Q1 2021 ViaSat Inc Earnings Call

[music].

Welcome to science yet.

Ask why 21 first quarter earnings conference call.

Our hosts for today's call is Mark Dankberg, Chairman and CEO you May proceed Mr. Dave.

Hey, thanks very much.

So we published or shareholder letter last night.

ER.

First quarter results and Luckily detailed.

Yes isn't there.

When it make a few points.

Before we currently questions.

Well no results came in came in a better than what we expect looking at things from.

Our opening in the March.

EBITDA grew.

8% just on revenue, though just slightly lower.

Despite all that headwind that we had from.

The code situation on especially our commercial and quite connectivity business.

No. We've got I think very good diversity in our business space and that was really but helped us.

Have such strong results.

Government.

Let's stay really well.

Fixed broadband shows.

Very significant demand out there what folks there.

I'll comment on cost management.

It's like connectivity business was actually you probably little worse than what we had expected in that first quarter, Oh, we're still able to grow adjusted EBITDA.

And overall car.

New contract awards were really strong which.

The bottom confidence for the rest of this year.

That's kinda we've been talking second theme here is my second main point, which is an opportunity for us we had a lot of opportunities in our government segment.

I'm very strong.

Hi, Dan.

So activity and how do you.

We see opportunities for our aeronautical business to grow out of the low point.

First quarter.

And our international businesses, we expect can be able to start expanding after some delays that we encounter in our partners encounter.

In the first quarter again due to a cobiz paint.

He got.

I want to make that is just that we're making good progress on a on our bypass three.

Satellite program.

So the coping pandemic have definitely creating some issues for us to overcome but.

We've got we've continued to make good progress.

Yeah worth of twice in the program, where they payload integration is coming together, so we're testing larger and larger subsets of the payload and we're making really good progress on those costs stones.

We were aiming for being able to ship that payload at around the time that we report next quarter doesn't look like we'll have shifted by then but will be close enough that more definitive data we can report.

We reported earnings next quarter.

So with that are being happy to take questions now.

As a reminder, if he would like to ask a question. Please [laughter] number one on your telephone keep.

Thank you kind of stars in the number one.

So just a moment you call because my day rounds huh.

Yes, exactly they probably take questions I'll, just give you our safe harbor well. The here. He has his discussion will contain forward looking statements, that's where my head. It factors could cause actual results could differ materially additional information concerning factors that something in our E filing, including our most recent reports on form 10-K and form 10-Q copies are available.

Well from the actually came from our life.

No question.

Your first question is something that kiichi with JP Morgan.

HM Okay. Thanks for getting up early March [laughter] I Wonder if you can start with government last quarter, you had some delays from from getting signings, what's the status of Oh I'm getting.

She signed off on at this point.

Oh, Yes, I think the to the thing that we highlighted last quarter the biggest issues where.

Direct government prime contract, especially ones that involves the security classification. We the two main issues were some cases, just being able to get.

Kick it to get the contract signed off from the other was.

Acceptance of products that required guys security.

And I I would say good kinda with it as we expected.

And it's.

Better dotcom, it's kind of the way I put it.

How does that play into I noted in the <unk>.

Shareholder letter. This morning, you say that government systems, a momentum a building back after the year you anticipate those signing issues needing to be cleaned up for that or is that despite the assign interest.

Oh, I think things continue on the trajectory that Ron.

No.

That's consistent with our outlook for that segment of your from your other good thing is that the backlog that we've got is really good I mean, we had good good awards. This quarter. So we've got back on going in so we always have in each quarter, a fair amount of product orders that go against the.

I'd I acute contracts that we have so the so.

Oh, it's not like kids every everything's all locked up but.

Based on the way things are going the outlook is let's see seems good for us to continue to build a revenue and earnings through the year as we usually have in that business.

Okay. That's helpful and then it sounds like bias that three timing.

Getting pushed out a little bit you mentioned some special on pressure on shut down a little bit later should we look at that still being being a launch in calendar 21.

Yeah, that's what we're aiming for I think I Cook said before the.

The.

[laughter] you're shipping the payload back to Boeing is a really big milestone because then from there on the rest of the program is is really pretty straight forward as a.

No two production program for them.

I think the last thing that we said was.

That we were aiming for around the middle of the year. So.

I'd say, we're certainly aiming to happen.

Next year, so I think we feel a lot more comfortable giving specifics next quarter because at that point, we'll have we'll be will be quite close to being able to ship that peel it back to going.

Sounds good and then last one if I can the equity raise hundred 75 million very recently.

Can you help us understand number one.

Why you wanted to raise equity and number two the timing seems a little bit strange.

Post the quarter pre pre earnings release why do it then thank you.

Okay.

Two.

The equity raise was with to investors a inner core and.

And really it was kind of catalyzed by or relationship with inner core who we see is a really helpful partner in our international expansion and so we had been working on it for.

For.

Quite a while quite a few months and Uh huh.

You know it came together at the time that it did I would say the.

Overall market rents are very dynamic and so we've just figured that it would be better to execute the deal when when it was ready as opposed to cook waiting even weeks just because markets are are so volatile no no. That's what explained the timing once weve.

But the deal together outflows to expressed interest in in participating in that same deal.

Yeah I'd say.

It wasn't until now so I think as Vicki yeah. It though.

That's fair.

Yeah, and then I would say that the Oh.

Just in terms of why I mean, it's up the auto environment that we're in so will we see a bunch of opportunity and I think that having additional equity base gives us more maneuvering room could deal with that.

To deal with the opportunities that are coming up and can.

I would you know because we never can say anything until things are done, but there are definitely opportunity, though [laughter], where I think this will be helpful and if they come to fruition I think people understand sort of what were the kinds of things that we're looking for.

Understood Thanks very much.

Thank you Phil.

Your next question is suddenly treaties with Raymond James.

Great. Yeah. Good early morning Hope you guys are doing so to your families are pleased as well in coated 19 sounds like business, obviously doing well.

<unk>.

Question with all of them Phil's question. There then Mark you mentioned, there's opportunities out there as a shareholder letter talked about potential strategic growth opportunities evaluating success based investments can you elaborate a little bit on that about what's interesting out there what you might want for what you might need in the array of your did.

Versus my portfolio.

Uh huh.

No [laughter] art, it's hard to give specific.

No I think we have a pretty good track record.

So you know doing.

Your strategic transactions that are just.

Generally they're kind of tuck in type things that help us either with specific element technology or weird in specific market segments or possibly in specific geographic areas and that's those are in general the kinds of things that we would look at it would be in general things.

That would be helpful to either depend to broadband services.

Possibly in the possibly some things that we might do in the or or an article thing.

And then also that you know there's also some.

Potential opportunities to make interesting value propositions and some of our markets that though that could be in April but some of these potential transactions.

I'd say, that's kind of fame that we're looking at.

Okay, and obviously a lot of discussion with the our dog off the rural digital opportunity Fund you talked about at some last quarter.

Other satellite operators have started talking about it as well can you update us as far as where are you think.

Satellite providers can play in the art off given the latency requirements, but then also mark if you could expand it more broadly into what's happening in the competitive universe, a lot of incoming calls about fiber moving deeper into the marketplace and also all the speculation on the new leos as far as.

What they'll be as far as a competitive dynamic, particularly versus your your businesses.

Okay. So those are all good and fair questions right.

The our Dot program has reached the point, where no no no potential participant can make any comments on our dog whatsoever. So we're taking that very seriously. So.

I'm, putting it off the path pretty much everything yes.

How about the newly goes as far as what a competitive threat they might close.

Well I'd say that the wheels are kind of evolving the way that we expected a I don't think it's I don't think anybody should be surprised that the a amazon.

Kuyper system, you know got FCC approval, I think that's going to.

That's clearly going to complicate live situation because.

But just from from orbital dynamics perspective.

Good Okay, it's going to get crowded in that region of space.

Those are things that I think were.

Addressed to little extent, a in the Fccs noticed approving approving there's still some work to do.

I think that does a main themes that we've been saying Oh I'm arm Leo is that the.

The.

Cost of.

Of useful bandwidth is going to be quite a bit higher said it will be for our Geo satellite.

So we think that's a pretty pretty strong advantage for us in most of the markets that were in well also who also have.

Lots of coverage, especially in the ocean areas, probably before the Leo systems too.

So you know we're comfortable with our situation I think though I think it'll bring.

Growth to the market I think it'll expand the market and we've been anticipating as we've done each time, we launched new satellites that we'll be able to improve.

Got a man with how we can deliver to our customers in each of those markets. As you know as we are Josh catalogs.

So I think that's kind of I don't think anything's changed.

This quarter relative to those major points.

Maybe when you can elaborate a little deeper says I hit a couple of set top subject.

Obviously military and government feeling quite strong where are you out as far as maybe moving.

Your products beyond like special forces is a mainline forces in that backlog and the opportunity set for the government business.

I would I'd say, we're continuing to make make good progress there I think that's one of the underlying reasons that our business has been growing kind of so steadily for such a long time.

He.

The basic theme is the one that you said, which is to get into kind of the first responders early adopters in a lot of these markets and then have that example would be something that some of them more the mainline forces can see.

And also adopt and.

You know it takes.

It takes work has one of the other teams that we've.

Described a fair amount in our government business is that a lot of our business is not in what are called programs of record it's really showing.

Operational capability is better.

So so important or valuable that a customer basis. It was figuring out how to allocate money to its to acquire that stuff and so are you know the main areas. Some of that example that we've given our being able to the first get into special forces.

Go Air controllers with things like handheld link 16 to be able to get.

A little color small tactical terminal again for late 16 onto rotary wing platforms.

More recently, we've been getting on were rotary wing platforms for.

For satellite broadband and in each case is generally there was some.

Some part of the special forces of each service that are adopting these things first.

We see that continuing to go usually those start small and they just continue to grow there's not.

Often like a major event that occurred as well you'll see it's kind of a major event was getting on a particular platform for a particular application with a particular, usually that's that's generally how these things start and then they expand.

I wouldn't say, yes, the other thing that's going on as we are seeing.

I think the big theme.

Overall.

Pivot to Asia Pacific or more focus on dealing with near here, that's kind of the you know those the way that it's phrases near beer.

Competitors is shifting of out of the priorities in deal D. and that's also creating really good opportunities for us some of those are bigger opportunities, but they also often generally start with.

Some form of study or technical prototype, peaking or demonstration or isn't it.

Those go well, then, though they'll pass them into larger programs.

We make progress on those we may bring some of those out over the next few quarters.

Okay, Great did you get your nose under the 10, and then wish you Oh, well your family employees. They will stay safe in this crazy times.

Thank you very much right you too.

Your next question is from Simon.

Yes.

Great. Thank you very much good morning, Mark I want to be could talk a little bit more about I've see what if you've been seeing in the last several months in terms with the ramp up and not I'm. It seems like you've got a few more planes flying perhaps than you know the industry overall is that continuing to build truth, so well to third quarter.

And what about the pipeline I spent a lot of focus about deltas plans to go free Wi Fi and on other potential opportunities in the pipeline is that all on hold given kogut and.

Yeah, the pick their kind of thoughts one by the environment for the industry overall, but any color there would be great.

Okay.

So this was obviously a [laughter] like mix the both counting time ever for our commercial airline customers and the you know the progression out of the bottom of the market is you know.

It's happening it's happening slowly, but it's happening steadily I think what princeton's one of the first thing that we've seen see this a little bit from a report is that the proportion of claims that are fine as a lot higher than the <unk> portion.

Passengers better on those planes and that's really the biggest issue for the airline to deal with the good from some statistics are I think you know when we looked at it if you use a.

Yes, Hey, check says a metric.

<unk>.

We we saw those down 90% or taken made about a 80% in June and.

75% in July so things are coming back I think as you have the planes come up a little more.

I think you'll see more planes coming back into service and then you'll see you'll go to go back and forth.

On that that's hopefully the way things will go.

The airlines themselves, how I mean, just.

Great empathy for them, just because of the issues that they're dealing with.

I'd say.

So there the attention that they're paying two inflight connectivity is it's insignificant I mean I think.

As anything they're seeing this is probably even more important than it was before that people want to be connected while they are fine.

See you know clearly a where a cost input for the airlines and so we've had a lot of discussions with them about [noise].

Helping them through this time, but I'd say all those discussions have been constructive no centered around how do they are out of day and we improved the offerings make it more available.

And maybe expand.

Good ways that it's offered so I think we're making progress on that and that's the last part which is supposed to be up the other part I would say is becoming.

More evident as one of the point that we made and theirs is that because you know matters because we've been on newer planes were probably dealing with a lot of fewer retirement and some of the other oh I see providers, which I think is going to help us coming out of that situation then too.

The last part which is activity among the airlines that either.

Don't have it yet or we're going to.

Expand their service you know expand their fleet or expand span the markets, where they offer service.

And you know potentially in the Delta case, where airlines are talking about switching service providers. We're we're still seeing really robust activity.

A lot of virtually no both great.

Lots of virtual meetings with airlines and I'd say, we're I I'd say, we're optimistic but any anything that we described will be.

To schedule, that's convenient for airline customers, but that's what that's how that's how we'll.

Hopefully be able to announce a things, but the other point that we made in the shareholder letter is that.

Oh, the orders that we already had entering into the pandemic pretty much all of those are still intact and we still expect deploy them once the market picks up again.

Great and then turning to the consumer broadband, obviously up very valuable product in a time like this.

How are you how does your capacity availability out to continue to satisfy demand. There are you pushing up against limits of Viastat, two or do you think there's still room to continue to add subscribers.

Well see the basic famed as well we've seen before which is at the demand tends to be concentrated in high demand areas and certainly that's where we [laughter] think I think that's what's happened in the industry is that the places where there wasn't high demand now there's a lot more done.

<unk>.

And there's also more demand in the lower demand areas, but.

Not the same as in the high demand area. So so we are.

Supply constrained in.

Meeting the demand I mean, that's that's been a factor I think thats from our perspective, that's a good sign going into the along to advise had three is that it will be able to offer.

Plans to more people and a lot more attractive plans as we get more bandwidth.

I think also though we do have room for growth in what are the lower demand areas in the U.S. and we certainly have real growth internationally and so that's in the time interval between now and when we advise at three in service.

It will be the main areas that we're going to look for growth and.

Well do that on the international side by being able to engage some of our distribution partners who are paying.

Mostly had been kinda temporarily.

Sort of.

I found it there constrained because of the virus, but are now.

It's kind of you're seeing in the U.S. has a that people are determined to open up the Rick economies. So I think we'll see some of the international side I think we'll come up with some new plans and programs in order demand areas that no help us grow there, but in the overall our long term trend is.

Yeah.

Good to be.

Yeah, well long term trend.

Good to be improving the service and so as the demand.

It's increasing we talk about demand increasing in two forms one is.

Subscribers already have using more bandwidth and then.

Lots of people with lower end services switching to services that can offer higher speeds and I'm. Our bandwidth that is creating some you know some some stress for us in the high.

Demand areas. So what are the things were going to be focused on is maintaining service quality. We're you know were when things we talked about last we're pretty excited about it you know being in a top 10 in the U.S. News report for a price peas, and it'll be like <unk>.

To preserve and built on that reputation and so the demand that you're seeing now is definitely making that making that a little bit harder.

Right understood. Thanks, Mark.

Thank you Simon.

Your next question Nelson reached Atlanta, with Needham and company.

Hey, this is Chad TV gone for rich Valera I was just wondering in terms of the recent equity rates. If you could you know give us any more color around potential business opportunities in Latin America that could arise from it.

Okay, well put up you know, who we mentioned dinner Corp has a strategic partner in Latin America, and so that is going well, we're looking to expand our relationship with them and that is you know that will help us.

With service distribution in a number of markets and also in some of the.

Specific services that we can bring to those markets and that.

That you know I think I think it's.

A little less that were needed funding in order to do it in a little more that we really valued the strategic relationship and the skills and resources that inner core brings.

To those markets and so the I wouldn't necessarily dry connection between that and investment into Latin America, I would or.

Tucker think about it in terms of kind of.

Well, we think is a strategic relationship with a really strong partner in that region, and then giving us more flexibility maneuvering room for strategic opportunities.

Go wrong globally across the businesses and across geography.

Great. Thank you.

Thanks.

Your next question comes from Matt do you have any yard with my Green.

That's good morning, and then also thank you for making that early or makes a difference when when calling from Europe's thinks about [laughter], our pleasure I sort of [laughter] I had a question about all coolant on the top of light service, obviously very impressive progression.

At this quarter and what I was trying to understand is how much is linked to some of your consumers.

Popping up on their existing plan all how the consumers actually moving up the lot around the plans and taking a.

Bigger packages, but I'm really trying to understand how sustainable that increase in New York reasons. It just a spike because of the current situation or do you think this is it more structural.

Okay. So.

You know what are the main reason.

Okay. So wonder if there's been ongoing reasons in the ER and the growth of ARPU over the last two years. So we've talked about in the past, which is generally a higher proportion of retail subscribers over proportional altos.

Subscribers and then also.

The fact that we the aimed our services that kind of higher value higher bandwidth fans, but in the last quarter there was a.

Additional ingredient, which is the upgrades that you mentioned and the way the way that our plans work Oh, we tend to kind of minimize a top up in terms of purchasing additional gigabytes. During the course of a a month and more to having plans that have higher speed.

More bandwidth allocation and that's that's a trend to happen.

You know we we'd go.

We expect that the ARPU is going to continued or two to right. So the way it.

Has been there will be no I think it'll be.

Just a number of dynamics that are going to affect ARPU or whatever we are you know, especially as we go into buys had three era. We expect that will in general offer service plans at lower price points and we do now so I think we expect go longer term.

ARPU to come down the other thing is that we expect our international business will continue to grow and that will have a mitigating impact on our total ARPU in the fixed broadband business and then also.

We'll be expanding our Wi Fi hotspot sites and that that has a little bit of funny impact on ARPU.

Vigil users spend much much less money per month, but there tend to be a lot of them per site and so that's why wouldn't you put all that stuff into the mix.

You know revenue per site.

Which is kind of the way that we're starting to look at as we get this mix of sites or revenue per site. So I don't [laughter].

I don't think it's going to move.

That dramatically in either direction.

Mike It might trend up a little bit or it might trend down a little bit just depending on the mix of growth in each of those categories over the next few quarters.

Thanks, and just just following up on the mechanics up the upgrade so if I'm, a consumer and I'm on the package stay a LIBOR to 25 or something like that and I want to move up.

Hi, I'm isn't quite easy I mean, there's no compared to the mill I might have been I'm, okay, and Conversely to come down about a de or yeah.

Okay, Yes, yeah, I mean, we get we yeah, we give customers the ability to go up or down.

Great and then actually calling up on your your point so.

In the emerging markets that have you seen many noticeable pickup <unk> in volumes or you know in programs by governments, but realize the important salt.

Ben connectivity to these time to [noise].

In markets, where youre right.

Okay, we've definitely seen.

The issue of.

Government government interest in in making broadband more universally available, but definitely seen that in the U.S. at both yeah and every level whether its federal state.

Local municipalities in counties.

Every level, there's interest in that so I'd say strong demand there a internationally I would say.

The same theme, maybe not with quite the same intensity.

The especially domestically as we've gone too much more school from home when work or home, that's really spike that interest because you know because of interest because of.

Interest in.

Fairness University education equality of opportunity those those have been strong teams in the U.S. I think well I think we'll see similar themes internationally that we're probably not as.

Ah embedded in those markets to be able to discern them as quickly or to get the the imbalance as quickly as we have come to you asked I think that we will we will see them I mean, that's an example in Brazil. The you know what are the main premises or for our biggest problem. There was cut to reach a real schools in rural communities. So I think.

We will see it I think as we become more.

Embedded in those markets that that will be more of a factor for us but.

Notion of a universal kind of activity I would say is getting more and more attention on a global basis.

That's great. Thank you very much.

Sure. Thank you.

Your next question, that's a micro sites with B. Riley.

Folks. They my quick look close a fixed broadband adds around six or 7000 look order.

Oh I'm sorry, if you ask if gross ads, where that are or net yeah, I mean net.

No go that route at all.

You mean net net ads.

The net adds were 9000 I was wondering what the great yeah.

Oh.

I would take churn has been relatively constant slightly improving for us and so you know for the net adds to go up by that amount that eats up kind of a corresponding improvement in gross adds.

[noise] Rightsizing kind of wondering I know, it's turned has been improving especially as you had a better fit a customer what these high value play as always we'll just wondering if I could sneak them what around where churn is right [laughter]. So you're you're pretty close Mike I mean, it's just you know what kind of thing.

Way from trying to get all these and and then the actual gross and net adds in this space are becoming less and less.

An indicator, where our business going, especially if we talk about rent enterprise customer right.

Some of these other community Internet sites and saw the and they all differ from a standpoint. So right now we don't have blended ARPU, but we will a future probably so we're trying to figure out how that.

So to give you guys some indicator, where that's going that's probably not the current gross and net adds numbers that are going to be critical.

Okay. Thanks reclamation.

Switching gears.

Gears with your.

Hybrid.

Adaptive network concept or.

But that gives you a more relevant flexibility to.

You are.

Particularly government customers is there.

A chance you could get.

Pre buys or pre commitment on five Centsthree network or before are you actually launch.

Hi, Statthree, so from that commitment from the D.

[laughter] purchase capacity.

Oh.

Well I'd say, yes, and no I mean look the way [laughter], let me look into the government, where the government business work you know that it's difficult for the government to make multiyear commitments. So.

But in general what you see is that when we go out when we get on but they would get onto new platforms.

Aaron Aero platforms, or even even with a lot of the ground based terminals that we provide.

The main reason often for our customers to acquire that equipment is to get the services that go along with that and so cool form that those usually come in our.

Yeah, they basically they're either from contracts with options or they they can acquire service under these ideas acute contracts. So you wouldn't necessarily see us making announcements that says you know ex.

Organization. This purchase this amount of bandwidth over a five year period, but when you put you will see is it will get a contract for a six or seven year period with the base year in a number of option years and that's cool that's a form that that happen that that occurs.

It's.

So they're not exactly take or pay contracts, because they may or may not execute the option years, but our experience has been bad.

Once they take those contracts that so that you know that's really been quite predictable after that so that that is the mechanism here. The other point that I'd make.

What's goes along with this is that.

Oh, yes.

Most.

Defense activities take place outside but you know the continental U.S. or U.S. territories, and so the fact that we have buys have three coverage and that we have these global partnerships with other satellite operators.

Means that you're one of the attractions is being able to use that bandwidth wherever those forces maybe in some cases, there the room everywhere globally in other cases, there, they're more likely to be geographically predictable.

And then and then the other part.

Say that actually a good thing for us is that kind of Oh, yes, I'd say almost all anything you're seeing this I think going to Oh is that.

One of the big benefits of of arc terminals or that they work on not only our assets or other commercial assets, but they were kind of government organic asset as well. So they generally don't bake that into their plans as was wells, how what that access they expect to have or need.

On the government systems, I, Couldnt, WGS and not what's going to use on the commercial ones.

But I do think that [noise].

If things play out well.

[laughter] kind of on the path wrong that we'll have a pretty good amount, but it isn't this.

Oh My God by the time you know these calls satellites are launched it but it'll be in the form that I described.

[laughter] that can help.

Yes, yes. Thank you and then just since you mentioned the global coverage so.

Oh, I mean, we're gonna get some.

For my family of networks globally.

Which then also can be used as part of such I'd like to say a hybrid adaptive network concept for de customer but.

<unk>.

What about the repetitions of Uh huh.

Uh huh.

Potential.

Say aggression in that space, where.

Oh, I mean, how hard for someone that's where I think it would take a pretty sophisticated nation state to try to saying directly target say geostationary satellite.

Yeah, so far up and not moving around but if you had if there was a.

Uh Huh, how many people would have the ability to say going on a mess up or you know a whole orbital lower thorburn region remote would be that you know repercussions or something like that.

Okay. Okay, so well I think the area that you're touching on is really go up.

So it wasn't one freight one phrase it uses for that now its resilience.

You know in Ah Theres actually.

Ah Theres Theres, a acronym that's surfacing and becoming more common in in the.

In D. for describing a situation, where though how about having primary communications and alternative contingency and emergency communications and silver different levels.

<unk>.

Tried to attribute different levels of resilience to those so.

The notion of actually [laughter] based at pretty high on a scale Oh, absolutely one of their concerns in the most extreme cases.

And I would say that the.

[laughter] different forms assets are it's it's off because you're seeing impact is when can we read the news everyday which is.

For example, especially recently people are talking about using directed energy weapons against a little worth orbit satellites as an example, which.

Brings the cop, though it brings the economic cost down obviously there's.

Could be so.

Nor miss geopolitical consequences of taking action like that so so that's where that goes into the more extreme space attacking.

Geosynchronous assets much more difficult and there are targets that are.

You think much more valuable than and commercial assets in that space, but I think that the the main theme and then you mentioned at the beginning with our hybrid adaptive network. That's the main theme across this is resilience is being able to access a broad range of networks and one of the.

Things that we've been pulling together 'cause being able to show defense customers and we just did a very.

Very good or well attended demonstration on this topic was.

Yes, using a single networks any platforms could switch pretty seamlessly I'm.

Broad array of commercial and government assets in geosynchronous orbit, which are difficult to target so that that.

I think that's a really attractive value proposition, especially when that can be done with terminals that are already highly proliferated throughout the floors. So that's one of the main themes that we're working with him and I think that you will see.

Satellite operators from each orbital regime.

Being interested in participating in something like that to the extent that you can check.

Access to non geosynchronous orbitz on terminals that work well with the.

Look the government.

Assets and the other commercial assets at kind of more of the current thing.

Okay. Okay. Thank you very much.

Thanks, Mike.

Your next question is from Chris Quilty. Please go see enemies.

Hi, Thanks, Mark had a question on the backlog I mean in the old days. It was two thirds mids can you give us a sense is kind of what it looks like nowadays.

In terms of the mix and along those lines in the quarter I mean phenomenal orders.

Was that some somewhat unexpected where these you know.

The government, it's been trying to accelerate Ah orders and that in this difficult time, where were the most of these kind of on the schedule that you were expecting.

Okay first one [laughter] appointed always make we want to bake it in both the good quarters in the back orders is that owners are lumpy in beauty and so I'd say the.

The things that we the contract that we received are all pretty much things that we've been working on I mean, there's no bluebirds or things that jumped out and it was it was a good awards quarter for us I think that.

We have or one of the points I wouldn't make.

Good before I just want to reiterate is that a proposal activities for us both in terms of.

Quantity and value our hospital, so I think that.

It's a it's a good yeah. That's a good thing you're not going to get you're not going to get more orders I knew then you submitted proposals for.

The in terms of the makeup of the backlog.

It's.

More snow.

It's definitely not two thirds, so I mean, it's more much more diverse base and that so we just.

Link 16 business itself has become a lot more diverse so we have now multiple products within that and mid as a proportion of all of our total tactical data links.

It's actually gone down a little bit because of a diversity.

Oh products in there and then the other area. That's the other areas that I think are growing for us in general.

Right and I'm not.

Intending to <unk>.

Describe them as.

So nothing intending to describe the instantaneous makeup of the backlog today, but I can tell you in general the things that are.

That do get into backlog to some extent that are helping one is the information assurance appliances, especially if the government goes more and more to cloud services. That's an area that were strong in.

And then.

You know the satellite broadband part has been really good for us that's a very diverse base more and more platforms. What are the things that we've talked about.

Couple of quarters go was how our defense mobile broadband services businesses as big as are bigger than the commercial Aero one and now you know it's obviously, it's it's a run rate it substantially bigger than that commercial Aero is and then the other the other area that is there's a good growth area for.

For us.

His integration satellite and terrestrial tactical networks and being able to merge those two together.

It is something that's really interesting tool out of our customers and so that's been one of our fastest growing product areas.

Okay on that point, what a launch did you sneak that link 16 small sat into orbit.

And can you talk about.

You know real interesting.

Networking opportunity there, but how does it play in currently to the thinking that.

DARPA or I guess more specifically Sta has in terms of the the information layers.

Okay.

First thing is Oh, we do have our first small sat anymore, but it's not going 16 satellite it was for a different mission.

We can't describe commission, but it was our first a prime small fat and do it completed.

Well over a year ago, but only was recently launched and I I think our customer is really pleased with the performance of it and I think that creates additional opportunity for us in that particular market space. The link 16 satellite is probably a you know maybe a year ish away from from watch.

The.

Okay going to DARPA and ask you Hey, you know the there there.

Well, there's one area of interest in small sats in general what are the things Sta has talked about is the notion of a kinda transport layer, which would work with.

A number of different sensor systems, and and are targeting systems to provide transport among sensors and shooters and think of the as kind of a.

Generic layer until you what you've seen from them is.

And I and.

There's multiple programs and they're not necessarily totally coordinated among themselves, but you've seen programs like fact backward where they're looking at sort of up to us.

They could reuse for multiple missions and now you're seeing interest in specific types of payloads. What are the main things that one of the main points I would make is that.

You know the communication systems, the transmission systems out there talking about in these aren't necessarily what you would consider to be just plain old broadband systems, they're not necessarily looking for broadband pipes, they're looking for for.

Specific connections among certain types of sensors, and and targeting or communication networks. That's definitely an interesting area right now I would say, it's it's more in the research and proof of concept.

Pays the.

But the as you know the other areas for us. So we're really interested in is you're seeing more and more interest.

Among a variety of government organizations interested in mission specific smell has.

And this deal there's lots of different missions that are out there some of them would.

Sort of shore up or replace where make more resilient ER.

Systems that we've had for quite awhile, but are viewed to be more vulnerable to.

Either physical or electronic countermeasures.

Some of them is just hey.

With more individual satellites can we have a greater.

You know greater presence and get more timely information and so that's that's.

Really the market that we're looking in a lot of that will come from.

Got it kinda good familiarity with the mission to the different organizations that are going to be involved.

Well, that's going to be kind of a single universal a system that gets applied to all these things exactly that.

Help clarify that at all.

That doesn't and maybe just a quick clarification too if you can remind us this bundle a the current work on that link 16 satellite.

Ah that's airports research back.

A final question on the Iraqi market or I guess I'll just be Blockier, which is you know global Eagle is for sale, a global Gogos CA business.

Can be bought everything else is a mass.

Yes, we woke up $1 a press release that Viastat acquire something.

That I have seen sector.

No I don't generically without responding to individual couples why would it make sense, who know what do judge I'm on price paid whatnot, but.

The pluses and minuses in terms of industry consolidation.

Okay [laughter].

I think I think it was saying things that I think well is repeated you know before but the generally the value proposition that we're offering is to be able to provide connectivity.

You know to everybody on a plane and basically everybody the thing to do whatever whatever they want to the internet and it's really difficult to do.

Using the terminals that are on them out of the planes and that some of the competitors have theres just not the space segment resources available to be able to fulfill that value proposition and that's especially true given a high you know peak to have.

Average demand Oh, how do these fleets see when they have you know.

Hub airports or destinations that that attract a lot of quite Smokeable times a day.

So.

For us to to acquire assets that don't align with that value proposition, probably not something that will do.

Unless you know it somehow part of a strategy that.

No that an airline wants us to take to use for poor transitioning or something like that but but I'd say right now.

You know were but we feel like we're in a pretty good position our business spaces diverse the airlines have confidence that that will be there to serve them. We've got a really good reputation for liability I think one of the other thing so you've seen.

Yes. It was is that other terminals or installations have had reliability problems independent of bandwidth availability.

In the airlines or they're just generally very concerned about reliability.

I think I think it plays well for us.

We don't have enough and certainly don't want to come across as overcome [laughter]. We have we have a good.

Good value proposition that that people respect I think it's in demand and we're seeing continued opportunity. So that's the more likely path that you'll see us take over the next few quarters in here.

The other thing I would say is there are gonna be opportunities to present, maybe some unique and new value propositions for us that we're working on and that that could help us grow as well.

I understand I think your parceling talking about the the amount of key capacity that exists and wont be coming on line a little extra years, which is pretty limited outside on Leo.

You also have popped in the cost about.

Council of usable a door vulnerable Paula.

As a way down in the interim sort of expand.

Your airline coverage is that still a focus for you or are we getting close enough to know the launch at the device that three satellites that you just pretty equal to stand on and pure <unk> path.

No. So we have we've.

Okay, Yeah, so yes, Oh your observations there are correct.

In terms of the availability of K. you bandwidth in general.

We have shipped.

And we have fine dual band K K you in commercial Air now are we did only habit on government, but now were a fit on again on the newer wide bodies. So that's good I think you know I think that there could be opportunities in K K you I think one of.

The things that were also.

Pretty pretty focused on or building.

Lower cost lower profile antennas that or more agile and will bring a not only all of the or.

Came in global satellite and that will bring in some of these non geosynchronous satellites as well and we've already done that with existing it has some of the new terminal products that were working on well do that to a greater extent and bring it more non geosynchronous systems as well so.

But we aren't we aren't doing those things I think the general aim that that our responded too in the.

Well to go to my preference question about the government and that.

After network I would let us move them a mobile satellite I think that I think that's a theme that you'll see play out in commercial markets as well.

Because as.

The the number of participants grows the peak peak average demands.

Increase and the number places where they occur increase and so.

Being able to access multiple orbital systems. It is a really it's a really valuable aspect of what we do and having you know having the agreements with those operators is good I think the airlines I. Appreciate it just in the same ways that the government do I think that's there are a little bit less concerned about the physical or Europe Kevin.

Yes, but they are certainly a sensitive to congestion and availability and reliability the satellite or those factors still carry over into the commercial market.

Right got appreciate it.

Thanks, Chris.

And we'll take one more costly my colleagues Louie Dipalma William Blair.

[noise], Mark Rick Sean and Bruce Good morning can you hear me.

I think that learning.

I hope all is well in Carlsbad.

So far so good thanks.

Great.

Yes, it appears to be moving ahead with their mpower constellation with Boeing and plan to target. The U.S. Department of Defense can you discuss your partnership with <unk>.

Yes, yeah for the the terminals for that constellation you and he had seemed to be on fairly friendly terms relative to the other competitors and was SCS related to your your bookings and that satellite systems group this quarter.

Okay.

So we're not going to announce any we're not going to.

Give anymore detail in backlog.

One other things on so just on Mpower. One is we absolutely expect if they're gonna deployed and system I think that.

I think satellites will make sense.

Going in knows how to build them.

No wonder why don't.

I think that there's I think it's over its a very interesting non geosynchronous system, Scott just like any other it's got its own strengths and weaknesses.

We have worked with Sps, we work with them on all three d. for quite a while we've done demonstrations or whatever.

For defense customers in particular, where they've been able to switch among geosynchronous and non geosynchronous satellites.

That our customers like some of the features.

Some of their non Geo system, and they like being able to access the absolute like having access to multiple different systems through common terminal hardware. So all those themes are true I think that you think that.

Yes.

No partly because of.

Their experience with those Uribe.

Appreciate the value of being able to deliver services through a broad range of terminals.

From their perspective.

Having terminals in the market that can access their system is a plus I think from our perspective.

To be extent that they are a partner that we cooperate with.

Can deliver a service to a customer.

Yes, you know in some cases better than what we couldn't do or in some particular rotation or under certain particular and conditions. That's a good thing or for us and for our customers I think that you know our focus is really on.

Quantity of bandwidth will have probably with box had three little broader coverage then.

And then and power will in terms of geography, but empower might be able to because of just because of the went operating might be able to bring.

Peak speeds to bear for specific platforms for instance, in a particular area and being able to help do that is good and one of things I'm going back here. What are your other question. There's one thing we announced quite a while ago whether relationship with F. D. S. Four phased array terminals for an hour and so that programs.

Progressed really well.

Generally I think we don't talk about are phased array.

Business as much as other people do but I I think we're probably be leader in low cost high performance.

Page race at Kb in now and we may expand that into can you as well, but certainly that's one of the things and we're working with.

Both Fcs and and other customers as well is to be able to get those phase range terminals out there that will work.

Better when he's not using the system. So there's there's the opportunity for us there and I Hope you know I think we do have a good relationship and doesn't yes.

Sounds good and also during the quarter, you announced a partnership to bid on the Skynet rap services contract do you anticipate that skynet and the future well like utilize I'm biased that three as.

Now part of.

You know a multi satellite no commercial government owned architecture.

Yeah Okay.

So yes.

You know we do.

We do a lot of business with the UK or defense Ministry of Defense, We do have you know.

You look at kind of our defense business.

Main focus is U.S. next focused business was called the five I spoke to which includes UK and a interoperability among.

Oh, the five Andas certainly.

Certainly a high priority in them ago vessel with NATO.

Let's say skynet itself has a long history I think the UK is working on trying to figure out is there a way to transition from the current.

System to a broader to a system that's god.

I think you're more capability, probably ties in more space assets, and it's kind of a more comprehensive program and what they've had in the past think fairly recently feeling really finally went ahead on kind of a interim next generation that that's what's been anticipating runway, but we think rhonda.

I think run a good team that's a good contender for the long term program.

Yeah that they envision that it'll probably be a little while before that.

Long term program comes to fruition, but again nothing in the short in the short answer though it yes, I think that in a in their vision of upturn program. It would go beyond just dedicated skynet space aspects that I think that's one of the things that.

We bring to our team I'm sounds good thanks, Thanks, Mike.

Thanks, well now turn the call back Tomorrow, that's my closing remarks.

Okay. So a lot of [laughter] since I got really appreciate everybodys interest and everybody joining us. So early in the morning, or do we need to do and well look forward to speaking again next quarter.

[noise], ladies and gentlemen.

Okay cool. Thank you for participation you may now disconnect.

Good news that who's doing now.

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