VSAT - NASDAQ

Welcome to Viasat's FY '24 First Quarter Earnings Conference Call. Your host for today's call is Mark Dankberg, Chairman and CEO. You may proceed, Mr. Dankberg.

Thanks. Good afternoon, everybody. Thanks for joining us for our call today. With me, Guru Graben, our President, Shawn Duffy, our Chief Financial Officer; and Robert Blair, our General Counsel. So before we start, Robert will give a safe harbor disclosure.

Thanks, Mark. As you know, this discussion will contain forward-looking statements. This is a reminder that factors could cause actual results to differ materially. Additional information concerning these factors is contained in our SEC filings, including our most recent reports on Form 10-K and Form 10-Q. Copies are available from the SEC or from our website. Back to you, Mark.

Okay. Thanks. So we encourage everybody to read the shareholder letter that we posted on our website earlier this afternoon. It will have a lot more detail. We'll give an overview of the main points upfront, and then we'll have out plenty of time for questions. So the first quarter results were very good. The Inmarsat acquisition closed in May and contributed one month to our first quarter results. Year-over-year consolidated continuing revenue grew 36% to $780 million and adjusted EBITDA grew 87% to $183 million, with good performance across the business. Viasat's standalone revenues grew 12% and adjusted EBITDA grew 13% year-over-year. New awards and backlog were good, and momentum has continued into the second quarter, especially in connectivity. On a go-forward basis, we'll refer to consolidated and segment results for the combined company and adjust for continuing operations that is appropriate. Post-merger, we're starting with a stronger-than-anticipated balance sheet and even stronger than what we expected when we closed the [indiscernible] back in January. And we're making good progress on the integration and are on track to achieve our overall synergy goals and aiming to improve on those. Also, I'd like to mention that Andrew Sukawaty, who is formulary Inmarsat's Chairman, and Rajeev Suri, who is the Inmarsat's CEO, joined the Viasat Board of Directors, and we're looking forward to their contributions. So I'll start with a little more color on the ViaSat-3 Americas situation and our response. Then Shawn and Guru will add some color on financial results, operations and our outlook, and then we'll go to the questions. So last month, we reported an anomaly with a deployable antenna on ViaSat-3 Flight 1. Since then, we've been working with the antenna supplier and the satellite manufacturer to more fully assess situation for the first flight and the implications for Flight 2. I'll discuss contingency plans in a minute. But given those plans, I wanted to point out that we do not currently anticipate that fiscal year 2024 financial results will be significantly affected by Flight 1 performance. FY 2025 will be affected by the performance of Fight 1 and the timing of the corrective actions on Flight 2. But given current information, we believe we will continue to grow in fiscal year '25 as well, but not to the same extent we would have without the anomaly. While we're making steady progress, we expect that analyses that are underway to provide more definitive insight and we'll provide updates when we have more information, which we currently estimate will be when we report earnings next quarter. So I'll give some additional color on the background of the antenna. Manufacturer is a major aerospace supplier for the decade allowing successful space deployments. The antennas from a product line with a history of 100% successful deployments on a number of missions, including 5 on Inmarsat satellites. The F-1 antenna was both partially and fully deployed with nominal results several times during manufacturing and testing. The Flight 2 satellite uses the same antenna, but the Flight 3 uses a completely different design from a different manufacturer, and that satellite is unaffected by the flight on anomaly. Via-1 satellite is insured and insurance is already placed on Flight 2. Inmarsat's heads, prior stand-alone outlook had no dependents on BiSat-3, of course, and we still do expect to capture revenue synergies with the ViaSat-3 fleet. So we've got 4 main work streams underway. One is to work with the antenna manufacturer and our satellite supplier to determine the root cause of the reflector anomaly and the appropriate corrective actions for Flight 2. We have a plan to collect additional data and incorporate that into the deployment fault analysis. We also expect to have more information to report regarding corrective actions from Flight 2 and an update on schedule next quarter. Second is to assess the performance of the satellite with the antenna as it is, initial end-to-end measurements with the effective antenna indicates the rest of the satellite including the innovative payload and ground infrastructure built by ViaSat are operating as expected or better. We have a plan for additional measurements that we expect will give us more definitive data on the throughput of the satellite, including the effects of the anomaly. and the potential operational mitigations and we're targeting to drive an act on that next quarter also. Third is to assess the potential of improving the antenna deployment on Flight 1. The outcome of this will depend on the results of the first 2 work streams. And again, we expect to provide an update next quarter. And then fourth is to mitigate the effects of the Flight 1 anomaly on our global mobility business, especially via optimizations of our existing fleet, optionality in the near and longer-term orbital locations of each of the ViaSat-3 satellites and additional third-party capacity as required. These plans are already well underway, and we're confident we can continue to support our global mobility customers as we do today and going forward. U.S. fixed broadband today represents about 13% of revenue that business will be the ones primarily affected by the anomaly. We'll be better able to assess that impact next quarter also. Importantly, for ViaSat-3 Flight 2 and Flight 3, our tests and measurements to date and increased confidence to those parts of the ViaSat-3 system that are where the new innovations are. Long schedule of Flight III is unaffected, and we'll provide an update on Slide 2, inclusive of corrected actions, as I mentioned, next quarter. The Inmarsat acquisition expands our inomed Ka-band fleet to a total of 13 Ka-band satellites, including Fight 1 and an i6 Fight 2 satellite, which was launched earlier this year and is undergoing corporate rating. We made more Ka-band satellites under construction with 5 of those planned for launch before the end of calendar year '25. So we have a greater diversity of on-orbit technologies. And as we've previously discussed, an opportunity to substantially improve the capacity of our on-orbit fleet via ground network technology and optimizations. That was of our objectives with the acquisition, and we believe will show the benefits associated with that through our resilience and growth in both the near and long-term time frames. So with that, Shawn will go into some of the financial.

Thanks Mark. Some brief color on the financials. Q1 revenue was $780 million. This was up 36% compared to the revenue from continuing operations of $575 million in Q1 of FY 2023. The results include Inmarsat's one-month revenue contribution from the acquisition date of approximately $134 million. We estimate that the combined Viasat and Inmarsat revenue for the quarter, including the pre-acquisition period, would have been about $1.046 billion, an increase of about 11% year-over-year as both companies achieved double-digit revenue growth. Net loss totaled $77 million for the Q1, above the $40 million net loss in the year-ago period, due primarily to the non-recurring acquisition-related expenses, higher intangible amortization and higher interest expense. Adjusted EBITDA for the quarter was $183 million, an increase of 87% year-over-year from continuing operations. Q1 FY 2024 adjusted EBITDA included a one-month impact from Inmarsat of approximately $72 million. We estimate that the combined Viasat and Inmarsat adjusted EBITDA for the full quarter, including the pre-acquisition period, would have been approximately $331 million, an increase of about 9% year-over-year. So, a little more color on Inmarsat. For the June quarter, we estimate revenues around $400 million and adjusted EBITDA about $220 million, about a third of which is included in our consolidated results for the quarter. Inmarsat revenue mix for the 12 months ended March 31 was 36% from government customers, 34% in maritime, 22% business in commercial aviation and 8% enterprise and other. That's a high-quality diverse revenue base, which fits well with Viasat business and our growth objectives in the mobility and government markets. Inmarsat's contribution has and continue -- will continue to be folded into our existing segments as follows. Government results will be included in our Government Systems segment and will be the individual largest revenue component in that segment, led by recurring Inmarsat Government services revenue. Inmarsat Maritime, Aviation and Enterprise revenues will be included in our Satellite Services segment. And as a result, mobility revenues will make up a strong majority of that segment's performance. And our Commercial Networks segment will be focused on equipment sales as it is today, with no meaningful contribution from Inmarsat. And you can find more complete review of our results in the shareholder letter we posted today. We ended the quarter with over $2.1 billion of cash and short-term investments. We expect to maintain additional liquidity for our client, given tight credit markets, our mature schedule, the low rates on our outstanding debt and higher rates of return on the cash we hold in order to preserve the company's financial flexibility. And we expect growth and the realization of synergies will improve our cash flow from operations over time. And on last item. The debt we issued related to the financing of our Inmarsat transaction, approximately $1.35 billion is currently held by the issuing bank. We'll provide marketing support for them when and if they choose to go to market. But as a reminder, the interest rates on the debt are already set based on the original financing commitments from 2021 and will not be impacted by the transaction. So, with that, I'll pass to you Guru.

Great. Thanks Shawn. I will cover three key topics; one, double click on overall operational performance; two, talk about our new combined company and exciting possibilities it opens up for us; and three, combined outlook. Now, as you just heard from Shawn, financial results in Q1 were excellent with healthy year-over-year growth across the businesses. Government Systems had another quarter of strong demand for our information assurance products, especially including our high-speed data center order in. And during the quarter, we earned an additional Type-1 certification for our next-generation ground to space intrusion product. During the quarter, we signed AUD187 million contract with Southern Positioning Augmentation Network to support improved satellite-based positioning and accuracy. And in Satellite Services, US fixed broadband revenue declined due to fewer residential subscribers, partially offset by higher ARPU as we continue to reallocate bandwidth to rapid IFC growth and update to new service plans. In Commercial, IFC and service aircraft grew 18% year-on-year on a combined basis to 3,230 aircraft. Passenger usage also increased driving of revenue per aircraft. And our quarter end, contracted backlog in commercial IFC stands at approximately 1,600 aircraft. Momentum has continued at a pace to-date in Q2, including additional new airlines and additional aircraft for existing customers. Inmarsat had achieved 11% growth year-on-year growth in clean express levels. We're excited about having greater diversity and scale market outlets in global mobile broadband. In this quarter, we announced Fleet Reach coastal LTE service, which is designed to augment uninterrupted high-speed broadband to merchant, offshore, energy, and fishing customers when sailing near the coast or docked in port. Commercial IFC equipment deliveries continued to be a strength this quarter and are reported in our commercial segment. Terminal deliveries are a good leading indicator of commercial IFC service growth and support our FY 2024 and FY 2025 outlooks. So, overall, this was an excellent quarter with the closing of the acquisition, strong financial performance, and an important step forward. Now, to the combined company. I would like to start by reminding everyone why we are so excited about the possibilities open to us as a combined company, and then I'll provide an update on where we are with the integration. Let's review why this transaction is so compelling strategically. first, it accelerates our global mobility and government strategy. This strategy is focused on the best and fastest-growing markets, including aviation, mobility services, maritime, land mobile, and enterprise. Second, Inmarsat brings global Ka- and L-band coverage with a robust satellite launch roadmap that both augments coverage and add resilience and redundancy. We are excited by future upside from valuable L-band spectrum assets, including the IoT and direct-to-device opportunities. Third, Inmarsat's well-established business greatly enhances our global distribution. The combined company has a large installed base of existing customers across a broader portfolio of markets and products that will provide greater overall resilience to our financial performance. This is also a compelling financial combination. We both have strong businesses today, but together, we are enhancing our future free cash flow that's supported by an estimated $1.5 billion in synergies on a post-tax and PV basis. Now we intend to be aggressive considering all options open to us as we build the business that focuses on markets where we can win and scale cost effectively. In terms of revenue, we are already seeing revenue synergies take from across key business units such as government, aviation and maritime. In terms of cost efficiencies, we are focused on achieving and accelerating our targeted cost synergies. In FY 2025, we expect to achieve about half of the forecasted $80 million in annual cost synergies. CapEx synergies remain a key lever for value creation as well. We are targeting $110 million annually a few years out. Now behind the actual numbers, we are integrating capabilities with an eye to being the best of the best from the perspectives of people, business processes and our partner and supplier ecosystem. I should add here that, culturally, we have already seen the two companies are a great fit, and that's very important. We recently formalized our go-forward leadership team. It's focused on scale, capturing the benefits of our technology and furthering enhancing the measurable value we deliver for our customers. We are committed to delivering a successfully integrated operating model while continuing to maintain momentum and delivering value to our customers and shareholders, and we are excited by the many opportunities ahead. We think it is important to spend this time to communicate how we view the significance of this combination and how that informs our diligent approach to integration Now moving to combined outlook. I'll wrap up with a high-level summary of our financial outlook. There is more on this in the shareholder letter as well. For FY 2024, we expect revenue growth in the high single-digit percentages for the combined companies relative to pro forma view of both for FY 2023. A simple view of expected FY 2024 adjusted EBITDA can be approximated by adding Viasat's stand-alone prior expectations of high single-digit to low double-digit growth for full year FY 2024 adjusted EBITDA from continuing operations to approximately 10 months of Inmarsat contributions, which we expect will grow slightly throughout the fiscal year. We expect growth in revenue and adjusted EBITDA for FY 2025, including assuming a full year contribution from Inmarsat for FY 2024. Our expectations are supported by our healthy backlog and strong orders. We do anticipate that FY 2025 growth rate will be affected by the ViaSat-3 F1 anomaly, especially by the fixed broadband business, where growth will be delayed. But that's currently about 13% of our revenue, and we anticipate growth in rest of the business as it is not directly affected, and that is 87% of our business. Our positive free cash flow inflection point is targeted to occur in the second half of calendar 2021. Lastly, our plan is to hold an Investor Day before the end of our fiscal year, so we can share more details of our plans with you. So there you have it. We had a strong operational performance in Q1. We are on track to deliver very material synergy value, and we expect the combined company to grow revenue and adjusted EBITDA in FY 2024 and FY 2025 while creating a powerful global mobility and government leader.

Good. Thanks. So with that, we'll be happy to take questions.

Thank you. [Operator Instructions] The first question comes from Simon Flannery, Morgan Stanley.

Great. Thank you very much. Thanks for all of the information. It sounds like you haven't yet determined whether the flight 1 is a total loss or not. Maybe we can just assume if the worst happens, what would be the timing of collecting the $420 million, what's the hurdles you have to go through to get that? And what would your mitigation strategy be? I think you've talked before about perhaps repositioning two and what about ordering an F4 satellite, how much would that cost? What sort of time frame would you put around that?

Hey, Simon, this is Shawn. I can take your first question on the insurance. I mean, clearly, we're still -- it's really, really early in the process. We had a lot of success in our -- in the timing of our prior collections. -- . But I think that it's hard to speculate when know what happened right now. But I think that we things are early in the process to make infatuation around timing.

And was that about 18 months, something like that before? .

It was -- yeah, I think it was a little shorter of that, to be honest. It was a little inside of -- around the 12-ish mark.

Okay.

And then in terms of some of the other questions that you asked, the -- we don't want to put out any assessments or statements of what we think the capacity will or won't be including going down to zero without having more facts. And I think we have -- we do have plans that cover all of the things that you asked, but obviously, what we would do for a as an example, what we'll do for a replacement satellite depends a lot on what the performance of this one is. And we expect to be able to take measurements on that. We as I mentioned, we have been able to get end-to-end measurements through the satellite. So that that's where we're starting from is to quantify those. I don't really want to speculate, but we do have plans that range from what we would do if we got very little or no capacity to what we would do if it turns out to be more closer to what we originally expected. And I think we won't -- so some of those -- to the extent that some of the plans involve forks in the road, we're not going to go through fork-in-the road without having the data that's supporting.

Understood. And you've already called out the impact on the consumer broadband business. What happens to the IFC business? Sounds like that's still growing rapidly. Are you going to have to work with the airlines to mitigate some of the -- their demand as to bring the planes on, do you think you can handle the backlog as it comes on without the new satellite?

So we can handle the backlog, at least for some period of time, but we can handle all the backlog that we have. Not all of it depends on this particular satellite. But the main thing we've been doing to handle our backlog so far is transferring business, transferring bandwidth from the fixed applications to be to the mobility business. So we have that going forward. And we also mentioned we have a -- we have a lot more additional maneuvering room using some of the Inmarsat, we have the potential to relocate satellite. We're -- but we're not going to make premature judgments on what we need to do, until we get the data that supports it. And we're -- that will be completely fine for our mobility businesses actually for an indefinite period. But certainly, through the period of time, it will take us to figure that out.

Great. Thank you, Mark.

Thanks Mark.

Next up will be from Mike Crawford, B. Riley Securities.

Thank you. If the ViaSat-3 Americas point one is the total loss, isn't it likely that the satellite that you've been expecting to put up over Europe that it would make most time supported over North America first, until you could get another satellite up and then you can move that satellite over to its European or EMEA slot?

Okay. Yeah. Yes, that is a possibility. I think that from our perspective, we will move satellites in a way that gives us the best shot at serving our customers, all of our customers' demands. So we have the flexibility to do that. It's it would be premature to jump to an operational scenario that assumes that the satellite has no utility. The -- what we are trying to do is we're trying to work through the financial scenarios that take that into account. But that's different than what the operational scenarios would be, because we have more time to work on those. And so we'll get the data for it. And then we'll make decisions.

Okay. One just maybe one more on that front, if you don't mind, so the APAC satellites configure differently with a different antenna. So pretty much that 1 I would imagine is going up over APAC regardless. And then, you've also been developing your ViaSat-4 payload. So wouldn't it make sense to maybe take some of those features to have like a ViaSat 3.1 come up over Americas eventually after the Flight 2, and Flight 3 satellites?

Yeah. Okay. So just to be clear, any of the satellites can operate effectively in any of the locations. So that does give us more flexibility. There was -- there is the additional operational flexibility that's built into the Flight 3 satellite. That works in Asia Pacific, but it also works in other areas. But I don't want to imply that we've made any decisions on that, because we want to get the data before we make the decisions. On the ViaSat-4, there are some -- there are some significant improvements there that we could use as the foundation for a replacement satellite. But again, what we do there will depend on what we measure and analyze in the near-term. And I think that's the main thing I would encourage investors to think through is that we're going to make a sound methodical decision with real data. We'll be able to get the data and it will be a lot more, clear. And I know everybody wants to know quickly that knowing there's no consequences to us taking another couple of three months to get good measurement and then making those decisions.

Okay. Thank you. That makes sense. And then just a completely unrelated quick question. With that $4.8 billion of unwanted IDIQ that's not in your government systems backlog, I know where in the past, you've had a single award contract, you've been able to realize most of that. But is there -- can you break down how much of that might be single award versus multi-award where you're competing against others?

No. There's a diversity of Syntel [ph]. I don't maybe we might get back to you a little bit more of a split there. But you're right about that is that some of those IDIQ contracts, a fair number of them are for -- they're a broad range of services, but they're pretty well-contemplated services or products that we would -- that are unique. Others are more or like for the broad agency announcement there are multiple bidders and the allocation of the words are less certain. But I don't think it -- I don't think we can give you a good breakdown of that right now on this call.

Okay. Well, thank you Mark.

Thanks Mike.

The next question is from Chris Quilty, Quilty Space [ph].

Great. So the guy from copy space is going to go against form. I actually got a question about the government business, which is, I mean, good numbers here on the quarter and good order flow. Just at the high level, as you look out over the next 12 months in that business line, what are the things that you think of as the worry case of continuing resolution to upside scenarios that overall, when we think about the outlook there?

Boy, it's hard to tie to some of these macro trends. We will know more by -- there's generally a lot of activity right around the end of the government fiscal year. So that will give us more insight. But some of the things that we're doing for instance, one of the growth areas that we highlighted this quarter. And it came up better than we expected was for high speed data center crypto appliances. And there, one of the things you can look at is just how much interest there is in AI and big data processing, and for government applications, if that occurs in classified levels, of course, that's going to drive some -- drive the demand for the types of products that we provide. And so some of those things besides just the way the budget is determined -- one of the factors will be how our customers decide to use their budget. And in things like these information assurance appliances, we have a lot more maneuver, right? I mean, because they can make decisions. The other thing is that we do have a lot -- this is part of what we're aiming for, a lot more of our government revenues and recurring services revenue. And those are much more predictable than individual contracts as timing might be affected by some of the budget realities. And that was one of our objectives as we like those types of revenues, which can change over several years, but our last subject to some of these kind of more short-term budget nuances. That question thing you were asking about.

Yeah. And just a quick follow-on to that. Have you now identified what sort of synergies you see between the Inmarsat government side and on the ViaSat? .

Yeah, I'd say we -- because of the nature of some of the contracts we have, it takes a little while for us to get the details across there. But we're getting more and more exposure to that. And obviously, there's a bunch of similar -- there's a -- we have similar applications for similar but different customers and opportunities to extend things like geographic coverage areas or types of services or technology equipment across those customer bases. Those are the things we're looking at. I don't think we have -- and we have identified these revenue synergy opportunities in the government area as well as in the aviation area and starting to in the maritime area. But it's -- we're not going to give any specifics yet. I think we'll be able to comment more on specific values in the next couple of quarters or so. .

Got you. And if I can totally switch gears, the IFC business, you've had tons of customer wins both domestically here, some big international deals, some of which I'm assuming we're predicated on capacity that those customers were expecting. Are there any new customers Southwest is a big win. I don't know how far they are in that process that you're feeling pushback from those customers around how you're going to transition and provide the capacity needed .

So the approach that we've been taking in the aviation business, which has been very successful for us is to provide very specific service level agreements that are end-to-end for their route system. So when we take on new customers, we look at their playing fleet, their routes, -- we look at the airports that they're serving, and we show them, here's the service level agreement that we can deliver. And here's why, how we know we can deliver that. And so we're going through the -- I think that kind of what is happening is we're going through all of those details again with our customers in light of the ViaSat-3 scenario. And there the -- yes, their initial question is, okay, can you still serve the planes that we have in the routes that we have going forward? And -- so far, that's gone, I'd say, quite well because we do have the resources to deal with the customers that we have. We may have, in some cases, we may end up with slightly different or somewhat different service level agreements for some routes or some portions of some routes. And those were going through with specific customers. But overall, I'd say that the qualitative reception has been really good because it's based on the approach that we've used. They understand the benefit of having the larger fleet -- and then the other thing that we did kind of mention is going into the second quarter, a large amount of which is since we did disclose the anomaly on ViaSat-1 our order book has still been really good. And that order flow includes both new airlines in different geographic regions as well as existing airlines. -- placing orders for new aircraft as well. And the large majority, I think of it as -- if you think about it as a different businesses, the Biosense business, the legacy Viasat portion was heavily North American oriented, and we have plenty of resources to serve that. We've been able to demonstrate that to customers, whether they're new line-fit aircraft or retrofits. And then on the Inmarsat order book tended to be more international, but none of their service level of premiums dependent on ViaSat-3. And so both of those are still proceeding. .

So if the -- it's pretty clear given where most of your customers' orders are that the next new capacity has to go to North America. Whether that's the next ViaSat-3 months or I think it's the GX7, the next Inmarsat. But short of that, I mean, it's the best case scenario a year or depending on the strategy, three years if you build something new, would you -- if you have to burn down and you've been burning down a lot of the consumer subs, do you hit a point where at a year to two years out, it's just not worth trying to scale in that business?

No. The short answer to that is no. Remember the things that we've been emphasizing and I think at our airline customers do understand more than, I mean, to a great extent because they're so logistics focused. What really matters is not just the amount of band we have about where we have it. And so those -- that's what we're doing is we're able -- we are we have the route map. Of course, we take into account that the routes aren't 100% deterministic, they take different routes depending on whether the schedule issues at times. So what we build a demand map from that and then when we work on supply and for supply, we -- one of the good things, if think of it as this way, is that if you -- if the real problem is reinforcing the areas with the highest demand, then when we add multiple satellites across the fleet that gives us a lot of maneuvering room for reinforcing the high demand areas. What we are doing, and we had already -- and we mentioned this before, we'd already done partly because the were concerns about additional schedule delays is we do have agreements with partner operators to reinforce both North America, in some of the ocean crossing routes and in the other high-demand areas. So we already had some of those agreements, we'll probably execute those, and then we have our other tools. And I wouldn't one thing I wouldn't tell you is what we're talking about financially, what's our outlook without one, it's not the same, the same. We won't have pipeline. So I think, again, the fact that we can communicate through it is hopeful, but I don't want to take any assertions about what capacity will be until we get more hard data. We'll be able to do that in November. .

Got you. On that note, I guess maybe I say my condolences, it just sucks. You guys have worked hard at this, been innovative and to have that kind of binary outcome on a component just it sucks.

Thanks. Appreciate that. But we're working through it.

The next question comes from Ric Prentiss, Raymond James.

Yes. Good afternoon, everybody.

Hi, Ric.

Hi, Ric.

Obviously, it's been a busy earnings day, earnings season. It seems like we've at the year on this last week. A couple of questions, if I could. Obviously, I'll echo Chris' comments, but maybe not use some four later words, but just say clearly disappointing the anomaly -- perhaps you're working through it. I might have missed this, but did you talk about the review process of what this doing to Flight 2 time frame. I would assume -- you want to make sure everything is good. But when should we expect Flight 2 would be going up?

Yes. So one of the work streams that I did mention is we are really the antenna manufacturer is the most knowledgeable. They are the ones that are leading the root cause analysis. We're participating in the spacecraft manufacturers participating. So we are still connecting and analyzing data to get to root cause. We think we will have more insight into the corrective actions based on our root cause analysis, probably by next quarter. Those corrective actions will -- that's what will determine help us determine when the launch date is for the next satellite. And it's good -- again, we shouldn't speculate on what they will be, but I'm sure you can imagine that the corrective actions can range from benign to more complex. And there's no basis to choose one -- any one time frame or another without the data from the root cause analysis, which is -- it's underway. There's a schedule for and we'll be able to report more about the time frame of a Fight 2 launch next quarter. It was pretty close to being able to launch when we had this antenna anomaly. So that's probably the corrective actions for the antenna will be -- the manufacturer determining when the new launch date is.

Okay. And I remember or maybe remind us previously, the path to positive free cash flow was going to be certain was it six months after Flight 2 was up, or what was kind of the previous thought of when free cash flow positive was going to be?

Hi, Ric. This is Shawn. So I think what we had earlier was kind of in that spring early 2025. So we're still shooting to be in 2025, but probably in the back half.

Right. Okay. And excuse me, if you've already provided, but did you provide some CapEx guidance? I know you had Viasat was separate. You had Inmarsat, you had to bring them altogether. You had to figure out what the arrangements were going to be. But how should we think about CapEx over the next -- this fiscal year and next fiscal year, at least?

So on the CapEx side, I think, first, yes, we have only one month this quarter, you need to think about having a full set of three months for Inmarsat for the rest of each of the quarters of this year. So probably a good way to think about the rest of this year is it's $1.3 billion, $1.4 billion to kind of close out for both companies for the next kind of nine months. And then if you think about next year, I would say, we could see that coming down a bit year-over-year relative to this year.

Okay. And obviously, one of the big events in our universe was the DISH buying EchoStar. A couple of questions there. Is that an asset you would have been interested in or were shown. And part of what they talked to on the DISH EchoStar call was the excitement about both direct-to-device but also private 5G network. So if you could maybe expand on that.

I'm going to pass on the first question about acquiring I think right. Yes. On the -- so on the direct-to-device part, we have talked about that. We do -- we are optimistic about that. We are -- we're working it from a number of different perspectives, including how we evolve the business from using L-band for specialized satellite devices. And we don't think that goes away. But what do we need to do to our systems to really make the direct-to-device business scale. We think that's -- it's both an interesting technical problem and one that we think we're really well suited to deal with. And then the other implication, the other thing that I think people should keep in mind is in order to be able to close good to provide good service to off-the-shelf cell phones or smart watches or the type of devices that people are putting in that direct-to-device category you feel need a lot more throughput -- effective throughput from the satellites, which will also greatly, we think, enhance the demand for from more specialized mobile satellite services because we'll be able to deliver a lot higher speeds and more bandwidth into still very small terminals, but with antennas that are still -- I mean you look at a normal satphone, that's not a big device, but the antenna -- the satellite antenna on that device can be as much as five to 10 times better than a conventional cell phone. So that creates opportunities. And what we're looking to do as this direct-to-device business matures, we want to be able to still use the space system assets we have and all the capital we invest didn't monetize that to these other markets that we're really familiar with. So yes, the short answer is we think it's a really big opportunity. I think -- I mean you get into the details. And we do think it's going to play out over several years. But we think the end state is really, really attractive, and we think that the both assets resources, technology we have will help us be successful there. And I also don't think -- I mean, personally, I know people want to always position these things as sort of winner take all. I think that in order for the business to really be scalable there's going to be an opportunity for certain types of standards that will -- I think operators that can work within those standards deliver space systems that work well with them, ground technology that uses them. I think all that stuff will play into it being a big sector, not just a win for one individual operator. .

Okay. Makes sense. We'll stay tuned. Everyone stay well.

Thank you, Rick.

We'll go to Ryan Koontz, Needham & Company.

Thanks. I wanted to ask about the core maritime business at Inmarsat. And obviously that's been long time legacy strength of their and ask about the competitive environment, if that's changing at all. It seems to me there's, lower barriers to entry from the LEOs and Starlink. I hear about some progress from them in the maritime area. So any insights you can share in that space would be great. Appreciate it.

Yes. So I think the maritime space is changing. I think a lot of that is because the entry barriers are low. The thing -- and this is actually a big part of what we're tooling across the mobility businesses as part of what we think makes the mobility business is interesting is, if you look at it from the perspective of where geographically, where is the demand? And then, what type of service are different segments of the maritime market looking for. That's where the opportunity is by because the big issue is we have spoken over and over on the in-flight space.

Yeah.

The real problem for airlines, especially, these are enterprise users who need to provide a predictable level of service. The big problem is not connecting an individual plan in play it's providing a predictable level of service in the places where the airlines congregate, which is a specialty hubs right? So the airport hubs. So what we are seeing in the maritime space is unsurprisingly congestion in major ports or the places where people are trying, these LEO systems especially early on. And a lot of that things like leisure, leisure boats where you're dealing with an individual that may use a ship sporadically or occasionally and where connectivity is nice to have, but it's not operationally important to the mission of those ships. So that -- those areas are the areas where ships are looking for end-to-end service level agreements at a predictable level and where you're already seeing congestion on some of these -- on the LEO systems. There's a real opportunity for us to both improve our services and to make them more enduring. And that's where we're focused. So it's a different segment of the Maritime business that meanwhile.

Definitely helpful. Thanks Mark.

Inmarsat has maritime customers across multiple segments. That's a segment that really has been the one that they've grown on the most. And I think that's the one -- we have the best opportunity to show what we can do.

Got it. Thank you.

Thanks Ryan.

Our last question today comes from Louie DiPalma, William Blair.

Mark, Chris and Shawn and Peter, good afternoon.

Hi Louie.

Good afternoon Louie.

Hi Louie.

On the government defense side, there's been a lot of publicity regarding how the Ukraine war and geopolitical tension in Asia has triggered a robust demand for Starlink as a backup or even a primary source of defense connectivity. Has the Ukraine war also led to a surge in demand for Inmarsat's Ka-band services?

I think, unlike other. I don't think we're going to go into great depth about what we're doing in specific defense communications. I can you don't -- you just read the newspapers and one of the things you can see is that, there is concern of multiple fronts about being overly dependent on single sources of connectivity for various reasons. And so I think a number of satellite operators are seeing demand different operators are somewhat uniquely positioned to serve different elements of that demand. So you could put us in that.

Great. And along different lines. Mark, Legato was recently in the news regarding potential restructuring. Can you discuss the status of your and Inmarsat's relationship with Ligado. And is there the potential that Ligado could begin again making large payments to Inmarsat?

Okay. So ViaSat and Inmarsat, each had a relationship with Ligado for quite a while, but in different domains. The Inmarsat relationship was really around the spectrum. And our relationship has been more around operational performance using their satellite. And I think what we're trying to do is bring those two things together. It's really going to be up to Ligado to determine how they want to proceed. I mean, not on their own, but we're discussing -- we're in discussions with legato about how best to proceed on both of those fronts. It's -- some of that depends on decisions that Ligado makes as well as choices that we did. So it's a little early to tell -- they've expressed -- I think one of the things that Ligado has expressed is interest in the long-term satellite business more than they have in the past. And so that's a basis for the further discussions. But -- it's just too early for us to comment on what the outcome of those discussions.

The one piece, Mark, to add it, Louie this is Guru. I would say, we have excluded Ligado from our financial models. So repayments or return spectrum would be an upside. So we've not included that in our models.

Yes. Thank you so much. That's been our position all along since we announced the acquisition. Thanks.

Great. And one final one for Mark, what is the process to make existing Viasat in-flight connectivity systems for your like North American airline customers interoperable with the Inmarsat network that also has coverage over North America.

Okay. So it's a little bit of a nuanced problem. Either -- so think of it as one of the ways to start with and we can build on this is that -- so we can support both either network pretty straightforwardly. So, think of it as the -- there's a little bit of a nuance part of our fleet, and it becomes a little more -- it's a little bit of a newer part of our fleet. But basically, that we can make -- and you've seen this, for instance, with Inmarsat, where Inmarsat has used third-party satellites, we use third-party satellites. And what that speaks to is just the ability to adapt the networks to other satellites for some of the specific satellites, but not all. It's a little more complicated to do both networks at the same time in exactly the same place. But not, but there's a lot of places where we can do that as well. So, think of -- I mean, the simplest way to think about it is that the -- because they're not on the -- other than one special case. They're not really onboard process satellites. -- satellites are just repeaters. So, there is, from a basic interoperability perspective, we can run our network and Inmarsat can run their network over third-party satellites, including each other's or including different parts of each other's as we need to. The last piece is to be able to do to do much exact use both of them at exactly the same place at exactly the same time. And while we can do that, some cases, not -- that's the best pieces. Does that get to what you're asking about? Is that covers .

Yes. For your existing North American customers such as JetBlue, United, American Airlines, Delta, you've discussed how you need to add a certain amount of capacity to make up for the loss of ViaSat-3. And I was wondering if the Inmarsat capacity over North America can be 1 of those sources of capacity. And -- like for the aircraft that are being line set now, like -- have you already done the work to make the antenna like interoperable with both networks?

Thank you. I appreciate that. We'll give an update on that next quarter.

That does conclude our question-and-answer session. I'd like to hand the call back to Mr. Mark Dankberg for any additional or closing remarks.

Okay, good. Thanks. So again, thanks again for joining us this afternoon. I would like to leave you with three important takeaways. So one, we had a really good first quarter, strong financial performance, lot of that is based on the specific businesses that we're in and the backlog that we had, we expect to continue to grow revenue and adjusted EBITDA for this year and next year, even if we made a very conservative assumption about no contribution from ViaSat-1. It's not the same, just to be clear, that's not the same as a prediction about ViaSat-351. That's not the same as a prediction of what the ViaSat-351 will do. And then we do have a great long-term opportunity to create a lot of value. We can build on market-leading positions in these growing global mobility and government services markets for both broadband and the mobile device market. We've got material synergy opportunities that we're executing on, and we like building a diverse, resilient financial profile, and it does bring strong cash flow potential with it. So with that, we look forward to updating you on our progress next quarter. And I'll hand it back to the operator. Thanks.