Hello, and welcome to ViaSat's Fiscal Year 2022 First Quarter Earnings Conference Call. Your host for today's call is Rick Baldridge, President and CEO. You may proceed, Mr. Baldridge.
Okay. Thanks. Thanks everybody for joining us today. We released our share own letter earlier today before the market opened, And we hope you guys have had the time to review it. Today's call, we're going to have just a brief opening remark and then we'll go into Q and A.
But first, Robert, can you provide a safe harbor?
Sure. 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 Form 10 ks and Form 10 Q.
Copies are available from the SEC or from our website. With that said, back to you, Eric.
Okay. Thanks, Rob. In addition to Robert joining me on the call, it will be Mark Densburg, our Executive Chairman Our CFO, Sean Duffy Paul Froelich from Corporate Development and Peter Lopez from Investor Relations. Just a couple of comments before we jump into the Q and A. We had another great quarter.
We generated record revenue, Record adjusted EBITDA and we can build on the momentum that we finished our last fiscal year with. Revenue grew 25% year over year to $665,000,000 and adjusted EBITDA grew at more than twice that rate, up 52%. That part of that's reflecting last year with the quarter was one of those hard to see or first hit by commercial air. H2ware segments delivered strong year over year revenue growth. In satellite services, year over year double digit organic revenue growth was driven mainly by the improvement in our in flight connectivity business, which was, as we've mentioned, severely impacted last year by COVID.
We continue to see sequential quarterly improvements as passengers return to air travel, but we're still well below pre pandemic business levels. Our fixed broadband revenue continued to grow organically as well, both year over year and sequentially, as we continue to see strong demand in the market. Strong organic growth across the segment was also augmented by the 2 acquisitions we made, RigNet and ABI that closed early in the quarter. Government Systems had good revenue and EBITDA performance up 4% 6% year over year, A 22% year over year increase in service revenue was the main driver, while tactical data links, cybersecurity And mobile broadband product lines also contributed. We expect continued growth in the segments in addition To another 900 and large IDIQ, dollars 120,000,000 of backlog with that IDIQ win in the period.
That award the $920,000,000 represents kind
of unawarded potential value of that one. And when you add those IDIQ is up, it's about $4,000,000,000 of unawarded IDIQ values that doesn't isn't reflected in our backlog. Commercial Networks had a great performance with strong revenue growth and a large reduction in our record loss in that segment. A lot of this was from the ramp up of IFC terminals, shipments that has restarted and we had another strong contribution from our Ground Antenna Systems division, which is driven by all the new space demand. In addition to the really good financial results, We completed several key execution milestones.
We closed on the RigNet and the EBI, our European Broadband acquisition in late April. Both these will accelerate our expansion into new and adjacent vertical markets, Such as energy and maritime and new geographical markets, particularly in the EMEA region, both expand our global operational and customer Greetings to ISN-three. Regarding the ISN-three constellation, the payload of our first satellite of ISN-three for the Americas Has been at Boeing for 2 months now for integration with the bus module and final environmental testing. We began installing IFC equipment on the first aircraft of our new customer Delta Airlines with whom we have over 550 aircraft under contract. We expect the install rate to continue to accelerate over the next few quarters.
And by this weekend, we'll have about 80 aircraft installed, And that's accelerating. These achievements reflect our continued focus on execution ahead of IASA 3 Our global footprint expanded in new geographic and vertical markets. Our recent results As I think key proof points, we remain confident in our bill to deliver on our 5 year financial targets that we communicated last year. To that end, as you've seen in our letter, we also introduced revenue and adjusted EBITDA guidance this time To give you a picture of the near term ramp towards that 5 year goals that we talked about last year, This guidance shows that we expect solid growth over the next 2 years across all of our business as we begin to bring the ViaSat-three network online. So with that, operator, we'll go to questions.
Thank you. Our first question comes from the line of Philip Cusick with JPMorgan. Your line is open.
Thank you. This is Sebastiano on for Phil. The fixed broadband versus Yes, mobility and other fixed broadband breakouts in the letter was very helpful. Wondering if you could perhaps provide some More similar incremental color just on the domestic broadband trends. What are you seeing in terms of subscribers and ARPU?
I mean, results We're stronger than we had anticipated. I just want to see if you can maybe delve a little deeper into some of the underlying trends and What if any indication or impact are you seeing from Space StarLink's launch and ramp?
Mark? Okay, it's Mark. The dominant issue for us over the next few quarters in U. S. Broadband It's just going to be supply.
We pretty much sold out the satellites that we have over the U. S. So the main trend we're seeing It's high demand for more bandwidth and a lot of that's being absorbed by customers that are upgrading to plans that Provide more bandwidth. So we're seeing probably a few 1,000 in order with few 1,000 fewer subscribers, but The subscribers that we have are buying more premium plans. And so that's sort of holding that steady to up.
But then the other factor that's entering into it is all these other markets that we're developing in advance ViaSat-three within the return of the in flight connectivity. So that is causing us to Basically allocate our bandwidth in the ways that both pave the way for the fastest growth In the new businesses and deliver the revenue and earnings growth that we're counting on to finance The new system. So that tells them kind of the factors that are in play. In terms of overall demand, Overall demand is really high. And yes, of course, we can we have tools where you can see that they Starting just serving people in the market, but overall demand is far greater than Look, they're still keeping up with this is so far not really material.
I think in the last call, we indicated that we had expected decline And subscribers in the U. S. Market over until Viasat 3 comes online. But in general, we think the revenue will be about flat year over year In that residential broadband segment.
That's helpful. And perhaps I guess, there haven't been any headlines subsequent to the Linksys, the potential divestiture of Yes, a portion of the government business. So anything there, I mean, how should we be thinking about that? Obviously, trends in Link 16 business and some of your other verticals remain Strong. So anything we should be thinking about as it pertains to your potential monetization of a portion of your government business?
No. If there was, we wouldn't say anything about it here, but we like them as the business is growing. And so we see continued very high demand and good growth in that segment. So I think we're Positioned strongly. You saw in the note, we're going to hear pretty soon, we will launch our First, LEO that has Link 16 on it.
And so that new space element of Link 16 business is a growth area. So But in general, whether it's acquisitions or divestitures, we wouldn't make any comments on it here.
Fair. And maybe one ask one for Sean. Just how should we think about the CapEx run rate for the remainder of the year? Obviously, you called out about leverage Ticking higher through the rest of the year. So just overall CapEx expectations within fiscal 2022 Would be great.
Thanks again, Josh. Yes,
no problem. So I think what we talked about last quarter was on average kind of targeting that $300,000,000 per quarter, Kennemark. We were a little lighter this quarter, but it starts to ramp through the year As we get closer to launch. So that's still a good number.
Thank you. Our next question comes from the line of Ric Prentiss with Raymond James. Your line is open.
Thanks. Hey, everybody. Hey, Eric.
Hey, couple of questions. Again, appreciate that near term guidance on the long term path. One quick housekeeping one. I assume RigNet is not in the fixed U. S.
Fixed broadband percent then, that is just truly U. S. Fixed broadband?
That's correct. I should let Sean answer that.
Good answer. That's correct.
Okay. And when we think about that near term guidance Of revenue average annual revenue growth of approximately 20% and average annual EBITDA growth in the mid teens. Obviously, this fiscal year you get 11 months with the benefit of the 2 acquisitions. How should we think about what ex M and A growth might look like Over that period, you did call out how much M and A was helping in the quarter?
Yes. So I think when we tried to give you that guidance, we kind of looked at All in, but if you recall, last quarter we talked about the kind of adder that we expected this year for RigNet and EBI. That was about $40,000,000 on the EBITDA line.
Okay. And it looks like RigNet does split between Satellite services and product though or commercial networks?
Yes. There is about 90%
that shows up in
the service side and about 10% related to some of their product efforts on I'm sorry, 90% in the satellite service side, about 10% that shows up over in commercial.
Sure. Okay. That makes sense. And then when we Think about from the letter you mentioned recalibration of metrics reported. Can you help us understand what you're thinking about How you're reporting what you might add to what you're telling us or what you might take away from what you're telling us?
Sure. Yes. Right now, what we're seeing is a lot of demand across multiple vertical and geographic markets. So that's Residential enterprise, in flight connectivity, general aviation, land mobile, government, maritime energy, so we've got all those different markets And we've got to figure out how to allocate that across them. What we and Clearly, there's way more demand than we can serve with the resources that we have for the next few quarters when you aggregate it across all those markets.
And we were thrilled. We like having a broad robust and resilient base of markets. We don't want to be Overexposed to any one geographic market or any one vertical market. So What we're trying to do is, hey, look, here's what our focus is, is we want to earn revenue, earnings and cash flow In line with our capital planning and our leverage objectives and we also want to build momentum for the Increased economic productivity, the coverage we'll get, the total bandwidth we'll have, the geographic flexibility they'll have with ViaSat-three. And we want that to increase our revenue and earnings diversity and resilience and robustness.
So that's those are our objectives. And what we're looking to do is, one is, we know that people are trying to use some of these other metrics to forecast Well, what our growth will be, so we're getting to that, right? We're basically saying here's the guidance that we're going to get in revenue and adjusted EBITDA. And we also will continue to give this metric that shows the diversification of our business, Now here's the U. S, which has been especially during COVID, it was very U.
S. Residential centric. And now you can see we're back on track To get that diversification, so we'll give you that. And then we're still looking at ways to refine those metrics that take into account all these markets I capture them holistically and we'll probably introduce some other metrics over the next year probably over the next year or so, certainly by the time we have 5/5/3, in service.
Okay. Makes sense. And the one thing I don't hear a lot about probably because it's such a low bandwidth It's Internet of Things. Other companies are looking at IoT opportunities. Should we assume that's not as high a priority given a
good problem to have, you
got way more demand than supply right now?
Yes. So a lot of people define IoT businesses as sort of by definition level bandwidth states. There actually are some really interesting IoT businesses that we're working on and especially with the addition of Bricknet that are Those are they're basically think of them as the recurring revenue It's pretty high relative to the acquisition cost of the terminals. So that type of IoT stuff is really interesting to us. And there are some.
A lot of those you might imagine are things that are say video intensive. Those types of IoT applications Our bandwidth intensive, so are things in monitoring certain industrial processes, drilling, mining, things like that. So those are absolutely in the near term opportunity set for us.
You can also think of things that need to be
Need the cloud compute to
be able to have AI elements back to how you control elements. And so Those things are very data intensive.
Yes. But we will right now, we're just including all that in our enterprise segment. That's because they're all enterprise applications.
Okay. Thanks Rick. Thanks Mark. Thanks John. Stay well.
Thanks Rick. Thank
you. Our next question comes from the line of Mathieu Robillot with Barclays. Your line is open.
Yes. Good morning. Good afternoon. Thank you all. I had a question first with regards to the guidance.
Obviously, it's great that you gave more clarity, but I guess we always want a bit more. And I was wondering, what is the Launch schedule that you have assumed in the guidance in terms of the satellite in order to deliver that growth? That was my first question.
Yes. Well, it hasn't
changed. Obviously, those things Can move around a little bit, but it hasn't changed since we gave it before. When we had talked about Roughly a 9 month schedule from the time we delivered the satellite to Boeing until the time they would ship it. Obviously, there's multiple factors that can cause that to move To the left or to the right, it should be the most predictable part of the schedule versus building the payload. So you could say, well, that represents a time frame of X and then you add a month or 2 to that for launch preparation And then a couple of 3 months for testing and once it gets on orbit.
Right now, we don't have
a real reason to change the schedule we've given and but we might. Something could happen In the interim, it's just been it's just too early since we gave it the Boeing to change to predict Anything different than what we've said before right now.
Okay. So that's still Q1 2022 calendar kind of
Q1, Q2 time frame in that I'd say just given the schedule things more likely Q2.
Yes, yes.
Thank you. Dennis, I have a second question about CapEx. And obviously, you've given Indications over the years. And because phasing can be different from what we At some point in time, it's always difficult to hit it right on our side. But I just wanted to confirm that the kind of numbers you had given initially about the cost of the constellation were basically on track.
And What I have noted down is like $550,000,000 for ViaSat-three satellite, plus maybe $150,000,000 for ground. So that was the plan for ViaSat-three. I just want to confirm that was still more or less what you guys had in mind. And whether or not you're already spending Something on ViaSat-four or that is something that we should wait a little bit to start to incorporate in our estimates?
Yes. So I think a couple of things. We've talked about what the full cost is for the full constellation And the ranges there that have been about, I'll say, dollars 2,300,000,000 and so for all 3 satellites. And so we're continuing to make progress. I'd say coming out of
this That has launched and in terms
of ground
and the satellite set. Yes, and
the initial ground. So we need to make sure that you've got All that into your numbers. The other thing is we're about right now 60%, maybe a little bit more Complete on that funding, so you can kind of get a notion of what's left over the next couple of years.
Okay. And on ViaSat-four, sorry, maybe I missed it in your answer. Is there anything already being spent that is relevant?
We're doing some early initial efforts there. We're still scoping out what that Ultimately, it looks like that there's some real small spending, if not significant there.
We have started work
Great. And maybe a last question. So I think it was yesterday that there was an article Page 10 speed test done by Ookla, which is respectable as far as I can say. And it shows that Some of the speeds on Starlink are reaching 100 megabits, that's why you guys and Hughes And now there are more around 20 megabytes now and maybe a bit further. I realized this is not apples to apples.
You are For capacity, you're trying to manage that as well as you can and there's obviously a different mix in your customer base. But I just was curious to hear from you what you thought about those numbers, if That is in line with what you're expecting and how maybe you can start to think about what you could deliver with ViaSat-three. I guess it's Again, it's always a mix between volume, speed, ARPU.
Yes. So one is, yes, it is a mix and all those things, but the most obvious Ping, on the speed test measurements is that we offer service plans with different speeds. So The vast majority of our customers are on plans with 12 or 25 megabit per second speeds. Well, we have tens of thousands of customers with 50 or 100 megabit speeds and the speeds That we deliver on those plans are above 100 megabits plan, they're above 100 megabits per second. And look, I mean that would be the apples to apples comparison.
And the thing I would emphasize is that, Yes. Even with the number of subscribers that we have and our satellites being effectively full, We do meet the speed that we advertise. So that includes the 50 megabit and 100 megabit size of equipment. So that would be a more relevant comparison of us versus anything. And the same is true If you look at that article, the article that you're referencing, what it does is, it's not just for us, it's For all service providers that provide multiple speeds, they just provide the average across all their different service tiers And compare that to StarLink, which has only one service tier.
So that's really the part that I think people should pay the most attention to.
Yes. Makes sense. Thank you.
Thanks, Stifel. Thank you.
Our next question comes from the line of Simon Flannery with Morgan Stanley. Your line is open.
Great. Thank you very much. I wanted to talk about LEOs a little bit. You talked about the LINQ Dean Leo going up. What is the process for the testing of that and the potentially for a larger order Following that, and then I think in the past you've talked about if there was government funding a domestic LEO And a broadband product might be interesting to you.
We've obviously got the broadband bill or the infrastructure bill working its way through Congress with significant funding for broadband. So I wondered if you had any thoughts on that and how that might apply to ViaSat as well? Thanks.
Okay. So first On the Linksys team, Leo, there is definitely interest And U. S. DoD to extend the range of Link 16, which is it's a line of sight network And it has terrestrial relays, but you still have a fairly limited coverage area of any particular network. The data that is on late 2016 is really, really valuable for a number of applications, including in applications that are Well beyond the range of each network.
So that's what's I mean fundamentally that's what's driving DoD interest in Link 16. There are, I'd say, a few different initiatives, all of which we're involved in to provide Lean So how what the ultimate manifestation of that is, it will depend a little bit on which Organizations end up having the lead on it. Right now, we have an Air Force program. There's a Space Force program as well that we're involved in For Link 16 in Space, there are we believe there's still a bunch of Additional work to be done on networking, ground, terminal interoperability with space, what the functionality of space is, How are you integrated with other data links? So overall, we see it as a really, really interesting and Potentially really big opportunity, but it's a little bit early to be more specific about How programmatically how it will turn out.
Also, I think the other thing that we really like about it is that There's opportunities for us, especially given what's going on now. We work with a lot of the customer organizations that we do work with In order to help shape that program and that's in late 2016, that's really been one of the reasons we've been so successful It is our ability to kind of work with end users and anticipate what their needs are. That's how we develop Most of our Lean 16 product line is through that type of non developmental item and we think there's a really good similar opportunity in space. On the commercial LEO front, we have a filing that we've done for a Ka band Non geosynchronous orbit system, where we propose to lower the altitudes from MEO to LEO In order to deliver latency that's in the sub-one hundred millisecond range. So that we're It's still pending approval from the FCC.
I'd also say, we're doing additional work on LEO. We're doing work on LEO business models. We've done a ton of work on space sustainability, which is really I think it's going to be a very big factor In how the entire LEO market develops, especially given filings for like close to 100,000 new LEOs in the last A few couple of quarters. So I'd say just stay tuned for that. I think we will come up We're going to continue to evolve our plans.
We're also going to work with other NGSO partners To the extent that we can, Leo is an area where to a hard extent, we may rather work with others than just own everything ourselves. That will allow us to deliver the services that we want through these hybrid models, which we Ultimately, it's still the way things are going to turn out.
Okay. Thanks, Mark.
Thanks, Tom.
Thank you. Our next question comes from the line of Mike Crawford with B. Riley Securities.
Thank you. Further toward the proliferation of all of these Sensory satellite constellations going up that
are just
collecting just Ever increasing amounts of data, has there been any more progress on talking to anyone about using ViaSat 3 is sort of like a backhaul network where they could upload the data into up to geo and then down back down to earth get the data into the hands of the people that want it more quickly?
Yes. Yes, absolutely.
And that would require what them pointing just them pointing an antenna to you, that's the main requirement there?
Yes. Think of it as the way things work now primarily, there's really 2 modes. The dominant mode now is that satellites have ground pointing radios that Send the data they collect to earth stations that are distributed around the world and it's pretty much same for government and commercial systems. The one of the main issues is that there are no ground earth stations in sight In a lot of places where we're trying to collect information, especially over oceans and other areas. And so People are interested in getting that data back sooner.
So we're involved in a number of different Ways to do that, one of which is what you just mentioned, which is satellites could have an additional upward pointing radio That relay stuff pretty much immediately upon anywhere in the world they can relay data back If they use a geosynchronous satellite as kind of a relay node. And there are a number of government and some 1,000,000,000 Satellites that do just that already. It's very, very expensive when you use government and civilian satellite, You've got NASA or government satellites to do that. And it can be far, far less expensive with satellite like ViaSat-three. So we're working with both government commercial operators who are interested in doing that.
The other thing that we're doing as well is people are interested in doing sort of a similar thing, relaying among other NGSO satellites. And that's another area that we've been really successful in. So for instance, on the Iridium network, we've built their All their inter satellite links and we have a number of government programs on those inter satellite links as well. So that would allow people To relay control our data information at altitudes lower than geosynchronous. And then the other thing that we're doing, which just ties into the same thing is, especially building A number of really large ground earth stations, which would allow These sensing satellites transmit much higher volumes of data without having to make the satellites bigger and more powerful From a transmission perspective, so that's so basically just think of it as 3 different approaches all aimed at the Same issue, which is how do I get a lot of data down really fast.
And then the other part is how do I do that as quickly as possible From when I collect that data to get it back to the ground.
Okay. Thank you, Mark. And then Final question for me just relates to TPE. So companies have invested 1,000,000,000 of dollars in trying to make Phased array or flat panel antennas that are low cost and easy for consumers to install and get their data or their broadband. Is that still something you envision being able to offer with ViaSat-three?
And if so, how soon? And would that With your own technology or are you looking at others as well?
Okay. So the phased arrays are valuable When you have to constantly repoint and that can be because you could have a fixed satellite and a moving platform. That would mean you have to Constantly report repoint or you can have a fixed user terminal and a moving satellite. That's why you have to have them For or something similar to that for a non geosynchronous constellation. You call that moving platforms And moving terminals or moving satellites and moving terminals.
So we've we're working on all of those modes. We recently did a flight test of a small Phase 3 A antenna on the business jet. And so we think mobility platforms are probably the 1st place that we would apply That type of Phase 3 technology. We also could apply it to ground terminals. One of the other benefits Ground terminals would allow you to quickly hop among multiple different satellites.
So that could be Multiple different fixed satellites or multiple different NGSO satellites. And for the types of hybrid services that we're talking about, Having a phased array antenna even for a fixed terminal is what makes that possible. So we're working on all those. Yes, sure. Certainly, we'll have those out in the ViaSat-three timeframe.
In addition to that,
I mean, one of the things on the Residential such, you can do self install. It doesn't have to be a phased array and other low costings. So we're working on those as well, Mike.
Okay. Thank you, Rick and Mark.
Thanks, Mike.
Thank you. Our next question comes from the line of Kunal Henry with Quanta. Your line is open.
Hi, guys. I had a question about the Viasat's role in the recent $950,000,000 IDIQ contracts, I think there's 27 different companies on that. Can you share what exactly ViaSat's The fold is amongst that group and perhaps of the $950,000,000 do you have a percentage you think is up for ViaSat to claim?
That's our piece. That value isn't distributed among everybody. That's the IDIQ contract for ViaSat. And the task orders will evolve, I mean task orders will evolve from studies that specific Contractual task and that there's a lot of things in there that we could do over the window, but that's not a shared value.
But what we do on that is it is an area that we've done for 30 years, which is Simulations for multiple aircraft. We have been the primary Developer and provider of these stimulators that they use to evaluate aircraft. And it's hard to estimate what the For communications. Yes. Yes, communications, simulators primarily.
Communications and other things that match with communications. Yes. And then we've done that for Like one of the major markets is for all the advanced fighter jets that they all use our simulation equipment. That's what it pertains to.
Certainly, the near term test quarters.
Okay. And then just a clarification from something you said earlier, I wasn't sure if I heard right. Did you say that ViaSat-three will have 3 months of
I said it would have 2 to 3 months. I mean, it could be 4. We're hoping for it
to be sooner. This is
a very, very complicated network. Obviously, it's our first one, and we want to be incredibly thorough in the testing of it. So We will give more updates as we get closer to that, but we'd love for it to be 2. It could be 4.
And then just a question on the real time earth network. You were just talking about various solutions for Ground connectivity, how many of those antennas or gateway stations have you completed at this point? And can you remind us How many you're deploying globally?
We've been working in this space for a long time. So it's a bunch of the news based platforms that Mark was talking about and very, very, very large Antennas in the market right now. We have multiple programs going simultaneously right now.
There's 2 different elements to this. 1 is us providing antennas Two customers that purchased those antennas and use them only for their own networks. So we also have a service where we will either use antennas that we own or that partners own and Sell time on those antennas to multiple systems as a service. So there are others that do a Similar service, but the services can be differentiated in a number of ways by the size of the antennas, by where they're located, what RF band they operate in. So we've been oriented towards our more of the emerging markets, which are higher frequency bands And placing those antennas in places where we think they're well suited to those applications.
But our main Effort right now is not on owning a whole bunch of antennas, but on building a partner network for that. And I'm not going to give an answer right now on the number of antennas. I don't know what it is exactly. It's not enormous, but what matters a lot is the capacity, the placement of those antennas and what we think is The way the market emerges in which antennas and RF bands
will turn out to be the
most important and what we're really oriented Towards where we think the market is going, which is the higher vans and higher speeds.
All right. Thank you.
Thank you. Our next question comes from the line of Ryan Coons with Needham and Company. Your line is open.
Thanks for the question.
When I think about your supply chain and you're seeing much of an impact from the semiconductor shortages, Impacts on your terminals, costs, deliverables, sort of thing? Thanks.
Yes. We really For deliveries to date, we have seen very little impact, but we're starting to see the impact
across the
business, Mainly in longer lead items that we have. So yes, we're going to we will have it. It's not I'd say the good news during the window where it had the biggest impact on everybody, we have Less deliveries in that cycle and pretty good inventory. We actually have pretty good inventory built on the government side. And so we haven't seen much But we have forecasted in our outlook, additional impact for delays.
That's helpful. Thanks very much.
Thank you. Our next question comes from the line of Gil Thorne with Jefferies. Your line is open.
Thank you. One of the my favorite pronunciations of my name,
Ferdie O'Brien.
For some reason, Americans just can't that's like you guys can't get the names. Anyway, I want to come back to the question of Leo. And Leo, this is a mobility advocate rather than the discussion about the program. And this is a question prompted by Two substantive developments in the past few weeks months. One is Starlink talking about the In active discussions with several airlines and predicting that 90% of ISD traffic would be over LEO's within 10 units, Which is a big departure I guess from what anyone else has been saying.
And then obviously you must start with Orchestra and having a multilayered
Okay. Well, it's not super surprising that An operator has only LEO, saying that 90% of the market will go to LEO operators. There are some really difficult challenges with doing mobility with Especially low flying LEO satellites that have very small needs. And we've kind of seen this in other NGSO systems where think of it as, hey, I might have global coverage And global coverage might mean I can be anywhere, but I can't be everywhere. I have Especially if you think about some of the problems that are around hub airports, we have large numbers of airplanes That dispersed in all directions or lots of different directions.
Those are really hard problems for video satellites with very small means. And lastly, we have very, very large numbers of satellites. And that's where I think this whole issue about Space sustainability, how many satellites can be supported and how those should be allocated is going to turn out to be a very big factor in that. What we do think is that a hybrid approach or a multi orbit approach, which you're seeing, I'd say, more operators I kind of come to the conclusion that multi orbit, hybrid makes complete sense. That's one of the things You've been saying that.
I think that's a lot more likely long term solution. And yes, and going to the Inmar Orchestra thing, Could you bake terrestrial into that? It's possible certainly for terrestrial mobile or land mobile or in You have a plan? Maybe you could. I think there's some challenges with that at scale, but it's possible.
What we would say is that having more tools In your toolkit to deliver a comprehensive services, good. And remember those comprehensive services are going to include not just Internet access, but Probably media entertainment, other forms of communications as well. Did I answer your question?
So I just have one thing that we still think the dimension of value that we Have been successful at and that is the right one and that's delivering a
lot of bandwidth. Yes.
In an area where there's high demand and that's the problem. Yes.
Both I mean bandwidth is the dominant value. We think it's the dominant value proposition. The thing we've been the most focused on And I still think we're absolutely on the right track. It is most bandwidth in the right place for the low scale cost.
Remember Gogo was a very low latency network that we underground that we compete against. I mean, it's Lower latency than LEO, and that wasn't the right dimension of value.
So, depending on your balance of probability, do you see yourself allocating capital Into Leo from ABILITY in the medium term? Sounds like no. I mean, this is obviously the Linked 16.
I said, we're interested in NGSO. We're interested in hybrid networks. We have discussions going on with NDSO providers about cooperating, so that's one way That's one way to fulfill it. We've been pretty clear and I I think the idea is to look at research from Cisco or Sandvine or others that the Low latency component of total broadband traffic is not a very big fraction of the total. So we can certainly enter the market using 3rd party networks, whether it makes sense For us to own just to get owner economics or because we can greatly improve the productivity compared to others, Those are things that we're still looking at.
So a lot of them will depend on when somebody can bring these things to Market and scale, and we get firm pricing on it. That will have an influence on Whether or not we invest capital in it.
And our confidence that they're going to be there and for counting on them as part of our network.
Understood. Thank you.
Thanks, Josh.
Thank you. Ladies and gentlemen, we have time for one more caller. And that call is from Louie DiPalmol with William Blair. Your line is open.
Rick, Mark and Sean, good afternoon. Many of the defense tech providers like Booz Allen, Parsons, ManTech and Mercury Systems are seeing Funding and program delays, are you seeing this as well even though your government Division grew nicely during the quarter?
We talked about it last year where we had seen some Impact of both COVID and administration changes in terms of delays, but not really. I mean, I'd say it's not back to normal, but we've seen a lot of Order flow in that business segment.
Sounds good. And for Mark, As it relates to space sustainability, do you think that there is a limit to the number of satellites that can Ultimately go into LEO in order to keep everything sustainable and prevent Collisions and do you expect regulators to eventually like pause or even stop granting licenses because they're Going to be so much traffic up there?
Okay. Yes. So it's a complicated question. The Simple answer to that. Number 1 is, yes.
So the answer is yes, there's a limit to what can go in the Lido. It's a little bit complicated because it's not only the number of satellites. It depends on things like the cross sectional area of those satellites Or what orbits they're in, how those orbits may overlap or intersect with the mass of the satellites are. So I don't want to oversimplify it, but yes, there's limits. The FCC itself, When it comes to the U.
S. Has said like 3 times in proposed rule makings For other proceedings that yes, there's a limit to the number of objects that can be in lit. So I think It's only a question of time before people start calculating what those limits are. I'd also refer you To research that others have published, including there was an NSF study that was done by MITRE that calculated For the number for satellites that are, let's say, have the same characteristics as StarLink In the roughly 600 kilometer orbit, it's like low tens of thousands of satellites before Debris starts growing without bounds and you can't even maintain that many satellites in orbit Because of the provision of profitability and oil equivalent. So it's a real issue.
It's not just That's interesting. I think we've been doing a lot of work to help compile and Sort of correlate other people's inputs as well. That is where things are headed. I think that The main issue and one thing that we're seeing with a lot of international operators, you're certainly seeing with Europe, when the European Union is talking about having a constellation. And in other administrations as well is if there's a bounded number of satellites Or think of satellites with given characteristics, how should that number be allocated among different countries?
And then what tools do countries have to help us assert what their rights are. And That is, I think, a rapidly evolving situation, but I think where it's headed is what you're There will be limits to what can be put in orbit very, very similar to what's been done with orbital spots And Geosynchronous.
The other thing I
would just add, we want to make it really clear, we're not against LEO. We're a full responsible approach to all over the space. So back to underscore what Mark said.
That makes sense. And one last one for Sean, you discussed how You have $600,000,000 in liquidity. Is that 600,000,000 Enough to fully fund the build out of ViaSat-three or do we either need Raise more capital either from the debt markets or as part of the potential divestiture?
Yes. So I think if you look at our performance, our operating performance and in cash generation and what we see is the trajectory of that as well. That plus the liquidity, we're in a really good position to fund out the buyout outright. It's kind of consistent to what we told you guys last It might
take a different form other than just using revolver, but Yes. Let me
make sure our cost of capital makes sense.
Sounds good. Thanks everyone.
Thank you, Evan.
Thank you. Ladies and gentlemen, that concludes our Q and A session. I would now like to turn the call back over to management for closing remarks.
Okay. Thank you, operator. Together with Mark and the rest of our team, thank you for joining us this afternoon. We had a strong quarter To start off the year, our operating momentum is really positive. Hopefully, you heard that we're confident in our outlook, Including achieving both near term financial targets and our longer term financial targets.
We're really excited to bring ViaSat-three's Capabilities to market, our leadership team and our employees are diligently focused on executing to our plan. We want to say thank you to them. They've been working really hard through this pandemic and today. Don't hesitate to contact Peter or the rest of our team, Sean or Paul, if you guys have any other questions on our results or our topics And we look forward to updating you on our continued progress next quarter. So with that, I'll hand it back to the operator.
Thanks.
Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.