VSAT - Earnings call transcript Q3 2018

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Operator

Welcome to ViaSat’s Fiscal Year 2018 Third Quarter Earnings Conference Call. [Operator Instructions] And as a reminder, this conference call is being recorded. And I would now like to introduce your host for today’s call, Mr. Mark Dankberg, Chairman and CEO.

You may proceed, Mr. Dankberg.

Mark Dankberg

everybody third to fiscal afternoon, call earnings Good our for quarter thanks. and ViaSat’s welcome conference Okay, of XXXX.

Mark Rick Corporate and Dirks, our am got Development. Officer; Robert Duffy, I Dankberg, and Counsel; CEO Financial and So Bruce General and our with Chief me Operating Paul Baldridge, Chief President Treasurer; Blair, our Officer; Shawn Chairman I’ve Froelich in

Robert we start, will before Safe disclosure. provide So, Harbor our

Robert Blair

Mark. Thanks

could is know, actual this contain a discussion differ reminder results cause This materially. factors you to As forward-looking that will statements.

information these filings That website. XX-Q. SEC reports XX-K Additional concerning in the factors our our Form including on said, is SEC back and Copies contained from from recent are to available our you most or Form Mark.

Mark Dankberg

Okay.

that I will web into come over I in-flight we questions. will slides on So segment back review are consolidated available will businesses our Then and go residential with Shawn then we our outlook and will take discuss and and the of will our and highlights and the referring results. start government depth be financial some broadband, to

highlight planned is of month. first early region next for as is national region ViaSat-X launching end the the So, service service. We by with week as for starting ready the coverage anticipate that this

detail the feature and well I demand with will of We unlimited in plans plans in has gone will more highest high the some available speeds later. nationwide markets. that unlimited Test marketing discuss

with and anticipating testing Airlines. third using with on been Australia we a in Qantas connectivity the service platform retrofit new quarter, second and service have We production In ramp began generation aircraft both our that’s entered American in-flight and significant we underway. in

just XXXMAX to quarter aircraft, our aircrafts for for the just over additional contracts new over airline including today, that XX announced to new third with new that aircraft Then are airplanes subcontract also now closer and And a addition we during besides XX United direct those the so total brought it’s to other in quarter, puts signed total fleet. in United only and existing planes we us XX the under a originally and where signed during from were their situation. JetBlue contract contract because Airlines X,XXX significant, the in-service have X,XXX. that sure, was the be We airline additional were customers of to third

as to a systems good at see periods R&D reminder which by backlog government as in drove really to that both pleased Now, and up JetBlue had working strong we give X% was third significant also major prospects the third the Revenue a up are for $XXX product We over with on in EBITDA and basis. lines, all And adjusted enabled have $XXX in we a quarter we year-over-year across about Orders and quarter on XX% later were that that directly government well. investments growth be another quarter very the prior we were government and United. in more systems. strong just information record was million million. made at will

do part. So, Shawn, just that financial

Shawn Duffy

Overall, quarter the expectation line were Mark. drivers Thanks business our in have last our results with third call. discussed based we on

billion. fronts. were up year-over-year, we record multiple Orders well-positioned of backlog Looking XX% are with forward, on $X.X

capital which payload P&L about services expenses R&D to beginning and are are We transition support we flow the will lower to further launch improvement. ViaSat-X program, to on and ViaSat-X

launch. ViaSat-X P&L, commercial slightly ahead grew service of capacity Turning year-over-year contend the to despite we revenues quarterly the to have the constraints with just

technologies. continuing gearing strong expenditures the R&D ViaSat-X up flow-through impact year’s next-gen and Loral recall included our year-over-year the into associated bringing IFC of Let’s of impacts settlement settlement reflected of Loral million service, that QX for proceeds. the $X.X elevated also last EBITDA the expenditures with on growth,

point as to decrease our begin a year-over-year of want quarter QX R&D million $X transitioning the as basis see do do on out a sequential were we I portion levels expected, that program. based while to we up However, capital ViaSat of the

due These subscriber have residential the XXX increasing at marked over service offset in service this down contract double versus in last new I was a with $XXX and record Government silicon year points our million is excludes a high bringing service X.X stabilizing in service to across R&D segment EBITDA QX and the a impact, elevated by XX.XX. up orders grew broad combined we ID/IQ more and downtick aircraft at announced than up backlog year-over-year of product $XX ARPU. IFC, modest In that results, quarter under of was mentioned it EBITDA X% increases growth efforts the initiatives, ahead segment thought new anticipated margins of recently awards basis QX secure in looking QX In ARPU increase were strong level as segment partially significantly count, Product to record settlement future million. nice primarily earlier. quarter, were of factors quarter offsetting X% over XX% of new million. million we saw which and adjusted very Satellite such in Services, a our Systems, And were portfolio. we $X So, rate a that with revenues revenue more included our reaching which at million year-over-year remember, Loral launch agreement $XXX proposal year-over-year. XX help Revenues to and million in $XXX were year-over-year margins with to $XXX an growth, end million another growth

line upcoming we as segment commercial the incurring impact launch reductions plus we see expenses earnings, alongside are to satellite additional of near air. QX service large-scale the the in ViaSat-X ramp Turning we service top our

a also over subscriber see the to commercial few heavier of forward month, ViaSat-X segment to expenses commission we percentage as additions. in with advertising this QX, expect to Conversely, up service year quarters. activity we moderate of we growth next As revenues look ramp much launch related this to Plus, the revenue. higher resume these beginning expenses expect higher

here moment new that the begin already estimating to will a quickly be primary subscribers broadband those two, expected lives. remind which capitalized And come and be into take the record commission in subscribers’ we recaptured our that with amortized network to revenue everyone subs want April amortization impacts business. us two and over associated net amortized also Commissions incurred for have lives. remaining April our over of the will after customer at the I time, for on to will they standard So, will consumer effect and XXXX new X asset,

I we XX% efforts, review have expect review versus many of and completed our approximately have the result our is we accounting of of historically. to known our would part implementation being in this largest still capitalized of to contracts, customer while impact As single QX with implementation this to ranged XX% the XX% our XX% stock impact underway, the future in being difference

we fiscal early should into given is year was business. XXXX, a in margins there, on were when account, and fixed X our From that quarter where ViaSat-X. service ViaSat-X low ViaSat-X quarter service margins So, Services we first these we EBITDA each to where just see more variable should the in high taking of this increase cost, full see started over we segment all margins into begin to than Satellite cost were on similar elements commercial higher which

$X were increases business quarterly than networks, lower sales commercial revenues into ex-terminal in Moving to related with up more our terminal offsetting million airborne sales. IFC

in book-to-bill good also ratio generating flow win solutions for some a exciting We order and saw contract next QX. positive antenna generation

sequentially Looking year-over-year, terminal cost approximately segment in was commercial modest forward, payload it And we prepare phase. expect support network growth coupled to for down production the revenue our R&D transitioning as Satellite was from heavy a segment are $X airborne as expenditures, to sales reporting commercial EBITDA with was R&D our reported see in X actually begin impacted subsequent although with higher by revenues air. again, million ViaSat-X Gen the construction ramping negatively we adjusted as by we ramping increase Segment strong up service installed Services. chipsets being

our we downwards expense to been the that R&D of forward, are launches ViaSat-X right and reflected transitioning is systems service for. Going Wi-Fi year-over-year and the phase. in-flight the companywide. around construction at XXXX seeing to levels levels, growth to stage strong have are ramping performance drivers of another corner deliveries milestones, stepping similar preparing phase anticipated Overall, QX with early continue recurring percentage now for payload to program and commercial revenues. record segment we expect our fiscal as coupled have and ViaSat-X the a These we our are company set the our government at backlog

the across drivers QX reviewed. to year-over-year line segment adjusted Turning same EBITDA and the revenues and reflects year-to-date performance X, the we Slide Top EBITDA trends see we for generally just period. quarterly revenue

the all So, here. I through details won’t go

we have Additionally, in quarters, billion. while what I and Similar whole in been the we have those that been of $X.X with launch The base show transitional a and fundamental for growth reconciliation have periods. the the shows adjusted business. order X provided isolates year-to-date have items a will new high note growing year-to-date two heavily the business to is service to highlighting the Slide of EBITDA large for revenues as both our EBITDA last engaged preparing quarter activities, a reconciliation been hitting still in record in awaiting we for ViaSat-X the

side the of increased negative look cost, growth Loral page, you the businesses. QX from the to If payments, reconciliation $XXX million the due $XX settlement of the by was you million our which impact R&D right plus can offset commercial accounting on conclusion partially of together investment, then the the all-in ViaSat-X existing at mobility organic for the ramping see approximately year-to-date variance,

things, leverage the QX our to reform from of to to non-GAAP in net the QX, cash debt EBITDA tax million. income earlier the we recent million the impacts Slide our $XX.X rate federal net enacted net year-to-date earnings, $XX.X trends. and with $X.X of other flows we tax I In loss tax million corporate discussed income year-to-date income, lowered Among plus XX% legislation XX%. GAAP see and new the see impact result X, Turning related

for has fiscal XX% year phased the March for will lower approximately subsequent and be rate XXXX in years. XX% company resulting end, corporate in XX year fiscal the U.S. As rate a a of federal tax

other year-to-date to still resulted for based provisions long-term, for X tax both basis non-GAAP net future federal federal the and those with the in assets per lower periods. income by deferred review. income months dates of ended our revised XX, $XX the will and the share did respectively on rate we for codes of expense reduced revalue in positive the tax charge and In new tax under along tax utilization the the QX, a company XXXX. be This Although assets $X.XX of additional rate X GAAP third December our which non-cash quarter months on million approximately XX%, figures and the $X.XX of

cash Turning capital phases network cash ViaSat-X expenses flows, constraints, the of year-to-date constellation. operations and despite million to our capacity $XXX and ViaSat-X of the ground generation was our from this of and entire funded ramp including our over XX% the build-out year-to-date, spend final our

Looking comfort range. the EBITDA, was at net right, times at of well lower chart which leverage end QX our X.X the is in the with

our outward, ViaSat-X ratio likely to scale subscriber EBITDA few as under higher as alongside incurring with $XXX our grow look $XXX we constellation finally, position next QX strong, move quarters credit As ViaSat-X with the this million facility. our the stack we And over as will liquidity future begin cost build, very million of nothing base, cash, continue remains the de-levering outstanding again. we

when two outstanding of outside these liquidity have LCs, So, account, $XXX of take into total amounts million. we we

will over it I back that, turn to you, with So Mark.

Mark Dankberg

thanks, Okay, Shawn.

narrowband appliances terminal and cyber broadband the services. and chart had satellite products as portfolio product and assurance government the with segment. we isolate start it helps XX and again, this across offerings. products tactical government information We datalinks, Link Systems business. and multiple our services steady So, last service of and and use call in will on the The of excellent are Once Government software I seasonality performance and expanding

that’s and left, see services You revenue the that growth year-over-year the I mentioned. can to attributable just products on the

incurring you been little about backlog $XXX future. into has to right, EBITDA account for during higher of the quarter the see awards us a can $XXX after and over faster million with positioning are ended R&D other continue the million strong the even On We record quarter. bit we selling taking growing costs

migrating mainstream by early of increase effective strategies Air been to products such growth adopter market One and as our Force. have very organizations, addressable is Army, Forces, Navy Special our to that in the

Forces to that services generally indefinite delivery, executed ID/IQ opposed that unique ID, items with as contract indefinite non-developmental During the illustrate and the a for helps third programs of $XXX quarter, products quantity, million ViaSat we record. are Special or demand

purchase received sure, our new under include to that backlog. orders firm only we awards in be Just contract when and

also and adopted products execute are of users, by other As those aiming with types services those contracts we to similar organizations. are

and not cost having for commercial success a as move close technologies initially we that Army their and filed with capability others out to The the recently tactical refers emphasizes our report are to indirectly have Congress of faster early just to specifically to we it migration but strategy. two for products on adopter Army gaps calls well. deploy and effectiveness, We report organizations new and strategy. developed needs report The that network develop ViaSat done modernization Department the with

as approved budget continuing prospects. difficult organizations. contract to Having growth helpful We will with environment more resolution continue capabilities it new makes to and/or very our be for the optimistic an be about DoD new

So, starting our factory each, current chart. a that. ramp quarter. in that planes third our as we have began sample is been some for XXXMAX several And testing line air significant the We on had to quarter in and this a the to positive there service service including of pave objective in connectivity, ground. Passenger planes, as in-flight anticipating turning way both existing new to well for American been was the fourth on Airlines to has retrofits fit, feedback aircraft

one They media in of been with service including applications other are leveraging agreements Australia. live is matches. We live cricket in every for have service streaming video-on-demand. for very in entertainment innovative to in passenger also production agreement TV Qantas also their Internet and free Qantas forward-looking an music, has and streaming

bringing making customers good venture in European online, are our and on our airline ViaSat-X. coverage joint We transatlantic also forthcoming European with progress KSAT

and the total we in-service we mostly And of today, new that added the contracted mentioned Airlines MAXes direct XX aircraft and a announced trend to United connectivity quarter, of entertainment to proposition. XXX includes planes, plus X,XXX unique That to to a and differentiate cost us also themselves will to close wireless our there of additional which clear towards end I third our We engagement, is which effective in-flight passenger just X,XXX. that that levels earlier, a capitalizing over quarter. both product. additional of think contract claims as As way airlines in value puts XX lead and brought as with contract higher just in-flight our for on satisfaction drive passenger new is

Just personal alone, to customers. reinforce connectivity in third quarter X our for that point Wi-Fi we delivered device over electronic sessions in-flight the million Internet

additional the We geographic and optimistic we we can as regional ViaSat-X we grow that partnerships in with our regions in other have coverage are expand possibly U.S. ViaSat-X, as that

Okay.

ViaSat-X. quarter to consumer we on at everything So, Pretty the was in turn let’s launching service now broadband. much third did aimed

and more more speed long that have market We the to streaming. said video higher bandwidth want with with addressable we plans grow

of subscribers are that on plans on customers. over coupled we of we So plans. we the video these test by stream extend offer, subscriber that were test quarter, favorable. of are quarter, At from ViaSat-X already began the available a existing but ViaSat-X marketing third About results be hours, unlimited XX,XXX subscribers viewing trade in plans. who would and could end XX,XXX management appeared for the on speeds third the had something were of the limited very the the new other migrated those we marketing second – expected to amount bandwidth We new with still good many half

subscriber as growth existing elasticity plans X% of price limits losses about each of of areas. we to plans support coverage come and of mix given learned budget wholesale increased these the the and higher So limited the also marketing we even combining an appropriately the adds speeds of churn have to have ones an gained as record bandwidth lot ARPU, year-over-year to net with seen new of in into bandwidth to and unlimited over the attractiveness Overall, older effects leading the plan insight and plans attractiveness gross well different ViaSat-X of retail new our $XX. and relative down, a moderate. a types the lower the combination Higher due

aside, of the January service, an top helps in broadband as for which video, Internet to $XX macro share illustrate growing second high we of to a given suppliers seen of Just per access. the environment XX cable standalone bandwidth multiple from megabit Internet value just month over have speed, high pricing rise a

ViaSat-X and forward early couple on on the looking that. So as slides, week into backdrop, regionally go service really are of the of as with as the starting more that next will launch we to we in depth next

speeds quick most addressable We set of a what objectives We good first, for satellite review and faster of the with our network. want our points. demand and thus second market have ViaSat-X want all think been we type a to for new are grow expand We into to So XXX unlimited on offering start these areas geographic bandwidth [ph] an bandwidth our in up high and per to in megabits new speeds more and virtually format. markets. plans

the and business advantage connectivity coverage too. on of will there Trans-Atlantic Caribbean and include in-flight Mexico of Our south and take likely ocean

on been Mexico, We Wi-Fi expanding have I defer but another our services pretty that day. also more rapidly in for will

those dimensions. which right in in has but idea the earnings bandwidth satellite, ViaSat-X to each of direction flexibility growth, lot downstream of new is ViaSat-X most One mitigate and upstream. the it’s bandwidth on we not in to there available the where versus allocation. right right is have the obstacles The a the got place important flexible capabilities terms not of at in of time, revenue with of

geographic imbalances area such geographic instance. respond long-term different different for where as can trends variances due one peak to as to due airline busy such another, in zones in versus we short-term hour demand to to more time were So demand schedules due

we bandwidth had that traded back was some downstream over downstream of upstream the could. bottleneck, if from more ViaSat-X with found a left we So that would have we we

economic markets allocate high with We demand different or and that markets service we vertical demand also can with flexibility very some required discounting had the Also promotions that on could and to residential. to sold significantly lower services to little or plans applications more X bandwidth have quickly different with mobility use others that peak our or portion represent next in-flight the in triple or profiles business that such years based and businesses our connectivity demand as for compared know We instance government of larger backlog revenue. a yield.

We also demand have profiles. other opportunities businesses complementary to scale with

growth and So dimensions returns those effectively to higher multiple subscriber the on demand got bandwidth we based ARPU, we environment serve as have and in and and more way the using allocating the to such long-term a ViaSat-X verticals opportunities expanding in drive opportunities across addition growth, geographies opportunities represent. to thoughtful growth

ViaSat-X greater and long-term is those planning residential fixed, we coverage geographic to have than that ViaSet-X. broadband to trajectory allocated to XX% available, different greater constraints want was mix So flexibility. ViaSat-X X.X years have in more is of an loading allocations, which and to and satellites optimizing we productivity beyond terms of geographic addition years, generally our of it’s value. are a X and also allocation to of to improvement, dynamic current even our should And the designed our launched have the On growth with the capacity we In manage XX% bandwidth fleet, the including ViaSat-X. change

consider while just scale business. opportunities us makes largest we on these for not understanding enter and and geographies, strategically simply path existing markets our subscribers, and services the further still part and satellite of can residential new sense thoughtfully to focus just for So businesses

about next our on we think productivity additional economic some the is turning about on productivity give top So, how will color bandwidth left and The chart allocation. gains gain into slide, we value.

may do the sold. the ViaSat-X find ViaSat-X. dividing sells that have value get the there deployment degrade business by twice capacity antenna bandwidth compared We by an Our that issue you can the bandwidth different productivity be market a bandwidth ways to services ground to services the and of was must revenue of packaged tests. designed in

bandwidth team satellite the capacity bandwidth performance currently capacity flexibility, least data. demand pod we ViaSat-X So, its we to The the the to geographic Boeing spectrum will test could potential. we current satellite. left gigabits have and taking chart the should system for capacity the ViaSat-X the and upper experiments usual it. is the how of at as believe estimate turn network the question into as given on-orbit maximum when working earnings? mix, optimized We double Still, XXX The account available models, performance our we really are X important revenue and characterize antenna be shows the maximum market around understand into some service of and understanding estimate

revenue if The of got the the same in first is gain the next per X of we productivity years or column market stays life for the that dollars would value terms just and satellite be the all the gigabit for say.

half and X and we optimistic. if on or X triple that probably required shows triple happens in ViaSat-X next So, scenario too all unit will bandwidth our revenue and would hypothetical a market to column which ViaSat-X the to that’s give on what be ViaSat-X The the seems about were then the since And with higher likely its ViaSat-X the revenue has and would pessimistic. yields too that ViaSat-X of did, gain customers. than revenue revenue ViaSat-X about to bandwidth alone productivity have. XX% ViaSat-X Combined useful same respectively be would

is purely maintenance total CapEx called a reflects more will ViaSat-X we we column before arguing no just that ViaSat-X. than bare with and revenue third in case did The get

productivity it should all based is results than productivity to pessimistic in even doesn’t So The today, customers. have two the in-flight plans end test the the view, connectivity opportunity reflect ViaSat-X of reflects that is to of as that that using pretty column the gain the just we of points shared be over for clear market a our two the the that first rapidly it cases. consumer XX,XXX we fourth we the would value marketing and third quarter it see seem between on planned our and our share giving yield growing what more ViaSat-X from customers higher backlog, most supports like plans expected the because data the which gain would interesting, ViaSat between and and the subscribers in

guidance. So point, it’s just exciting growth to as of we data clear, the this but It’s in an opportunity. just be one don’t intend terms the

Some also of the the factors better chart, the the that’s upper to worse that the that that about or chart only left over yield are things start column. could shown lower is in hand the trajectory revenue on make right when fourth next Then represented achieving and economic time cases, we possible from for other ViaSat-X.

noted of second improve goes time X.X we would fleet half ViaSat-X calendar combination on to ViaSat-X year service. productivity estimated again. like would we do the like to so as by that into designed to from optimize So XXXX, years the a to of the and X revenue That’s is now. I that moment our as ago, roughly

launches, to our it like would we service. available So, filled the have by bandwidth time

bandwidth fast, to little and we market try have overestimated probably only sell slowly, our we potential, building we want its so too yield. to a we speed it slowdown relative value, to if may we If increase might may So, revenue we too this market are be should up. undervaluing

knobs levers and cold too we based adapt. not finding from rate to and not is there having in too and on are the the what focused Somewhere hot, on market that’s goldilocks facts

the revenue as exactly earnings be counts. the not focusing we same that’s focused on and trajectory and are to clear, Just on really the subscriber

the Simply approaches simply illustrate on So, we subs expenses this Residential with lower. lower the counts. given are at subscriber with and subscribers lower look service than stated, profitable be fewer more higher helps chart Subscriber more how the can so Service net is levels ARPU. product revenue base. are better, times plan as churn is ARPU. acquisition ARPU investments cost subs right subscriber

marketing design than be with demand help still our plans performing the want was plans. and price, and with don’t achieve that of currently have trajectory the on more economic yield consistent third the service seems this that good, we adapt our of and as obtain quarter subs trajectory find those up this marketing, and we much our earnings The all Also on plans plans yield based revenue of economic results. churn consumer should the lower grow is delivers can spend. to and lower the require number that charge attractive We will are revenue addressable the promotional driven Based plan can market. test sufficient business of and better by approach measure

in connectivity, the subscriber that affects right other account in would allocate fleet. significantly total a opportunities and anticipate that of ViaSat-X the growth our current smaller of that total to our enterprise including the maritime, on we amount Finally, into bandwidth residential point be Based and our growth XX% services allocated fleet taking of on portion than service. the to bandwidth to will be we residential counts rate in-flight Wi-Fi government and XX%

count overall it in that that our is subscriber increase improve and it So revenue growth would would ViaSat-X but could would limit additional enable likely earnings markets service, outlook. and until

Okay.

has up see segments. been we continue quickly we our executing overall that. good well, see systems summarize wrap So main to in Government business to each of really opportunities the drivers

items to. continue receptive record our we our compared programs capability We into with unique of as to Defense NDI of to gaps. to technology critical a commercial record products on be of close have or of The record successful become more incorporating Department to programs programs although number also has successful non-developmental been turning

are introduce is resolutions but that, tactical leverage on unique far, continuing IDIQ new to data been to of it new cyber short-term products of of number the and and security and services we maintain satellite in are links, budget because quo. always and these services. continue quarterly can makes forces capabilities a that the successful good got our have so kind In a authority merely to in example status reliance challenging special short-term we broadband the products We or with But the intended to variations have resolutions organizations, continuing possibility. of lack work

and growth lower networks business Our for expenses. has R&D commercial several indicators revenue leading

and We anticipate to expense. have show which sequential connectivity equipment a ramp ViaSat-X that reductions and book in seen we sales, significant bills, have up R&D quarterly seen positive segment in-flight in

satellite arrays advance and supplemental success We STCs involve the additional on for is that and aircraft continued launch including the type ViaSat-X. R&D expense. or phased does long-term for flat-panel new ground additional our airline of have factor new and needs create biggest networks services opportunities in customers ongoing line-fit On certifications in does capturing retrofit services,

be allows satellites though as initial promotional SS/L of associated subscriber ViaSat-X go the also but year-over-year – return by affected fixed value, bandwidth SAC And to We will growth have us we on be settlement a higher remember by the initial most and revenue earnings driven fly gains will that as earnings costs and to a Short-term to of enables fill. a by so increased plans. with will expenses. that speed higher include comparables bottom create higher near-term to we ViaSat-X by away. tempered growth, to pricing, got quarter progressively our higher just one somewhat revenue fall line focused wheel effect that expect more payments, and service are overcome proportion that residential revenues

and demand. into from as applications enterprise revenue growth such constrain in-flight monetization applications a with it improve peak that total higher anticipate geographic connectivity may proportion also be higher of but temporal subscriber complementary value satellite and generated We residential to government services ViaSat-X, will through

Systems Government are in As satellite a broadband segment. our reported government of applications reminder, bandwidth

So results. have Services some segment impact that may Satellite on

So up for questions. it that let’s open and with

Operator

from Mike the question Crawford Our with Instructions] line [Operator first of Riley. B. comes

open. now is line Your

Mike Crawford

manage, that you. what now you carrier expectations. airborne in fleet carrier that to do united of experience Thank passenger manage And you how believe will in-flight have percent is and mobile going

Mark Dankberg

Okay.

had XXX we or or XXX around XXX…? I in think maybe

Shawn Duffy

On the airplane.

Mark Dankberg

XXX the their in think on roughly close say XXX mainline XXX of that’s… I Yes. United to to out domestic fleet,

Shawn Duffy

Could that closer be higher to little a United than and XXX of planes.

Mark Dankberg

Okay.

this to our will So of that. add proportion

fleet terms I but for what we – think United their to don’t United planning speak is still wide want of is. in

the come terms themselves how the and are think of will fleet they for deliver the throughout of course I they to speak in the through fleet. services going

see will I out to we that and more more them. that to they our in excited you support try leverage think I – to understanding will them is and they probably likely the general figure about are offer capabilities think

Mike Crawford

XG And was European – regarding I you. Okay. to they be Inmarsat’s and mobile sorry use for where do with mean then be Europe? A, XXX B, tower to and spectrum aviation Thank have service if what you to so purpose for build the you be Europe that to you fight Ofcom this network spectrum m Ka-band have on in your without that in phones that dispute is able of able and that a for there regards our spectrum what I supposed in purpose etcetera think your regulator use used would satellite out prospects

Mark Dankberg

Okay.

Let’s that up for open question. it

think I part network satellite that’s our basically like that it the is will EAN be the airplanes on augment that’s network So position merits. bandwidth that network be that providing basically application to application our about passengers the to delivered that something not think through deliver was resolved the I ground the satellite it of with opposed position satellite a will that the ground XX% all on the the will be as the tiny intent and

important that the on I argument least I probably but it we contesting So the resolved on of are others. will a the merits, pretty our where jurisdiction couple basis, it there think by approved think EAN haven’t that straightforward. and already be at jurisdiction in arguments countries is that are And understanding

spectrum satellite locations is the S-band whereas or and that is Ka-band orbital generally to allocated taking MSS – more only the is called Ka-band service at operators and to because applied, is think like applying spectrum XG fixed bandwidth satellite between in spectrum L-band service. a is I omni-directional. this it mobile specific Fixed what’s satellites there difference difference networks

currently to it’s no not spectrum that. practical so really And each is MSS There operators for FSS allow really the doing ground. on protocol of use the to

Mike Crawford

in And Okay. negotiations Thank is update any Europe question then last on you. with Eutelsat? also

Mark Dankberg

Yes.

we are that would both Eutelsat think I the result ViaSat-X and JV. agreements away working in on

done. not are We

make progress it. to continuing are on we think I

Mike Crawford

you. Thank Okay.

Operator

Thank next of our line question you. And with from Valera Needham & Rich comes Company. the

now line open. is Your

Rich Valera

of you kind get talk And at to know first to a capacity? are I like you this closer if your a still lower, could ViaSat-X before XXX with versus be up the XXX bit something was on think the projections Thanks. had talking if it out are about you bridge how said you would XXX, original you maybe sounds original the capacity I so can to Thank what you bit can number. you original financial thought lower backup you do the your you guess the a you that would fix original even bridge the, come you. point Mark, are turns then projections what that about that capacity know expecting financial to of odds

Mark Dankberg

Okay.

resolve still So with second start part do There the may first. let’s are satellites that we with that problem. the can the maneuvers

are make what be future, we working the prudent. would the where to can’t the understand not are and could when bit it’s with take but not still we it I is improving of sure are we with binary, completely. something really those make it often we that immediately manufacturer are trying say, situation, do not make there that actions could a that’s to we little and around a anything I outcome either, they situation And to probability not the insurers things end could We up it that worse is the Boeing it’s going – put will inconceivable distinct that sure do do is outcome appropriate. think it fix we that a It’s and

to In and multiple work work we of is times achieve with have that and we that still the that as into that a have capacity potential how – maximizes revenue things one when intend put we capacity. its exactly configuration the that’s with service capacity will not this it the the bring of our maximizes the said financial we regional the can same terms results, basically situation that in

about capacity over capacity point the maximize area it sort you where having has have it whole you of of demand. of spread think to most coverage and the of capacity think part in places as you fairly the use evenly if the of that how sort So, flexibility is to

– So, and flexibility. of we satellite have the a deal has great basically

but capacity think those beginning that will right be most a less at places capacity at have just to said the and uses. for VaiSat-X the the we I concentrated so right more places ViaSat-X, the do little that with the beginning, look total happy order change that we was to in what like at we and we in and have demand have might capacity be to to to this that allocate it trade-off So, makes least the would for may intended

So we models. have demand

We putting in the capacity are that configuration.

The plans margin on that perfection for things simple reason other for we network there also are didn’t and is we in of the we that can think satellite. we still had have are we problems had why our business meet other our than ground plans better not base These things the on then of work attributes we that and the planned. parts in are

panel one So think I a is way they deploy good to had XXX% imagine that is had would this didn’t right. about just solar example want think satellite it be, really I make a to that

up somewhat It otherwise, impaired. than than originally exactly where if still the power less codecs put partial that’s you we it done and XX% together. performance that has modems all better satellite is have better satellite now that originally have have pretty do anticipated, though have There you The video you situation loss. you anticipated but performance what can’t could it a what your things could satellite that come much with So, is to. performance used you when targeted achieve the consider even than impaired have itself is

Rich Valera

well? it. Got of part that potential claims is as And insurance any

Mark Dankberg

Yes, there are.

partial what the So anomaly And coverage in insurers we be would us on would basically and a with that a is anomaly the we want that risks to the for fix working we the that there one will to insurers satellite. satellite we we loss that like then decision. it end also is are notified try we make to – to that quantify thing that try have the think those an as entitled will them to will evaluate will

Rich Valera

trajectory That’s very in pretty in-flight the update quarterly aggressive think ramp over helpful. progress it. And then you talked terms backlog next quarters? two, us can And before nice to just the of how a obviously three Thanks about on having might that respect Mark. Got you with you an installs have give now.

Mark Dankberg

any I to to if numbers would any give any, give don’t want Rick, color or you that? know like you on

Rick Baldridge

we line are going things is two to are Boeing we doing No, different because retrofits. on, there delivering for and then fit

QX I had was they is and we and pretty those into much basis a double, get steps will you our up so our but of on that, it summer steeply the see or pretty if you delivery ahead And so of think start it then double will numbers rate schedules, QX but schedule are Shawn QX in in-service until slows growth see the down? QX quarter-over-quarter

Rich Valera

take your guess that at is quarters quarter, a our your to peak peak well run that would I over pretty still was it be few thought per of your XXX rate? thought still sort going I still

Mark Dankberg

will It higher be like… will than that. it No,

Rich Valera

Okay. Like XXX, is number that sort the or ballpark? of

Mark Dankberg

Yes.

the… I to Shawn, think think probably XXX. closer in it’s I

Shawn Duffy

Yes.

is I XXX good. so between XXX, think and XXX

Mark Dankberg

is and number range are we that Yes, in obviously that as more growing. adding

Rich Valera

Great.

to is think might quarters And so you hit the that…? that next in this not you beat four and but one,

Mark Dankberg

Yes.

Rich Valera

I leave for that’s will me. you. Got it, floor. okay, Thank it the

Mark Dankberg

Rich. Thanks

Operator

Thank comes of next Prentiss you. Ric James. from question the our Raymond And line with

Your line is now open.

Ric Prentiss

obviously ViaSat-X a about you Thanks. the have lot launch your to a just out used, assigned that how them? going out get were to going through amount go but goes you to how do these bandwidth the handled, job are are market, you get that little mobility, exciting moves us government reducing market think thoughts to market to have the maybe from Good in a residential, times bandwidth about test to different testing, obviously maybe that trying got good to you channels of talked areas to fly on help distribution And as of understand afternoon. did bit laying

Mark Dankberg

Okay.

talk just really one the didn’t residential distribution first and important. is still I yes, So thing in about case actually this

reengage months nine really And while. important on the chance one with Also in of have that mentioned residential the there. been that things we direct have distribution. our things improving last TV home is a there of very I on expanding we working it’s We a the we think to distribution. the is past about steps and for little satellites had new good up have that will And good

are things side. those on residential So the

On approach we working that for or with this Gulf configure to of government markets C-XXXs government talked streams. the has These specific side, ISR about our directly in instance have platforms, types is platforms. essentially distribution or been are

lead then it’s each sponsor. platform a say an equivalent platforms. to qualified be organizations one on go and the other like same that that would to with exactly, equivalent on not – to we So work in use to but tend And the get getting is of platform with those the qualified order STC it’s of

platforms. for C-XXs. that C-XXXs adopters Special other So then users And instance Forces me platforms. them are to and for to were organizations worked in different new organizations C-Xs on instance And then or one of C-XXXs would – early are we have with excuse And be or [indiscernible]. of those C-XXs go

These sales a terminals pretty it’s then as our services use So buy much direct customers taken approach. they will us. from and

it application going organizations tactical example for T-program having back services with primarily enhanced to – partner by we T-program, talk about want bandwidth, satellite on services us program, a not have in with. area One information working called lot into of about of defense side. in was greatly The will that’s have the another emerging what’s the very expanded program distribution large are much an also a been networks a those in types as modernization and good one villages there I Army couple greatly example that that a too we because is those we to this markets to detail issues talk Wi-Fi is has of terminals We a on – along with and is and different their when really more a remote as think ground approaches weeks provides and go again don’t there connectivity current few markets working a services. that are in of of information

example. a past as we have In could with we chain, served be available in new example think that other working by some large partners as of sites satellites Comcast the quick I to in we network ground in that enterprise mentioned fill have markets, we an terms range serve aren’t where are who an a for their on

We like other applications that. will expand

Ric Prentiss

about all market you subjects or Okay. from what equal ARPU higher educating kind as and are the then reporting of world you a this not the mentioned are rated we think of on Obviously, on should ones, of kind getting how modeling you new thinking about type standpoint? subs

Mark Dankberg

Okay.

So I report think on to will side, ARPU. the we residential continue

do thinking the when more material. – won’t about I it still are we shared become we that and probably we’ll applications those on think until have that applications are

at out, gets an will a thing until reporting these of be up for for appropriate the value that So, the investors with of connectivity way kind and but it just mechanism instance current to in-flight levels, and with as our analysts will it it’s been business, we come approaches. not giving built relative backlog part material a

Ric Prentiss

for July, auctions? as Also or are mean U.S., has discussions as that competition interest far in a at what up the you the and lot it about coming in from been on auction Okay. CAF going of auction with on the II your what any guys might views CAF II looking there what’s

Mark Dankberg

Okay.

neutral to technology to example undermined the to interested make that that So attention We movement the There in we value more latency that we rules to as speed. somewhat think was CAF auctions. it. an paid are have bidding really at relative a allocated point one by them was

do. compete the choice, higher of in can that but our speeds lower rules of we over of are lot what the out CAF are we a that we really fairly demonstrate this when trying University the service they we prefer given studies came to in in latency and the two constrained can rules summer – bandwidth reflect that customers we Indiana given what like adoption through from the of through do and best the meantime when really way will the will and to are We and more and plans

Ric Prentiss

recently a calls becoming that the possibly just you rural it the as Can much last is solution. to on about product bit little OneWeb Sprint earnings put both from ability a into ultimately OneWeb Softbank were thoughts brings update their And it. market? bandwidth us on up actually and and your how Got me talking broadband and

Mark Dankberg

in definitely OneWeb think from systems orbit I a technology are So interesting low-earth perspective.

to geographic really consistent of I of low-earth the is think on that geographic with one think with contrary And of from spent it that we we just any our have the bandwidth. we we how system satellites to challenges have amount use uniformly facts and distribution been distribution like geographic really of and pretty targeted the and world. expect the to you seen time haven’t that just that a in really the distribution that relative important operator over a are a assets way. fairly you control people it mean, can’t definitely around the spread orbit that have bandwidth it’s is that’s imagine can employ to I cellular you more your disadvantage their

serve can we things deliver we and volume combination part to what of than I terrestrial. high we lower doing is going XX% our those latency end know do for with while think are with to coupled have did latency systems that would will we valuable that sensitive to that that bandwidth to of services that than serving. to assets deliver that that speeds latency of that We be market more use ultimately some satellite, for are terrestrial less a the really generally at lower partner high is low-earth approaches higher orbit to hybrid speeds over be of bandwidth more try So, to use other that’s some a one fraction we the of the lot more of will the and and other comparable and services, where markets cost for needed able is

compete game. going a I think think we are it’s don’t to well. I zero-sum

an those to are of OneWeb, ability going just we that’s failure of it’s to I think So, not disrupt that the that bring amount in markets our compete we the predicting markets. bandwidth not going serve to to

Ric Prentiss

your great. Great. thoughts. That’s really for Thanks

Mark Dankberg

Thank you.

Operator

comes with Spinola Andrew Wells the of from question our And you. Fargo. next line Thank

Your open. line is now

Andrew Spinola

– with subscribers amortizing the ARPU or did current about then Shawn, ViaSat-X rate X-month at at for ask these I a X-month we new from recognizing impact or day the and Thanks. new the plans to quarter? time lower those price, the from the to guess I – that from and are accounting revenue full promotion can you one wanted you the boost these what the – over you as after device expect somehow sort in discount and see it subs from we of subscribers the period

ShawnDuffy

Okay.

couple dynamics So, there. happening

to is see points and would it I upward, kind general would and bit should what early those see a Those price you we you little see will that that when lower – skewed we some expect skew say blended then based then pretty say on that’s look… effect. a promotional of I over So, are tend of in time to when

Andrew Spinola

transaction that occurs? words that we that let we discount, up Shawn So it in in amortize other period the don’t show

ShawnDuffy

of on kind at end customer result happens but That’s the pretty non-contract, a end pretty much. with approximation. pretty the to much pretty some other day, that’s we the look Yes, that the contract, at considerations subject good of that

Andrew Spinola

Okay.

they subs, that impact points December full X to it not break sort seeing months the those you are to of XX,XXX the fair? stepped after the the down, be in Just of is plus quarter, that price up will

ShawnDuffy

fair. that’s say, would I Yes,

Andrew Spinola

of aircraft the networks and you particularly expecting expect down business ‘XX, expenses fiscal commercial the second me to for a is you talk from of maybe what from from what also fiscal uptick question step willing, high maybe from EBITDA level are potentially And could trajectory you could are if the ‘XX about i.e., the terminals? ViaSat-X you Okay. the then

ShawnDuffy

So, if of at given look you a R&D say tick going tick straight the kind the down to are through to the we guess I would number I of quarter-over-quarter, year. that is the all end without that mean, down, I way see

savings definitely So, on I baseline so terminal ‘XX of year did then some coming revenues see going will pretty had EBITDA the that’s commercial early into that you ‘XX increases. additional next is percentage we that the at to air and let’s if driver think a other a to we and significant around that hit spend, R&D look contribute you really say

the bit piece talked we should little be year. to of significant have next I So, think about a those

into guys to I next think give color head significant pretty next as that into call. year could EBITDA you additional some improvement can So, a in you we see and or we

Andrew Spinola

on to you profit or breakeven? sold that it that Just finish is ship at up point, hardware a the is

ShawnDuffy

sold No, profit. at it’s certainly a

Andrew Spinola

It you very thank is. Alright, much.

Operator

Morgan next question our Flannery from comes line you. Stanley. Thank And with of the Simon

line now open. Your is

Simon Flannery

as Thanks. ViaSat-X ramping then ads all margins just the and color or address XX%, of ads ballpark? talk thank very could expansion a the just sort Great, it that you you that And right XX% view evening. of speeds on you margin to that talked more you more markets broadband rollout really you thinking looking and year hit? around really after market when to greater we to Are are you a the the you given the to target turn And the you the about in scale footprint that EBITDA bit broadband about that with going in it like in kind versus with when Shawn shaping an ViaSat-X of is does the clarification you check can set and in the ViaSat-X, capacity positive same ViaSat-X quarter a Good as you the there us up? give your is be start your much. about range, to on any that ViaSat-X initial went math, does how going little churn Mark, are your addressable here?

Mark Dankberg

Okay.

with the me two. let start So first

Okay.

I First, think I think with are more marketing for that is to video more our sell so would want granular, working to best target right. – approach of us more rely are the places and the in I entertainment. terms for say Internet who best people we on And for market, become to to

we do they higher of can and where do speeds, who they they so some Netflix streaming they are want video can other are service. targeting can that’s using or enough So people that similar it, because

per doing like second like would megabit that, would and people or we to to target don’t that cable. the doing but XX people also to we say are mostly So have are XX who who target access

in what an example. think means trying just understand And so And to that And this have just would kind the better that really I use I companies of of the be those as look intersections because two. computing fraction bunch each you when he at each cable company’s overlaps footprint services. [ph], will for Greg of Moffatt looks cable it, at instance, of but different

much the fiber is how it right. ADSL is to instance home, For how it to of how fiber much node, of or is much the

do the to bandwidth are be so more what where think to And to are market our trying those we trying we we there places demand. where intersections. match is to are will to initially Those supplier

in the And the macro I at think the But speeds available when we the bit perspective past was will in U.S. kind we XX are XX showed overall marketing it we so U.S. median. and of is with XXX in Now, and the of median megabits than median a one when think we do of little things ViaSat-X we right you look speeds at just about in the the and kind megabit speed XX per the speed have the is second from started things are that maybe where worse around a fit in megabit that now – plans.

we way our from to engage we trying but are be target other the and think market, those channels precise to actual a a speed is in little intersections. we and advertising are overall, have – in to are we that addressable promotions do we we more some trying perspective our better So increased do

Simon Flannery

Okay.

Mark Dankberg

am I sorry of ramp ahead. the – On shape go

Rick Baldridge

the… that’s Yes,

Mark Dankberg

Okay.

and I are try is thinking So looking on the we across part that relationship at there of the trajectory. we different the the the we And think thing understand what growth that shape main of to or of is trajectory that but plans would the are trying of get to that of linear, growth consumed certainly really we definitely the our and to by the ramp, as is linear revenue that’s is it’s bandwidth subscriber offer, between them. is price exactly speeds desirability fairly not amount the proportional there a And plans. opposed the

but is would per megabit selling we XXX somewhat would if have different megabit we to So yield think XX to as as it opposed that about comparable by plans we do yields, can plans, get dollars a gigabit like that, alright.

So the because as XX. points that megabit the can’t as XXX many different just of of but one price that we

what going look is. are that at And so we to mix

plans, I support couldn’t think from the fair the test we market those. a we marketing, but X,XXX test satellite mega learned didn’t amount pretty because

we subscriber a experience the the quarter, with report we until numbers start we some So will actual markets. – going time plans we activity full of the which all I defer to actual all we a with the next probably have by are bit little in with with get all month think marketing,

Shawn Duffy

Hey. on And then in from that’s range the your good that quarter start. full increase service ViaSat-X there. kind EBITDA, to last or question a each sequentially we XX% to of And services was first at to XX% quarter looking satellite so will range that

Simon Flannery

you. Thank Great.

Operator

And you. question net from the Cusick with comes Thank Phil line our of JPMorgan.

now is open. line Your

Phil Cusick

ViaSat-X for think Mark you that? plans, guys. you unlimited up how sell Simon’s to forward, I Thanks. Hey, on do about unlimited only little like going the expect do A following question bit

Mark Dankberg

see the demand a very that’s in with Yes, people ones lot plans is those. unlimited. the even a soft that trying or we the what for either there for trade That’s high the We what caps to can are that’s is big to way to of caps understand and of unlimited plan old is. Clearly, part good video of and way couple the you going like to it streaming looks get a but the fulfill bandwidth it sense be takes forward. the go plan our with the able price yields, points on when on overall management, amount those to

Phil Cusick

you in Thanks. give an And point what this thinking us ViaSat-X, capacity, changing? of anything are then at can terms update on and you timing

Mark Dankberg

to are modules reflected on the is – and it’s and hardware flight and transitioning main is and that thing more are testing the that. we testing, are in No, subsystems engineering the more testing it’s that transition getting model – building we we of from financials into basically the prototype into that

have think on for satellite the a hardware, but integration uncertainty pre-flight of done is of lot in we programs, source largest these the testing the in I basically general phase.

ahead So, of that’s us. still

where really deployment that’s we And so schedule out what is. the figure will

orbit also are launch which with reducing raising of at different options a date. looking in was the in-service big time We ViaSat-X prospect factor campaign the

now, half right range to think when about would I XXXX come of that the second a that So reasonable in think is service. for

risk in look nothing In lots testing really and – done promising terms we have of reduction has integration still technical things of capabilities capabilities. of really and technical a terms performance and supply mean, lots lot the of I its changed.

Phil Cusick

know are X might just forward And if testing the you now years you could could look push is – if ViaSat-X limited plans ViaSat-X you about evolving? those and think do this plans what yourself those I on you like, imagine but how

Mark Dankberg

may think a speeds streaming is of would could as market clearly and more more the as to speeds but what need up expect moving push with the the notch streaming in take risk we or rates, probably whichever want deliver values able plans them up we being an – speeds assuming to think we market that we would are I that’s higher be go we that that valuable a people what some those tending example way end towards up able these give well. increased us and with do with or about as along higher bigger you that

I the think general of are kind trends. those

Phil Cusick

Got it. Thank you.

Mark Dankberg

Thank you.

Operator

have caller. time for Quilty one last And the Analytics. Quilty do from we next comes our with of Chris And line you. Thank question

is Your open. line now

Chris Quilty

costs ViaSat-X selling think where XXXX Thank can level kind subs specifically I the on will me or little of you. you you so guide breakdown once it math, detailed am more or that little kick is in, less? like for margins whatnot, at bad service the a very except you better thank go and Shawn, the

Shawn Duffy

it better to we kind full to it expect did of or wanted then And you it’s on thought as ViaSat-X point first you see to ultimately. able sequentially say of would be was as would quarter would we than say where we was, I not because what and quarter-over-quarter do just give I we our should So, starting be to is going kind guys low increase continues started to I ViaSat-X. when

Chris Quilty

got Okay, it.

So, any it either be you there disproportionately think some looks like or Mark, where or might money that to budget area because unavailable general you to particular might able was program get increases, related? we benefit are poised is be double-digit Pentagon budget think there

Mark Dankberg

was would Army the that that it’s I rather for the report modernization Army say more week rather a most about the that thinking that at back at to are it more and going people about that To to for I – really than on us. focused the tactical buy I that think filed think that than impactful that just okay I us. think things gaps. think things ago they from instances just look capability as And money and buy had looking already I budget, be go

it’s gaps. capabilities than if those similar they we And by could growth the at budget, certain do in we Air think we is the going means the likewise Navy much with better Force or if have really that grow, taking clearing – looking that to and applications applications. Army do the market mainstream several our if things bigger, is instance for just to will going gaps, are things we I close be

sort that’s is So with I to deal and with the the of gap think – gating the model demand – capability that step model. a

is the another. for compelling so those arguments what that gaps that one have budget that are seen when makes often capability you feel we think people I way the it or find

and functional bring. to the really test big make that for think we but find performance to think the us easier it issue a is the value value getting and I little people budget, this I understand

Chris Quilty

component final related question that And in-flight the come? ViaSat-X do orders selection of Trans-Atlantic think you have or element source any orders major to on got Okay. like where to on one book you that quick that in think you yet connectivity, customers are reflects plans ViaSat-X I an already is Trans-Atlantic the the do feel for or

Mark Dankberg

think I some got of them. On have the we Trans-Atlantic,

first I I there our up of some We use. returning service, talk we I have customers come. think you to – got Trans-Atlantic are those from we the And that about up which already. think it, a see to flights that I bring immediately tend are that got, know the already think think, there they kind But have is deal already we some because have we once opportunities residential that more arrow we got mean should to of like on it, will bring be let to after I carriers I make shortly big but about service. would customers will

Chris Quilty

Great. Thank you.

Operator

And session for Q&A today. you. concludes our Thank that

the return management to closing like for would remarks. I to So call any

Mark Dankberg

Okay.

forward for your our this afternoon. a and So to time I call you look interest concludes everybody lot that again Thanks for talking quarter. and to next think

Operator

great all have gentlemen, for and today’s does program. conclude conference. participating you And may day. in thank This a Ladies the you disconnect. Everyone

Viasat (VSAT) 9 Feb 182018 Q3 Earnings call transcript