Q4 2020 Earnings Call
Ladies and gentlemen, todays conference is scheduled to begin shortly please continue to stand by and thank you for your patience.
[music].
Ladies and gentlemen, today's conference is scheduled to begin shortly please continue to stand by and thank you for your patience.
[music].
Welcome to buys that F. Why 24th quarter earnings Conference call you host for todays call is gonna be Mark Dankberg, Chairman and CEO you May proceed Mr. dankberg.
Thanks, Good afternoon everybody.
Our earnings offer.
That's cool 2020, and fourth quarter results, So Mark Greenberg Chairman and CEO.
On the call a Rick Baldridge, our president and Chief operating Officer choppy.
See Oh Robert.
General Counsel research and Treasurer, and Paul <unk> corporate development.
And as you may have seen in a press release announcing this call. This quarter were introducing a new format quarterly earnings for the initial results business discussion and other special topics that we normally would have covered in opening remarks, and Pfizer now contained in our shareholder better I'm talking about type.
So the show out to the bulk of it I missed call her more in depth excuse me.
Before we start Herbert will provide our safe Harbor disclosure. Thanks, Mark as you know this discussion will contain forward looking statements. That's just a reminder that factors could cause actual results to differ materially additional information concerning these factors is contained in our FTC filings, including our most recent reports on form 10-K and form 10-Q.
Copies are available from the FCC or from or one thing that's funny contract more sick or.
At or.
Letter described.
Fiscal year 2020 with record results and ER and we've taken some additional steps to make sure that we've got a secure financial position going forward.
Unfortunately, this is against a really terrible backdrop.
I'm going global pandemic, not going to spend too much time, reviewing what was in the letter so that would get to accurately.
I'd like to highlight a few key points.
<unk> revenue operating cash flows in adjusted EBITDA Records for fiscal 2020 ended with our balance sheet and how it shape and slightly lower leverage so we had in the third quarter.
Our diverse portfolio with vertically integrated service and product offerings across multiple markets and so part of our duty insulate us from the negative business have accident pandemic.
With our up in flight connectivity business being the only one materially negatively affected.
Well, it's hard to predict the future impact to the ongoing crisis. We can take a continued towards our goal of shipping the first buys that three payload later this fall.
Endemic does increase schedule risk in the form of supply chain and hopefully disruptions.
We have taken cost reduction measures earlier this quarter to address the downturn in commercial in any kind of activity.
We've been through other global financial crises World, we understand the importance of financial discipline and the potential for strong companies to emerge even stronger.
Well I've never in room to do so this time and we'll continue to act appropriately hasn't situation evolves.
Well, we don't expect those cost actions to fully compensate for the downturn and then five connectivity, we do anticipate stability and growth opportunities in our fiscal 21 and at this point better growth opportunities in adjusted EBITDA and I didn't really.
So that's it kind of running remarks, and we'd be happy to take questions.
As a reminder to ask the question you'll need to press star one on your telephone to withdraw your question press the pound Keith. Please standby was a composite kuni roster and once again that star one if you like the asked the question and I first question comes from Philip Cusick from JP Morgan. Your line is now open.
Hey, Mark Thanks can you hear me.
Yes, good though.
Great. Thank you.
Maybe start with the cost cutting that you discussed in the letter what was done late in the quarter or early in the first quarter this year and how should that impact projects for or spending going forward.
[noise] Nevertheless, Rick voltage.
We did a whole series of things so we in general Oh.
We had a way off of a reduction in force so.
Well over 300 employees.
We.
Our going through a series of.
Additional furloughs in areas that are impacted near term I'm just from a work schedule standpoint.
We.
Froze salaries for a large part of population except for the a a group of people making.
Under a certain dollar threshold for the year.
We we froze hiring in general we never totally freezing because there's some.
Oh look we've got to still you know that we still have to effect.
And then we we took action in a whole series of other.
Overhead expenses.
We felt like we could avoid or delay here in the near term but.
In aggregate, it's it was.
[music].
Over $100 million, a cost reductions and here.
Okay, and and the but any sort of it's disgusting.
The second part of your question is a domain. We have made area is in Uh huh.
Right conductivity and support those are the main areas and because of the.
Downturn there, there's just a lot less demand for work in that area. That's an area, where do you see that cost reductions.
We also took robyn.
Ken.
Right.
Should we think about any projects that are being put inside aside from the the Arab business.
Not really.
<unk>.
And as my pack.
So what we're trying to do is we think there's opportunities for for additional new projects.
I I assume one of those is that the Leo constellation can you dig more into the.
Sort of.
Likelihood or or timeframe of of information of finding out if you're gonna start spending that money and and sort of range for us what that Leo constellation might look like.
Okay.
So the first step is Oh, you know Weve already filed for a India SOCOM automation pad for you. So basically what our filing doesn't how was it took lowers the orbit.
Uh huh.
Me too we.
We had a purpose in mind for the MEO, but the the biggest.
Factor.
And wanting to lower to the the altitude is really the amount of funding that the FCC is aiming at voting indication. So go they put a particular threshold on it which was 100 milliseconds and Uh huh.
You know what what are the things that we've been.
Following closely is what the rules are for bidding for those subsidies.
And just as a reminder, Oh, we had participated in what's called the cap to connect America fund subsidies. So were really get understanding of how they work and what the implications for those rules, including the move agency rules, so quite a while ago, we did start.
Looking at what would be involved in lowering the altitude and.
The license out we were just recently granted.
So that.
It does involve more satellites than we would have you didn't show.
But the satellites are a lot smaller and less expensive than they otherwise would be but the main you know the main attraction is that.
Yep.
[laughter] think things are evolving, but assuming that the.
FCC.
Does allow we owe to be eligible in the phase two part of the rural digital opportunities fund the opportunity.
For funding as far in excess of the increase in and what the calculation would cost. So that's that's the main reasoning behind it. The main point I'd make is that we're early in the process and stuff. The first step is to.
Just to follow the amendment that we did that would allow us to use the spectrum that were already granted data whatever altitude.
Hey, I guess, you took to add a little bit more color.
Uh huh.
Yeah, you know that.
We spent a lot of time looking at trade off on a on a.
Surface economics on bandwidth economics for all these different applications, we participate in and.
Right.
You know when would we put some other stuff in the latter I'd be happy to go into more depth of good questions around what's in the letter but to the upside if at all is that you know the thing that really.
The thing that scales in driving bandwidth costs down our network and and payloads and wouldn't payloads being part of the network and so what we had been working on in and what Weve made really good progress on an adjusted the reason for it probably is basically a way to get a lot more.
Capacity through lower orbit satellites and anybody has done before and that's really what the point is a we think that having been through quite a few reasons, but having fewer satellites with a lot more bandwidth per satellite we believe it a lot more economical and doing the opposite not as much.
Our satellites with much span.
That's true, but until we were able to make a really good progress on that and that kind of the economic underpinning that makes it worth we're filing for.
Okay is it is it fair to say that if you didn't get a pretty substantial amount of funding from the government you wouldn't be building now.
He wouldn't be planning to double the satellite constellation.
The funding is certainly the most of you know that that's the most obvious attraction too.
I wouldn't say that there are others, but that's been really big chunk.
Okay. Thanks, guys.
Thank you and our next question comes from Rich Valera with Needham and company. Your line is now open.
Thank you Rob good afternoon, I'm, just a follow up on the commentary on the cost cuts sounded like you're making and I wanted to make sure I was clear on that 100 million of annualized cost cuts, but that's not going to fully offset the impact of the lower I have see revenue is that correct I just wanted to make sure.
Sure I understood the magnitude of both the cost cuts and how much impact you're expecting from the lower I F.C.
Flights.
Yeah, it's really just.
Over the next year, what about so to that rich, but it's not doesn't all go forward because you know it. These are some of these are temporary right. So things like salary premature wont go on in perpetuity. So.
So it's not you can't project Oh, well in the future certainly the head count reductions, we made should carry on but at some point in time they have to staff the business that we have so.
And yeah. The so what we said earlier was our cost cuts.
Not completely offset the impact that we're seeing and I see.
In fact, we anticipate any I've see.
Business outlook.
Got it in presumably at some blend of both service and fewer terminal sales is that correct.
Yes, correct, Yeah got it got it and then you mentioned I think that you had some success in shifting bandwidth from I.F.C. applications to consumer can you just talk about that how seamless that is and is it can you can do that one for one just wondering how efficient that is and does that change at all your thoughts on that the Phil.
The timing of the feel of the satellite you know as you look towards the D. S. Three launch.
Well [laughter], yes, those when are we can we can apply bandwidth then we share bandwidth.
The.
Ah yes.
Yes. So so we're doing some of that you know where we're keeping an eye on the bike market. So we can you know we can respond to that I mean, there's one you know what are the things that.
Sort of in April that is the fact that there is some amount of churn in the residential so you can anticipate.
No.
How how much bandwidth would free up anywhere.
You know all that stuff goes into our important thing so we can bias.
Huh.
The mix of applications, a little more to those that have.
More demand though.
The not much more to it than that.
Got it and then the ARPU was was pretty impressive I'm wondering if you could give any color on kind of what.
What drove the strong ARPU in how we should think about that going forward is it sustainable or is there potentially even upside from from these levels.
But oh.
Okay. So there's multiple factors that have gone into the girls who are some of it is a shift from hope we've talked in the past shift from wholesale to retail some of it is migration from.
Customers that have had older fans to newer to the newer bands and so it's just turned on the older customers replacing them with.
Customers have chosen.
The higher value and we're not yet have to.
At the top of ARPU.
But the growth rate in ARPU will be.
Well or this year than it was last year, because we've got a lot of the migrations that have contributed to the growth in the ARPU.
The but given another factor.
[laughter] things, we talk about a pretty fair amount is that bandwidth is really the dominant issue in providing residential broadband service and this you know the current environment is definitely showing that because we've got a lot more people doing work from home or school from home. So there's a lot more high bandwidth that.
Locations as well and then the other thing, which I think is gonna be a very significant factor going forward is steady migration from broadcast TV to over the top broadband video. So we are seeing even though you know even among the relatively.
Recent base of subscribers, we have more interest in the higher higher bandwidth way instead of saying that have.
No more more bandwidth usage.
Yeah.
And so that no that's probably added.
Increment to ARPU.
This quarter well starting.
The current first quarter that'd be I'd say a year ago.
And all got out there. The other thing you know the other thing is when it comes to for instance, you I think what to think <unk>.
I have mentioned is that.
One of things, we're seeing now or people, who really didnt have broad band or fixed broadband service at home because they had access to broadband network and let's say that you took their mobile services at home people like that or a running out of bad right. They can't there's not enough bandwidth.
What their needs at home so they're much more interested in.
Services like ours that have a lot more bandwidth or.
Well I think that are those things in the near term will probably 10 to drive ARPU I think you know what we've said for one thing to get I've got three is.
Not expect ARPU to continue to rise because weve Jamie.
Wider segment of the market.
Got it that makes sense, thanks for that Mark.
Welcome.
Thank you and our next question comes from Simon Flannery more promotion Stanley. Your line is now open.
Great. Thanks, very much and thanks for all the information the shareholder letter very helpful.
On Viasat three and I'm told that can you just talk about how have you actually had delays so far or are you just stop being cautious about the steps and maybe you can just to think about where that the challenge us. Our do you think you still have a shot of making that made 2021 timing, which is likely to slip.
Later, and then maybe Sean you can help us with some color as we think through the Capex in March and implications. So as we run up to the Viasat three long term beyond thank you.
Yeah.
No I'd say, we're being cautious we've had oh.
A lot of challenges.
Yeah.
The performance.
Because working on the payload requires both us and our subcontractors down people working together, so I think pretty resourceful and that in.
Hold up pretty well or not.
Perfect, but we're pretty well, but ER.
There's going to be challenges.
And.
As time goes on.
Probably run into more people that get exposed to the virus and that will have to work or how.
You want anything because Oh, we would be we had one critical sub goes down for two weeks as result of.
Result for the impacting their facility, but other than that they've just been minor.
Yeah.
And Simon I think it's fine yeah, [laughter] say on that as you know I find 20, well, it's a little bit lighter than what we were anticipating so when I think about that for next year I Kinda plan on that I've checked out looking happening any share happened into next year.
So I I think that back on Capex and then when you look out you know anything yet airplanes, Alex Barron a shareholder letter we talk about it.
We we think we're going to be able to say comfortable within our target range on the leverage side no creep up a little bit with that normal out of like you know cycles of the timeline, but you know well within triggering.
Great and then just one one follow up on there's been a number of the players in the industry have passed being under financial Jurassic. During the last couple of months do you think this my kinda lead to a realignment in the industry or from a consolidation perspective, both through the.
Satellite operators and they kind of a third party providers et cetera, and any opportunities for you to take part in that.
Uh huh.
So there certainly paying attention I think that.
I think if you look in you know and then any debt.
Players that have been under the most directly pretty different business models that are we.
Yeah, I think one of the things that really been surfaced is that there's really not all I'm you know complete alignment of interest between Princeton satellite operator and these are.
Distributors and other kinds of companies that provide the value added services and customers such as governments are airlines are.
Maritime or oil and gas or whatever that there's clearly there.
There's just contention over margins and strategic value and so I think that Oh, we're.
Vertically integrated model is difficult.
It's just more straightforward. It's it was hard to develop we've invested a lot it it over the years I think it's working well.
It'll allow this could basically be totally aligned and focused on our customers and there's not a lot of assets out there that are built around that business model. So that makes it tricky for us to go to be able to finding things that we wouldn't go after.
[noise] pick the things that were mostly after would be.
Specialized skills or especially as market access that would help with our regarding model.
The other you know the other thing that we're in really focused on is.
This bandwidth value proposition and there aren't a kind of assets out there that.
Have a the same type of productivity sorry.
As it can be repriced in the market and so that's one of things were going to look at that.
Are you know even with the repricing, it's not crew that they'll come very close to two what we can we can do.
But those are the things that will look I think.
We've been in general that poor focused on.
Attracting customers then in sort of maneuvering around competitors and so a number that really going back to our trajectory that much but do you think I do think.
They industries will consolidate and I think we'll come out with a stronger strategic position.
That's what we're focused on.
Great. Thank you.
Next time.
Thank you and our next question comes from Rick Prentiss.
With Raymond James Your line is now open.
Thanks, Good afternoon.
The U. employees and families are all okay. During this difficult time.
Couple of questions if I could.
First can you remind us of what that target leverage soon is that you would creep up too.
And I think you called out in the shareholder letter, which again appreciate that new items, the timing of the government contracts, maybe slipping into not early fiscal 21 or does that mean kind of more middle of the or small winter.
Okay, and Ted Yeah, I don't know libraries question, I think where we can look like that and I didn't know three and a half or right around that you know around that range. I think it is kinda that copper level and then as far as say the government contract you know what were Japan and finance.
You know delays isn't diminishing of delays, it's not lost their current often business concoction.
Things are moving into the right with them and additional like weeks not months.
And if they're not right.
On the government.
Okay.
Fair amount for the government bureaucracies, having trickier time adapting to work from home them commercial customers are some of that has to do with security. So it has to do with well I'd have to do it security.
Ill do.
Typically machines that people can use.
To do their jobs, so that I'd say, the things that will help out along will be better process and remote security and Gore.
Better.
More people being able to work from from their facilities I think those those are kind of the two things I would hope.
Work through that administrative back on.
Okay and should still be able to ship then catching up because you probably had built some of the stuff. It really is more just on the receipt side of it it sounds like.
I know, there's also whether you need to have government approvals at chip and time and again those can be little tricky to pick up to.
People are.
People are doing the best they can it's just unexpected and there's really no precedent for it. So I think that's I think thats, what well we Jim.
Customers are working through but there's a there's some issues on both sides of the final acceptance and the final order anish issuance.
Okay, and you talked a little bit about though the Rudolph auctions coming up first can you remind us of how much caf two funding subsidy you were winners for when that might start being received in the second question related would be any concern on what competition for more fiber.
For deeper into the network might mean, either from from Rudolph for a future infrastructure build maybe coming out of covered my team.
Okay. Okay.
Okay. So on the.
I'm not arda, there's current plan is 16.4.
$16.4 billion in phase, one and about 4 billion phase two.
You know the.
Not that time in cap to not all of the funds were awarded and so we would expect that some of the funds would.
Likely but from phase one to phase two could be a fairly meaningful number also the dynamics on hard enough I think will be different than they are.
We're on Caf II, the couldn't because it could be more satellite.
Kinda like a.
Competition in that might end up.
Basically, meaning some areas our third awarded.
The fiber fiber doesn't.
Didnt go that deep into the Caf two auction, we don't expect it to go that deeply into <unk>.
Our top option.
It's kind of in the 2020 fiveish percent.
For the Caf Caf, two but used a disproportionate amount of the subsidy.
One thing what things that we look at and we take into account all the time is basically kind of.
Overlap of our subscriber base and our perspective subscriber base and how that involves with these subsidize areas and it's not super.
You know that did of course, there's some correlation to it but it's not super impactful and you know, mostly we don't compete with fiber I think the fiber the or the growth in fiber is.
Let's say for about a 6 million if it were 25% it'd be about a million and a half owns most of the rest of the stuff. We feel like we can compete with a pretty pretty effectively.
Great appreciate that color and again best wishes everybody in this difficult time.
Thank you Rick you too.
Thank you.
And then next question comes from my Crawford from B. Riley. Your line is now open.
Thank you so mark since the FCC subsidies could make Leo business changes tenable.
We look.
One when constellation is being tenable. If you consider the initial equity holders is basically subsidizing whoever is going to pick up the pieces and build out the rest of that constellation.
Okay.
The one one is Oh I don't think I would go so far is to say that.
NFCC sub sea would make a constellation in general and well see.
If you're I'm, just kidding I mean, if you're throwing up if you're investing $10 billion in a constellation getting one or 2 billion, probably not going to be decisive in making that economically good but if you know what the locations or what the range of subsidies are and you can design a system, that's really kind of.
With that we aim to that I think it way better shot at being able to do that.
Oneweb the big issue with Oneweb in the context of its up to you I guess, they didnt have anywhere near enough total bandwidth over the U.S. to to have a meaningful impact on that one of the.
Well you know after that well wildly low latency of latency requirements are hard the bandwidth demands that are associated with BARDA Oh very you know those are much harder and so I think bandwidth is going to turn out to be the.
The most Titan metric and that's why we focused on that so you got there.
He's systems are just impossible.
Of trade offs and.
We don't see other systems that have the right balance of tradeoffs that we could achieve ER with this particular constellation.
Okay. Thank you and then related to.
Leo constellation.
Liability would be costs, Oh ground equipment.
And.
Ooh, particularly Uh huh.
It's flat panel antennas. So do you see that there's a hurdle that.
Through brute force will be overcome overtime or is that still just prudent to be two leases.
It's not going to be overcome through brute force that's for sure and it's a it's a child I think you know that is the whole notion of Uh huh.
Flexible beamforming is that the core of what we've been working on for a decade. So I think we can do it and we are we can I think that we have some pretty big advantages in ground terminals at the user side and in the a gateway side and that those things are going to end up having no. It.
The impact on the economics, so I just wonder.
If you look at the chart that we said they're not.
It doesn't overcome the issues a lifetime and.
The fact that you just can't.
[laughter] cluster non geosynchronous satellites over.
Any particular territory you got to deal with the orbital dynamics issue, but I think though that we're really strong and all the ground elements and I'm quite confident that we can deal with a lithia user terminals apart.
Okay.
Thank you and.
Yes.
Five side.
Word it gets subsidy and build out small Leo constellation, then that presumably would delay yours shift well to generating positive free cash flow above the investment that you've been making into.
Basically buys that three constellation. So I think previously you said once the first two last time three satellites I'm sorry to load up and then that's when you move shifting to you know positive free cash flow never looked that <unk> is that still the case or when do you think glass that hits that that's muscles.
Okay. Good fortune. Thanks.
Asking that question should it sounds a lot of People's mind so.
No. It does not change or you know, where we really said Oh a on that.
You know that.
That's the way we've way we make money is by putting bandwidth in space and then monetize and so we have had a plan for.
Building additional satellites beyond bias that three talking about five or.
This particular constellation doesn't need to be in service until 2026, and so we're looking at.
Like you said, but being able to reach free cash flow positive with the second satellites in orbit, which would be much sooner but is that.
With that with Ah, so they'll be much sooner than that timeframe for deploying this constellation.
<unk>.
The answer is whether you know we're.
We understand the reasoning behind getting to free cash flow positive and a and and will you know we're embracing it so that but that doesn't mean that were jumping on three satellites and stop no. We're looking at whatever it is whatever it is that drives incremental returns and you know being able to.
Pete in an environment, where.
Where that a male subsidy maybe available makes for a really attractive returns so that would be one other ways that we'd look at allocating capital beyond the first five statthree satellites.
Okay. Thank you and then final quick question just relates to ER launch window. So.
Assuming you can over time or supply chain challenges will get the pay about it and then the only greater phone can you know did that to the Spacex or whoever is little to your first launch well is that window or getting jammed up by five delays in 2020 or do you think that that'll be.
The that not all beyond baffled by the time, you're ready to go next year.
So we've been we've been working with our watch provider and we have primary one and the backup and we've been working with them to make sure that we've got a bunch window that fits with the completion date or the satellite.
So where we're in good shape, we've got multiple we've got maneuvering room, if if we do get delays as a result of this a pandemic but no.
We have already worked through that issue.
Okay. Thank you very much.
Thanks, Mike.
And thank you.
And our next question comes from Chris Quilty, I'm guilty analytics. Your line is now.
Hi, Thanks, guys. It a question on the I F.C. market and maybe it's a little bit generic but how are you thinking about the market and its recovery and sort of what.
Hi actions are you seeing by customers in terms of.
Their ability or willingness to install new aircraft have they just signaled to you that hey, we're on hold for the next several months.
Is there the possibility of the actual aircraft getting retire that are currently installed and when do you think they'll get back to a more normal rhythm of installing aircraft.
Okay. So it and are very difficult to generalize among the different carriers because.
They have.
Different strategic orientations, there Joe is that it's up somewhat <unk> randomness of the timing of this relative to what their own business cycles were about what you know whats situation there in their.
Near term versus long term focus so what I would say in general for the carriers that we're working with their children.
There it's a two friends issue it's for a number one is just to make sure that they are.
That they survive through the pandemic.
And that they keep you know the keeping workforce and their assets intact and their customers.
Their customer value propositions and communicate customers and so what part of it so near term.
Issues, but the other part or on the on the better best carriers is what so I'm going to be like on the other side and what's the role of conductivity in that and so we're seeing among the airlines that we've been working with our existing customers and new ones is.
Absolutely continued interest in it.
In in flight connectivity, probably expanded interest in it.
I would say that.
Yeah.
There's.
No. There's a lot of discussion about what the shape of recovery will be I think that most of the carriers.
Our probably looking to retire older less efficient aircraft.
So I think you will see retirement sleep retirements.
And you're seeing some of those announced already as an example from our perspective.
We have tended to capture new airplanes, a and so I think that we'll see fewer retirements than some of the other I invite providers, we'll see.
Yeah as an example.
Matt there's not really been a lot of discussion about the Mac rounding, but the Max is one of the new you know the most fuel efficient planes out there that comes back that's good for US 787 was also.
I think were little bit disproportionately.
Tilted towards the newer playing so I think we'll see probably a little fewer retirements, but the other thing that's coming plays out if there are planes that are grounded.
And may not returned to service that quickly that's a great opportunity to upgrade or install in flight connectivity at effectively lower costs and it wouldn't be apollo's change there in use and that's not lost from the carriers as well so that that's a pretty good that's a good.
For two study for us.
Yeah that cover most of the.
Right.
Now with so many aircraft park this would be a great time to install aircraft, but no given my first priority of preserving cash I'm, assuming not much of that is happening.
But I guess the the question is do you see the long term profitability the aircraft.
The airlines.
Restricted in the number of passengers and the load factors they can achieve that.
It was profitability overall is her where are they going to cost I mean are they going to reduce their investments in inflight connectivity as a service offered to customers and is that a concern.
Okay. So I think that Oh question number one is.
I don't think we don't see airlines in general looking at if I kind of activity.
As a money loser not maybe but that's not what their intent is I think what that attentive is to use that to add up money maker and the way they would make money if either through you know.
Better fill factors better ticket pricing or.
A better better yielding and price.
Variable pricing that think that there are different strategies I think those are not yet proven.
I think that one of them the things that.
What are the things that we've been saying I think it's catching on do that for airlines, they're not really going to monetize in flight connectivity and must everybody can use it in unless engagement is high and the things that drive high engagement are often high bandwidth. So that's a that's been our competitive entre.
For years, and I think that.
Airlines, but there are definitely airlines that are looking at how.
So you look at that more seriously how do they integrate that into other into their business model and can we help them with that and I think that we can and so that that's what are the things that are you one thing that happens.
Yeah, it would seem to us.
Tons is that when money is really tight people are generally more receptive to to new business models, and we generally have pretty creative business models, and so I think that the idea that we could work with the airlines to help them.
Improved their business model through higher passenger engagement.
Rob high bandwidth activities that I think that's getting more traction now because of the limitations on the budgets and the fact that they've got the opportunity. So how whether you know we can pull that across the finish line with a number of carriers will will see over the next few months, but the opportunities are clearly there.
Yeah.
That's good thank you for the explanation and a question for Sean I mean have you seen any issues with the bad debt.
Yes, I would say that that we didn't have a better pressure points and the infrastructure side and then.
Yeah, I think you bought recently filed one west and I think I'll add a small amount every Paul now and way we partnered but then there than expected thing a lot more.
Great and a final question here I hate to ask the Leo thing because it's kinda non relevant near term, but is there a regulatory precedent or that you can site of changing from a a meal to a Leo I mean I know.
Spacex for example has done some filings to change the altitude of their satellites and they're fighting Amazon and others with what are relatively minor altitude changes I can't recall, an example, and I just don't know what the regulatory process would be for that kind of a shift.
Hi, and this is a key ban system correct.
Okay, Yes, our filing it can be the ER there.
The.
I don't I definitely don't want to go into about it.
Each on that but our filings our public you can see them. So you can read you know you can read the filings.
And you can understand what our arguments ever basically the filings are primarily spectrum filings and the burden. The main burden is to show that the constellation.
I have modified would not cause any more interference to other constellations then would have been generated by the original filing that that's really about protective and that's the tests that are Spacex and others have gone through when they have adjusted their attitudes and ER and theirs.
That's a data in our filings that show that that's actually the case that we in some cases, we'd actually caused lessen interference even with more is how do I sort of over altitude and all that in the reasons why are explained in the filings tenders charts, and there's charts and graphs that support the arguments, but that's that's basically the justice.
At the Alpha to ship itself isn't the issue. It's the company. It's the basically the compliance with the spectrum license.
I understand thank you.
Thanks, Chris.
Thank you.
And our final question comes from Louie Dipalma with William Blair. Your line is now open.
[noise], Hi, Mark Rich Sean on Bruce Good afternoon.
Larry.
There's been a couple of questions about Capex and leverage should we still expect capex for the next three years. So fiscal 2021, 2022, and 2023 to be and a 900 million to one.
Billion dollar range.
Yeah, I think I think a changes is okay, you're talking I said that they are that device I think I'm trying to my office [laughter] contractor.
Okay and.
And Sean.
She that's all by like around 40% or so.
Following.
The build out of the device that three.
Pack is that the type of like Capex, Seth that you're expecting.
I I think what I say apps and you know follow on you know satellite investments and things. We made you end up.
Got it obviously, bringing down the satellite enough and stock.
The significant drop off yet.
Okay, Thanks and.
[laughter], maybe I, just don't think about capex as a fixed variable and everything else is varying right, we're going to treat everything.
Everything holistically so.
I've heard the truck I had my others I'm spending on Capex operating expenses and we have variables in in our revenue and earnings. So we're going to treat it all adds a symptom.
What you know what Sean just described is correct based on our assessment of what the situation is now.
Gotcha.
Thanks and related to that the government division Mark for any delays that may happen for government procurement and in the near term.
Should we expect an elevated.
Second half the year four or do you expect something that the orders that you previously anticipated for fiscal 2021 to just shift into fiscal 2022.
No I think put the point, we've been trying to make is that it seems right [laughter].
It's always hard to predict the future right now so all of the.
Sort of the theses that we've had that of work to grow our government business. They're all in place Ah things are going well I think that's what we're trying to communicate but the main thing is that the execution of certain orders and the execution of acceptance on certain products is is gonna be slow.
Until either people can work from the office, where they can adapt a little bit better to work from home that that's really what the issues. We do think that that will be resolved by.
By the second half of this fiscal year, and so that would account for some slippage you have I mean, basically think of some fit some revenue and earnings have would shift from the first half to the second half.
But overall things or you know things are.
On the government side are a good I mean, it seems to be overall business as usual with good opportunities you know.
We we did talk about that billion dollar I'd Q that we just one that was really goods or substantiation as well Oh, we do have some of these customers that are.
If it is by the work from home.
Sounds good and related to the billion dollar I'd like you for the mid GTR, yes.
I think during the quarter vein systems, well announce the the acquisition of Raytheon's airborne tactical radios, and Rockwell Collins GTS assets.
These two acquisitions has any impact on on your business I know you compete would be age systems through there.
For the long solutions joint venture.
Yeah for late 16 or be a ease business is pretty much expressed through drs up for that they have.
Well, then I would say on the edges a there was some in the old.
Rockwell or two can and various business there were some overlapping in our old you adjust business, that's probably the only a main area and I know, it's supposed to be kept architectures with the old Magnavox Fort Wayne for wind businesses that they should they kept yard.
So to the.
I'm a bit he perspective that would be it would be the a.
Parts of Raytheon Fort Wayne and there's there's a little bit of overlap there, but it's not substantial.
That's all.
And final one for me, you announced and slate connectivity contract when for American Airlines, low Balling 77 cents Japanese boring as well delta that you're able to disclose or did you have anything brewing prior to.
Well a pandemic.
[laughter].
We're not going to kind of not going to comment on that one thing one thing I think we can bring up that we.
I haven't mentioned otherwise is that our backlog of.
The airplane has grown.
From including from some new customer Oh, we can't announce anything or the customers who are now when they're ready, though no announcement they are but what we are still winning we after winning business.
We can't comment on any particular airline.
Great. Thanks, Thanks, Mark Thanks, everybody.
Excellent.
<unk>.
Hi, I'm showing no further questions I'd now like to turn the call back to Mr. Dankberg.
Okay. So they really appreciate everybody's.
Taking the time for political spend more of it on a on your questions.
And if anybody has to be back what liking the feedback on the side on our new format, we'd really like that other than that of it puts speaking again next quarter. Thanks.
Ladies and gentlemen, this concludes todays conference call. Thank you participating you may now disconnect.
[music].