations section of our website. During the presentation, We will describe certain of the more significant factors that impacted year-over-year performance. We will also make forward-looking statements within the meaning of the federal securities laws, including statements regarding events or developments that we expect or anticipate will or may occur in the future. These forward-looking statements are subject to a number of risks and uncertainties, and actual results might differ materially from any forward-looking statements that we make today. Information regarding these factors that may cause actual results to differ materially from these forward-looking statements is available in our SEC filings and subsequent report on Form 10-K. These forward-looking statements speak only of the date they are made, and we do not assume any obligation to update any forward-looking statements. With that, I'll turn it over to Mark Descartes, Chairman and CEO.

Good afternoon and thanks for joining us today. With me I have Guru Gaurapan, our president, and Sean Duffy, our CFO. We encourage reading the shareholder letter that we posted on our website earlier this afternoon for more details. I'll give an overview of the main points and then Guru will cover operational results and highlights and our growth outlook and then we'll take questions. Fiscal year 2024 revenue and adjusted EBITDA growth above the high end of our guidance, driven by mobility and government. Fiscal year 2024 was a big year for us. We closed the Inmarsat acquisition, dealt with satellite anomalies, immediately undertook integrating the companies to eliminate redundancies, capture synergies, and drive productivity. Our objective is to integrate Inmarsat's global customer base, distribution partners, global satellite coverage, and leading global L-band spectrum rights and aeronautical and maritime safety services with Biosat's technology, domain expertise in aeronautical and government, and systematic methodology to achieve high utilization and productivity to cost-efficiently deliver reliable services to mobility customers, including in the highest demand places and times. Within about six months of close, we made difficult but necessary reductions and achieved operational and recurring capital synergies of approximately $200 million ahead of the planned schedules as we aligned our organization and optimized our satellite networks. We reorganized the company to help drive efficiency and productivity by integrating engineering, operational, distribution, and support functions. We've also added a number of key people to our leadership team, In fiscal year 24, we achieved another approximately $175 million reduction in CapEx, largely through investment prioritizations and synergies, along with some savings due to satellite system delays. We strengthened our capital structure and extended about $2 billion in debt maturities. The state focused on achieving our main operating financial goals for fiscal 24, and as previously mentioned, achieved above the high end of guys. All that while continuing investments to support mobility and government growth, including new implied entertainment and connectivity functionality and additional monetization options for our airlines and next-gen encryption and advanced technology programs for government customers. Now our highest priority for fiscal 25 is establishing a foundation for accelerated multi-year revenue and adjusted EBITDA growth in fiscal year 2026 and beyond as we multiply our total global bandwidth resources substantially with new satellites entering service. Getting those satellites launched and their network infrastructure into service will enable us to continue to normalize CapEx with additional savings in fiscal 26, providing a clear line of sight to an inflection to positive free cash flow by the end of the first half of calendar 25, which is also the end of the first quarter of fiscal 26. GURU will update our capital budget outlook in a few minutes. During fiscal 25, we'll also continue to improve operational efficiencies that drive steadily increasing utilization and productivity from our satellite fleet and partner satellite networks. Starting in the first quarter of 25, we'll also be resegmenting our financial reporting to give investors more transparency into our business areas. We'll also be extending our hybrid multi-orbit, multi-band network services, adding broadband to LEO. We've already executed agreements for LEO components for maritime and enterprise and anticipate providing hybrid multi-orbit to all our mobility services. Our shareholder letter provides a satellite roadmap and schedule. It includes satellite in-service dates consistent with our financial outlooks. The in-service dates are the same as we assumed last quarter. The next ones entering service are GX10A and 10B that are planned for early to mid-2025, calendar 2025. They will support government and enterprise mobility in the polar region. Flight 1 BISAT-3 antenna deployment anomaly is motivating us to reduce the capital cost and schedule for individual future satellites through design approaches that will benefit return on invested capital and further drive down fleet-wide bandwidth fulfillment costs while also improving service quality. Also in fiscal 25, we anticipate introducing the first scalable commercial 3GPP cellular standards based on direct-to-device service for customers of consumer mobile devices on five continents on our existing L-band network and partnering with like-minded mobile satellite services operators. We're working with the Mobile Satellite Services Association to promote a mobile satellite services ecosystem offering the greatest amount of licensed satellite spectrum. We have unique advantages and a technical approach to preserve and evolve our large base of safety service, aeronautical, and maritime customers to next-generation capabilities, building on the D2D infrastructure. We understand the satellite communications competitive landscape is evolving. BISAT entered the satellite services sector by focusing on driving down bandwidth costs to deliver greater value to our customers in terms of speed and consumption volume, and do that via cost-effective user terminals. We offer leading service-level agreements, giving customers confidence their service will meet expectations, even in the highest-demand places and times, and innovations that help our customers leverage connectivity to achieve their operational needs and increase passenger and crew satisfaction. We're adding low-latency services from LEO broadband partners. We've always expected increasing speed and volume value, along with innovative new business models, would drive industry growth through steadily increasing total addressable markets with pronounced price elasticity. That's clearly happening. Now, Biosat has evolved very successfully through several transformational stages in our history. This next phase is very competitive, but with commensurate growth opportunities. InMarsat has a heritage of cooperative engagement with all nations to create timely new services in a unique international ecosystem. We see opportunities to synthesize complementary investments from satellite companies and regional space champions into cohesive multi-band, multi-orbit solutions for enterprising governments, emphasizing global mobility. We're helping foster interoperable architectures that will enable us and others to preserve and responsibly extend our services profitably to Mokivan mail groups. This past year, we faced challenges and embraced a major acquisition. We've taken difficult measures, maintained our focus, met our business objectives, achieving results above prior guidance for the year. As we meet rising customer expectations for quality and certainty, we're capturing more and more real-world data on how, when, and where our customers and their customers use connectivity. We've leveraged that knowledge to help our customers compete and win, dynamically managing our own network ecosystem and shaping future space systems, architectures, and services. We're focused on serving our customers, our employees, our partners, and our shareholders. We continually evaluate our portfolio for opportunities to bring even more value. We're energized by the pace of change. We know we have work to do, and we're up to the challenge. With that, I'll hand it to Guru to cover operational results.

Great. Thanks, Mark. I will cover three topics, financial performance, near-term priorities, and update on our outlook. YSF generated good financial performance during FY24. We earned combined revenue growth of 9% year-over-year and combined adjusted EBITDA growth of 6% year-over-year driven by mobility and government. excluding the one-time catch-up benefits of the litigation settlement in Q2 FY24. The pressure on operating leverage reflects incremental R&D investments to deliver mobility growth, including new in-flight entertainment and connectivity functionality, next-generation encryption offerings, and ramp-up for the YSAT-3 satellite entering service in FY25. For Q4 FY24, we grew combined revenue by 5%, while combined adjusted EBITDA declined 3% year-over-year. Adjusted EBITDA in Q4 was favorable to guidance last quarter due to accelerated cost savings from synergies alongside slightly improved top-line performance in government and commercial segments. The Q4 cost savings were previously slated to begin Q1 FY25. Some of the key highlights from the quarter include we completed the YSAT-3F1 handover from Boeing. Our satellite control center is now operating the spacecraft. In March, we demonstrated speeds over 200 Mbps to an aircraft, and we continue to expect to place YSAT-3F1 into commercial service later this Q1 FY25. Government systems had another quarter of strong demand for information assurance, high-speed network encryption products, increasing just over 40% year-over-year. We also had a strong quarter in tactical SATCOM networks, driven by growth in blue force tracking, L-band services revenue. We were awarded a contract from Northrop Grumman to support the U.S. Air Force Research Laboratory initiative called the Defense Experimentation Using Commercial Space Internet Program, and our Aviasat-3 satellite network will enable users to access high-bandwidth satellite Internet connectivity from existing aircraft or ground vehicles. Our satellite services segment benefited from strong growth in aviation, Commercial IFC ended the year with 3,650 aircrafts in service, up about 17% year over year on a combined basis, with over 1,350 aircraft in backlog. U.S. fixed broadband revenue declined as expected. Fewer residential subscribers were partially offset by higher ARPU. We continue to deprioritize U.S. fixed broadband to support our rapid and higher-margin IFC growth. We developed a hybrid multi-orbit managed service for maritime called Nexus Wave. It's expected to launch this Q1 FY 2025 and is a scalable solution with global coverage, speed, capacity, security, and resilience to meet enterprise-class operational needs and crew welfare. Nexus Wave will seamlessly integrate YSAT-3 capacity as they enter SOAS. And finally, Mark described the full year impact, but in Q4, we extended the maturity of $1.3 billion out of $1.68 billion off Terminal B debt and paid down $84 million with cash. We also extended the InMarsat revolver for three years in an amount of $550 million. We continue to optimize our balance sheet while retaining ample liquidity to act opportunistically. Now some color on the financial results. Q4 FY 2024 revenue was $1.2 billion, up 73% compared to $666 million in Q3 FY 2023. Combined revenue was up 5% year-over-year, driven by growth in government systems, products, and aviation services, In maritime, RKA and L-band hybrid offerings, Fleet Express continued to grow with some ARPU pressures slowing the overall trend, and while expected declines in L-band only, Fleet Broadband continued. Given the recurring nature of the business, shifts up or down in revenue trajectory tend to be gradual. That said, we expect improvement later in the year with new multi-orbit Nexus Wave installations, which also lay a foundation for maritime customers onto YSAT-3. Net loss from continuing operations was $85 million for Q4, up from $23 million net loss in the year-ago period, primarily due to increased interest expense associated with the Inmarsat acquisition. Adjusted EBITDA for the quarter was 358 million, an increase of 188% year-over-year. Combined adjusted EBITDA decreased 3% year-over-year, reflecting an expected decline in fixed broadband service revenue, lower product revenue, which tends to be lumpy, and higher R&D expenditures in the quarter, largely offset by approximately 30% growth in aviation. Sequentially, net leverage declined 0.2 times to approximately 3.6 times estimated combined LTM adjusted EBITDA as of Q4 FY 2024, which is substantially favorable to plan at the time the Inmarsat acquisition was announced. We ended the quarter and year with $3 billion of liquidity, including $1.9 billion cash cash equivalents and short-term investments at quarter end and no near-term maturities and a fully funded path to positive pre-cash flow by end of Q1 FY26. Finally, insurance recovery claims are proceeding well. The first claim submitted was for the I6F2 satellite, and we have received 100% of the insurance proceeds or $348 million. We are in the process of collecting YSAT 3 F1 insurance proceeds, and to date, we have collected about 55% of $421 million expected. Overall, it was a good quarter for YSAT, and we delivered above the high end of previous participatory guidance. Now I'll touch on the three priorities we discussed in our letter. build operational momentum and financial performance of our core businesses. FY24 was a good year achieved through focused execution, continued strength in awards, and we extended a meaningful portion of our debt maturities. Our second priority was executing the Inmarsat integration to achieve operating, capital, and revenue synergies to reduce costs and expand the scale and scope of our products and services. We accelerated delivery of the $100 million in annualized cash operating savings, bringing forward about $25 million of the savings into Q4 FY2024. Capital synergies and discipline allocation reduced FY2024 capex to $1.5 billion, or about $175 million below our previous $1.7 billion outlook as we drive towards positive pre-cap flow. In Q3 of FY24, we announced operating expense synergies, as I just mentioned, alongside the rationalization of our satellite roadmaps, which is yielding 100 million of capex synergies for a total of 200 million, as Mark said earlier. Today, we're announcing an additional 100 million of capex synergies related to network and platform integration. You'll also notice 75 million of capex shifting from FY24 into FY25 due to the ebbs and flows of satellite milestone payments. Third, sustain and improve mobility business growth while advancing the inflection point to positive free cash flow. We are proud of the businesses and trusted customer reputation we've built. Our portfolio enjoys a strong right to win, good margin profile, and long-term attractive growth in mobility-focused markets. We are progressing on putting $3.3 billion of satellite under construction into service. That positions us for profitable growth through higher-performing satellites and partnerships with other operators. We are making steady progress and have line of sight to positive free cash flow by end of Q1 FY2026. Now to outlooks. We are initiating our FY2025 outlook and a preliminary view of FY2026. We exclude satellite impairment charges and the catch-up benefit from the litigation settlement announced in Q2 FY2024 from our guidance. As Mark said, FY 2025 is about setting a foundation. For FY 2025, we expect roughly flat year-over-year revenue with low to mid-single-digit year-over-year adjusted EBITDA growth. We've also provided additional segment-level detail in the outlook section of our shareholder letter. While we are getting positive operating leverage, we are remaining prudent with our top-line guides given uncertainties with delayed OEM commercial aircraft deliveries. Given these pressure points, we've taken targeted measures to resume top-line growth in FY26, building on our strong backlog and anticipated awards growth. We may have opportunities to resume growth earlier and will provide additional updates as warranted. In FY 2025, we expect capital expenditures to decline to a range of $1.4 billion to $1.5 billion. The FY 2025 range excludes the benefit from insurance recoveries as capitalized software and network synergies offset a portion of the FY 2024 expenditures that moved into FY 2025. We include capitalized interest in our CapEx guidance, which is approximately 200 million per year, but it will decline in future years as we place satellites into service. In FY 2024, our investments in our satellite network projects and success-based CapEx were over two-thirds of our total capital spent. It's less than one-third associated with other maintenance and general CapEx activities. A preliminary view of FY2026 indicates we expect to grow revenue and adjusted EBITDA gain in FY2026 relative to FY2025 as a majority of our $3.3 billion assets under construction go into commercial service. Capital expenditures for FY2026 are expected to continue to decline to a range of $1.1 billion to $1.2 billion. Again, FY25 is foundational to multi-year accelerated sales growth, adjusted EBITDA growth, and continued step down in CapEx in FY2026. In an effort to communicate our outlook more consistently, we will be providing all outlook comments based on fiscal years rather than a mix with calendar years. So let me just be clear. Our target has not changed. We continue to expect an inflection point to positive free cash flow by end of Q1 FY2026. Our path to positive free cash flow is expected to be driven by double-digit operating cash flow growth and continued declines in capital expenditures as we normalize capital expenditure in line with satellites going into commercial service. Before wrapping up, I have two important updates to share. As Mark referenced, in May, we initiated a new segment reporting structure to give additional insights into our portfolio and drivers of value. Going forward, we will have two reportable segments, communication services and defense and advanced technologies. We listened to our investor feedback, and we will include revenue data for each major business unit within segments. We plan to provide retastered historical financials ahead of our first quarter call so that you have time to update your models. Secondly, we are continuing to gather feedback, both from our direct outreach and the perception study that is wrapping up. as we enhance communications and planning for an investor day and or other opportunities to highlight market potential, competitive strategy, growth runway, and our playbook for improved returns and sustainable cash generation. We will come back with future updates. Despite some challenges, our operational performance in FY24 and Q4 was good. and we are capturing substantial operational and capital synergy. In FY25, we expect to make significant progress on our satellite roadmap and towards positive free cash flow with good increases in operating cash flow and moderated capex. With that, I'll pass it back to Mark.

Okay.

Thanks, Guru. Before we take additional questions, I just wanted to clarify one point. We have gotten some questions, which is, what is the exact adjusted EBITDA base for FY24 that we're using as a reference for our growth into FY2025? That number is... $1.489 billion of adjusted EBITDA on FY24. That's the base that we're using. And that's shown on page three, the FY2024 year in review of the letter, where if you look at the middle right chart, what we described as the combined base for FY2024 was 15, 1.575 billion. And then we had referenced that there was $86 million of one-time catch-up gain associated with the litigation settlement. So subtracting 86 from 1575 is what gives that 1489. And then the growth outlook of low to mid-single-digit growth for FY25 would be off that base. So just wanted to clarify that at the beginning, and then we can open it up to additional questions.

Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. If you would like to withdraw your question, simply press star 1 again. Please ensure your line is unmuted if called upon. Your first question comes from the line of Simon Flannery with Morgan Stanley. Your line is open.

Thank you very much. Good evening. Thanks for all the color and for the new disclosures on things like the satellite schedules. We appreciate that. If I can sort of dig into that a little bit, perhaps you could just give us a little bit more on the current status of the F2 and F3 satellites, the kind of preparation and where you are and the kind of the cycles for getting them on the schedule for launch and for commercial deployment. Any updates on what's happened in the last 90 days there? And perhaps you could just update us on your thoughts on how you're going to distribute the capacity once they're launched. You've talked in the past about maybe moving some of them from EMEA or Asia-Pac over the Americas. Any updated thoughts on that as well? And also just interesting to see the Nexus Wave product coming out. I think you said in your comments you might extend that to IFC. Is that something that we'll see this year, a similar product set, or any more thoughts on when we'll see that integrated product? Thank you.

Simon, thank you for the question. This is Guru. I'll start it off and then I think Mark will chime in on a couple of the points. On the YSAT-3, F3 and F2, just to point to the document or the letter as well, page 10, actually includes the overall roadmap now that's a new thing that we've added for everybody's reference so on f3 in terms of schedule and where we are we continue to expect to bring f3 into service in mid to late calendar year 2025 which is a little more than a year from now and a key milestone which is thermal vacuum testing is expected to begin this quarter on the f3 spacecraft And then in terms of YSAT-3 F2, we continue to anticipate bringing F2 into service in late calendar year 2025. And we expect the improved reflectors, which include the corrective actions, to be delivered to Boeing in late calendar 2024. And you will notice, you know, just to clarify, we are only giving in-service dates as these are the most critical milestone for our customers and also most relevant for you as they best inform our growth outlook as well. I'll pass it to Mark in terms of overall coverage, and I think you had a question on Nexus Wave. We may ask you to repeat that, but Mark.

Yeah, on the locations of the satellites, remember one of the things we did originally is each satellite can be used in any region. So we have flexibility there. I think one of the things that we're looking at and I think we've talked about is maybe relocating them so that we would probably ultimately have Flight 2 over the U.S. and Flight 3 will go into Asia Pacific directly from launch and then Flight 1 would be moved to the EMEA area. That's That's what we think is going to optimize the use of the satellites. Your question about the Nexus Wave, that agreement is specifically for maritime. We expect to have additional agreements that will go into service for in-flight connectivity. The agreements are kind of optimized for each of the markets in which we'll be.

And this is with OneWeb, is that right?

Yeah, for the Nexus Wave. But we're working, we actually are working with almost all of the NGSOs. And so that, you know, we'll be mixing and matching as appropriate based on the deals.

Great. And just maybe one last follow-up. Just this point on substantially lower OEM deliveries. Is that something that's changed dramatically in the last few days? I don't remember you really last few weeks. I don't remember you talking about that before. Perhaps you could just flesh that out a little bit because it does seem like you've got a pretty good backlog still.

Yeah, so we do have a good backlog. The main issue is following the Alaska Airlines event, Boeing has reduced, it's pretty much cut its delivery of 787s, 737s, excuse me, 737s and a half. And so that affects a fair number of our customers. And so that is a change to what they're receiving relative to what we believe last quarter. And so we're flowing those through into our outlook for FY25. That is one of the factors for our FY25 outlook.

Thank you. Thanks, Simon.

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

Thanks, everybody. A couple of questions. Couple of questions, appreciate that. With the current quarter results, we'll get the new reporting segment. Can you maybe give us a sneak peek into what you think we're gonna see as far as those major business units under those two comm services and defense advanced technologies?

Hey Rick, yeah, this is Shawn, I can help you out. I think what we talked about is we're gonna have two segments underneath the new reporting. And, you know, the goal there is really to better, you know, reflect our strategies and mobility and, you know, our overall portfolio drivers. You know, there's more data that's going to come, but I think some high-level thoughts is that the communications services segment, that's going to be all of our businesses that utilize the satellites. And so that means that that's going to include the government SATCOM as a service, which is in our government segment today. Whereas in defense and advanced technologies, that's going to consist of all of our other businesses. You can think of that as, for example, our encryption business. So within that, we're also going to give additional top line revenue data for most of the, you know, the major revenue drivers in those segments. You can think of that as like aviation or maritime or network encryption. And we'll give more color, you know, relative to the contributions as well. So a couple other highlights, I think, just to kind of give you that as well. An example would be our IFC equipment revenues. Those are going to now flow into the commercial services segment alongside the recurring aviation revenue streams. And then another would be like our antenna systems product. That's now going to be reported in the defense and advanced technology segments. So that's probably some key takeaways. You know, you'll see R&D move along those as well. For example, our R&D in commercial networks and related to our bringing our networks into service. That's going to flow over, for example, in the communication services. Hopefully that's helpful.

Yep. Yep, it is. And appreciate the color that you provided to us before we go into the next earnings season to help us kind of use the quiet time to update models. So appreciate that. When you think competitively about these segments then, so comm services and defense advanced technologies, who do you see as the top competitors that you're competing against in comm services versus defense and advanced technologies?

Well, I think everybody's pretty focused on Starlink in these satellite services markets, so so are we.

So we're positioning ourselves to compete with them.

And from the launch schedule, as far as in-service, keeping kind of where we were, make up some of the delays in launch, we can get the in-service a little quicker. What is the Flight 1 capacity you're expecting that you'll be able to bring into service versus what we originally thought? I think that's just a couple months away then for F-1 to come in service.

Yeah. Our view of that hasn't changed from what we said in the past. which is that we think we would get up to 10 percent, you know, roughly up to about 10 percent of the originally anticipated capacity on the satellite. So that's from a total bandwidth perspective. The big thing is that we still have really good flexibility in how we apply that bandwidth, and so it'll punch above its weight relative to older satellites in those markets.

Okay, last one for me, the directed device, 3GPP, you touched on that a little bit, but there could be something this fiscal year. Can you help us understand how do we size that opportunity? It's complicated as heck, I think, because the ecosystem involves so many people, chips, handsets, carriers, satellite companies. Help us understand kind of what the go-to-market strategy is there and what the opportunity is, particularly since we've got this, you know, the next fiscal year, we don't really have capacity coming online from from flight two or flight three then?

Yeah, so for the D2D market, I think there's at least a couple of different target markets for that. One is literally the direct-to-device market, which is getting a lot of attention. And what that refers to is pretty much any smartphone being able to communicate directly to a satellite. I think there's clearly that's never been done before, and so there's just unknowables or unknowns about how big that market will be. One of the things that we're aiming to do, and this is what we've talked about with the what's called the Release 17 3GPP standard, which is also known as the Narrowband Internet of Things non-terrestrial network standard, that that does enable messaging or emergency communications to smartphones. And so, you know, one example, the emergency communications example is what's, you know, Apple kind of kicked this thing off with their iPhones over Global Star. So we are working on being able to deliver those capabilities through our satellites and partner satellites during fiscal year 25. in five different continents. So that uses the Inmarsat fleet and partner fleets. And one of the things that we aim to measure with that is how many of the phones that are capable of implementing that service are signed up in some way or another for service and what types of use do they get. That's one of the ways that we'll be able to get a better handle on how that market might grow. And that's one of the things we're looking forward to reporting on. There are a number of really interesting and popular phones that will be equipped with chipsets that are capable of performing to that standard. And so we're working with the ecosystem of chip makers, device makers, and mobile network operators to create service plans that you know, that should be interesting to those customers. And we'll report on that as that comes into service. The other market that's also really, really interesting is to upgrade the existing mobile satellite services market. So Inmarsat has a pretty interesting base of customers in aeronautical services, maritime services, and land mobility, which are pretty basic services performed by their fleet, which don't have the existing fleet, which don't have a lot of throughput. That just reflects kind of what the state of the art has been in L-band. What we believe is there's real opportunities to improve that. And so those will be reflected in new satellites that evolve from the narrow band version of directed device to what's called the new radio 5G version. And I think that's where what most people think is really the big potential prize is getting that new radio version, which can do voice and higher speed media services to those same cell phones, in addition to just texting and emergency service. So the satellite set up can do that, will also be capable of greatly enhanced mobile satellite services And those, we think, fit really well with our large base of customers and prospective customers in aeronautical, aviation, and land mobile. So those are the markets that we're going after. It'd be kind of premature for us to put any numbers around them, but we think we'll get data on those as we start rolling out these services. And the one thing I also do want to reemphasize is that This is all consistent with our forward-looking plan for capital investments. So anything that we do here will be consistent with the capital budget guidance that we've been giving.

Great. That helps a lot. Thanks, everybody. Thanks, Rick.

Your next question comes from the line of Edison Yu with Deutsche Bank. Your line is open.

Hey, thank you. Thank you for taking our questions. First one on the maritime partnership. I'm wondering if you can give us a sense on the economics that go to market of this type of arrangement.

Well, you know, so what we're aiming to do with this is to provide services that are both, that include things that, there are enhancements to things that we do, but these would be crew services and operational services to maritime users integrated through a single provider. And then also, as we add the low Earth orbit component to it, we also can provide low latency services, which are interesting for both of those applications for some portions of the crew use and some portions of the operational use. So we'll be integrating that into both our direct and indirect service plans. We haven't announced all the details of those, but there are a few really important concepts that are described in the press release, and one of those is untapped services, which is one of the things that people are really looking for. So the, I think those are the main points, you know, high speed, uncapped, including low latency. And the idea is that those will be, all those services will be delivered through our management of those two services. It's not just two side-by-side things. We're not just going to present two services next to each other. They'll be integrated in a way that actually allows us to, fulfill our commitments on speed, volume, and latency more effectively than either one could on its own.

Understood.

And just to follow up more generally on maritime on the VSAT side, have we been seeing any sort of incremental pressure from Starlink? And I said in the context of I think some competitors out there are seeing a lot of pressure, but the MRSAT VSAT growth has actually been pretty solid. So are we more resilient? And is this partnership going to kind of reinforce that?

So first of all, yeah. So we believe that our broadband maritime service is pretty resilient. It's continued to grow. I think that's not maybe the case for all other competitors. but our KA band service has continued to grow. In maritime, we offer a land, we offer both KA band services branded generally as Fleet Express and the older L band services, which are branded Fleet Broadband. We've, the Fleet Broadband, which is, you know, kind of the L band version of broadband, that's been declining for a number of years. the fleet express is still growing and we have opportunities to refresh the fleet broadband as well. But yes, it's a competitive environment. We see the competition just as, as others do. I think that it's a combination of our services and our market segments that have helped us to you know, to, to, to be resilient. And you know, there's, it's, It's a big market. We believe it is segmented. Certainly certain segments have been seeing more, I'd say, more competition from Starlink than others. The enterprise segments, which do depend on operational and sometimes safety at sea certifications, those are the most resilient ones.

Thanks. If I could just sneak in one clarification. I think you made a comment that was about the growth CapEx over two-thirds. Did I hear that right? And is that for the full year or for the quarter?

I think the two-thirds was around maintenance CapEx versus... No, no, no. Oh, go ahead.

Yeah, I can help you with that. So the two-thirds is just to give you what the percentage of our CapEx spend is. that's related to essentially satellite, ground networks, and our success base, CapEx, for a year, given a year. For a full year. Yep.

Let's go 2024, full year. Yeah, correct. Okay. Thank you. Okay. Thank you. Thanks, Curtis.

Your next question comes from the line of Caleb Henry with QuiltySpace. Your line is open.

Hi, thanks. Broad question just for Mark. I was curious with the Nexus program, has your philosophy around low Earth orbit changed at all? I know you've talked in past calls and years past a lot about LEO, but this seems like a little bit of a shift from Biosense logic from years past.

First of all, I think my philosophy matters a lot less than what customers really want. And so the first thing we're going to do Make sure we're responding to what customers want. There is a desire for low latency. We have talked about that. And so what we do see is an opportunity to combine low latency and geo to deliver a complete suite of services. The other thing that we have focused on a lot is being able to deliver service-level agreements wherever customers are. And so the combination of... geo can be helpful doing that. It can lower our overall fulfillment costs if we can manage that as a single service. And so we get that in addition to the low latency. But we recognize that low latency is something that customers want, so we're integrating that. As I mentioned, it certainly may in a big way this year with maritime, but we expect to do the same in all of our global mobile services as well.

Okay. And then on the integration there, assuming it's starting with OneWeb, they're a KU band system, whereas the current satellites in the Biosat fleet are KA and L band. Does that present any sort of integration challenges? And if so, how do you work through those?

Well, so that's one of the reasons we're starting with Maritime, where shipboard operators seem to be completely fine with the notion of having separate LEO and GEO antenna components. So This goes along with what a number of ship owners and operators have been open to doing. It's a little bit more complicated on other platforms where we may end up with, for instance, working with our K-A-Band antennas, working with K-A-Band LEOs.

Okay. Next question. I know Viasat hasn't given the number in a little bit, but can you share how many consumer subs the company has today and kind of is the plan to continue with that business or do you see that eventually kind of closing as you focus purely on mobility and other high ARPU sectors?

So we haven't disclosed exact ARPU numbers for a while. It's been one of the things that we would point out is that as we, especially as we shift bandwidth from that market to the mobile markets, there's been a relatively steady rate of decline in that business. That's one of the areas that is affecting our FY25 revenue outlook. So even though our revenue outlook is relatively flat, we will be overcoming all of that in FY25. You know, with essentially no major new satellite additions in that year. I'd say going beyond FY25, one of the things that we do see is opportunistic uses in residential. And we think that based on the initial feedback that we've gotten from some of our newer residential service plans, we do believe that we may be able to flatten that out or improve it. depending on the amount of bandwidth that we allocate to that market in out years.

Okay. A couple more questions. On the schedule for satellites, it looks like the Swiss 212 Humming Sats have incurred a two-year delay. I think last year they were supposed to launch in 2026. Now it says 2028. Can you shed any light on the reason for that, and does that have any impact on the plans for shoring up L-band capacity?

No, I think there's a misunderstanding there. I think that those satellites are pretty much on the schedule on which they were originally procured. Inmarsat had procured them prior to the close of the merger. We were aware of them, and That is, you know, one of the purposes that you mentioned is one of the main purposes is to provide additional coverage and resiliency for the safety services. And that schedule is consistent with that.

Okay. And then just the last question. I was curious if Biosat sees any opportunities with the Space Development Agency with the I know a lot of that seems to be focused on providers of the satellites, maybe some of the ground network infrastructure, but is there any way for Biosat to contribute to that program?

Yes. The answer to that is definitely yes. We've been involved in some of the programs in the past, but we do see We do see a number of opportunities to participate in that program on a go-forward basis. A lot of what they're doing is satellite technology, and that's really what the opportunity is for us, is in satellite technology.

So could that look like supplying payloads or space hardware, or is it something else?

No, it's really around payloads. specific subsystem hardware or specific missions of those satellites. All those are the kinds of ways in which we could be involved and have in the past.

Okay, great. Thanks, guys.

We have time for one more question. It will come from the line of Ryan Kuntz with Needham. Your line is open.

Great. Thanks for squeezing me in. On the IFC side, your puts and takes there relative to slow shipments from Boeing to Alaska and maybe some push out in available capacity, if you exclude the Alaska impacts, how would you characterize the growth in IFC from 24 to 25? Is it a demand issue? Is it a capacity issue? What kind of growth are we talking about here at a high level? You don't have to quantify it, but is it, is it in line with your goals? I guess my question.

Yeah. So I think Brian, I can take this and, you know, we've had, um, you know, some good momentum this year with respect to new installs. And, um, you know, even though we're seeing some of that shifting into next year, we're going to continue to have a good install, um, activity into the year as a whole. So I would say that, you know, as we look outward, aviation is, you know, a big part of our growth, both from services and products.

Got it. Helpful. Thanks.

And maybe to clarify there, just one thing, because just to bring it back, you know, I still think that we're expecting around 4,200 aircraft in service by the end of fiscal year 25. Great.

Thank you for that. With regards to the quarter that's in the books here, Q4, we saw a step down in gross margins. Is that primarily driven by, you know, pricing in these maritime and fixed markets or something else going on there on the gross margin side?

Yeah, so, you know, overall in gross margins, I think, you know, it's multiple components. We saw some cost growth, for example, in our government business and the programs. We also saw a bit of You know, if I go below the lines, we saw some R&D expenditures. But I think if you're looking at the gross margin line, it's predominantly a little bit of cost growth that we had on the program side.

Got it. All right. Thanks. It's all ahead. Appreciate it.

This concludes the question and answer session. I will turn the call to Mark Dankberg for closing remarks.

Okay. Thank you. You know, try to give you a good discussion about our initiatives and our approach to competing in this evolving and what we feel is rapidly growing global mobility market. We've got work to do. We know we have a lot of work to do. We know we also have a lot of opportunity to grow with those markets in a rewarding manner. So thanks, everyone, for participating in this call, and we'll look forward to updating on our next call.

This concludes today's call. We thank you for joining. You may now disconnect your lines.