Q3 2024 Viasat Inc Earnings Call
Hello, and welcome to the Viasat fiscal year 'twenty four third quarter earnings Conference call. Your host for today's call is Mark Tandberg Chairman and CEO. You May proceed Mr. Ginsberg.
Operator: Hello, and welcome to the ViaSat Fiscal Year 24 Third Quarter Earnings Conference Call. Your host for today's call is Mark Dankberg, Chairman and CEO. You may proceed, Mr. Dankberg. Thanks. Good afternoon, everybody, and thanks for joining us today.
Mark D. Dankberg: Thanks Jack.
Mark D. Dankberg: Everybody and thanks for joining us today.
Mark D. Dankberg: So with me, I've got Guru Gorappan, our President, Shawn Duffy, our Chief Financial Officer, and Robert Blair, our General Counsel. First, we'll have Robert provide our Safe Harbor Disclosure. Thanks.
Mark D. Dankberg: So with me I've got Google wrapping President Shawn Duffy, our Chief Financial Officer, and Robert Blair, Our General Counsel.
Mark D. Dankberg: First of all have that Robert Wright, our safe Harbor disclosure.
Thanks, Mark as you know this discussion will contain forward looking statements. This is a reminder that factors could cause actual results to differ materially additional information concerning these factors is contained in our SEC filings, including our most recent reports on forms 10-K, and 10-Q copies are available from the SEC or from our website.
Robert Blair: As you know, this discussion will contain forward-looking statements. This is a reminder that factors could cause actual results to differ materially. Additional information concerning these factors is contained in our SEC filings, including our most recent reports on Forms 10-K and 10-Q. Copies are available from the SEC or, Back to you, Mark.
Mark: Back to you Mark.
Mark D. Dankberg: Okay, so we encourage you to read the shareholder letter that we posted on our website earlier this afternoon for more details. And we'll give an overview of the main points, and then we'll allow plenty of time for questions. I'll start with a quick overview of our results and status on our satellite fleet, and then Guru will go into more depth on the quarter. Our three main priorities, as described in that letter, including the Inmarsat integration, and update our outcome. Our financial results for the third quarter were good. Revenue of $1.1 billion was up 73% year-over-year compared to revenue from ViaSat's continuing operations last year. InMarsat's contribution was about $443 million, up 12% year-over-year on a stand-alone basis, while combined growth was 8% year-over-year.
Mark: Okay. So we encourage.
Mark: Reading the shareholder letter that we posted on our website earlier this afternoon for more details.
Mark: And we will give an overview of the main points and then we'll allow plenty of time for questions I'll start with a quick overview of our results and status on our satellite fleet and then Guru will go into more depth on the quarter.
Mark: Our three main priorities as described in that letter, including Inmarsat integration and update.
Guru: Update our outlook.
Guru: Our financial results.
Guru: For the third quarter were good revenue $1.1 billion was up 73% year over year compared to revenue from continuing operations last year.
Guru: <unk> contribution was about $443 million up.
Guru: 12% year over year on a standalone basis.
Guru: Combined growth was.
Guru: 8% year over year.
Mark D. Dankberg: Our adjusted EBITDA for the third quarter was $383 million, up 214% relative to adjusted EBITDA from continuing operations last year. InMarsat's contribution was $260 million, up about 7%. Combined adjusted EBITDA grew about 11% year-over-year. Awards were also very good at $1.2 billion for the third quarter, resulting in $3.7 billion in backlog, and Government Systems also has about $6.4 billion of unawarded indefinite delivery, indefinite quantity, or IDIQ, potential contract value. As you can see from our results, we're continuing to grow and win business in our core target market segments, including selected enterprise and government mobility services. We continue to compete well with customers that value four main attributes: an expansive view of connectivity that integrates not just reliable, measurable, and affordable speed and bandwidth but also includes hardware, software, and service products that are tailored to optimize those customers' unique requirements, and also where we bring scale not only in bandwidth and coverage but also in operational support and or partnerships that add value in key verticals and in important geographic regions. Three is where we've earned the trust of similar customers and partners through years and decades of performance and technological innovation.
Guru: Our adjusted EBITDA for the third quarter was $383 million up 214% relative to adjusted EBITDA.
Guru: Can you in operations last year, and <unk> contribution was $260 million up about 7%.
Guru: Okay.
Guru: Combined adjusted EBITDA grew 11% year over year.
Guru: Lords were also very good at $1.2 billion for the third quarter, resulting in $3 $7 billion in backlog.
Guru: In government systems also has about six $4 billion and awarded.
Guru: Definite delivery indefinite quantity variety Iq potential contract value.
Guru: You can tell from our results, we're continuing to grow and win business in our core target market segments, including selected enterprise and government mobility services.
Guru: We continue to compete well with customers that value for neenah attributes.
Guru: An expansive view of connectivity that integrates not just reliable measurable and affordable speed and bandwidth, but also includes hardware software and service products that are tailored to optimize those customers uniques.
Guru: <unk>.
Guru: And also where we bring scale not only in bandwidth and coverage, but also in operational support.
And or partnerships that add value in key verticals and in important geographic regions.
Guru: Three is where we earn the trust of similar customers and partners through years and decades of performance and technology innovation and finally, those those customers recognize our history of identifying a pie and evolving.
Mark D. Dankberg: And finally, those customers recognize our history of identifying, applying, and evolving both the right business models and technology for our target markets. I'll cover a few business highlights, including applying our existing infrastructure to new seamless non-terrestrial network industry standard services through partnerships with Skylo and Legato, and expanding our hybrid inflight connectivity network agreement in Europe with Deutsche Telekom. Scaling up government cyber security production and winning and expanding some key government satellite services and new technology programs, we continue to deliver leading in-flight connectivity service quality metrics, supporting our airline customers' initiatives to increase passenger engagement and offering scalable free Wi-Fi with high-quality performance metrics, even at the busiest airports, and now preparing for increased geographic coverage on important routes, such as from the continental U.S. to Hawaii. Next, I'll give We've completed in-orbit testing and taken over operation. Flight one performance, other than the effect of the antenna, is nominal or better.
Guru: Both the right business models and technology for our target markets.
Guru: I'll cover a few business highlights, including applying our existing infrastructure to new seamless non terrestrial network.
Guru: <unk> standard services through partnerships with Scotland and Lucado.
Guru: Expanding our hybrid inside connectivity network agreement in Europe with Deutsche Telekom.
Guru: Scaled up government cyber security production.
Guru: And winning and expanding some key government satellite services and new technology programs, we continue to deliver leading in flight connectivity service quality metrics supporting our airline customers initiatives to increase passenger engagement and operating scalable free Wi Fi with high quality performance.
Guru: Metrics, even at the busiest airports and now preparing for increased geographic coverage on important routes such as from the Continental U S to Hawaii.
Speaker Change: And next I'll give a quick update.
Speaker Change: Network, starting with progress on Viasat 351.
Speaker Change: We've completed in orbit testing and taken over operation.
Speaker Change: One performance other than the effect of the antenna is nominal or better.
Mark D. Dankberg: We're configuring now for operational service and integrating, analyzing, and measuring performance. Based on results to date, we're targeting commercial Infitec connectivity service in the first quarter of fiscal 25. We've already demonstrated Peak Downstream, data rates into consumer terminals in the 200 to 300 megabit per second range. The bandwidth allocation features of ViaSat 3, such as optimizing delivery to hotspots dynamically across the service area in real time, support our productivity initiatives. The Flight 1 Antenna Root Cause Investigation was completed in the third quarter.
Speaker Change: We are configuring now for operational service and integrating analyzing and measuring performance based on results to date, we're targeting commercial in flight connectivity service.
Speaker Change: In the first quarter fiscal 'twenty five.
Speaker Change: We've already demonstrated peak downstream.
Speaker Change: Data rates into consumer terminals in the 200 to 300 megabit per second range.
Speaker Change: The bandwidth allocation features a viasat three such as optimizing delivery to hotspots dynamically across service area.
Speaker Change: Time support our productivity initiatives.
Speaker Change: The fight one antenna root cause investigation was completed in the third quarter based on its findings were implementing corrective actions on the ft.
Mark D. Dankberg: Based on its findings, we're implementing corrective actions on the FTA, on the F2 antenna. The F2 satellite is otherwise complete. The antenna, with corrective actions, is expected to be completed, thoroughly tested, and delivered this calendar year, and F2 is expected to be launched in the first half of calendar 25. The ViaSat 3 S3 satellite remains unaffected, and we expect it to launch late this calendar year.
Speaker Change: On the <unk> antenna to satellite is otherwise complete.
Speaker Change: Turner with corrective actions are expected to be completed thoroughly tested and delivered this calendar year and F. Two is expected to be launched in the first half of calendar 'twenty five.
Speaker Change: The Viasat three three satellite remains unaffected and we expect it to launch late this calendar year.
Speaker Change: We also have gx 10, a and B, which are hosted payloads on polar satellite and they completed their thermal vacuum testing and are expected to launch together.
Mark D. Dankberg: We also have GX10A and GX10B, which are hosted payloads on polar satellites, and they completed their thermal vacuum testing and are expected to launch together mid-calendar year 2024 this year. They'll improve coverage and performance for polar government and commercial routes. By the summer of calendar 25, we expect to have those four new satellites in our constellation to scale mobility services. Additionally, the GX-7, GX-8, and GX-9 satellites are being built by Airbus and are expected to be completed beginning early calendar 26 for additional geographic coverage and peak demand depth.
Speaker Change: Mid calendar year 2024 of this year.
Speaker Change: They will improve coverage and performance for polar government and commercial rates.
Speaker Change: By next summer of calendar 'twenty five we expect to have those four new satellites and our constellation to scale mobility services. Additionally, the gx seven eight and nine satellites are being built by Airbus and are expected to be completed beginning early calendar 'twenty six for additional geo.
Speaker Change: Graphic coverage and peak demand depths.
Guru Gorappan: Those highly flexible satellites will further improve our ability to optimize capacity and deliver high-quality, reliable services to our mobility customers. So with that, I'll hand it over to Guru to cover our third quarter results and more. Great. Thanks, Mark.
Speaker Change: Those highly Pepsico satellites will further improve our ability to optimize capacity and deliver high quality reliable services to our mobility customers.
Speaker Change: So with that I'll hand, it over to Gary to cover our third quarter results in more depth.
Gary: Thanks, Martin I'll cover three key topics Q3 financial performance integration and transformation.
Guru Gorappan: I'll cover three key topics, Q3 financial performance, integration and transformation, and an update on our combined outlook. We are executing on our strategy and delivered strong core financial and operational performance during Q3. Core revenue and adjusted EBITDA both grew year-over-year by 8% and 11%, respectively, driven by our mobility and government businesses. Some of the key highlights from the quarter include: Government systems had another quarter of strong demand for information assurance, high-speed network encryption products, and Tactical Satcom products, which drove product revenue up 55% year over year. During the quarter, ViaSat supported the U.S. Air Force in a major exercise called Mobility Guardian 2023. ViaSat provided interoperable communications through next-generation hardware and software products and systems to ensure robust and resilient connectivity. Our government business also had a fantastic quarter of awards, which were up more than 50% sequentially.
Gary: And an update on our combined outlook.
Gary: We are executing on our strategy and delivered strong core financial and operational performance during Q3.
Gary: Core revenue and adjusted EBITDA, both grew year over year by 8% and 11%, respectively, driven by our mobility and government businesses.
Gary: Some of the key highlights from the quarter include.
Gary: Government systems had another quarter of strong demand for our information assurance high speed network encryption products.
Gary: And tactical Satcom products, which drove product revenue up 55% year over year during the quarter, we supported the U S Air Force and a major exercise called mobility Guardian 23, wireline provider interoperable communications through next generation hardware and software products.
Gary: And systems to ensure robust and resilient connectivity.
Gary: Our government business also had a fantastic quarter of awards, which were up more than 50% sequentially.
Guru Gorappan: While we can see lumpiness quarter to quarter in the business, the backlog is over 3.7 billion, adding confidence to our outlook. Recent trends in satellite services continued with strong growth in commercial IFC, ending the quarter with 3,500 aircraft in service, up over 17% year-over-year on a combined basis with over 1,400 aircraft in backlog. U.S. fixed broadband revenue declined as fewer residential subscribers were partially offset by higher ARPU.
Gary: While we can see lumpiness quarter to quarter in the business. The backlog is over $3 7 billion, adding confidence to our outlook.
Gary: Recent trends in satellite services continued with strong growth in commerce, IFC ending the quarter with 3500 aircraft in service up over 17% year over year on a combined basis with over 1400 aircrafts.
Gary: And backlog.
Gary: U S fixed broadband revenue declined as fewer residential subscribers were partially offset by higher <unk>.
Guru Gorappan: We continue to reallocate bandwidth to support our rapid IFC growth. Subsequent to Quadrant, we expanded our relationship with Lufthansa Group, adding over 150 aircraft on our hybrid EAN network alongside their existing KA satellite fleet. It's a great example of the integrated network solutions enabled by adding Inmarsat, and the teams are working together really well. We also began launching, in partnership with Skylo Technologies and Legato, the world's first global direct-to-device network, enabling mobile network operators, device makers, and chipset manufacturers to take 3GPP Release 17 compliant products to market for the first time with non-terrestrial network satellite service within our global L-band network coverage.
Gary: We continued to reallocate bandwidth to support our rapid IFC growth.
Gary: Subsequent to quarter end, we expanded our relationship with Lufthansa group, adding over 150 aircrafts on our hybrid EAN network alongside their existing Ku satellite fleet.
Gary: A great example of the integrated network solutions enabled by adding Inmarsat and the teams are working together really well.
Gary: We also began launching in partnership with Kalo technologies hand, legato, the world's first global director device network, enabling mobile network operators device makers and chipset manufacturers to take <unk> released 17 compliant products to market for the first time with <unk>.
Gary: One terrestrial network satellite service within our global L band network coverage.
Gary: And finally on the list of highlights our new business momentum is robust we are winning in the large and growing mobility and government markets. Our government business has very unique solutions that enable critical operations for the U S government and others. It is bolstered by IP that unique.
Guru Gorappan: And finally, on the list of highlights, our new business momentum is robust. We are winning in the large and growing mobility and government market. Our government business has very unique solutions that enable critical operations for the U.S. government and others. It is bolstered by IP that uniquely addresses these complex ecosystems that are evolving fast and where security and resiliency are at the forefront. Some key indicators are government product growth at 55% year-over-year, IFC installations 17% year-over-year, total awards at $1.2 billion, backlog of $3.7 billion, and unawarded IDIQ value of $6.4 billion.
Gary: <unk> addressed these complex ecosystems that are evolving fast and where security and resiliency are at the forefront.
Gary: Some key indicators are government product growth at 55% year over year, IFC installations, 17% year over year total awards at one 2 billion backlog of $3 7 billion and unrewarded <unk> value of six.
Guru Gorappan: Now some more color on the financials. Third quarter 2024 revenue was $1.1 billion. This was up 73% compared to revenue from continuing operations of $651 million in Q3 FY 2023. Including Inmarsat in both years, Q3 2024 revenue was up 8% year-over-year driven by strong growth in government systems products and IFC service. Net loss totaled $124 million for Q3, up from $47 million net loss in the year-ago period, primarily due to increased interest expense associated with the Inmarsat acquisition and the non-recurring Inmarsat acquisition-related charges.
Gary: $4 billion.
Gary: Now some more color on the financials third quarter 2024 revenue was $1 1 billion. This was up 73% compared to revenue from continuing operations of $651 million in Q3, FY 2023, including Inmarsat in both years Q3 2012.
Gary: Q4 revenue was up 8% year over year, driven by strong growth in government systems products and IFC service.
Gary: Net loss totaled 124 million for Q3 up from 47 million net loss in the year ago period, primarily due to increased interest expense associated with the Inmarsat acquisition and the nonrecurring Inmarsat acquisition related charges.
Guru Gorappan: Adjusted EBITDA for the quarter was $383 million, an increase of 214% year-over-year from continuing operations. Including Inmarsat in both years, Q3 FY 2024, adjusted EBITDA was up 11% year-over-year as good cost management leveraged our top-line growth. sequentially, net leverage increased 0.1 times to approximately 3.8 times estimated combined LTM adjusted EBITDA as of Q3 FY 2024, substantially favorable to plan at the time the Inmarsat acquisition was announced. We have significant financial flexibility with approximately $3 billion of liquidity, including $1.7 billion of cash, cash equivalents, and short-term investments on our balance sheet at quarter end, and no near-term funded maturity. Importantly, we have a fully funded path to positive free cash flow. Finally, insurance recovery claims of $770 million are proceeding.
Gary: Adjusted EBITDA for the quarter was $383 million, an increase of 214% year over year from continuing operations, including Inmarsat and bulk years Q3, FY 2024, our adjusted EBITDA was up 11% year over year as good cost management.
Gary: Leverage our topline growth.
Gary: Sequentially net leverage increased 0.1 times to approximately three eight times estimated combined LTM adjusted EBITDA as of Q3, FY 2024 substantially favorable to plan at the time, the Inmarsat acquisition was announced.
We have significant financial flexibility with approximately $3 billion of liquidity, including $1 7 billion of cash cash equivalents and short term investments on our balance sheet at quarter end and no near term funded maturities.
Gary: Importantly, we have a fully funded path to positive free cash flow.
Gary: Finally insurance record room claims on $770 million are proceeding claims for Viasat three F. One and I think <unk> were filed before calendar year end, we expect to receive proceeds over the next few quarters subsequent to quarter end, we have risk.
Guru Gorappan: Claims for ViaSat-3 F1 and i6 F2 were filed before calendar year ends, and we expect to receive proceeds over the next few quarters. Subsequent to quarter end, we have received more than $200 million to date, with the majority anticipated to arrive in fiscal 2025. Overall, this was another strong quarter for ViaSat. As Mark mentioned earlier, I will touch on three priorities we discussed in our letter, mainly around integration and transformation. First, building operational momentum and financial performance for our core business. Operational momentum is reflected in the financials I just covered. Aviation continues to be our fastest growing area, with good progress in aircraft served and passenger engagement and in the scope of services we deliver that help our customers use connectivity to benefit their unique business models. We are proud of our reputation for predictable, reliable, and measurable service quality. Our new order pipeline remains robust.
Gary: <unk> more than 200 million to date with the majority of the anticipated to arrive in fiscal 2025.
Gary: Overall this was another strong quarter for wildfire.
Gary: As Mark mentioned earlier I will touch on three priorities, we discussed in our letter mainly around integration and transformation.
Gary: First building operational momentum and financial performance of our core business.
Gary: Operational momentum is reflected in the financials I just covered aviation continues to be our fastest growing area with good progress and aircraft served in passenger engagement and in the scope of services, we deliver that help our customers use connectivity to benefit their unique business models.
Gary: We are proud of our reputation for predictable reliable and measurable service quality, our new order pipeline remains robust our service services businesses also benefit from an innovation and an innovative and differentiated portfolio of hardware and application software products.
Gary: Our second.
Priority is leveraging the inmarsat integration to achieve operating capital and revenue synergies to reduce cost and expand the scale and scope of our products and services.
Guru Gorappan: Our services businesses also benefit from an innovative and differentiated portfolio of hardware and application software products. Our second priority is leveraging the Inmarsat integration to achieve operating capital and revenue synergies to reduce costs and expand the scale and scope of our products and services. We took a big step in Q2, integrating space and ground infrastructure operations, go-to-market engineering, and supporting teams. Reducing human resources is really painful but necessary to sustain our growth and achieve the financial metrics we expect.
Gary: We took a big step in Q2, integrating space and ground infrastructure operations go to market engineering and supporting teams, reducing people resources is really painful but necessary to sustain our growth and achieved the financial metrics. We expect we expect about $100 million annual cash.
Gary: Cash savings by startup FY 2025, better than the $80 million target when the acquisition was announced.
Gary: Sooner by about two years, but also integrating our global networks and support to further improve service quality scale and resilience and to achieve capital synergies should drive positive free cash flow.
Gary: The third priority is sustaining mobility business growth, while advancing the inflection to positive free cash flow our.
Guru Gorappan: We expect about $100 million in annual cash cash savings by startup FY 2025, better than the $80 million target when the acquisition was announced, and sooner by about two years. We're also integrating our global network and support to further improve service quality, scale, and resilience, and to achieve the capital synergies to drive positive free cash flow. The third priority is sustaining mobility business growth while advancing the inflection to positive free cash flow. Our strategy is to measure and drive asset productivity by best matching bandwidth delivery to our target customers, as well as geographic and peak time demand needs, especially in the world's mobility hotspots, such as major airports and maritime ports. We are leveraging our extensive global operating data and applying machine learning techniques to dynamically optimize our existing satellite fleet, as well as our forthcoming seven Ka-band satellites under construction and third-party assets.
Gary: Our strategy is to measure and drive asset productivity by best matching bandwidth delivery to our target customers geography, and peak time demand needs, especially in the world's mobility hotspots, such as major airports and maritime ports.
Gary: We are leveraging our extensive global operating data and applying machine learning techniques to dynamically optimize our existing satellite fleet as well as our forthcoming seven ku band satellites under construction and third party assets.
Gary: We're also using unique technologies to enhanced video streaming quality and efficiency and dominant factor driving bandwidth usage growth.
Gary: <unk> capital budgets reflect the opportunity we have to scale productivity cost savings, while simultaneously driving further measurable increases in service quality.
Speaker Change: Now moving to the next topic on outlook.
Speaker Change: We exclude in terms of outlook, we exclude satellite impairment charges and the nonrecurring benefit from the litigation settlement announced last quarter from our guidance.
Speaker Change: For FY 2024, we expect revenue growth in the high single digit percentages or FY 2023 for the combined company in a range of $4 1 billion 242 5 billion.
Guru Gorappan: We're also using unique technologies to enhance video streaming quality and efficiency, a dominant factor driving bandwidth usage growth. Our revised capital budgets reflect the opportunity we have to scale productivity cost savings while simultaneously driving further measurable increases in service quality. And I'm moving to the next topic on how to, We exclude, in terms of outlook, satellite impairment charges and the non-recurring benefit from the litigation settlement announced last quarter from our guidance. For FY 2024, we expect revenue growth in the high single digit percentages or FY 2023 for the combined company in a range of $4.1 billion to $4.25 billion. For FY 2024, we expect adjusted EBITDA growth in the mid-single-digit percentages over FY 2023 for the combined company.
Speaker Change: For FY 2024, we expect our adjusted EBITDA growth in the mid single digit percentages over FY 2023 for the combined company.
Speaker Change: We are now expecting adjusted EBITDA in the top half of our previous range.
Speaker Change: One $2 75 billion to $1 3 billion with continued growth in FY 2025 in both revenue and adjusted EBITDA.
Speaker Change: Capital expenditures are expected at approximately $1 7 billion in the current.
With our current satellites under construction.
Speaker Change: In Q3, our investments in our satellite network projects and success based Capex, which both drive growth. We're over two third of our total capital spend as compared to less than one third associated with other maintenance and general Capex activities.
Speaker Change: In FY 2025, we expect Capex to decline to a range of $1 4 billion to one 5 billion inclusive of a placeholder for the potential funding of an <unk> app to replacement.
Guru Gorappan: We are now expecting adjustability in the top half of our previous range, $1.275 billion to $1.3 billion with continued growth in FY 2025 in both revenue and adjusted EBITDA. Capital expenditures are expected at approximately $1.7 billion in the current year, are current satellites under construction. In Q3, our investments in our satellite network projects and success-based CapEx, which both drive growth, were over two-thirds of our total capital spend as compared to less than one-third associated with other maintenance and general CapEx activities. In FY 2025, we expect CAPEX to decline to a range of $1.4 billion to $1.5 billion, inclusive of a placeholder for the potential funding of an I6-F2 replacement. Capital expenditure guidance does not include the expected $770 million benefit from insurance recoveries.
Speaker Change: Capital expenditure guidance does not include the expected $770 million benefit from insurance recoveries. So on a net basis, our client growth spending fits well within our capital structure and liquidity framework.
Speaker Change: Note that we include capitalized interest in our Capex guidance, which is approximately $200 million per year.
Speaker Change: We are working on reducing leverage and optimizing our balance sheet and that is closely tied to our capital investment plan post merger and taking advantage of the capital synergy opportunities we mentioned earlier.
Speaker Change: Before wrapping up I have two important updates for sure. We felt it was time to scale, our investor relations programs, given our nearly doubling in size post merger. So I am happy to announce that Lisa Curran has joined our team as VP of Investor Relations.
Lisa Curran: Lisa brings a unique breadth and depth of experience across sectors and leading companies through growth transformations.
Guru Gorappan: So on a net basis, our planned growth spending fits well within our capital structure and liquidity framework. Note that we include capitalized interest in our CAPEX guidance, which is approximately $200 million per year. We are working on reducing leverage and optimizing our balance sheet, and that is closely tied to our capital investment plan post-merger and taking advantage of the capital synergies opportunities we mentioned earlier. Before wrapping up, I have two important updates to share. We felt it was time to scale our investor relations program given our nearly doubling in size post-merger, so I'm happy to announce that Lisa Curran has joined our team as VP of investor relations. Lisa brings a unique breadth and depth of experience across sectors and leading companies through growth transformations. And I'm sure Peter and Pete Lopez will facilitate introductions with all of you over the coming weeks.
Lisa Curran: And I am sure Peter Pete Lopez will facilitate introductions with all of you over the coming weeks.
Lisa Curran: We've talked with a number of you about our plans for our wireless at Investor day, and listen to your feedback on multiple fronts.
Lisa Curran: We've heard you and we will instead focus more immediately on enhancing our reporting disclosures and investor outreach, including giving more insight on our growth businesses. We look forward to getting more of your feedback. We are aware that we are competing for your capital every day we are can.
Lisa Curran: <unk> in our path ahead, and we want you to match our confidence we expect to provide an update on our next earnings call.
Lisa Curran: Now our path to positive free cash flow in the first half of calendar year 2025 is driven by sourcing growth from our large and growing markets, including mobility and government.
Lisa Curran: Ongoing execution on our sizeable backlog meaningful cost rationalization, and prioritize capex spending which benefits from the natural decline as we launch our SAP.
Lisa Curran: We are driving cost structure improvements with synergies scale and benchmarking.
Lisa Curran: Our operational performance in Q3 was very good and we are on track to achieve substantial synergy value and expect the combined company to grow revenue and adjusted EBITDA in FY 'twenty, four and FY 'twenty five and to be clear our FY 'twenty five growth is based on a full 12 months of Inmarsat.
Guru Gorappan: We've talked with a number of you about our plans for a ViaSat Investor Day and listened to your feedback on multiple fronts. We've heard you, and we will instead focus more immediately on announcing our reporting disclosures and investor outreach, including giving more insight on our growth business. We look forward to getting more of your feedback. We are aware that we are competing for your capital every day. We have conviction in our path ahead, and we want you to match our confidence.
Lisa Curran: Slide 24 with that I'll pass it back to Mark.
Mark: Okay. Thanks crew and at this point, we'll be happy to take some questions.
Speaker Change: Thank you if you have a question. Please press star one on your telephone keypad. If you wish to withdraw your question simply press Star one again.
Speaker Change: Your first question comes from the line of Ric Prentiss with Raymond James Your line is open.
Guru Gorappan: We expect to provide an update on our next earnings call. Now, our path to positive free cash flow in the first half of calendar year 2025 is driven by sourcing growth from our large and growing markets, including mobility and government, ongoing execution on our sizable backlog, meaningful cost rationalization, and prioritized CAPEX spending, which benefits from the natural decline as we launch our SAP. We are driving cost structure improvements with synergies, scale, and benchmarking. Our operational performance in Q3 was very good, and we are on track to achieve substantial synergy value and expect the combined company to grow revenue and our adjusted EBITDA in FY24 and FY25. And to be clear, our FY25 growth is based on a full 12 months of Inmarsat in FY24. With that, I'll pass it back to Mark. Okay, thanks Guru, and at this point, we'll be happy to take some questions. Thank you. If you have a question, please press star 1 on your telephone keypad. If you wish to withdraw your question, simply press star 1 again.
Ric Prentiss: Good afternoon, and first thoughts.
Ric Prentiss: With you your employees and families with all of that whether you've all walls ourselves everyone's okay.
Ric Prentiss: Thanks, Rick.
Ric Prentiss: <unk>.
Ric Prentiss: On the business side of things.
Speaker Change: I appreciate the update on the flight to.
It sounds like first half calendar 'twenty, five and the flight III actually before that.
Speaker Change: Late <unk> calendar 'twenty four helped us so is there any more ground network or any more investment that needs to kind of occur as we kind of think through that and have you gotten the insurance yet for the flight III and then I'll come in with another question.
Speaker Change: Okay.
Speaker Change: Okay on the on the.
Speaker Change: Capital investments I think where we are is about we're about 85% through the total capital investment plan that we had.
Speaker Change: When we started the Viasat three program so about 15% to go and that includes both the remaining space and ground initial ground segment.
Speaker Change: And then insurance Blackberry.
Speaker Change: And so we are still working on now.
Speaker Change: Our lagging.
Speaker Change: And we would expect that probably be in FY 'twenty five yes part of the part of the.
Speaker Change: The process for ensuring the third pie is growing over the status.
Speaker Change: One and we will do that through.
Speaker Change: Questions and responses with the insurers now that we filed our claim.
Okay, and then Gary you kind of pointed out a little bit that you are looking at how best to use the bandwidth that you're bringing to bear with all these new birds. Both on the virus outside of the Inmarsat side can you help us from a from a high level, maybe understand how much capacity should we be thinking that you are bringing into the multiple cells and then as you think about.
Ric Prentiss: Your first question comes from the line of Ric Prentiss with Raymond James. Your line is open. Thanks, good afternoon, and my first thoughts are with you, your employees, and families with all that rain and weather you've had out there, so I hope everyone's okay. Thanks, Ric. On the business side of things, I appreciate the update on Flight 2. That sounds like first half calendar 25, and flight 3 actually before that, kind of late 4Q calendar 24.
Speaker Change: We call game government aviation Maritime and enterprise, but then also world consumer housing.
Speaker Change: How should we think about that capacity, where you might want to apply it and what those growth profiles look like will make it even more complicated question help us understand the competitive dynamics in those silos of who you feel youre most pressed against.
Speaker Change: Okay. Okay. So there's a lot in there.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: So the FERC the first part is.
Mark D. Dankberg: Help us, so is there any more ground network or any more investment that needs to kind of occur as we kind of think through that? And have you gotten the insurance yet for flight 3, and then I'll come in with another, Okay, on the capital investments. I think where we are is about, we're about 85% through the total capital investment plan that we had when we started the ViaSat III program, so about 15% to go, and that includes both the remaining space and initial ground segment. And I think you have the... So we're still working on that. We filed claims.
Speaker Change: And one of the things we emphasized early on when we were first entering the business was the performance of each individual satellite and now given <unk>.
Even the size of our fleet and the fact that we have.
Speaker Change: <unk> satellites covering.
Speaker Change: Individual places.
One of the main things that were.
Speaker Change: That we are now working on is using each incremental satellite.
Speaker Change: To effectively increase the capacity of the whole fleet.
Speaker Change: More than what you would get from just that first satellite and that comes from the way that we operate the fleet as a whole.
Speaker Change: No.
Mark D. Dankberg: Things are looking good. But I think you'd expect that probably to be in FY25. Part of the process for insuring the third fight is going over the status of fight one, and we'll do that through questions and responses with the insurers now that we've found out.
Speaker Change: So debate, particularly as this was the basic idea is that if you look at SAP.
Speaker Change: Satellite coverage, just like cellular coverage in each beam of any satellite.
Speaker Change: The.
Speaker Change: The areas right in the middle of the beam that are really that are there.
Speaker Change: Most efficient in their places at the edges of beams that are less efficient. So the facts since all of those patterns don't line up on all of the satellites one of the things that we can do.
Mark D. Dankberg: And then Guru, you kind of pointed out a little bit that you're looking at how best to use the bandwidth that you're bringing to bear with all these new birds, both on the ViaSat side and the MRSat side. Can you help us from a high level, maybe, understand how much capacity we should be thinking that you're bringing into the marketplaces? And then as you think about what we call GAME, Government Aviation Maritime Enterprise, but then also rural consumers, how should we think about that capacity, where you might want to apply it, and what those growth profiles look like, and I'm making this a more complicated question, but help us understand the competitive dynamics in those silos of who you feel you're most pressed against. Okay. Okay.
Speaker Change: Reallocate the way, we think about our allocations.
Speaker Change: <unk>.
Speaker Change: User terminals to satellites by doing that in the most efficient way possible and that is much easier to do with mobility.
Speaker Change: Terminals than it is with fixed because of mobility terminals are already.
Speaker Change: Able to be handed off from satellite to satellite at any time.
Speaker Change: The other thing, which which goes to par.
Speaker Change: About competitive dynamics is that.
Speaker Change: Well one of the things that we've talked about.
Speaker Change: You can measure pretty easily.
Speaker Change: Is that the high demand markets have very high ratios of peak demand to average demand so think about.
Mark D. Dankberg: So there's a lot in there. Yeah, Yeah, Well, the first part is... And one of the things we emphasized early on when we were first entering the business was the performance of each individual satellite. And now, given, you know, given the size of our fleet and the fact that we have multiple satellites covering individual places, one of the main things that we're now working on is using each incremental satellite to effectively increase the capacity of the whole fleet by more than what you would get from just that first satellite, and that comes from the way that we operate the fleet as a whole. So the basic idea is that if you look at satellite coverage, just like cellular coverage, in each beam of any satellite, the areas right in the middle of the beam that are really the most efficient, and there are places at the edges of beams that are less efficient.
Speaker Change: Airports, especially a big airport with a lot of connecting sites three or four times a day made has.
Speaker Change: 10 times the demand that it has on the average of those peak times.
So our more recent satellites that have dynamic bandwidth.
Speaker Change: Bandwidth steering, where more dynamic bandwidth securing them than we've had in the past.
Speaker Change: As an additional benefit.
Speaker Change: Okay.
Speaker Change: Being able to move those beams around.
Speaker Change: Among the different places to have those high peak demands and the other thing is we have plenty of data.
Speaker Change: Differences in those peak times. So for instance, the peak demands and Atlanta arent necessarily the same as they are in Chicago, Dallas, Houston or other hub airports. So we can then optimize our bandwidth.
Mark D. Dankberg: So since all of those patterns don't line up on all the satellites, one of the things that we can do is reallocate the way we think about allocations of use of their terminals to satellites by doing that in the most efficient way possible. And that is much easier to do with mobility terminals than it is with fixed ones because mobility terminals are already, you know, able to be handed off from satellite to satellite at any time. The other thing which goes to the part about competitive dynamics is that Well, you know, one of the things that we've talked about, and you can measure pretty easily, is that high-demand markets have very high ratios of peak demand to average demand. So think about, you know, airports, especially: a big airport with a lot of connecting flights, three or four times a day, may have ten times the demand that it has on the average at those peak times.
Speaker Change: To match those patterns.
Speaker Change: We remain.
Speaker Change: The main the biggest.
Speaker Change: Overall trends in these mobility markets are really.
Speaker Change: Increasing both the amount of bandwidth that individual passengers use and then the number of passengers that are engaged in using Wi Fi. So that that's kind of the change that we've really.
Speaker Change: Catalyzed and it's.
Speaker Change: The way, we kind of explained it to airlines is you don't really get any credit from passengers for having Wifi, if they don't use it right. So the big challenge has been how do you scale up to engagement without having bottlenecks at these hub airports and we think that that's a really.
That's a that's a big dynamic that is playing out first in the U S and is expanding internationally there are.
Mark D. Dankberg: So, our more recent satellites that have dynamic, you know, bandwidth steering, or more dynamic bandwidth steering than we've had in the past, have an additional benefit of being able to move those beams around among the different places that have those high peak demands. And the other thing is, you know, we have plenty of data on the differences in those peak times.
Speaker Change: Similar similar effects going on in maritime markets.
Speaker Change: The way they are manifested in maritime markets.
Speaker Change: <unk> a lot on the type of ship whether it's.
Speaker Change: It's a laser chip or you know think of it as a personal ship or or enterprise ship and if it's an enterprise ship as its main function moving people or is it moving cargo as an example.
Mark D. Dankberg: So, for instance, the peak demands in Atlanta aren't necessarily the same as those in Chicago, Dallas, Houston, or other hub airports. So we can then optimize our bandwidth to match those patterns. The, you know, the main, the biggest, you know, overall trends in these mobility markets are really increasing both the amount of bandwidth that individual passengers use and then the number of passengers that are engaged in using Wi-Fi. So that, you know, that's kind of the change that we've really... catalyzed. And the way we kind of explain it to airlines is you don't really get any credit from passengers for having Wi-Fi if they don't use it, right?
Speaker Change: What we're doing is working on each of those areas and then you can imagine.
Speaker Change: You also have to work on.
Speaker Change: The combination of those areas because a lot of the big.
Speaker Change: Airport.
Speaker Change: Cities are also major maritime ports and so.
Speaker Change: Those are the dynamics there basically what we are.
Speaker Change: What we're working on it is that match of supply and demand. We can do that in two ways one way is to.
Speaker Change: Is too.
Speaker Change: Optimize the fleet using some of the techniques that I talked about at the beginning and the other one is to be really thoughtful about the customers that we choose to serve so that we can deliver those.
Speaker Change: The performance that they are counting on.
Speaker Change: Ted that cover those.
Speaker Change: Yes.
Mark D. Dankberg: So the big challenge has been, how do you scale up the engagement without having bottlenecks at these hub airports? And we think that's really, that's a big dynamic that is playing out first in the U.S. and is expanding internationally. There are Similar effects going on in maritime markets, and the way they're manifested in maritime markets depends a lot on the type of ship, whether it's a leisure ship or think of it as a personal ship or an enterprise ship. And if it's an enterprise ship, is its main function moving people or is it moving cargo, as an example? So what we're doing is working on each of those areas, and then you can imagine you also have to work on... You know, the combination of those areas, because a lot of the big... These cities are also major maritime ports.
Ted: It sounds like you feel good about the amount of bandwidth you bring to bear and the ability to the time, it's the right time to market time of day or sorry in geographic market.
Ted: And try and convince people used to be using this stuff.
Speaker Change: Yes, Hello demand.
Speaker Change: Yes, it's all of those.
We've been refining our ability to do this.
Speaker Change: Three years at least.
Speaker Change: Kind of are.
Speaker Change: Original go to market value proposition and the insight space in the U S.
Speaker Change: Have years worth of data the data is constantly evolving but we've got our fingers on that and then we also are augmenting that with.
Speaker Change: Industry based data that helps us deal with <unk>.
Speaker Change: Perturbations to those scheduled users and for those.
Speaker Change: Types of vessels or airplanes at Orange scheduled so you have to combine all of that stuff, but we feel like that that's the direction that service providers are going to need to go to to deliver it's a certainty that those enterprise and government customers want.
Mark D. Dankberg: And so those are the dynamics. Basically, what we're working on is that match of supply and demand. We can do that in two ways. One way is to optimize the fleet using some of the techniques that I talked about at the beginning. The other one is to be really thoughtful about the customers that we choose to serve so that we can deliver the performance that they're counting on. Does that cover those? Go ahead; click your head.
Speaker Change: Thanks Mark.
Mark: Thanks, Ed.
Mark: Your next question comes from the line of Mccann.
Mccann: With J P. Morgan your line is open Sir.
Mccann: Hi, Thank you if I could ask a question on IFC you guys mentioned in the <unk> thousand 500, planed backlog can you help us think about how quickly youre able to activate those and what the pacing might look like as they come online.
Speaker Change: Then more higher level on IFC.
Speaker Change: Mark you touched on the go to market.
Mark D. Dankberg: Yeah, and it sounds like you feel good about the amount of bandwidth you're bringing to bear and the ability to time it to the right time of the market, time of day, sorry, and geographic market and try and convince people to be using this. Yeah, that's fine.
Speaker Change: Maybe if you could give us some color on what the competitive intensity has looked like is there anything that you feel like you need to change potentially around pricing or promotion in the IFC business to maintain this kind of growth that you've been run rating. It. Thank you.
Speaker Change: Okay.
Mark D. Dankberg: You know, kind of spur demand. Yep, it's all of those. And, you know, we've been, you know, refining our ability to do this for years. It was kind of our original go-to-market value proposition in the insight space in the U.S. We have years' worth of data. The data is constantly evolving, but we've got our fingers on that. And then we are also augmenting that with industry data that helps us deal with perturbations to those scheduled users and for those types of vessels or planes that aren't scheduled. So you have to combine all that stuff, but we feel like that's the direction that service providers are going to need to go in to deliver the certainty that those enterprise and government customers want. Great. Thanks, Mark. Thanks, Rick. Your next question comes from the line of Mikhail Aluru with JP Morgan. Your line is open.
Speaker Change: Sure so the.
Speaker Change: The rate of deployment as it is.
Speaker Change: A little bit.
Speaker Change: A bit unpredictable are the main factors one of the biggest factors.
Speaker Change: The delivery rate of new aircraft.
Speaker Change: The delivery rate of new aircraft from the Oems, especially Boeing and Airbus They have.
Speaker Change: A lot of that.
Speaker Change: So there are a lot of demand and there has been supply constraints, including.
Speaker Change: Including on some of their major components.
Speaker Change: We've ranged from.
Speaker Change: Two or 302 in some quarters, we've done as many as 500.
Speaker Change: We're looking at Cowen.
<unk> from currently around 3500 to probably around 4200 or so by the end of <unk>.
Speaker Change: Next fiscal year, so that would be a little over a year from now.
Speaker Change: And then.
Speaker Change: I think that's a reasonable assessment based on current new delivery rates and how those delivery rates affect our customers' retrofits. If they don't if they don't have new planes at sometimes slows the rate at which they will take existing planes out of service for retrofits.
Mikhail Aluru: Hi, thank you. If I could ask a question about IFC, You guys mentioned the 1,400 plane backlog. Can you help us think about how quickly you're able to activate those and what the pacing might look like as they come online? And then at a higher level in IFC, you know, Mark, you touched on the go-to-market. Maybe if you could give us some color on what the competitive intensity has looked like. Is there anything that you feel like you need to change potentially around pricing or promotion in the IFC business to maintain this kind of growth that you've been running at? OK. Here, so the...
Speaker Change: I think that's a pretty reasonable estimate.
Speaker Change: And then on the other.
Speaker Change: The other question about what the growth drivers are.
Speaker Change:
Speaker Change: I I'd say for us.
Speaker Change: Canada.
Speaker Change: The biggest.
Speaker Change: Let's say I'm going to talk about a few things one is the.
Speaker Change: In fact connectivity business.
Speaker Change: <unk> to be.
Speaker Change: Okay.
Mark D. Dankberg: The rate of deployment is, it is, a little bit. It's a little bit unpredictable. The main factors, one of the biggest factors is the delivery rate of new aircraft. The delivery rate of new aircraft from OEMs, especially Boeing and Airbus, they have... A lot of you know that they have a lot of demand, and there's been supply constraints, including on some of their major components. We've ranged from 200 or 300 to, in some quarters, we've done as many as 500, but we're looking at going from currently around 3,500 to probably around 4,200 or so by the end of next fiscal year.
Speaker Change: Our regional carriers have.
Speaker Change: They have different ways of approaching their customer base.
Speaker Change: Global long haul carriers and then.
Speaker Change: Some of the premium carriers generally are driven really by revenue per seat mile compared to.
Speaker Change: Very low cost carriers and low cost carriers that can be driven by cost.
Speaker Change: So the.
Speaker Change: I think that it is.
It's not really a good idea.
Speaker Change: We've set the way we approach it we don't we don't really approach it as a one size fits all market.
Speaker Change: We do see is kind of a dominant theme, which probably will play out over the next few years.
Mark D. Dankberg: So that'd be a little over a year from now. I think that's a reasonable assessment based on current new delivery rates and how those delivery rates affect our customers' retrofits. If they don't have new planes, that sometimes slows the rate at which they'll take existing planes out of service for retrofits. I think that's a pretty reasonable estimate. And then there is the other question about, you know, what the growth drivers are. You know the, um... The, I, I'd say, you know, for us, Canada. The biggest.
Speaker Change: It's happening on a quarter by quarter basis is that.
Speaker Change: Some of the competitive dynamics that we first in the U S market are starting to spread.
Speaker Change: Internationally.
Speaker Change: It is especially this notion that.
Speaker Change: The airlines don't really get any any credit from their passengers if they don't use the connectivity system.
Speaker Change: So.
Speaker Change: Really think of it as the main trends are.
Speaker Change: Increasing passenger engagement and then to increase passenger engagement and generally need to.
Mark D. Dankberg: So let me say I'm going to talk about a few things. One is, you know, the in-flight connectivity business tends to be, regional carriers have different, you know, they have different ways of approaching their customer base than say, global long-haul carriers. And then, All of the premium carriers are generally driven really by revenue per seat mile compared to very low cost carriers or low cost carriers that can be driven by cost. So the. You know, I think that it's not really a good idea.
Speaker Change: To offer them something that they want and more and more of that exit that includes video so that that drives bandwidth demand.
Speaker Change: Sure.
Speaker Change: And then the big issues really are when that happens how do those airlines have confidence that you can deliver that's what has led to.
Speaker Change: Having.
Speaker Change: Yes.
Speaker Change: Well defined service level agreements that we in the airline can measure and then the other the other ingredient.
Mark D. Dankberg: I mean, it's not the way we approach it. We don't really approach it as a one-size-fits-all market. What we do see is kind of a dominant theme, which probably will play out over the next few years, and, you know, it's happening on a quarter by quarter basis, is that some of the competitive dynamics that we first saw in the U.S. market are starting to spread internationally. That is especially the notion that airlines don't really get any credit from their passengers if they don't use the connectivity system. So, really think of it as the main trends are increasing passenger engagement, and then to increase passenger engagement, you generally need to offer them something that they want. And more and more, that includes video.
Speaker Change: We've been increasingly successful at is helping the airlines.
Speaker Change: Monetize that engagement different airlines have different strategies for monetizing it but if they don't monetize it and they just add more costs that doesn't work for a lot of airlines. So the idea of.
Speaker Change: Building the increasing.
Suppiah bandwidth and the increasing engagement into a business model that works for each airline.
Speaker Change: One of the main things that we've been focused on and one of the areas.
Speaker Change: We're going to aim to try to provide investors with more.
Speaker Change: With visibility on.
Speaker Change: Got it thank you.
Speaker Change: Sure. Thanks.
Speaker Change: Your next question comes from the line of Mike Crawford with B Riley Your line is open.
Mike Crawford: Thank you a couple of questions regarding the L band.
Mike Crawford: First can you.
Mark D. Dankberg: So that drives bandwidth demand. And then the big issues really are, when that happens, how do those airlines have confidence that you can deliver? That's what has led to us having sort of well-defined service level agreements that we and the airline can measure. And then the other ingredient that we've been increasingly successful at is helping the airlines monetize that engagement. Different airlines have different strategies for monetizing it. But if they don't monetize it, and they just add more costs, that doesn't work for a lot of airlines.
Mike Crawford: Elaborate on your.
Mike Crawford: Three geo stationary small sat L band satellites that youre, developing and whether that may.
Mike Crawford: Contain some of that discontinued viasat for IP.
Mike Crawford: No.
Mike Crawford: L band satellites those those three new <unk> band satellites were started.
Mike Crawford: Inmarsat prior to the merger being completed.
Mike Crawford: Do have some pretty innovative.
Mike Crawford: Thus our features.
Mike Crawford: Very little cost geosynchronous satellites, which are interesting for a variety of reasons, but they're not based on.
Mike Crawford: On Viasat three IP.
Mike Crawford: Those three arent.
Mike Crawford: And those might launch in 2026.
Mark D. Dankberg: So the idea of building the increasing supply of bandwidth and the increasing engagement into a business model that works for each airline. That's one of the main things that we've been focused on and one of the areas that we're going to aim to try to provide investors with more visibility on. Got it. Thank you. Your next question comes from the line of Mike Crawford with B Reilly. Your line is open.
Mike Crawford: Yes, I think they're gonna intended to be in service in <unk>.
Mike Crawford: By 2027.
Mike Crawford: Part of it is.
Mike Crawford: It is they will have reasonably on orbit raising time, so we've got to work through the launch and the orbit raising in bringing into service missions, but those are ballpark correct at this point.
Speaker Change: Okay. Thanks, Mike and then separately on L band.
Speaker Change: Can you just elaborate more what you skyler and legato each are bringing to the table on this.
Mike Crawford: Thank you. A couple of questions regarding LBAN. First, can you elaborate on your three geostationary smallsat LBAN satellites that you're developing and whether those may contain some of the discontinued ViaSat-4 IP?
Speaker Change: N T N attractive device.
Speaker Change: Service and weather.
Speaker Change: That requires a special device such as like a formerly bullet phone or or a cat phone that.
Speaker Change: Our or this would be to any.
Mark D. Dankberg: No, the LBAN satellites, those three new LBAN satellites were started by Inmarsat prior to the merger being completed. They do have some pretty innovative features. There are a number of BUS features. They're very low-cost, geosynchronous satellites, which are interesting for a variety of reasons, but they're not based on ViaSat-3IP.
Speaker Change: IPhone or Android phone.
Speaker Change: Okay Yeah.
Speaker Change: So what is happening in the in the device market is.
Speaker Change: As expanded interest in integration of terrestrial and satellite networks and satellite networks are often referred to as MTN are non terrestrial networks.
Speaker Change: And you have to you have to think of the motivations of different parties here.
Mark D. Dankberg: Those three aren't, and those might launch in 2026. Yes, I think they're going to be intended to be in service by 2027. Part of it is, you know, they will have a reasonably long orbit raising time, so we've got to work through the launch and the orbit raising and bringing into service missions, but those are ballpark correct at this point. Okay, Mark. And then separately on L-Ban, could you just elaborate more on what you, Skylo, and Legato each are bringing to the table on this, MTN, Director of Advice, Service, and Weather? That requires a special device, such as a former bullet phone or a cat phone that or this would be to any iPhone or Android phone.
Speaker Change: The device makers and the and think of it as think of it as device makers mobile network operators over the top.
Speaker Change: Companies that provide services data services to smartphones as well and then or other devices and then also think about it from the user's perspective. So the device makers are really looking to integrate our next generation of modem chip.
Speaker Change: That's what's standardized industry G. P. P standard Theres also some specifications around satellite frequency bands L band being one of the most prominent for delivering these services and then.
Mark D. Dankberg: Okay, yeah. So what is happening in the device market is, you know, an expanded interest in this integration of terrestrial and satellite networks, and satellite networks are often referred to as NTN, or non-terrestrial network. And you have to think of the motivations of different parties here, but the device makers, and think of it as device makers, mobile network operators over the top, companies that provide services, you know, data services to smartphones as well and then or other devices, and then also think of it from the user's perspective. So the device makers are really looking to integrate a next generation of modem chips. That's what's standardized in this 3GPP standard.
Speaker Change: Device makers are working too.
Speaker Change: Seamlessly integrate.
Speaker Change: Yeah.
Speaker Change: This handoff from.
Speaker Change: Terrestrial cellular networks to satellite service.
Speaker Change: That is.
Speaker Change: So that's a general theme what Youll see.
Speaker Change: Youll, probably see our inner.
Speaker Change: Initially.
Speaker Change: Some functions that are.
Speaker Change: For remote.
Speaker Change: Basically remote.
Speaker Change: Emergency remote location type services and then also just remote coming now will be remote messaging and communication services that are built into the devices. The idea would be if you have a device that benefits from cellular connectivity.
Mark D. Dankberg: There are also some specifications around satellite frequency bands, L-band being one of the most prominent for delivering these services. And then the device makers are working to, to seamlessly integrate the, you know, this handoff from terrestrial cellular network to satellite service and that, you know, that is, So that's the general theme, what you'll see. And what you'll probably see are
Speaker Change: Use of satellite connectivity to extend that range and what we think is also fill in black spots and coverage.
Mark D. Dankberg: Initially, some functions that are for remote, you know, basically remote emergency or remote location type services. And then also, just like remote, coming now will be remote messaging and communication services that are built into devices. The idea would be if you have a device that benefits from cellular connectivity, you would use satellite connectivity to extend that range and, what we think is also fill in black spots in coverage. This is to be determined, but some part of the market is for people that you know are far away, often deserts or mountain ranges where there wasn't and probably won't ever be cellular coverage, but a lot of devices are disconnected, just even though they're near.
Speaker Change: Yeah.
Speaker Change: Some part of it and this is to be determined but some part of the market is and people that you know are far away.
Speaker Change: Often desert mountain ranges, where there wasn't an probably won't ever be cellular coverage, but a lot of devices are disconnected, just even though they're near.
Speaker Change: <unk> cellular coverage, but in a dead spot or black Spider sure shadowed by a mountain or hail Ciders similar things like that so one of the big things going on in the industry is whether you want it.
Mark D. Dankberg: So one of the big things going on in the industry is whether you want to serve those people with existing cellular terrestrial frequencies that are allocated to satellite or, and this is the part that we're aiming for and we think makes a lot of sense, if you can augment terrestrial cellular with licensed satellite spectrum. That will fill in all these black spots, and you don't have to take, you, the carrier, don't have to take any existing spectrum out of service. You don't have to take terrestrial spectrum and dedicate it to satellite use.
All of those people with existing tourette cellular terrestrial frequencies that are allocated to satellite or.
Speaker Change: This is the part that we're aiming for and we think makes a lot of sense is if you can.
Speaker Change: Argument terrestrial cellular with license.
Speaker Change: License satellite spectrum.
That will fill in all of these black spots and you don't have to take the carrier doesn't have to take any.
Existing spectrum out of service to take terrestrial spectrum and dedicated to satellite is.
Mark D. Dankberg: That's so that is. That's what these 3GPP standards are about, enabling that capability. We think ultimately that's the way to both get scale and make the services more attractive. So now, Skylo has put together kind of a network and back-office solution that lets us start delivering those services pretty much right away. We're doing tests with some really interesting devices. We're working with Legato to help scale what we can do in the U.S., and we, ViaSat, have worked with Legato for years. They have a very kind of the most advanced L-band, ground-based beam-forming satellite.
So that is.
Speaker Change: That's what these three GPP standards are about is enabling that capability. We think ultimately that's the way to both get scale and make the services more attractive.
Speaker Change: So now.
Speaker Change: Skyler has put together kind of a network and back office solution that lets us start delivering those services pretty much right away. We're doing tests with some really interesting devices, we are working with legato to help.
Speaker Change: Scale, what we can do in the U S and we.
Speaker Change: We've always had it worked with Ricardo for years, they have a very.
Speaker Change: Kind of the most advanced <unk>.
Speaker Change: Band ground based beam forming satellite we hoped.
Mark D. Dankberg: We helped them to develop that, and we also help them to operate it. And then, with NMARSAT, we can extend that globally across all the rest of our fleet. So that's what's going on now. The main things you'll see kind of in the near future are device makers that choose those chips that have the satellite and TN capability starting to talk about their products and bring them to market probably later this year.
Speaker Change: Develop that and we also help them operate it and then with Inmarsat, we can extend that globally across all of the rest of our fleet. So that's that's what's going on now the kind of main things, you'll see kind of the near future or.
Speaker Change: Device makers that choose those chips that have the satellite and <unk> capability, starting to talk about their products and bring them to market probably later this year.
Mark D. Dankberg: And one couple quick clarification points, Mike. One, this is, as Mark said, it's still in market discovery and development mode, and we don't have any incremental capex associated with this deal. And right now, you know, we think this will start slowly. Ultimately, we think it'll build, but as Guru said, you know, I think market discovery is a good way to describe it. Okay, thank you.
Speaker Change: Couple of quick clarification points. Mike wanted this is as Mark said, it's still a market discovery in development mode, and we don't have any incremental capex associated with this deal.
Speaker Change: Fiscal clarity yes.
Speaker Change: And right now we think this will start slowly ultimately we think it'll build.
Speaker Change: I think market discovery is a good way to describe it.
Speaker Change: Oh, Okay. Thank you I will just one final question and more on that.
Mike Crawford: Just one final question, more on the financials. Just given the quarterly variability in your gross margins for products and services, Uh, how... What was in the mix to cause that variance this quarter, and how should we be thinking about that in, say, the March quarter and also next year regarding gross margin on products and services revenue? Hey Mike, it's Shawn.
Speaker Change: Financials, just given the.
Speaker Change: Quarter to quarter.
Speaker Change: Variability in your gross margins for <unk>.
Speaker Change: Products and services.
Speaker Change: Uh huh.
Speaker Change: What what was in the mix.
Speaker Change: Cause that that variance this quarter and how should we be thinking about that and say the March quarter and also next year is regarding gross margin on products and services revenue.
Speaker Change: Hey, Mike It's John So I think if you think about are there are there is a couple couple Uni. One is we had a little better paper ability on the next and our government business and so that you know they had a little bit in <unk> margins.
Shawn Duffy: So I think if you think about this quarter, there are a couple of unintended things. One is we had a little bit of favorability on the mix in our government business, and so that yielded a little bit improved margins. On the service side, we also had a kind of contract negotiation that we were able to resolve with a customer, and so that had some favorability as well. So those are things I would say that I'm not expecting to keep going into the next quarter. And we also get a little bit of benefits from the acquisition accounting and the flow through of that. And that's going to start to meter down as well. All right, thank you, Shawn. Thanks, Mike. Your next question comes from the line of Ryan Kuntz with Needham & Company. Your line is open. Thanks. I appreciate your commentary, Mark, about the major long haul versus regionals there and different strategies. Maybe please take a step back.
John: On the service side. We also had all we had a kind of a contract.
John: Hey, good initiation that we were able to resolve with the customer incentive that Hudson paper ability as well. So those are things I would say that I'm not expecting to.
John: Keep going into into the next quarter and then also we get a little better benefits from the acquisition accounting and the flow through of that and that's going to start to meter down as well.
Speaker Change: Alright, Thank you Sean.
Sean: Thanks, Mike.
Sean: Your next question comes from the line of Ryan Koontz with Needham and company. Your line is open.
Sean: Thanks.
Ryan Koontz: State your commentary Mark about the major long haul versus regionals are they're in different strategies, maybe piece, we should take a step back can you maybe characterize kind of how you view those markets in your kind of targeted western markets of where.
Ryan Kuntz: Can you maybe characterize kind of how you view those markets and your kind of targeted Western markets, where we are in penetration for long haul and regional, at number one? And the second question is that you've talked before about, you know, wholesale partnerships to fill bandwidth needs. Is that still on the table of looking at a relationship with other providers to fill any gaps you might have with the change in plan for F1? Okay. Sure. Yeah, you know, I'd say that.
Ryan Koontz: We are in penetration for long haul and and and regionals.
Ryan Koontz: Number one and second question is that you've talked before about.
Ryan Koontz: Wholesale.
Ryan Koontz: <unk> partnerships.
Ryan Koontz: Partnerships to fill bandwidth needs is that still on the table of looking our relationship with other providers to fill any gaps you might have with the change in plan for F. One. Thank you.
Speaker Change: Okay sure.
Speaker Change: Yeah.
Speaker Change: I'd say that.
Mark D. Dankberg: If you want to see what the future is, let's see what the future of InFight is. One is, if you look at the regional, I don't like regional, that would be like the U.S. market. Looking at the U.S. as a domestic market compared to international flights to and from the U.S., that's a good proxy. I'd say on the domestic, the domestic mainline fleets are typically single-aisle planes, maybe a couple hundred, you know, the range of a couple hundred passengers.
Speaker Change: If you want to see what the future.
Speaker Change: Let's see what the future St. Paul It is.
Speaker Change: One is if you look at the.
Speaker Change: The region.
Speaker Change: That would be like the U S market.
Speaker Change: Looking at the U S as a domestic market compared to international flights to and from the U S.
Speaker Change: Good proxy I'd say.
Speaker Change: On the domestic for the domestic mainline fleets are typically.
Speaker Change: Single aisle planes, maybe couple of hundred range, a couple of hundred passengers.
Mark D. Dankberg: And some, There's a mix of seatback entertainments and no screens. So those things, I'd say a pretty fair, very high penetration of those. There are many flights where we'll serve well over 200 devices at peak times. And I'd say we're serving both entertainment and connectivity options. And one of the main themes is going to be greater integration between those, sort of reflecting what people do at home, if they're watching entertainment and still communicating with friends or social media or other things on their devices. In the long haul business, the long haul market has been, I'd say it's a little bit behind, and that has been because the planes have a lot more people, so high engagement, high bandwidth means higher capacity links, and so that's an area that I think we're going to do well in, but we're really, within MarSat and the new ViaSat-3 satellites, really entering that now, and we're working with our customers to bring similar experiences to those large, twin-aisle, long-haul aircraft as have been in the, say, the U.S. domestic market or intra, you know, big domestic markets in other parts of the world like Australia, Europe, Brazil, some some of the other markets that we've been, Also you're going to see, because feedbacks are such an important part of that, I think that's where you'll also see a lot of innovation in combining the entertainment and connectivity parts. The part that's still really to be penetrated is the low-cost carriers because their focus on cost per seat mile. Really, it's a.
Speaker Change: And some there is a mix of seatback entertainment and no screens.
Speaker Change: The thing I would say a pretty fair.
Speaker Change: Very high penetration of those or many fight where will serve well over 200 devices.
Speaker Change: At peak times and.
Speaker Change: I'd say.
Speaker Change: We're serving both.
Entertainment and connectivity options and one of the main themes is going to be greater integration between those two.
Speaker Change: Reflecting what people do but at home.
Speaker Change: If they're watching entertainment and still doing.
Speaker Change: Communicating with friends or social media or other things on their devices.
Speaker Change: In the in the long haul business that the long haul long haul market has been.
Speaker Change: It takes a little bit behind and that has been because the planes have lot more people, so high engagement and high bandwidth means.
Speaker Change: Higher capacity links and so that's an area that I think I think we're going to do well in.
Speaker Change: Really within Marsh.
Speaker Change: And the new Viasat three satellites really entering that now and we're working with our customers to bring similar experiences to the to those large twin aisle long haul aircraft has had been in the.
Speaker Change: Say, the U S domestic market or intra.
Speaker Change: Big domestic markets in other parts of the World like Australia, Europe, Brazil, some of the other markets that we've been it also youre going to see because seatbacks are set to an important part of that I think that's where you'll also see a lot of innovation in combining the entertainment and connectivity parts.
Speaker Change: The yoga.
Speaker Change: The.
Speaker Change: The part that's still really to be penetrated as the low cost carriers because they are.
Speaker Change: Focus on cost per seat mile.
Speaker Change: Really as it is.
Speaker Change: Big pumps. So building up these monetization strategies I think is going to be a big factor in the low cost carriers, both on the regional domestic fleet.
Mark D. Dankberg: So, building up these monetization strategies, I think, is going to be a big factor in the low-cost carriers, both on the regional domestic fleets and on the home fleets. Does that give you some sense of what those dynamics are? Yeah, when you talk about complementary... revenue, do you think of things like advertising? Places like that where you can kind of boost revenue per seat, or what other monetization schemes are there?
Speaker Change: Oh.
Speaker Change: So it gives you some sense of what those dynamics are.
Speaker Change: Yes, when you talk about complementary.
Speaker Change: Revenue, there you're talking I think things like advertising.
Speaker Change: Places like that where you can kind of boost revenue per seat or what's the or what sort of other monetization schemes are there.
Mark D. Dankberg: Yeah, so one of the tricks is really, you know, the whole purpose of this is to increase passenger engagement. And then basically think of in-flight connectivity as an amenity, like other amenities, and it's got to carry its weight for those airlines. So, the idea is to come up with monetization strategies that help the overall net with passenger engagement. Advertising is one mechanism, but there are quite a few others that we've been testing with other airlines, and some of them involve promotions with interesting online services or destination-driven things.
Speaker Change: Yes, so that well one of the tricks is really the whole purpose of this is to increase passenger engagement and then basically you think of.
Speaker Change: In flight connectivity is an amenity like other amenities and its got to carry its weight for those airlines alright. So so the idea is.
Speaker Change: Come up with monetization strategies that are.
Speaker Change: Help overall net with passenger engagement advertising is one mechanism, but theres quite a few others that we've been testing with other airlines.
Speaker Change: Some of them some of them involve promotions with interesting online services or destination driven things, there's just a ferry.
Mark D. Dankberg: There's just a very broad range of monetization opportunities, and I think our approach, and I think we've been fortunate here in working with some really savvy airlines that have different approaches to them. I think one of the things you're going to see, pretty much by definition, is that if every airline does the same thing, then no airlines have a competitive advantage. So a lot of this is really around how they brand and monetize their operations in general and the partners that they use, which are often associated with their route structure and the values that their brand conveys. And I think we'll give a little more detail on this, but I think it's one of the biggest opportunities in invite connectivity. That's really great. Thank you for sharing that.
Speaker Change: Broad range monetization opportunities.
Speaker Change: I think our approach.
Speaker Change: We've been fortunate here and working with some really savvy airlines that have different approaches to it I think one of the things.
Speaker Change: Youre going to see pretty much by definition is if every airline does the same thing. They know airlines have a competitive advantage. So a lot of this is really around how how the brand and monetize their operations in general and the partners that they use which often associated with their route structure.
Speaker Change: In there.
Speaker Change: The values at their brand conveys.
Speaker Change: And I think well.
Speaker Change: We will give more a little more detail on this but I think it's one of the biggest opportunities and in flight connectivity.
Speaker Change: That's really great. Thank you for sharing that and any comments on the kind of wholesale needs you might have with other.
Ryan Kuntz: And any comments on the kind of wholesale needs you might have with other site operators? Well, third parties, yeah, especially, one of the main ways in which we've been working with third parties is on international markets, where you have kind of flag carriers, and it doesn't have to be a flag carrier, but basically, local regional carriers, and then you also have......................................................... And one of the things that we've been able to do is work with them. I think you're going to see more of this, on a partnership, roaming, wholesale basis where they can bring their space assets into service for their needs, and they can also address international flights where their own carriers go global and where other global carriers go to their regions. And we think that's a really interesting formula that also helps deal with this issue of reinforcing those hot spots. And it's also very extensible to the maritime industry. So those are themes that really underpin a lot of these wholesale agreements or third-party partner agreements that we mentioned. That's really interesting. Thanks Mark for that commentary.
Speaker Change: Operators.
Speaker Change: Third party, yes, especially you know one of the main way the main ways in which we've been working with third parties.
Speaker Change: As an international markets, where you have kind of flag carriers and it doesn't have to be a flag carrier, but basically.
Speaker Change: Uh huh.
Speaker Change: The local regional carriers.
Speaker Change: Then you also have.
Speaker Change: Our regional <unk>.
Speaker Change: Satellite operators that are often tied to the regional governments and their ambitions in this space.
Speaker Change: And one of the things that we've been able to do is work with those.
Speaker Change: Partners I think you can see more of this.
Speaker Change: Oh no no.
Speaker Change: Think of it as a partnership roaming wholesale basis.
Speaker Change: They can bring their space assets into service for their needs and they can also address international flights, where their own carriers go global and where.
Speaker Change: Other global carriers go to their regions.
Speaker Change: We think that's a really interesting formula.
Speaker Change: It also helps deal with this issue of reinforcing those hotspots and it's also very extensible into the maritime industry.
Speaker Change: Those are the themes that <unk>.
Speaker Change: Really underpinning a lot of these wholesale agreements or third party partner agreements that we mentioned.
Speaker Change: That's really interesting and thanks, Mark for that commentary appreciate it.
Chris Quilty: Thanks, Ryan. Your next question comes from the line of Chris Quilty with Quilty Space. Your line is open.
Mark: Thanks Ryan.
Mark: Your next question comes from the line of Chris Quilty with coffee space. Your line is open.
Shawn Duffy: Hi, thanks everybody. Real quick first, a question for Shawn. I'm assuming the CapEx figures exclude capitalized interest? Yeah, so to clarify, and thanks for asking Chris, the number that we gave you for both this year and next year do include that capitalized interest, which was about $200 million. Okay, good, that's even better then. Great. Second follow-up question on the I-8 satellites: apparently, they've got electropropulsion, but that doesn't prevent you from doing a direct injection if you want them to get to orbit quicker, is that correct?
Chris Quilty: Alright, thanks, everybody.
Chris Quilty: But real quick first question for Sean I'm, assuming the capex figures exclude capitalized interest.
Chris Quilty: Yeah.
Chris Quilty: Clarifying okay. So that's the number that we gave you for fall this year and next year and do include that capitalized interest, which was about $200 million.
Chris Quilty: Oh, Okay, that's even better than a great.
Chris Quilty: Alright second follow up question on the IAA satellites are apparently they've got electric propulsion, but that doesn't prevent you from getting a direct injection. If you want <unk> want them to get the orbit quicker is that correct.
Mark D. Dankberg: Correct. Yeah, we will do a launch mission that's really based on when we need them in service, the services they'll provide, and the overall economics, you know, and trade-offs of that. But right, we can, and can, shorten the orbit raising time by choosing the launch vehicle, and we're going to keep that option open. Gotcha. And the i6-F2...
Speaker Change: Correct, yes.
Speaker Change: We will do a launch mission, that's really based on when we need them and serve as the services that will provide.
Speaker Change: And the overall economics and tradeoffs of that.
Speaker Change: Right we can.
Speaker Change: We have in Cannes.
Speaker Change: Shorten.
Speaker Change: The orbit raising time bye.
Speaker Change: Using the launch vehicle.
Speaker Change: And we're going to keep that option open.
Speaker Change: Gotcha and the six yes.
Speaker Change: Yes.
Mark D. Dankberg: I think I got that right. It is there... fairly standard. I mean, you're not going out on a limb and doing something majorly different with that replacement, as it's more of an off the shelf replacement from an existing bus or the existing vendor. Or do you see this as an opportunity to look to add new technology to that satellite? Okay, so there were some specific missions for Inmarsat that were combined on that satellite. The I-6 satellites, as an example, combined both L-band and K-band payloads.
Speaker Change: I think I got that right.
Speaker Change: Is that.
Speaker Change: Fairly standard I mean, youre not going out on a limb and doing something major different with that replacement and it's more of a off the shelf replacement from an existing bus for the existing vendor.
Speaker Change: Or do you see this as an opportunity to look to add new technology into that satellite.
Speaker Change: Okay. So there were some specific missions for inmarsat that were combined on that side of Ipi six satellites as an example.
Speaker Change: Combined both L band and Ku band payloads.
Mark D. Dankberg: So given where we are with the combined company and our other assets, what we're really looking for is just the L band portion of that payload. So, and that is, uh, it's, I wouldn't call it a commodity, but there are several different Inmarsat and other L-band satellites that we could use as the basis for that.
Speaker Change: So.
Speaker Change: Given where we are with the combined company and our other assets what were really looking for is is just the <unk>.
Speaker Change: L band portion of that payload.
Speaker Change: And that is.
Speaker Change: Got it.
Speaker Change: It's not I wouldn't call it commodity, but it's we can do.
Speaker Change: Several different inmarsat and other L band satellites that we could use as the basis for that right now we're really just looking at.
Mark D. Dankberg: Right now, we're really just looking at our overall L-band fleet and our overall L-band needs and a migration strategy, you know, that's around the safety services that are supported by our fleet, the aviation services, which are expanding and supported by our fleet, in making the decision on the best way to fulfill what that satellite was going to do. And we'll report on that, but we did think it was prudent to include a placeholder in FY25 for the cost that we would incur with the replacement. Gotcha.
Speaker Change: Our overall L band fleet, and our overall L band needs and.
Speaker Change: A migration strategy.
Speaker Change: That's around the safety services that are supported by our fleet the aviation services, which are expanding and supported by our fleet.
Speaker Change: In making the decision on the best way to fulfill what that was what that is how it was going to do.
We'll report on that but we did think it was prudent to include a placeholder in FY 'twenty five for the cost that we.
Speaker Change: That we would incur with the replacement.
Speaker Change: Gotcha.
Mark D. Dankberg: Final question, and it's a little open-ended, but R&D, like we very rarely talk about R&D as a line in the income statement, more about specific projects. But when you look at the combination of the two companies, there are a lot of things you can do in terms of products. I think of terminals and gateways and modems and different things that need to be harmonized between the two.
Speaker Change: Final question and it's a little open ended but R&D.
We very rarely talk about R&D as a line in the income statement more about specific projects, but when you look at the combination of the two company Theres a lot of companies a lot of things you can do in terms of products I think of terminals and gateways and modems and different things that need to be harmonized between the two.
Mark D. Dankberg: Are there any anticipated step-ups associated with R&D investments? Forget the government stuff, which is funded R&D. Or do you just see sort of a regular investment, consistent with what the two companies had been doing individually? Or is there a period of time here where you need to spend more?
Speaker Change: Two are there any anticipated.
Ups associated with R&D investments.
Speaker Change: Forget the government stuff, which is funded R&D.
Speaker Change: Or do you just seeing sort of regular way investment.
Speaker Change: And with what the two companies had been doing individually or is there a period of time here, where you need to spend more.
Mark D. Dankberg: to get some of the products and services to market quickly. Right now, one of the main themes is, as Guru described it, it's really operational synergies with R&D being an important component of that. So one example of that is we have two different networking systems, and we're in the process of converging them.
Speaker Change: To get some of the products and services to market quickly.
Speaker Change: Right now the main one of the main themes as Guru described it's really operational synergies with R&D being an important component of that.
Speaker Change: So.
Speaker Change: One example of that is we have two different networking systems and we're in the process of converging and that's enough that's in our R&D plan.
Mark D. Dankberg: That's in our R&D plan. We also have... You know, a number of these improvements that we described that let our networks operate more efficiently, but the overall, you know, the overall R&D spend we think is going to stay in a rough range of around three and a half to four percent. And from New York.
Speaker Change: We also have.
Speaker Change: A number of these improvements that we described at our networks operate more efficiently, but the overall.
Speaker Change: Our overall R&D spend we think is going to stay in a rough range of around three 5% to 4%.
Speaker Change: Some.
Mark D. Dankberg: There were basically aiming at two big themes. One is synergies. And then the other is productivity improvements. And then think of it as service enhancements, a lot of which go around these missions that we described, you know, that our customers are doing that would be like for invite connectivity. That's, you know, think of it as the synthesis of the connectivity and the entertainment portions. There are similar but different types of R&D activities that we're doing for applications on the government side and in the maritime space.
Speaker Change: Yeah.
Speaker Change: Basically aiming to big themes one is.
Speaker Change: As synergies and then the other is productivity improvements and.
Speaker Change: And then think of it is service enhancements a lot of which go around these missions that we described that our customers are doing that that would be like for inflight connectivity.
Speaker Change: Think of it as a synthesis of the connectivity and the entertainment portions there is similar but different types of R&D activities that we're doing for applications on the government side in the maritime space.
Mark D. Dankberg: Okay, so steady as you go. Awesome. Thanks, everybody. Thanks, Chris. Your next question comes from the line of Edison Yu with Deutsche Bank. Your line is open.
Speaker Change: Okay, what's kind of studies.
Yep.
Speaker Change: Awesome, Thanks, everybody. Thanks.
Thanks, Chris.
Speaker Change: Your next question comes from the line of Edison you with Deutsche Bank. Your line is open.
Edison Yu: Hey, everyone. Thanks for taking our questions. First, just housekeeping. Did I hear correctly about the analyst aid that is being pushed out? Is that what you were trying to communicate? Yeah, hi. Hi, Edison. This is Guru.
Edison: Everyone. Thanks for taking our questions first just housekeeping did I hear correctly about the analyst day that it is being pushed out is that what you were trying to communicate.
Edison: Yes, Hi, hi, artisans in Peru, yes.
Guru Gorappan: Yeah, so I'll just say two things. One, we've had interactions with many of you, and we've had feedback on disclosures and overall reporting, and we've been taking that feedback and working through that. So our focus is really addressing some of the key questions that we're getting, and we'll address that in the next earnings call, which means we are not going to do the investor day that we had originally planned for in March, and we are, in parallel, thinking through what a new investor day would look like, so we'll come back to you when we have an update there, but we didn't want to delay the key questions that we're getting I understand. Thanks. Just a couple on the business. Curious on the cash flow; there were a couple of discrete items called out as a headwind. Any way you can kind of quantify what those were? And do those kinds of headwinds go away sequentially?
Speaker Change: Yes, so I'll just say two things one we've had interactions.
Speaker Change: Many of you and we've had feedback on disclosures and all reporting.
Speaker Change: And we've been taking that feedback and working through that so our focus is really addressing some of the key questions that we're getting in and we'll address that in the next earnings which means we are not going to do the investor day that we had originally part of March and we are in parallel thinking through or a new investor day would look like so we will.
Speaker Change: Come back to you when we have an update there, but we didn't want to delay.
Speaker Change: Key questions that we're getting around disclosures and reporting which we'll address in the next earnings call.
Speaker Change: Understood understood.
Speaker Change: Just a couple on the on the business.
Speaker Change: Just curious on the on the cash flow there were a couple of discrete items called out as a as a headwind.
Speaker Change: Any way you can kind of quantify what those were and do those kind of headwinds go away.
Speaker Change: Essentially.
Speaker Change: Yeah.
Shawn Duffy: I think that one of the things to keep in mind is that in Q3 we had kind of a lift in cash flow requirements related to the tax payments that we needed to do for the TDL transaction, and we had a little bit of that also on the UK side. So when I think about it, kind of Q3 to Q4, I think we'll have our interest payments in that quarter, maybe that's about $33 million. You can see our working capital requirements probably around $50 million or so and isolated there, but I don't think we don't have any material tax payments coming into Q4, so that's a good way to think about it. All right, great. Thanks for that! And then last question, just on cost, I realized you know we boosted the savings potential to $100 million and pulled that forward two years. Are we looking at trying to maybe take out more? Obviously, you had some more time to dig into the M1 stats.
Speaker Change: This is Sean Yeah, I think that you know one of things to keep in mind is in Q3, we had kind of a left them in you know op cash flow requirements related to the tax payments.
Sean: We needed to do for the TD, all transaction and we had a little bit and also around the U K side.
Sean: I think about it.
Sean: Q3 to Q4.
Sean: You know I think I would you know.
Sean: All of our interest payments in that quarter, maybe that's about $33 million you can see our working capital requirements, probably something around that $58 million or so.
Sean: And isolated there, but I don't think we don't have any material tax payments coming into Q4. So that's a good way to think about it.
Speaker Change: Alright, great. Thanks for that and then last question just on the cost I realize again, we boosted the the savings potential.
Speaker Change: And pulled that 40 years or are we looking at trying to maybe take out war and obviously you had some more time to dig into the inmarsat piece should.
Guru Gorappan: Should we think about, you know, potentially some upside to that $100 million as we move forward? Edison, I would say so. If you look at what we talked about in the 100 million and starting at 525, a lot of the focus there was on headcount and bringing the two teams together from go to market all the way through technology. So we feel really good about that. Now, what we are focused on right now is not headcount related, which you think about procurement and supply chain and some of the external spend that we do. We are now doing our analysis and working through that. So we do expect opportunities there in terms of savings, but we haven't quantified those yet. And Edison, if I can add one, just one light point, just keeping in mind that, you know, in Q3, alongside the risk that we announced with, you know, as we were right-sizing on the people, we saw some of those payments come in this quarter too, so that elevated Q3 a little bit as well. That is it.
Should we think about potentially some upside to that $100 million as we.
Speaker Change: Before it.
Speaker Change: Allison I would say so if you if you look at what we.
Speaker Change: <unk> talked about on the 100 million starting in FY 'twenty five a lot of the focus there was on head count and bringing the two teams together from a go to market all the way through technology. So we feel really good with that now what we're focused on right now is non head count related which you think about procurement.
Speaker Change: Supply chain and some of the external spend that we do we are now doing our analysis and working through that so we do expect.
Speaker Change: Opportunities there in terms of savings, but we haven't quantified those yet, but we're working through that.
Speaker Change: And I'm wondering if I can add one just one light point just keeping in mind that you know in Q3 alongside a rent that we are now with you know as we are right sizing on the people we saw kind of that payments come in this quarter to elevate it gives me a little bit as well.
Speaker Change: Okay, great. Thank you.
Speaker Change: Thanks, Chris.
Speaker Change: That is all the time, we have for questions I will turn the call back to Martin <unk> for closing remarks.
Shawn Duffy: Great. Thank you. That is all the time we have for questions.
Martin: Okay. So thanks, a lot everybody for joining us.
Martin: I would like to review with just a few important takeaways from the third quarter or when is that the results were good we generated.
Mark D. Dankberg: I will turn the call back to Mark Dankberg for closing remarks. Okay, so thanks a lot, everybody, for joining us. I would like to leave you with just a few important takeaways from the third quarter.
Martin: 8% year over year revenue growth and 11% year over year adjusted EBITDA growth.
Martin: We're winning.
Martin: Winning new business in our targeted growth markets I think.
Martin: Hopefully you can get a sense of.
Martin: Yeah.
Martin: The competitive environment that we're in and the way that we are targeting specific enterprise and government mobility markets.
Mark D. Dankberg: One thing I'd point out is that the results were good. We generated 8% year-over-year revenue growth and 11% year-over-year adjusted EBITDA growth. We're winning new business in our targeted growth markets. I think, you know, hopefully you can get a sense of the competitive environment that we're in and the way that we are targeting specific enterprise and government mobility markets. The Inmarsat integration program is ahead of schedule and ahead
Martin: And most of that integration program is ahead of schedule and ahead of budget.
Martin: And we are balancing growth innovation and profitability.
Speaker Change: So with that look forward to updating you on our continued progress next quarter and with that I'll hand, it back to the operator.
Speaker Change: Thank you. This does conclude today's conference call. We thank you for joining you may now disconnect your lines.
[music].
Speaker Change: Yeah.
Speaker Change: [music].
Operator: And we are balancing growth, innovation, and profitability. So, with that, I look forward to updating you all on our continued progress next quarter. And with that, I hand it back to the operator. Thank you. This does conclude today's conference call. We thank you for joining us. You may now disconnect your lines.
Speaker Change: Yeah.