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[00:00:06] Welcome to Viasat FY 21 second quarter earnings conference call for today's call is Mark Langberg, executive chairman and mortgage president and CEO of EPS.

[00:00:20] Ok, thanks for joining us today. Mark Paper, executive chairman. And we also have with this president and CEO, John Duffy, our chief investment officer at Texaco, and all of them. So we hope you've had time to review our shareholder letter that we posted on our website that provides information on our second quarter here today, financial performance, as well as a current overview today called primarily going to be questions and answers. So before we start, let's have Robert provided our books and Robert Black, general counsel for our department so that I can provide a safe disclosure. Thanks, Mark.

[00:01:04] As you know, this discussion will contain forward looking statements. This is a reminder that factors can cause actual results to differ materially. Additional information concerning these factors that contained in our SEC filings, including our most recent reports on 10K information. Copies are available from the FTC or from our website.

[00:01:22] Okay, so before we take questions, I do want to point out that today we announced that a request from the president and CEO and Hypercom executive chairman. So that's really the next step in the process we've been working on for a couple of years as part of our long term approach to management succession. I know the CEO title for almost 35 years has really been doing most of the executive management for the last few years, and I'm really happy that he's accepted the CEO position. We've been a close team in Building ViaSat for more than two decades. And so I think this is really, truly going to be a seamless evolution. He's got the confidence of our people, our customers, our board and our investors, and it's a great outcome for the company. Personally, I'm not going anywhere. We've taking on the CEO position. I'm going to be to focus more fully on our technology and business strategies and also in the overall space regulatory environment, which is essentially being figured out on a national and global scale in real time. Now, what I've been doing most of the time for the last couple of years anyway, so congratulations. And now over to you.

[00:02:32] Thanks, Mark. Like to say it's been a great ride, but I really think our best years are still ahead of us. I think we've captured the transition and the shareholders. Let's just say that I'm looking forward to the challenge and I appreciate the confidence of the board and especially Mark. So now for the fun part, we've had a great quarter and continue to bring challenges for all of us, but we've managed to do really well so far, even with the tailwinds from the IFC that were supposed to do without some tailwinds either must be a big driver. This year. We're exceeding expectations across the rest of our business. One and a half billion dollars and no orders for the first half of the year, over two dollars billion in backlog, not included in another nearly three billion dollars. And Yaku awards that still haven't been given details haven't been awarded government services and outstanding shape. Overall, we had a one point seven book. The first half hour fixed broadband business has been a great source of strength for us in the US and now we rolled it out completely across Brazil. Even in the IFC, we continue with our market share. Momentum is exciting. New Windscale, KLM that we just announced. Both the three continues to evolve with some minor central slogans, mainly due to the pandemic, its impact on us and our suppliers. We're ready to hand over the payload to Boeing and are zem zero in on one year before our first launch of the first three satellites. We're looking forward to what we think will be a really good year for growth. So it's up for an exciting twenty twenty to apply to our constellation begins to enter service. For that, let's go on questions.

[00:04:34] Thank you. Presenters at this time, for the purposes of Stotsky question, do we need to press star one on their telephone keypad? We have our first question from Rick Prentiss. Your line is open new markets and great work.

[00:04:53] We're glad you're not going anywhere. Also doing good work with you, Congressman.

[00:04:59] Thanks.

[00:04:59] We'll talk some more high level homes for sale on the afternoon and early season, a lot of movement on the in-flight connectivity landscape out there, Intelsat proposing to buy global Inmarsat with a collaboration with Hughes. Take a second. Just walk us through the business code. It obviously has had it. How do you see the time frame for recovery? How do you see the competitive landscape coming off?

[00:05:29] Well, you know, we're moving from a recovery standpoint. Obviously, the airlines are leading the way. So we're you know, we're talking to each one of our customers and getting their feedback. They're very cooperative and sharing kind of celebrates what they expect rates our aircraft retirements when they plan on, you know, having Max's back in. So kind of following their lead. And, you know, we had a little uptick in the summer and the of a little bit quarter over quarter, we were up a little. And we're seeing a little bit more demand of some of the guys are saying it's going to take, you know, three or four years to fully recover. So the guys are starting to year. So, you know, we've got an outlook. But the thing that's encouraging for us is through this cycle, we've continued to get a bunch of RFP traffic. And so, you know, with airlines that we're not on yet. So the KLM was a win. We actually had, you know, a quarter or so ago, but we couldn't announces we've had more or more and more are adding to the cycle. So we're encouraged. I think people want high quality service. I think I give a lot of a lot of different views from the industry analysts in terms of recovery. And, you know, they're just all over the map. Quite frankly, we have our own outlook. But, Mark, you want to talk about kind of what's going on with the other players in the industry?

[00:07:11] No. You know, I think that our approach, which is vertically integrated and it's based on a lot of usages, is the right model. I think we're still really, really I think we're very well positioned in that. I think there's going to be a business model evolution. One of the things that we did point out in the letters that we're doing more work in with some of our own partners and being able to offer passengers more free services, come up with a way to to make by connectivity a revenue source for the airlines instead of a cost center. And I think that is not of balance that we have available on. The airlines that we work with is is a really a competitive advantage for us to be able to do that. That's our focus in the near term. I think we're more focused on making that and what's going on with competitors.

[00:08:10] And do you expect further consolidation or changes in the industry in the short term or medium term?

[00:08:19] Yeah, I wouldn't be surprised.

[00:08:24] Ok, and the second high level question, we're obviously you probably are getting tons of questions about Elon Musk's SpaceX, Starlink beta test. Can you talk a little bit about how you view the beta test? How competitive is it, what it means to your kind of your game that you're running out there to help us? So shed a little light on your view of the beta test.

[00:09:01] Yes, sir. So one is, you know, we've been expecting them to roll out a statement saying they're going to do it. And, you know, that's pretty much what we thought they would do. It's still a hoot, but we expect that they're going to manage things so that the service is good. I mean, they have a small number of users on a lot of that. So it should be really good right now no matter what. And so that's what we're expecting. But there's also a lot of demand in the market now, already more than we can serve. And what we've seen is every time we've made a meaningful improvement in the speed and bandwidth that we offer, our addressable market is growing. And we can sell more services into areas that we didn't sell before. So ViaSat three is is going to be able to make major improvements in both speed and bandwidth. So we expect the market's going to grow significantly. Obviously, that's what they're intending to do, is offer more stability to the market. We think the market will grow from what it is now and we'll get our fair share of that. I would want to point out that we already have tens of thousands of subscribers that have 50, 100 megabits per second plans and they're pretty happy. We've got room so we can be competitive in the Internet even before ViaSat three to the extent that we choose to. And also, you know, we've been pretty clear that we think that lots of bandwidth for streaming video is going to be a really important factor in a lot of buying decisions. And that's going to be a really rapidly growing reason for growth. And that's how we think we're going to do really well there.

[00:10:45] And how important is latency? Because obviously the lawyers make a point that they have lower latency than the geos. My how important that how important is that in the marketplace?

[00:10:54] As you say, you know what is? We do think latency is important. We don't think it's decisive. I think the thing that that we've seen that's really the most decisive is being able to get a lot of the analysts, especially for video streaming. And that if you can do that. Well, that that's that's that's for sure. So that's why we've been so focused on the on the bandwidth economics and the volume. And so I think we're going to do well there. Now, we've also said that we think that latency is it is it's important. It's just not as precise, but it is important. And so we've been working on multiple ways to be able to deliver a low latency through our system as well. We talked for a while about doing services where we combine terrestrial and satellite. So we've got you know, we've got our own beta test of that in the market. And actually, it's gone. It's gone pretty well. There's definitely technical complications there. But one of the things we found is that when we were we had low latency terrestrial to our satellite service, that people's satisfaction goes up. So that's good. So we do what we can do that we've been doing it with water. So that's generally been DSL. We are expanding to be able to do it with wireless. And I think that will allow us to scale that up. And so I think the point being that not the only way to achieve we see at that scale, but I think that we look at it as. Kind of a sweetener or it can be a tie breaker for sure, but we think speed and volume is really the most important part.

[00:13:09] Great, thanks, guys, and congrats again. OK, thanks.

[00:13:16] We have our next question from Rich Valera. Your line is open.

[00:13:23] Thank you. Let me add my congratulations to Rick and Mark on your new positions and best of luck in the suit. Just continuing on the IFC market. It sounds like you saw some improvement quarter over quarter. I guess big, big in percentage terms, but I'm just in absolute terms, still pretty well off of where you were. Pretty cool. But I wonder if you give us a sense of just where that business stands, the IFC business relative to Preto with levels. And then just give us a sense of congrats on the scale then when. But give us a sense of what the rest of your IFC pipeline opportunity looks like. Is that pretty active right now? Are airlines in survival mode or are they looking at sort of next and in-flight kind of activity at this point.

[00:14:12] Or we're we're about we're still less than half are running less than half of what we were running this coming down for a while. It was down. So we have different types of contracts with different customers. So it was early on, it was down to nine percent, but we're still under half. And we recovered about five percentage points or so in the quarter from where we were in the previous quarter. So EBITDA of what we're seeing is range of airplanes increasing. And so what we're looking for, they start a little bit this clearing some airplanes flying back online. And certainly, you know, Americans said they plan to start bringing some of the Maxus back online, hopefully by the end of the year of of that, that's really what's going to drive growth back into that business. So, you know, one of the things that caused the office so much was with so many thermal deliveries last year and obviously people aren't doing a lot of installation on aircraft right now. So we expect that to start back up again early in the calendar year. So those are the things those are the biggest changes are in terms of backlog. You know, our backlog we have is still there. One of the things is mostly on new aircraft and or newer aircraft and retirements that are occurring over from some of the older aircraft. So everything was static just from a share standpoint. We could pick up, share and point to the RPF is pretty broad. I don't think you're going to get you're not going to get us to talk about which airlines are going to make it and not make it or, you know, where they are. Those discussions are very, very active.

[00:16:15] Thanks, Rick. You guys just had a nice announcement with respect to the roll out service in Brazil. Can you talk about the materiality of of maybe a rural kind of Latin American service in general? I know, you know, the materiality of maybe a rural kind of Latin American service in general. I know you've already had an ongoing kind of in Mexico, Central America for a while. But you talk about in aggregate the the scale of that and when that might be a material driver of revenue in the service business.

[00:16:55] There is some material when you say, I don't know, and I'm sure it's not, we're certainly continued to be dominated by the US presidential business, but it's growing fast, so there's going to be probably a little faster than we would have thought. We pause for a little while down there. Well, we got some of the tools in place for this growing very fast, so. With that, we actually have launched a small launch in Africa. We've got stuff going in Guatemala. We've been in Mexico for a while with this Brazil. You know, pretty quickly, I think we're going to you know, we're thinking about how to start. Showing numbers that include the international adds to our overall. Data, but we're not quite ready to do that, but we'll be ready pretty soon. We've announced that the new program, which is a government program and what we've got some of those members of a few quarters ago of the residential process, we just said we just finished the Countrywide launch. So we're quite ready to throw throwing those numbers out there again. Yeah. And I think what thing to keep in mind, right. As far as Latin America really starts to fail and grow by about three. But that additional capacity and reach.

[00:18:28] Got it, that's helpful. Just one more, if I could, on the government business. Fantastic bookings there for for the second quarter in a row. It sounds like you're pretty confident of seeing strong growth in the second half. Talk about what programs you think could really see a ramp in the second half and into the next fiscal year on the government side.

[00:18:53] The government business is in a mix of kind of have been cut off for quite a while. One area of the Tampa Bay Times area, one area is the information, insurance and cyber security area, and the other is the satellite part. And I would say we're seeing good opportunities in all three of those areas. So it will be very, very strong words for the guys. These exercises, the satellite services business and the cyber and information insurance business is also doing really well. And one of the things that I say is happening more and more is that we're seeing the integration of cyber with satellites space. That is what people want, security and monitoring services for those connectivity functions in general. Those are the main areas that cover what you're looking for, hoping for some something else that that's helpful.

[00:20:08] Thanks. Thanks for taking the questions, gentlemen.

[00:20:15] We have our next question from Canada. Your line is open.

[00:20:21] Hi, Mike. Congrats again on the new translation and quota. I have three questions and that's what I just did. And one at a time. The first is that biocide was listed as one of the eligible voters. Are they having completed an application to bid on C-SPAN? And the FCC is coming December 8th auction and curious why they chose to complete the application, saying how you do not operate the satellite currently. What is their motivation, their optionality? Ok, we've got our next question going back to latency, talking about latency being beneficial, but not in critical or the end all. Be all. OK, here's a couple of quarters ago you talked about perspective, rural population that I thought would be interested in pursuing possibility for Aadhar. Can you give an update on the status of that? Is that still pursuing it? And what are the odds that you do go forward with the bias that open up the broadband system so we can't talk about?

[00:21:43] So no comments regarding that. Now, regarding RVO. Yeah, well, you know, we're definitely interested in the area and it's hard to find a point. But I would say speed and bandwidth are one in two and price people and prices are one, two and three big agencies, probably four. And what he'd like is to be able to deal with all of them. And so, you know what I think we're we're looking at is what are the best ways to do that? And Leo is one of them. Now, on our overall priority list, I would say it's lower than than the speed and bandwidth. There are things you know, there are things that we can do for estriol. So those are you know, they're economical. They kind of check the box and they and some of our customers definitely appreciate you take there's no benefit downloading latency. Right. It's just there's definitely a benefit to having higher speed and more volume. That's that's what we focus on. So, Leo, so we proposed a system that is quite different from the others. It's much higher capacity. Percelay fewer satellites needed to get a lot of capacity. So we think that is important in itself because of things, because people are becoming more aware of what the issues are with proliferating vehicles and space safety and spectrum sharing. So we think what is we want to show that that can be done. And the other is, you know, I say we're working on it and we'll provide more updates when when it's appropriate that we're still.

[00:23:44] Ok, go back to the table. He said optionality to give any more color on what exactly that means. No, that's OK. I'll try and my answer is going back to actually the satellite conference where the satellites, only one viasat was announced, as was a catalyst for the power on road and cameras and terminals to get an update on the biceps, work on those. Do you hope to have an antenna and a terminal for there in the near term? And if so, what would the applications do for it? So surprised.

[00:24:27] Yes. OK, so yes, we are definitely interested in factories. We've been working on it for quite a while. And, you know, we we only wanted to do it if we had something that was significantly different from the other efforts that were out there. And and we do. And it's worked out pretty well. I think that is good. High performance and very attractive price points. So we are working with. Some, you know, companies that would be buyers of energy, you know, those would be the energy systems, but we're also working with prospective customers of our own. And, you know, when you're working with geosynchronous satellites, the main application for for a phase array is mobility applications. So that's that's the area that we're kind of more focused on. And it has had multiple benefits. One is that one of the main benefits is that you can use a phased array with multiple satellites at once if you build it well enough. So the one thing that we've done a bunch of work on with DOD is being able to build a network management system that has around all the available satellites, whether commercial or government. So that's a really good example of a Phase three application. There are similar things in being able to do hybrid between. Yes, those interviews with other people's access. So that's another one of the applications that we're working on. We also think there's a really, really attractive and mobile market with that space race open if there are low cost. And going back to that issue, if you've got a lot of bandwidth, then you can put it in small, undersized antennas that are really attractive and mobile applications. So those are some of the things that we're looking to do at the.

[00:26:37] Ok, I got to roll that out as oil prices.

[00:26:43] I do have a plan to roll it out. Yes, yes, I mean, we're working on it. Yeah, absolutely. We're working on, you know, the the main market for us is is to expand the addressable market for our own services, said we will work with other guys and do it. But we're we're not hawking our antenna out there, as you know, with a schedule and a price on it. That's not the main purpose for what we're doing. Yes, that's are we are we are working with some prospective buyers and we're interested in selling antennas. But the main reason we've been working on this is to get our services correct.

[00:27:26] Thank you. Thank you. Kim.

[00:27:33] And he will take one more call from Mike Crawford B. Riley insecurities. Elaine, thank you.

[00:27:42] As you've seen more of these little cancelations, like certainly any of your opinions been refined as to what type of bandwidth and capacity they might be able to get out of them, such as once a startling say gets more congested over specific service area, what might be required to to deliver residential broadband at 100 megabits per second speeds to not just one or two users with a with a tripod, but to tens of thousands of users?

[00:28:20] Well, I don't personally I don't think anything's really, really surprising has happened with so with the legal systems, I mean, the they have to go through all the same calculations that we do, which is the first outside. How much do you need to give per person? I want to have a lot of people with a small amount of a small amount of people. A lot of them. I mean, it's all the same. The thing the thing that I think is becoming more evident is the difficulty of having a strategy of scaling by having enormous numbers of satellites. And there's you know, there's just more and more concern about orbital debris and collision risk problem. And it's you know, the issue is becoming more a sharper point being put on it, because if you look at what's happened as a result of the collisions in low earth orbit already, that the the debris from those collisions is, you know, collides with itself and it creates more debris. And so the European Space Agency put out a really thorough report. And I think at the end of September, it has a lot of detail on the orbital debris issue. The you know, the FCC has had a focus on it. There was a proposed rule making that they deferred back in March and April. And at that time, we were one of the maybe the only one of the very few that supported the eskies position. But in comments that have been filed now, we've seen a lot more entities come in and say, well, this is something that really needs to be addressed. And I think that's an issue about how many orbital trajectories are really available. There's already contention for orbital trajectories and the risks of satellites that are sort of fell in orbit take a long time to deal with and contributes to the levels of risk. I think that is going to be one of the biggest issues in scaling the obvious. If it's not in making them work at all with a number of issues is how scalable. And I think that's becoming more clear that that's just going to be a really challenging issue. That's the main thing.

[00:31:05] Ok, thank you so much with your this this week 16 satellite, your lower satellite they are building that extends 16 to the online site applications, which has the opportunity to open up a lot of your devices to be used and more broader fashion then and then already today to get to the tactical edge. Is this a business where you might envision ViaSat becoming a builder of many Liow satellites or these satellites that could further extend the link 16 up to ViaSat three as well? Or what can you comment regarding 16 in space?

[00:31:51] Ok, so the notion of extending the range of A16 through space is really pretty interesting. And you can see there's there are government buildings, government programs to do the same thing. We want a program with you, of course, to build our prototype satellite for it. The advantage is that there are, you know, many thousands and going and going in the tens of thousands and potentially hundreds of thousands of devices that are being 16 capable. So if you can extend the range of communication, I think there's pretty good consensus. That's a valuable thing both for the for the devices that are on the ground and in the air and sea and also as a space business. So what we're really interested in it as an enabler for our lease 16 business, we think that that makes that business have a much bigger addressable market more valuable. So we would like it to exist. And I think, you know, the work that we've been doing in payloads and delivering a satellite has certainly helped to do that. The technical problems. Are more complex than just putting a ring 16 transceiver in space. So we're working on those as well, again, as an enabler that we're really interested. Yes, you know, if we could make a fleet of satellites that show, of course, we're really interested in that. And we have other applications that we've been working with government customers that that do involve involve either sensing or communications satellites in space. And so I think you're going to see us do more of that, but with a real focus on the payload and mission aspects of it and especially the networking parts of those payloads.

[00:33:56] Ok, thank you. And then finally, real quick, ViaSat three, Omiya. Is that something you expect to launch in the summer of 22?

[00:34:06] Yes, six months behind the Americas are so good. American satellite has basically been the trailblazer for so many surface issues. There have been on that one. But the one, you know, as a result, it's pretty solidly behind it. So that looks good.

[00:34:30] Excellent. Thank you. Thanks, Mike.

[00:34:35] Ok, that looks like that's all the questions we have.

[00:34:39] So thank you, guys. We'll see you next quarter.

[00:34:49] Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.