Welcome to Viasat's fiscal year 2022 third quarter earnings conference call. Your host for today's call is Rick Baldridge, President and CEO. You may proceed, Mr. Baldridge.
Okay, thanks. Thanks for joining us today, everybody. We released our shareholder letter earlier today before the market opened, and we hope you've had a chance to take a look at that. Joining me today on the call is Mark Dankberg, our Executive Chairman, Shawn Duffy, our CFO, Robert Blair, our General Counsel, Paul Froelich from Corporate Development, and Peter Lopez from Investor Relations. Today's call will consist of just a couple of brief opening remarks, and then we'll go into Q&A. First, let's have Robert provide us our safe harbor.
Thanks, Rick. As you know, this discussion will contain forward-looking statements. This is a reminder that factors could cause actual results to differ materially. Additional information concerning these factors is contained in our SEC filings, including our most recent reports on Forms 10-K and 10-Q. Copies are available from the SEC or from our website. With that, back to you, Rick.
Okay. Thanks, Robert. First, if you did have a chance to read the letter, you can see our business continues to perform well on almost every front. Today, we'll go into some of the details, talk about the ViaSat-3 schedule a bit, and give you an update on the Inmarsat transaction. We've tried to answer a lot of the questions that we've been getting in the letter, but also hope to answer any remaining questions here in a few minutes. With that, I'll start with a few of the important highlights for the quarter. Revenue grew by $144 million year-over-year to a record $720 million, while Adjusted EBITDA also reached a new record of $163 million, which continues the momentum of the last several quarters.
We grew year-over-year in each of our segments as well. In satellite services, year-over-year revenue growth of 40% was driven mainly by the performance in our IFC business. Both aircraft returned to service and new customers such as Delta coming online, as well as contributions from the RigNet and EBI acquisitions. Fixed broadband was reasonably flat as we continue to reallocate finite bandwidth resources to our growing mobility business. Overall, 37% of our satellite services revenue came from mobility in the quarter. International and other revenue, underscoring the increasingly diversity of our businesses. Those business have the greatest growth opportunity, and we anticipate we'll continue to diversify our satellite services portfolio as we go forward. Government Systems had good revenue performance, with service revenues up 5% year-over-year and total revenue up 2% year-over-year.
While we saw strong performance from Tactical SATCOM radio and Tactical Data Links products, there have been longer than anticipated delays in processing certifications required prior to delivery of some of our security assurance product orders. In addition to the $956 million of backlog, we have 90 IDIQ contracts with almost $4 billion of unawarded potential value, none of which is included in our backlog number. Commercial Networks continued to deliver good results with revenues up 55% year-over-year. The increase was mostly driven by increased IFC terminal shipments and another strong contribution from our Ground Antenna Systems division and RigNet product revenue. We expect that our IFC orders and antenna systems backlog will support continued good results in this segment. Turning to our announced acquisition of Inmarsat.
We've spent our time since the announcement preparing the required filings and are progressing well on multiple fronts. We completed the required loan amendment of Viasat's $700 million revolver and Inmarsat's $700 million credit facility and $1.7 billion term loan. We're progressing well on the regulatory front, both in the U.S. and U.K., and have made initial regulatory filings with the U.S. Department of Justice and the FCC, and plan to make many additional filings within the next few weeks. Inmarsat itself is delivering strong financial and operational results consistent with what we thought. You can see further details on page eight of the shareholder letter. I'd also remind you to keep an eye out for our transaction proxy, which is expected to be filed very soon. We're very excited about the transaction and so are our customers.
A number of airlines have been reaching out to learn more about the transaction, including how it will help us better serve our existing and future customers. We think our dedication to global growth has been a big consideration in recent business activity and new orders for long-range aircraft. On our last call, we said we expect to close in 9-18 months from signing. We continue to believe that's a good estimate, hopefully by the end of this calendar year. Regarding ViaSat-3 constellation, the ViaSat-3 Americas launch is now expected to be late summer due to some modest slippage in our supply chain. We've been working through limited availability of specific critical skill workers.
We've made really good progress on alpha testing of our space ground system integration using one of our own orbit satellites, and we're working to take advantage of that to manage on-orbit testing, so we can maintain the commencement of initial services by the end of the calendar year. We don't expect this, which is consistent with what we said before. We don't expect this to materially impact our financial outlook we previously provided.
The ViaSat-3 EMEA payload modules progressed very well in our Tempe facility by taking advantage of the learnings from flight one Americas. We're now at 95% complete of the payload units. They have already been installed. We're in the final stages prior to shipping that to Boeing for integration with the bus. We expect learnings on the payload bus integration will benefit flight two schedule at Boeing, and we continue to target that launch about six months after flight one. Turning to the outlook briefly. Our company-wide outlook remains strong. We continue to believe we'll achieve our standalone financial targets, including our average annual Adjusted EBITDA growth in the mid-teens for FY 2022/2023 relative to FY 2021, as we've previously stated. We also believe we're on track to more than double Adjusted EBITDA by FY 2025 relative to FY 2020 on a standalone basis.
While, of course, we're very excited about the Inmarsat acquisition and ViaSat-3, our strong operational and financial performance demonstrates that our teams are working diligently to drive good execution. I think the same can be said for the Inmarsat based on their strong performance. With that, we'll turn it over for questions.
As a reminder, to ask a question, please press star one on your touchtone telephone. Again, that's star one on your touchtone telephone to ask a question. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. Our first question comes from the line of Ric Prentiss of Raymond James. Your line is open.
Thanks. Hey, everybody. Happy, happy New Year, I guess, officially.
Yeah, Happy New Year.
A couple questions for you guys. First, obviously ViaSat-3A is slipping a little bit. ViaSat-3 B, you said about six months still after the first ViaSat-3 A. How should we think about the magnitude of costs that you need to put in for ground and other operating expenses before the revenues start generating, and what kind of pacing there might be as far as costs before revenues on the satellite launches?
Hey, Ric. This is Shawn. You know, we're starting to incur some of those as we speak, but they're, you know, we've been trying to pace those somewhat with the launch. You can think of those this quarter as maybe $5 million. As we get closer and closer to launch, like I said, those will start to ramp up. Maybe an annual rate around $35 million, you know, right before we go into service is a good estimate.
$35 million on an annual basis?
Yeah. It kind of ramps up to that.
Makes sense. It's about a year from now that you get into service, hopefully a little sooner. How are you guys feeling about maintaining flat revenue on the U.S. consumer broadband side, given the demand for in-flight connectivity? Or should we expect some declines in the revenues on consumer broadband as we look into the future?
Sure. It's Mark. Yeah. So far, you know, so far what we've seen is kind of the ARPU growth has maintained pretty much the same pace and actually in some cases, a little bit better than the sub decline. That, you know, I think that's also kind of consistent with what's going on in the industry. So we think that's, you know, more or less kind of the trend that we'd expect between now and entering service in the U.S.
Okay. We saw some announcements. It looks like, on the competitive front, SpaceX Starlink is starting to pivot to some more business enterprise, with $500 plans, $2,500 CPE costs. How are you thinking about the competitive dynamics out there, as far as your ability to grow, once ViaSat-3A is in the air?
Well, it's a few things. One, it's a very big market. We, you know, we have seen so far, sort of, I'd say, de minimis in material impact in the overall markets due to SpaceX. Certainly, you can see it. They're out there. But. You know, one of the points that we've made, and I think that this is, you know, turning out to be true, is that the better the services, the more value you can offer as a function of price, the bigger the market is. You know, what's happening is, you've seen the market. We're seeing the market grow, and I think we're still getting a share of that market that's sufficient for our growth targets.
The other point I would say is, you know, if you look at what we're doing on the enterprise side, we tend to be a lot more vertically integrated into each specific market, where there's quite a bit of value add besides just providing a broadband pipe. We think that's really a good fit for us. The types of plans that they're describing, well, you know, they're sort of interesting, but we don't really see them having any impact on our forward-looking outlook.
Great. Thanks, everyone. Stay well.
All right. Thanks.
Thank you. Our next question comes from Landon Park of Morgan Stanley. Please go ahead.
Thank you. Hello, everyone. Couple questions. Could you talk about the conversations that you've had with the U.K. government over the last couple weeks and maybe some of your takeaways from those, and what type of, you know, concessions or agreements you guys are thinking about as part of the deal?
Yeah. You know, when we announced the deal, we were actually ready to go a little earlier, and they asked us to delay it. They had worked out what they call undertakings with the previous private equity group that had taken this thing private. I'd say, you know, the discussions we've had are fairly consistent with those types of things. Quite frankly, the plans that we have in the U.K., in my view, are quite a bit more favorable to the U.K. than what's going on. You know, we're more vertically integrated. We'll bring more R&Ds. I think the types of people we hire will be more technical people. I think we just have a really positive story.
You know, you've read the things in the newspaper, what they're worried about. You know, I just don't think we have that situation. Not every deal is the same. Those have been the discussions, just talking about what our plans are. I think the discussions have gone really well. There were, you know, some articles that came out by the same three people that had previously written about in a very negative way, and the new articles are much more balanced. You know, I think that we've got a good story. We've been in the U.K. for 10 years, over 10 years. We have data at rest security products over there that we provide today, that actually provides most of the data at rest security across their MOD.
We've previously announced a satellite operations center investment in the U.K. prior to this deal even getting signed. We just have a very good story, and they seem to be pretty receptive.
Is the deal going to be subject to the new national security oversight law that recently went into place?
It is, yes. We expect a full review across the board. That's what we expected going in.
Great. So moving on to the broadband business. There's been some news that Facebook is gonna be sort of winding down some of their, or I think most of their international Express Wi-Fi business. They had partnered with you in Mexico. Could you maybe just talk about any impacts that might have on you and maybe just a broader update on that international Wi-Fi program you guys have been running and what type of returns you've been able to to see out of that business?
I'm sorry, I missed the very first sentence of that.
Who-
Who, the company that you mentioned?
Facebook.
Oh.
Facebook.
Oh, okay.
Starlink.
On the international front, in terms of fixed services, we have two sets of initiatives. One is the direct residential broadband that we're doing in several countries, for instance, Inmarsat in Europe, the other part of the joint venture we have with Eutelsat. The other part, which is the part that I think you're referring to, are the what we call community internet or shared internet services. We're doing that in a few different ways. The main common element is to bring bandwidth in by satellite to some central point and then distribute that bandwidth to end users. We're doing that actually in multiple different ways. We're doing it by LAN. We're doing it by wireless. We're doing it by, you know, by unlicensed Wi-Fi.
Each of those, you know, we think that each of those will have places under different circumstances. Right now, all three modes of delivery are, I think, growing and are attractive to us under different circumstances. On the Facebook thing specifically, we're working with those guys right now on transitioning that, so we don't see any impact. Yeah. Look, you know, the other part of it is
Right.
You know, what we're doing with Facebook was more about trying to understand where to deliver service and how effective that service was. I think that activity has been benefiting both companies.
Great. The last one from me, just on the commercial network side, can you talk about some of the managed services that you guys expect to ramp up in that business over the next couple years and, you know, maybe what that, the margin profile looks like for some of that and, the, you know, the prospects to get that segment closer to breakeven?
Okay. On the communications network side, I'm gonna unpack, look at that a little bit. One is from a managed services perspective, the main thing that we've been doing there is in what we call Real-Time Earth. Is that what you're referring to? That is a shared network services business primarily for Earth observation downlinks, data downlinks. Is that what you're referring to?
Yes, that is what I'm referring to.
Yeah, that's still a relatively small business, but it's growing pretty steadily. You know, right now what we've been doing is working primarily with third-party partners. For instance, we did one with indigenous people in Australia. We just recently did one in Ghana, and we have more opportunities for that. Then the other kind of really interesting elements are that one of the main businesses in our communication network that's accounted for a lot of growth for us is building kind of the largest, most capable full motion ground antenna systems. The reason that's valuable is, you know, very large antenna is just a lot more efficient at getting high speed data down. Highest speed for the highest resolution sensor data.
The other one is that makes them most effective for these new generation of very, very small satellites. You don't need a lot of power or sophistication from the spacecraft. You can focus most of your value on the sensing part. Those two things are really valuable. The other thing that we're working to integrate with that is, think of it as LEO GEO relay, which is a very unique mission, that ViaSat-3 constellation can do because of the global coverage and the high capacity. Right now, they're small businesses. They're good margin businesses. We think that is, you know, the variable costs are low, so as they scale, those margins will improve.
On the overall issue of EBITDA, you know, going to turn that business EBITDA positive. You know, the main thing that has been a drag on EBITDA is what we think is actually a benefit, which is, you know, we're doing our own payload designs for the Viasat satellite series. We're also now extending some of those payload capabilities into third-party satellites. Like, one area that's been good for us has been crosslinks for satellites, and we have a number of government contracts for that. We have commercial contracts for cross-linking. We think that that's a really attractive business.
The fact, you know, the fact that we do that for both ourselves and others, as opposed to just buying satellites like most other satellite operators do, means that we expense the R&D as opposed to capitalizing the R&D that goes into these next generation satellite designs. That's the single biggest. I mean, it's really the only factor in the negative EBITDA in that business.
Yeah. Shawn, just to add to it, right? Most of our R&D, we centralize in that segment, right? It benefits across the segments.
Right.
Most of it flows there. Outside of that, it's a nicely profitable segment for us.
Yeah.
No, I understand. I was just trying to understand if on a reported basis, if there was a path over the next three years or so to get it closer to breakeven.
Yeah, I mean, I think we'll see improvements in that. We're gonna continue to have good momentum in IFC and delivery of terminals there. We're gonna continue to invest as well for next-gen and things that we think are very valuable in commercial applications as well as government.
R&D at 5% of revenues is still a good range for you?
Yeah. This quarter, we were about 5.2%, so you know, 5%-5.5%, somewhere between there is a good estimate.
Great. Thanks. Thanks, everyone, for all the color.
Thanks, Landon.
Thank you. Our next question comes from Matthew Bouley . Your line is open.
Good afternoon, and thank you very much. I have three questions, please. The first one relates to the Inmarsat acquisition. You were mentioning in your scripted remarks that you've engaged with clients, and clients are asking about what this could mean and what kind of services maybe you can provide. Could you give us a little bit more color in terms of what is their interest focused on in a combined Inmarsat-Viasat proposition?
Sure. The main things that we've been focused on, and these are. I'd say these are common among a lot of these mobility businesses. Number one is this issue about bandwidth density, which is how do you avoid congestion in your network, so that your mobility customers get you know have a reliable service even when they go into busy airports or hubs. One of the things we showed, which we thought was one of the most important slides in our presentation about the Inmarsat acquisition, was just the density of demand for commercial air. Commercial air is relatively easy to show because it's scheduled airlines. Similar situations occur in things like general aviation, maritime, and other even in land mobile applications.
That, you know, one of the things that's really been an important factor for Viasat's growth has been our ability to deal with that, especially in the U.S., which is the largest domestic market for air travel. You know, it's the large airlines that we serve and the large airport cities. I think we've been able to demonstrate our ability to keep ahead of that issue. That's one. Another one that I think people are really interested in, and especially in maritime and in some of the, you know, the intercontinental aviation, is the hybrid services between Ka-band and L-band, and being able to provide that continuity of service even under the worst weather conditions.
Which is where when you think of airline safety or maritime safety, where a lot of the most distressful situations are associated with bad weather. That's being able to bundle those things into attractive systems is a really good thing. The other, which has been kind of the main thing that airlines have been looking to Viasat for, and that we believe Inmarsat really accelerates, is redundant global coverage. You know, we'll get there faster, and we'll have multiple satellites that serve those long-haul international routes. I'd say those are kind of the main, some of the main topics that customers have come to us to discuss first.
If I can follow up, is that also a discussion you're having with governments that they require more capacity?
Well, yes, if you look at. I mean, one of the things that's also been a valuable business for us, as well as for Inmarsat, is in dealing with government applications. You know, the big thing with government applications is they don't really know where their hotspots will be. They can, you know, they can anticipate them, but they can pop up anywhere in the world. When they do, they also have this issue about very large amounts of demand concentrated in relatively small geographic areas. Being able to deal with those issues and being able to deal with some of the unique things that we bring, for instance, with ViaSat-3 or the potential to deliver uplink speeds from platforms that are exceptionally good, much better than even a lot of these new NGSO systems.
They're, you know, just the attractions of the combined resources and capabilities of the companies.
Thank you. If I continue on the government and specifically service revenues, which kind of links a bit to what we just discussed. I realize service revenues and bandwidth demand for you today in government services is a small part of your revenues. But I was wondering if you're seeing any increase in demand recently. Obviously, we're in a slightly more tense geopolitical situation. Whether in the past you've seen, you know, big increases in demand linked to any deterioration on that front.
Yeah. I mean, I think all satellite operators tend to see increased demand for government bandwidth when there are, you know, conflicts in the world. You know, Well, if you have bandwidth in the places where it's needed, then you're in a position to be able to help support that. You know, I think more recently, yeah, there's threats of conflict. Hopefully it doesn't come out, turn out to be that way. Right now, we're just really seeing more, I'd say inquiries about, you know, more around planning and contingency planning. What, you know, what can be done. I think we're...
I think we're, you know, as we've grown, I think we're in a position to be able to deliver more support. In general, though, you know, some places demand's gone down. It'll probably appear in new places if it does.
Overall, not satellites, but the services portion of our government revenue has been growing over the last few years.
Yeah. I think we've talked about that being in the 20%-25% range of total services fee.
Of total.
Of the total Government Systems revenue. Yeah.
Great. Thanks. If I finish with one question on the U.S. broadband market. You do mention in your press release that the number of subscribers has come down a bit, but that's kind of voluntary to some extent, that as you want to use more capacity in IFC. I had a broader question concerning the market and the competition there, 'cause some of the telecom players are pushing a lot more, it seems, FWA solutions as a way to increase their revenues. I was wondering if you saw that as potentially a new source of competition, a reduction of your potential addressable market in the U.S. Thank you.
It turns out fixed wireless has not really been a material factor in, you know, changing the market for satellite broadband in the U.S. There are other factors. I mean, you know, cable edge outs, fiber, new fiber builds, those are probably more of a factor. The other one that I think kind of ebbs and flows depending on the economy, demand, and a couple other factors is people just using their mobile service plan as their home broadband service. That becomes a little more tenable for people when they have, when they're going to the office, and they have broadband resources at work or somewhere other than home. Those are the main factors.
That's how what we see probably shaping the market over the next few years. We've done a pretty detailed micro-analysis of that on a region-by-region basis. You know, we think it will eat into the market, but it's not gonna eliminate the market. You know, what we've expected over the next five years, we talked about this a few times, is kind of modest growth on a subscriber basis in the U.S., between now and say 2025.
Great. Thank you very much.
Thank you.
Thank you. Our next question comes from Chris Quilty of Quilty Analytics. Your line is open.
Thanks, guys. I had a question about the forgotten acquisition, maybe, with RigNet. We haven't talked about it in a lot of detail, but can you give us maybe a status update now that you've had it a couple of quarters under your belt of what you're seeing in that business in terms of, you know, both business operations, integration, cost reductions, and, I guess, putting Inmarsat aside for the moment, since there's a lot of changes that could come, but, like, what plans do you have now for that business in terms of growing it and migrating it with the ViaSat-3 services?
Yeah, the integration's gone very well between the two groups. There was some initial, you know, cost reductions that took place early on. We've been working on the integration of the business areas. Our global operations have all been integrated under one group. That's gone well. We have started our initial first Ka-band deployment in some of the rigs where they were previously leasing capacity, but that's just the very beginning. It's just started with some trials. That's, you know, obviously one of the big benefits here to both drive performance and help in the cost profile over time. That will improve as we begin to launch these ViaSat-3 satellites. That's where the real growth opportunity there is.
The Intelie part of that business has been a very positive surprise. Really strong team, has a good platform. They continue to win new business, and there's other applications across Viasat where that group can help. We're, you know, I'd say things are about as expected so far.
Gotcha. Question on that Ka-band rollout on the rigs. There was probably some reason in the past why RigNet was hesitant to use Inmarsat as the backup, but have you determined what the backup path will be there for those systems?
Yeah. One of the things we're not doing is disclosing our execution strategy to the competition. You know, one of the things we're doing in these trials is demonstrating what's capable. You know, our view is if you give a whole bunch of people a whole bunch more bandwidth and charge them a lot less, is you create things that they would have done had they been able to do and weren't. We're able to do that in areas where we have footprint right now, which is limited. As those satellites roll out, and then with Inmarsat, we won't be limited to that, and we'll be able to do that across the board. The real opportunity here is growing the type of services we deliver to all these platforms.
Understood. A different question. Mark, you mentioned crosslinks. I assume you were referring to RF and not optical crosslinks.
Yes. Correct.
Okay. Can you name any of the programs where, you know, you're targeting business? Because I'm not aware of any offhand, at least unclassified.
The largest commercial one that we've had is Iridium. Remember, you know, Iridium's a cross-linked system, so we did all of the onboard crosslinks for Iridium. We have mostly otherwise so far have been mostly government programs, including, I don't really wanna name them, but some name-brand new multi-satellite government programs where we've been funded, and I think we'll be in the production version of those satellites as well. You know, the crosslinks that we've been doing are generally Ka-band or much higher frequencies that have a lot more capacity. I think one of the most interesting ones where we are getting traction as well in both government and commercial programs is in the LEO to GEO crosslinks.
Which is a pretty unique capability. With the big advantage there, if you have a very high-capacity global system like ViaSat-3, you can just insert the LEO crosslinks into the you know global coverage capability of a ViaSat-3. That's a really interesting opportunity, and we're getting good traction on that on both government and commercial sides.
Gotcha. The sort of high-profile government name, is that perhaps a new effort with a generic-sounding domain name and very high volume where the primary focus is on optical?
No. You know, the.
Okay.
I don't wanna try and stir up speculation. You know, there's certainly a place for optical crosslinks. The big advantage of RF crosslinks, and you know, well, the RF's kind of interesting in the gigabit up to the gigabit range, and you may see optical crosslinks in the 10 or more gigabit range. But if a gigabit is a worthwhile bandwidth, the big advantage of optical is much cheaper, much less power, doesn't require the platform stability. You can network it, so you can hop the links around, a lot easier to make and break connections, build packet networks.
There's, you know, I know there's a lot of focus on laser cross links, but the optical one is a really interesting market, and one that I think we have.
RF.
I mean, the RF one. Sorry, yeah. The RF one's really interesting, and it's one where I think we have a really good competitive position.
Gotcha. Because I didn't ask Shawn any questions, I'm gonna follow up with one financial question, which is, when you were mentioning with Rick earlier the ground equipment costs, are those capitalized costs now, or are those costs that you are expending?
No, Chris, what I was trying to capture for you guys is how the OpEx will ramp ahead of the service launch. That's not the CapEx.
Okay. You're not able to capitalize any of the ground equipment R&D and build out until the satellite is operational?
No. As part of the full project profile that we've given you guys, which includes the satellite, the launch, the insurance, all the initial ground, that stuff is capitalized. It's just the operating when you light it up essentially that gets expensed.
Think of power and fiber optics.
Right.
And rent and, you know, all of those types of expenses.
Great. I know you haven't given out a specific number of... Ben, do you use the term gateway? No. What's the name you use for your-
What we call satellite access nodes. Or the, yeah, they're feedlink gateways.
Yes. Okay. What percent of those are installed now, and do you light them up and keep them lit up until ViaSat-3 is launched, or do you kind of light them up and turn them off just to test them?
We probably have close to half of the initial set of SANs in the U.S.
Coming over the next few months, I think.
Yeah.
Yeah.
Yeah. Somewhere in that range is what we'll have. You know, one of the things Rick mentioned is that things are going well on space ground testing. We're able to test a lot of the integration using the new ground network in one of our existing satellites. We can test a lot of the functionality. What we are doing is we're lighting up some of them along the way to increase the scope of that testing. The bulk of them will be activated, you know, very close to the launch or post-launch.
Gotcha. Final question for Shawn. I think the last number you gave was $2.3 billion for the ViaSat-3 program. Just a clarification. Does that include capitalized interest or not?
That is without the capitalized interest. About that range.
Okay. Perfect. Thank you.
Thanks, Chris.
Thank you. Our next question comes from Louie DiPalma of William Blair. Your line is open.
Good afternoon, Rick, Mark, and Shawn.
Afternoon.
I was wondering, does the U.K. government have any interest in investing in the Viasat Inmarsat combination in the same way that they invested $500 million into OneWeb?
We haven't had that discussion. I think OneWeb was having those discussions. I'd say that's the big difference, is they were looking for investors. I don't think the U.K. government is probably interested in investing in a public company.
Okay. That makes sense. Switching to ViaSat-3, I was wondering what is your degree of confidence that you will have ViaSat-3 services commencing for either consumer broadband or aviation this year?
I would say pretty good. I mean, we have that. We have a plan that does that. You know, there's uncertainties along the way. I wish we could be certain, but you can't be certain. I think we have a plan. You know, if you look at sort of the main thing that caused the launch schedule, it was the lack of availability of specific people. Who would have been able to forecast that three months ago? Things looked like all COVID stuff was going away, and life was coming back to normal. I wish I could say we're certain, but we have a plan.
Generally, we've been pretty good at executing plans when the assumptions behind them hold true.
Okay, thanks. Thanks, Mark. For the customer premise equipment and the terminals associated with the ViaSat-3 system, how will the economics be different for new customers that want to use the ViaSat-3 system versus existing customers that are currently on ViaSat-1 or ViaSat-2 that are looking to upgrade. The reason I'm asking is, a lot has been made about how, like SpaceX with Starlink takes a pretty hefty loss on their terminals. I'm wondering, like, how does that loss, like, compare to the economics for your geostationary type terminals?
Okay. One is the ViaSat-3 overall economics. I think will be in line with what we've experienced since we did ViaSat-1, which is think of it as, you know, customer lifetime value compared to customer acquisition cost. You know, the lifetime, it tends to be 3x, you know, somewhere in that range, right? About, think of like lifetime value. And that's based on, you know, many years of good understanding of customer acquisition costs, churn statistics, ongoing customer support. I think, you know, we have some initiatives that actually reduce cost and can improve that. We'll see similar things with ViaSat-3. It's kind of what we expect.
The thing I would say that maybe doesn't get as much attention as it probably should, you know, from investors to think about is really there's, you know, the kind of biggest issue in running these businesses to deliver an attractive service and to do it profitably is the amortized airtime costs. If you think about it, and this is kind of what we said in the past, you know, there's kind of a rule of thumb to think of bandwidth and space as inventory. You're seeing that right now, right? It doesn't matter if it's GEO or LEO. If you don't have enough bandwidth and you add more customers or your same customers use more bandwidth, speeds can drop.
That's exactly what you're seeing. For instance, in the LEO world speeds are dropping if you don't add more bandwidth, and the customers you already have use more bandwidth even if you don't add any new ones. What we think about is when we bring on these systems that have big improvements in the airtime economics, we tend to value the bandwidth on all of our systems at, you know, the lower of cost or market, right, so the cost or market, right? That's kind of the way that you tend to think about bandwidth. We can offer. We'll be able to offer a lot of the same services that we do on ViaSat-3 on the older satellites. They're capable of doing it. They don't.
You don't have to necessarily switch satellite or get new CPE to be able to get the new services. That's kind of what the payoff is. That's the payoff of that, and that helps us to preserve this kind of ratio of lifetime value to customer acquisition cost. Does that answer your question?
Yes. Great. Thanks. Thanks, Mark. Thanks, Rick.
Sure.
That's it.
Thanks, Louie.
Thank you. Our next question comes from Ryan Koontz of Needham & Company. Your line is open.
Thanks for the question. On the Delta IFC business, sounds like that's really humming here. When do you expect that to peak on the commercial side as you kind of penetrate the fleet there? Any outlook on timeline?
Well, we're a little over halfway through the build-out of the current backlog with Delta, and so we're still ramping there. There's a lot of other activity, I'd say, in the commercial air marketplace.
Delta's only a fraction of our.
You know, if you look at the number of new planes that we have on order that we described in the letter, Delta's less than half that. Well under half. Yeah. It's not. It hasn't been. We don't expect it to stop. There's just a lot of new interest.
Got it. Just a housekeeping question here on the acquisitions expense, popping up in the quarter there. You expect that to stay pretty steady into the close of the deal and kind of ramp post-integration of Inmarsat?
You know, right up front was pretty heavy on the expense side. We are still spending money. There's definitely lawyers still working on regulatory filings. They can spend money for sure. It's not at the rate it was in the December quarter.
Got it. That's it.
Thanks, Ryan. Okay. I think that was the last question. Just wanna say, operator, thank you. Thanks to everybody. Together with Mark and, kind of, the rest of the team here, we wanna thank you guys for spending some time with us. Hopefully, you found the letter informative, and your continued feedback on that, back to Pete, is helpful. Continue to make it better for trying to answer your questions next time. Our operational momentum is still really positive. We're excited about the capabilities and opportunities that Inmarsat will bring. We think they have got a strong team, and their performance has been excellent over the same period. At the same time, we're focused on what we're doing. We're focused on our execution.
Our leadership team and our employees are really focused on executing our plan. Don't hesitate to reach out to Peter with input or other questions you've got, and we look forward to following up with you guys. Thanks.
This concludes today's conference call. Thank you for participating. You may now disconnect.