ViaSat [VSAT] Conference call transcript for 2022 q4
2023-02-07 23:07:06
Fiscal: 2023 q3
Operator: Welcome to ViaSatâs FY 2023 Third Quarter Earnings Conference Call. Your host for todayâs call is Mark Dankberg, Chairman and CEO. You may proceed, Mr. Dankberg.
Mark Dankberg: Okay, thanks. Thanks for joining us today. We released our shareholder letter shortly after market close and its available on our website and we will be referring to that on this call. Joining me today on the call are Rick Baldridge, our Vice Chairman; Kevin Harkenrider, our Chief Operating Officer; our Chief Financial Officer, Shawn Duffy, Robert Blair, our General Counsel; and Paul Froelich from Corporate Development; and Peter Lopez from Investor Relations. So, let's have Robert provide our Safe Harbor disclosure for the start.
Robert Blair: 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 Form 10-K and Form 10-Q. Copies are available from the SEC or from our website. Back to you, Mark.
Mark Dankberg: Okay. Thanks Robert. So, I'll start with a brief overview, and then we'll go right into questions. So, the most important point for today is that construction and test on the ViaSat-3 and America satellite has been completed. We're scheduled to launch on April 8th and which follows a pair of NASA international space station missions that have been pushed about one to two weeks later than previously planned because of the replacement mission to bring back from IFS. Bringing that satellite into service addresses our most immediately challenge, which is bandwidth constraints. In the US that have caused us to steadily downsize our residential business to support the strong growth we've had in inflight connectivity. ViaSat-3, we'll be able to serve areas that are currently full and to introduce updated plans with higher speeds, more bandwidth, and greater value. And also supports more of our existing customers in the Americas and capacity to the good growth we've had in Brazil and Mexico and opens additional new geographic and vertical markets. We're confident it will drive growth. The satellite should reach its orbital site just a couple of weeks after launch and we expect to start initial services promptly and to start scaling during the summer. ViaSat-3, EMEA, Europe, Middle East, and Africa satellite is not far behind its planned for launch by ULA in September. That adds important coverage to our mobility businesses and capacity to a number of other markets. It's also the catalyst expected to enable us to reach positive free cash flow. The Asia-Pacific satellite is not too far behind now. Overall, new orders are up year-over-year. We're making very good progress on in-flight connectivity, especially. We think one exciting example is the recent announcement by Delta Airlines, making free Wi-Fi available on their full fleet, we've worked methodically with them to be sure, we both understand the growth in demand and how we can deliver the service quality that we expect at scale. Today, we're at about a total of around 3,000 flights a day with free Wi-Fi, now that's between Delta and JetBlue, and that's growing pretty rapidly. And of course, we also continue to serve all the other lines we support, including at those same major US cities. We see good opportunities in working with airline partners to scale past engagement with Wi-Fi affordably and in ways that pursuit their business models and brands. We shipped about 240 in-flight terminals in the third quarter for Commercial Air and brought about 160 planes into service, which is about a 17% year-over-year growth. New orders have been very good with both new and existing customers and we still have over about 1,200 additional planes at order. Our airline customers are seeing delays in some of their new aircraft deliveries probably in the range of about 50 to 60 cumulative by the end of our fiscal 2023. So, we expect deliveries and installs will grow sequentially in the fourth quarter anyway. We've also been equipping Station Airlines in China. The US and China are the largest domestic air travel markets. And we believe the ability to serve international pipes to and from China with our partners there seamlessly will be important to many global airlines as well as to the Chinese international airlines. The other major point for today is around the close of the sale of our TDL business just after the end of the third quarter. Within that, as we expected about $1.8 billion in cash, which greatly strengthens our balance sheet. We'll also realize again on the sale of over $1.5 billion. So, including that gain, FY 2023 will actually be a very profitable year for us. The sale will ensure we can drive our satellite services businesses since we have significantly greater growth potential. As we mentioned last quarter, we have some rightsizing to do as a result of the sale, and that's underway. And regarding Inmarsat, the remaining gates to close the transaction are primarily the U.K. and the European community antitrust approvals. We expect to have good insight into the regulatory -- the regulators current views on the matter this quarter. So, the shareholder data of the shareholder letter also provides our financial data for our third quarter of fiscal 2023 and year-to-date. Those results are below our expectations for the year -- in the quarter with the largest factor being the significant delay in launch of the first ViaSat-3 satellite relative to the schedule we expected entering the year. We've had other challenges on supply chain affecting cost or delivery schedule of some of our products, the right airplane deliveries to our customers and encryption product certification issues that are not specific to us, but the demand for our products and services is strong, and we've had good year-over-year performance on orders. With the TDL gain, we'll report our highest ever earnings for the fiscal year by. We expect to start fiscal year 2024 with the launch of the first ViaSat-3 and we think the outlook from there is very exciting, as described in the shareholder letter. So, with that, we'll open it up for questions.
Operator: The floor is now open for your questions. Our first question comes from the line of Ric Prentiss from Raymond James. Please proceed.
Ric Prentiss: Thanks. Good afternoon, everybody.
Mark Dankberg: Hey Ric.
Ric Prentiss: I appreciate the shareholder letter. A couple of two questions. First, Mark, you talked about ViaSat -- first ViaSat-3 coming over the Americas. We've got a launch at glad to have that. How long are you anticipating -- it sounds like there's pent-up demand from your letter. How long do you think it takes to fill that up? And when are we thinking that we need to be starting to think about ViaSat-4 is the first question?
Mark Dankberg: Okay. Well, the way we've operated in the past, which has worked well for us is, we kind of fill it up and then we people could say, groom or we basically tend to evolve our service -- our customers' mix to kind of higher-yielding customers, and that -- which is kind of what we're doing here. Think of them as that we've talked multiple times about this hierarchy of value and services, difficulty to serve with government, maritime and those types. So, we generally have been filled up the satellite two to three years post-launch. That's typically what we tended to do. And then we evolve the subscriber will a couple of years or so. The kind of our approach to ViaSat-4, we've been -- what we've been working on is really focused on the technology, making sure that we get the performance that we expect and that we can produce it at a more predictable schedule, but it's pretty much the same platform. So, the timing of that, we will adjust based on our cash flow rate of that current satellites and our assessment of demand. So, we don't -- we're not going to put out a specific timetable for it yet.
Ric Prentiss: Okay. Also in the shareholder letter, interesting comment about direct to device and that Inmarsat obviously has L-band spectrum that you're interested in. Can you maybe high level kind of obviously, the deal is not closed, but can you, from a high level, tell us, how do you feel that, that directed device satellite to smartphone is going to come to pass. There's a carrier model in the marketplace. There's handset models in the marketplace or coming into the marketplace, and then a chip fact one. So, how do you see this market kind of materializing? And do you all need to have a LEO type platform? Or how would that work? So, just high-level thoughts on direct-to-device slots.
Mark Dankberg: Okay. Well, first, so we're interested in the direct-to-device market, with likely -- I think a lot of people expect to be to address a very large market, but with probably relatively low average revenue per user. And -- but we also see that a lot of the things that lot of the things in space and in the ground network that are done to be able to serve that market. Also we're going to really enhance the existing mobile satellite services market. It will enable higher speeds, more bandwidth, lower airtime pricing, all of which we expect to also benefit those existing markets. For those operators that have access to mobile satellite services spectrum and the tools to address those markets. The big -- I think the big issues or uncertainties around direct to satellite there handset market are really around what are the speeds certainly that can be delivered to each phone, how many phones can you serve in a geographic area what will the airtime pricing be would be used for more than emergency services. And a lot of that, I think, is really going to depend on a lot of the same factors that drive the bracket market, which is as we talked about before really getting signal good density of bandwidth adjusted for the spectrum that it's operating in the areas where there's going to be the highest demand. And what is interesting about the handset market is it's probably going to be even more geographically concentrated than the broadband markets will be. So, we've actually been looking at design architectures that are both GEO and LEO. We think they're both interesting. We think that should be able to deliver pretty comparable services from each. It will probably take cooperation among some of the spectrum holders to achieve that. And we don't think it's necessarily a GEO or LEO-specific market. We do have concerns -- we've been one of the ones pointing out some of the issues around sustainable space in lower orbit. We are -- we think that there should be concern around just the cross-section area and mass of some of the satellites that have been proposed for this service. We're not sure that's the right -- that's going to be in a good direction, and we do have ambitions to do is to be able to deliver services that are much more interesting than just emergency services and that can be scaled to very large numbers of customers. That's kind of the -- kind of the overview at this point.
Ric Prentiss: Great. I appreciate. And we'll stay tuned as we access market and home.
Mark Dankberg: Thanks Ric.
Operator: Our next question is from the line of Phil Cusick from JP Morgan. Please proceed.
Unidentified Analyst: Hi, this is Nick on for Phil. Thanks for taking the question. I'm wondering if you could provide an update on how churn is trending in fixed broadband? And how any like increased competition may be playing into that? As well as what the strategy would be to return to fixed broadband growth once ViaSat-3 launches just given the competitive intensity? Thank you.
Mark Dankberg: Okay. Well, we haven't broken out churn buying markets, specific markets. What I can tell you is recently churn has been subsiding for us. We had -- some of the churn that we saw was probably tied to the COVID timeframe when people signed on their contracts and we're very dependent on broadband at their home. But since those -- since a lot of those are out of contract, that actually churns moderated for us. We think -- we see -- we do see that there's going to be more competition in the markets that are targeted for bias people estimate kind of 10 million to 15-ish million homes that are reasonable candidates for satellite broadband, but the big issue is the value proposition of the service in terms of speed, volume, price. And then I think the other thing that's becoming more and more important and that we're really focused on our -- the ability to stream -- to streaming. It's not speed intensive, but it is very bandwidth-intensive. And so it's difficult for pretty much any satellite terrestrial wireless surface to support that in an unlimited way. We think we're going to be really competitive in that aspect of the market. So, I think for us, we -- the big thing Viasat-3 allows us to do is to update our speed, bandwidth, and pricing. And I think we'll continue to be able to drive churn down with the.
Operator: Our next question comes from the line of Landon Park from Morgan Stanley. Please proceed.
Landon Park: Thank you. Mark, did you get cut off or did you add anything else you want to add under that?
Mark Dankberg: No, no. I think the last thing I said was that we expect churn to continue to improve with the new plans that we can offer. That was the last thing I said. I don't think cut off or not.
Landon Park: Okay. Thanks Mark. So, yes, on my side, I was wondering, Delta finally launching their free Wi-Fi product with you as a partner, they have a target laid out to have global -- this has a global product by the end of 2024, what is the prospect for you to be able to gain retrofits on their international fleet? Or are there regional jets -- and then maybe can you just review -- I don't know if you can talk about Delta specifically, but at a higher level potentially. What are your IFC contracts structured in terms of fixed versus variable? And how can we expect ARPA to trend and what are the current ARPA levels and where can those trend in the free Wi-Fi model?
Mark Dankberg: Okay. Okay. So, a lot in there. So, on the in-flight Wi-Fi, I think we do have a very good relationship with Delta, they've supported the notion that we'll be their partner, including on the global wide-bodies. I think that's part of what they're looking for is consistent service across all their fleet. So, we think that they're confident in ViaSat-3 is enabling us to do that on a global basis -- in the time frame that they're looking for. The -- on the business models, one of the things that we have done is we've tried to tailor the service models that we offer to different airlines to their -- to what their brand wants and the way they're trying to use in-flight connectivity on their clients. And it varies a little bit by type of plane or routes or length of routes. But there is -- like we've said before, there are fixed and variable components to it, and the variable parts are dependent on the airlines model and the way their pipes are planned sort of their roots are planned. So, it's hard to put a specific number on it. But I think overall, our revenue per plane, all things in -- when you consider kind of the full-service model that we have are very representative of what others in the industry have had. We're not going to break out average revenue per plane in particular. But it's pretty representative of what others that are in these kind of full-service models have patent.
Landon Park: What kind of upside can you see under a free Wi-Fi model in terms of percent increases as that model matures?
Mark Dankberg: I'm not going to put up a percent increase. I think that what we are seeing and expect, what we expected to see another -- in other places where we used in-flight Wi-Fi, you can see passenger engagement rates go from the 5% or 10% range up to the 30% to 40% range pretty easily. So, I think there will be a lot a lot more uptake. And that's -- I think that's one of the things that makes us attractive for it is the ability to support that. But we're not going to give any numbers about how that will translate into revenue per plane.
Landon Park: Understood. And then just one follow-up for Shawn on some of the financial guidance laid out in the letter. Can you maybe just bridge for me how you're getting to the 4.0 leverage target for fiscal 2024 versus the 2.0 pro forma?
Shawn Duffy: Sure. So, I think it's a couple of parts. First of all, keep in mind, as we look forward to our EBITDA next year, you need to right-size it with respect to not having TDL business anymore. Obviously, we'll have growth across our business and the continuing operations, but keep that in mind. And then from the capital perspective, this year was about $1.2 billion or so, a little bit over that. Next year, we'll see it about flat tick down a tad, but the mix will change quite a bit as we'll have a lot more on the success-based CapEx for CPE relative to the satellite, which ones are coming up. So kind of -- if you kind of roll that forward on our pro forma debt as the TDL sale, that's where you get to about that mark.
Landon Park: And so what's the underlying cash room that's implied by that for fiscal 2024?
Shawn Duffy: Well, I think if you just kind of look about to what that EBITDA inferred relative to that CapEx. I'm not going to give kind of the total cash burn to that number, but I think you can kind of do the math -- if you triangulate that on.
Landon Park: Okay. Understood. And then just so I make sure I'm understanding for fiscal 2023, the mid-single-digit guidance from last quarter is now flat, correct? So, what is the is the annual EBITDA number going to be in the low 500s on a continued operations basis?
Shawn Duffy: I think what we said is that next year's EBITDA, we expect it to grow in the low double-digits year-over-year. So, I think--.
Landon Park: Sorry, I was asking about the base of fiscal 2023.
Shawn Duffy: Right. So, for 2023, what we said is you could think of it to 2022 on a continuing operations basis to be about flat to the prior year.
Landon Park: And that was about, what, around $500 million in fiscal 2022, right a little less?
Shawn Duffy: It was a little shy to that.
Landon Park: Okay, perfect. Great. Thanks very much Shawn and Mark.
Operator: Our next question comes from the line of Mike Crawford from B. Riley Securities. Please proceed.
Mike Crawford: Thank you. Can you tell us what, if any, changes there are in the time line with the UK's Competition and Markets Authority Phase 2 review, when you expect that decision? And how soon after that presuming it's favorable, you could close Inmarsat?
Robert Blair: Hey Mike, this is Robert Blair. So, the timing for the CMA is the end of March is when we would expect them and what they've indicated to us is their plan to be wrapped up if it's favorable, then we should be able to close theoretically shortly thereafter as long as the European Commission and along the same timeline. But that could drag out potentially further after the CMA. So, it really depends on how quickly the European Commission would finish their review if the CMA is done and approved the end of March. But as soon as both of those processes are done, we would expect to be able to close pretty quickly after that.
Mike Crawford: Okay. Thank you. And then the follow-up question is relates to -- you provided your potential satellite launch timeline? Is there any similar information you can give regarding Inmarsat?
Mark Dankberg: I think they don't want to see information mostly available through their website. They do -- they are launching one of their satellite another six satellite this month, but they had their follow-on satellites are probably a couple of years behind and I think there's a gap for their I79 satellites.
Mike Crawford: Okay.
Operator: Our next question comes from the line of Caleb Henry from Quilty Analytics. Please proceed.
Caleb Henry: Hey guys. Question about the Link 16 business. So, I'm just curious if -- even though the sale is done, if there is any opportunity for ViaSat to providing sort of state-based Link 16? Or did that all go away with the sale?
Mark Dankberg: The Link 16 specific businesses went with the sale. But we do have space contracts that cover a variety of range of communications, wave forms and data links. And we can include Link 16, as one of those waveforms in a multi-waveform space system. And we're doing -- as part of the sale, we're providing a module to Inmarsat enable them to Link 16. So, we'll have that -- we'll have common hardware for that application.
Caleb Henry: Okay. Does that mean there's still opportunity for ViaSat to participate in the space development agencies constellation. I know that's supposed to use Link 16? And then do you still have the satellite that you're building with Blue Canyon or is that something that was sold as well?
Mark Dankberg: So, the existing contract that we had for XVI and FDA payloads did go with that business.
Caleb Henry: Okay.
Operator: Our next question comes from the line of Ryan Koontz from Needham & Company. Please proceed.
Ryan Koontz: Thanks for the question. Mark, thinking about how the IFC business scales here, apart from adding all the tremendous increase incapacity from ViaSat-3. What kind of key parts of the business do you think need to scale to address the global opportunity in terms of infrastructure, channel, support, those sorts of things as you think about taking that business global? Thanks.
Mark Dankberg: Sure. Yes. Well, I think 1 of the good things about what we're doing with ViaSat-3 is we pretty much have all the business models for the businesses that we've already been doing well in place. So, at least in the -- in residential or in rural in the countries in which we've been operating. We've set up business models where our ability to plug in more bandwidth is pretty straightforward. And I think that includes the in-flight connectivity space because we already have when we've done this pretty purposely -- purposefully, but we have customers in Australia, Asia-Pacific, Latin America, Europe, that and Middle East already that we support with our full-service model. So, I think that, that's one of the -- so one of the things that's most exciting about getting ViaSat-3 on a global basis is that it really is then we can just plug into existing models, especially in in-flight connectivity because that is really kind of a direct to airline business for us. And I think we have a good go-to-market sales force that covers airlines all over the world. And we have the support infrastructure that we can leverage for that as well.
Ryan Koontz: Got it. That's great. And just a quick question about the letter about your reallocation of capacity into IFC. How should investors think about the timeframe that it takes you to truly kind of reallocate it? Are we talking months, quarters to reallocate that capacity and move it into a particular new application?
Mark Dankberg: Okay. No, that's a good question. So, as the airline business has grown, the main thing that we've done very careful and purposely is to understand what the traffic demand will be on a geographic basis and then also be able to gauge not only where the airplanes are the seats are going to be where, when, but also to match the expected bandwidth demand on each plane in each airline. So, that we have the sufficient bandwidth that is scaled to the demand on those planes. And that, when we do it, what we've had to do. I mean, I think it's a choice that it's a choice that we made deliberately. And I think it's going to be good for the company, definitely been good for our IFC customers. I think it was weakest for shareholders is to plan ahead. And what we've done is we've used natural churn on the residential business, that frees up bandwidth in places where we may need it. And those places where we won't need it for IFC, then we can replace those customers with new customers. When we get ViaSat-3, problems could be way easier as we'll have a lot of bandwidth everywhere, and we'll just be able to add customers on both in-flight connectivity and in airlines and a few other businesses within the US that we think we can start and grow as well. But think of it as the reallocation process is really something we only have to go through when we're full, right? When we have to allocate bandwidth because we don't have enough to serve all the demand we could see in all the markets that we address, right? It's really a question of making choices about what we choose to serve, given all the demand that we see.
Ryan Koontz: It does. Thanks Mark. Thatâs all I have.
Operator: Our next question comes from the line of Louie DiPalma from William Blair. Please proceed.
Louie DiPalma: Mark, Rick, Shawn, Robert and Peter, good afternoon.
Mark Dankberg: Hey Louie.
Louie DiPalma: Following up on Landon's question. does ViaSat have a product/antenna to provide IFC on regional jet aircraft, such as CRJ700s and ERJ175s. I know that you provide connectivity for JetBlue's larger ERJ190s, but do you have a smaller antenna for the smaller regional jet aircraft?
Mark Dankberg: Right now, well, a lot of it really depends on the operating model of the airline and the exact type of aircraft that they have. But I think from a commercial business from a commercial business get, probably the E190 is the smallest that we currently have at any kind of scale.
Louie DiPalma: Okay. Are you ruling yourself out then for Delta's regional jets?
Mark Dankberg: No, no. I think we have airline products that we're developing that will go down to smaller planes. We certainly do that. We sort of smaller aircraft with that our business gets or others. It's really a question of coming up with something that amounts well and economically for the specific types that our customers want. And so we are working on more fuselage now did antennas for those smaller class of aircraft.
Louie DiPalma: Sounds good. And for the government encryption business, has ViaSat received the product certifications that were previously delayed? And are you out of the woods there?
Mark Dankberg: Pretty close. The government -- so the issue is they haven't been issuing certifications across a range of products for the reasons that they know that they have. But there's customer demand for -- especially for a number of our products. And so the kind of evaluated that demand relative to what their certification guidelines are and will be, and they've informed us that they expect to issue those certifications later this month. That's what we can make.
Louie DiPalma: Thanks. Great. And One for Shawn, how should we think about the customer premise equipment, CapEx and OpEx costs for ViaSat-3 residential customers when you deploy the new terminals?
Shawn Duffy: Okay. So, I think what I would think about the -- on the customer premise equipment. Similar, there's a couple of parts. So, similar to prior years in the early onset right? Those costs are a little higher because it's all brand-new equipment. And then as we have natural turnover in the basin, we get kind of a refer pool and the costs tend to come down over time. The ramp that we have next year when you're thinking about the quantum or the mix of CapEx, I mean, that's going to go up significantly year-over-year. You think of that as about 3x what it is to this year. So, that gives you just an -- we'll have significant investments in that bucket. On the OpEx side, it's primarily I mean we have advertising that you'll definitely feel in the front end as we're starting to prepare for service launch and marketing of our new plans. You'll see those coming in as part of the EBITDA margins in the front end. But I think with respect to the other components of acting, just to remind people, as we look to next year, our full year of ViaSat-3, for example, operating expenses on the ground. We've been talking about that through this year. This year kind of scaled to about the $50 million mark. Next year, we'll have the full weight of theViaSat-3 ground, and then obviously, we'll be scaling our revenues on that. We'll still be building out EMEA and APAC. So, you can think of that number is going to about 85%. So those are kind of some components of some of the capital OpEx.
Louie DiPalma: Sounds good. And is there any type of like a benchmark in terms of like for every customer, should there be like $200 of CapEx associated with the customer premise equipment or any other type of round numbers there?
Mark Dankberg: Well, we've had -- typically, when we go out with, as Shawn said, with the new generation of satellite, I think $800-ish numbers for -- be it depends on the -- it's a blend of advertising, commissions, equipment installation, it's all those factors. And it won't be -- it likely won't be markedly different. The mix of those costs will depend on what the demand is and what we can support in each region. But that's kind of not opening -- it could be a little. I think at the beginning, China is a little.
Shawn Duffy: beginning with the advertising, but I think--
Mark Dankberg: And then it can come down $100 to $200 as it matures.
Shawn Duffy: Yes. And we get that refer pool as well.
Louie DiPalma: Okay. And as it relates to the ViaSat-3 EMEA launch that is targeted for September. I mean you mentioned how it's with United Launch Alliance. Is that what their new Vulcan Centaur rocket?
Mark Dankberg: No, that's an Atlas launch. It will be at or their last Atlas launches.
Louie DiPalma: Okay. And one final question. This is a bit more speculative, but following up on Ric's question as it relates to satellite direct to device. Would it be possible for you to partner with SpaceX in the future, you used to have an antagonistic relationship with Inmarsat, but now you are merging with them, so things moved over. But is there a scenario in which you could lease a portion of Inmarsat L-band spectrum to SpaceX and partner with them for a direct to handset effort? Or are you committed to like launching and operating your own constellation in a vertically integrated manner?
Mark Dankberg: So, it's a good question. I think that in general, we're -- a lot of our value add is in the space systems that we can put together. And so that's still at the end, in dealing with -- any other prospective partner it would just be an economic trade about what's the nature of the partnership, who provides, which resources or capabilities. But personally, we don't rule out partnering with anybody. So, we do -- I think we've shown that we can really add value in the space architectures more than we could just in lease fees for spectrum as an example. We never say never.
Louie DiPalma: Yes, thanks. Thatâs all that I have. Thanks everyone.
Mark Dankberg: Thanks Louie.
Operator: Our final question comes from the line of Landon Park from Morgan Stanley. Please proceed.
Landon Park: Thanks for taking a follow-up guys. Just a quick one on the TDL prices, are you guys planning to use that to pay down any debt or anything? Or are you going to keep it as a buffer? Are you still playing with draw on your Inmarsat financing at the close of that transaction? Or is this replacing that in some way, just -- around those items?
Shawn Duffy: Hey Landon, this is Shawn. So, -- we definitely on the -- when we got the proceeds when we take down on our revolver. So, we did do that right now, I say with the backdrop of the, the credit markets and our 2025. We can counting a little extra liquidity makes sense. And with respect to the transaction, I would say it gives us a lot of agility. So, we haven't made any commitment there.
Landon Park: Is there any reason you wouldn't want to tack that financing given the attractive rates that have struck at?
Shawn Duffy: Yes, I mean I definitely think that we look at the transaction and look at the full-on lens of the capital structure, and I agree with you that where we are today is in a good position there, but we need to take that into consideration overall. But our intention is to be able to be sure we're in a good position with the right capital structure for the financing of the transaction.
Landon Park: Understood. And then just one for you, Mark, as well. On the ViaSat-3 as we look forward to that, you guys in the letter talked a lot about the enhanced flexibility of that satellite capabilities. When we think about the gross capacity of the ViaSat-1 and 2, can you comment on what the utilization rate on that gross capacity has ended up being now that those assets are stabilized and what that can look like for ViaSat-3 asset?
Mark Dankberg: Okay. So, first of all, it's a really good question. It's a complicated question because different -- I mean, you've probably seen sort of what they call busy hour demand curves from cable companies or others that are in the home residential business. And what you'll see, for instance, there is let's say, from like 6:00 p.m. to 11 P.M. or midnight, you see very intense usage and then it can fall off pretty significantly overnight and maybe a little peak in the morning hours and then not so much in the daytime, the low peak when kids get home from school. You'll see -- example of a utilization curve that would be that would be common to all the users in, let's say, give a time home, right, and that have common applications like residential. So, if you look at in-flight what you'll see is when you look at it, let's say, when you look at it geographically, for Delta, this was an example similar for American and United other major carriers is when they have a hub, if you looked at the sort of the same type of chart, as I described it residential, what you'll see is very high usage when a lot of airplanes and people are in those geographic areas around those hub airports. And lesser usage in between, certainly doesn't go to zero. There's different airlines with different schedules. But you'll see these pronounced peaks. And so when you think about utilization, one of the issues is if you have capacity that's not flexible or if you have satellites that only have views or fixed coverage over specific areas and can't move it around, your utilization tends to reflect the demand in each of those areas when you combine a weighted combination of those markets. But when you look at those -- when you look at those at times when it's not very well-utilized, the thing that ViaSat-3 lets us do is move back in with somewhere else. That's the thing that's really, really unique and doubt about it. We can move it somewhere else, pretty far away so far and not a way where we get -- take advantage of time zone effects or far of where we can take advantage of different connecting times at different airports as an example. And then we're also looking to do similar things with other mobile markets, including land, mobile, and maritime. So what that -- what we think that's going to let us do is get pretty meaningful increases in utilization in these high-demand areas. And kind of the way -- I think the way to think about it is, especially from a capital efficiency perspective, this is one of the things we try to put together and show investors is -- if you think of demand, the demand on the ground or in the air, it's really a property of who your customers are and your space systems and the failure modes or the congestion that occurs tends to be in hot spots. And so by being able to move bandwidth around what we think is we can do a way better job of serving hotspots than other space systems. That's what we're working on. It's a really optimization problem. But I think the economic payoffs are going to be significant. Does that answer your question?
Landon Park: It certainly provides color. I guess -- I mean, I'd love if you could provide more specificity.
Mark Dankberg: Number, do you want a number?
Landon Park: But when you say it's a meaningful increase I mean what is ViaSat-2 at today? I mean I assume you guys have a sense of what the utilization on that satellite.
Mark Dankberg: It really, varies by place, right? So because you have the -- right? So it's hard.
Landon Park: I guess what I'm asking is there's 240 gigs of gross capacity, and you guys provision capacity for users and the beams on that satellite are essentially fixed. So, how much of that gross capacity is essentially provisioned you say you don't have capacity limitations, right? So, -- are you bumping into that 70% utilization.
Mark Dankberg: That's the issue is that you run into provisioning limitations in specific places. Sometimes before the growth of our in-flight space was pretty much due to residential as we added in-flight users, then we have to provision for the peak demand between the two markets. And so we've got to be -- that's not an easy thing to do. We've got to be pretty good at forecasting and managing to that. And I think our provisioning levels are pretty good. We're pretty efficient and efficient in that we're able to meet the service level agreements that we described. It's a statistical process, but I think that we're pretty close to the provisioning you can get when you don't move bandwidth around. With ViaSat-2, there were some opportunities to do some dynamic scheduling, and we do some of that. ViaSat-3 takes that to another really big level. The thing I would say, though, is if you look -- one of the metrics to look at, and I think this is really important. Think of it as just it was the peak demand to the average demand in a given place or for a given airplane. And those numbers peak to averages can be high, especially for some of the mobility markets like more than 10 to one. So, that just gives you a sense of in key places, what the potential is by doing this as well.
Landon Park: Understood. Thanks for all the color Mark.
Mark Dankberg: Okay.
Operator: That does conclude today's questions. I would now like to turn the call over to Mark Dankberg for closing remarks.
Mark Dankberg: Okay. Thanks. So, just in summary, going back to reemphasize the significance of putting that first as a satellite and with having a launch date now in early April just about two months away. And with the Europe, Middle East, Africa, while it's not that far behind. The bandwidth coverage and flexibility it provides really addresses our most immediate growth issues and I think the last question kind of helps emphasize that. And then with the sale of our TDL products business, we've got a lot of financial mover room, the over $1.5 billion gain on that sale will actually make our fiscal 2023, our most profitable year ever, and we think it's indicative of the value we're building in each of our businesses. We continue to believe combining the complementary nature of our businesses, skills and resources with Inmarsat will be good for the companies, our people, our customers, the UK space business, and for our shareholders. So, thanks a lot for joining us this afternoon. Please don't hesitate to contact Peter or anyone on our team if you have any further questions on our results or other topics. And with that, I'll hand it back to the operator.
Operator: This concludes today's call. You may now disconnect.
