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 shareholder letter earlier today before the market opened. And we hope you guys have had time to review it. Today's call, we have just a brief opening remark, and then we'll go into Q&A. But first, Robert, can you provide the 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-K and Form 10-Q. Copies are available from the SEC or from our website. With that said, back to you, Rick.

Okay. Thanks, Rob. In addition to Robert joining me on the call will be Mark Dankberg, our Executive Chairman; our CFO, Shawn Duffy; Paul Froelich, from Corporate Development; and Peter Lopez from Investor Relations. Just a couple of comments before we jump into the Q&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 million, and adjusted EBITDA grew at more than twice that rate, up 52%. Part of that is reflecting last year; the quarter was one of the hardest hit by COVID. Our 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 two acquisitions we made, RigNet and EBI, that closed early in the quarter. Government Systems had good revenue and EBITDA performance, up 4% and 6% year-over-year, with a 22% year-over-year increase in service revenue as the main driver, while tactical data links, cybersecurity, and mobile product lines also contributed. We expect continued growth in this segment in addition to another IDIQ, $120 million of backlog with that IDIQ win in the period. In other words, the $920 million represents kind of unawarded potential value of that one. And you have those IDIQs up, it's about $4 billion of unawarded IDIQ values that isn't reflected in our backlog. Commercial Networks have great performance with strong revenue growth and a large reduction in our recorded loss in that segment. A lot of this was from the ramp-up of IFC terminal shipments that campus restarted, and we had another strong contribution from our ground to 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 expanding our global operational and customer-facing capabilities supported by the three global constellations as we try to launch services in those geographies. We are making progress regarding the ViaSat-3 constellation; the payload of our first satellite to ViaSat-3 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 to continue to accelerate over the next few quarters. By this weekend, we'll have about 80 aircraft installed, and that's accelerating. Now these achievements reflect our continued focus on execution ahead of ViaSat-3 as we expand our global footprint into new geographic and vertical markets. Our recent results, I think, are key proof points; we remain confident in our ability to deliver on our 5-year financial targets that we communicated last year. To that end, as you see in our letter, we also introduced revenue and adjusted EBITDA guidance this time to give you a picture of the near-term ramp towards those 5-year goals that we talked about last year. This guidance shows that we expect solid growth over the next two years across all of our business as we begin to bring the ViaSat-3 network online. So with that, operator, we'll go to questions.

Our first question comes from Philip Cusick with JPMorgan.

This is Sebastiano on for Phil. The fixed broadband versus mobility and other fixed broadband breakout 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 were stronger than we had anticipated. I just wanted 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?

It's Mark. The dominant issue for us over the next few quarters in U.S. broadband is just going to be supply; we're pretty much sold out on the timelines that we have over the U.S. So the main trend we're seeing is high demand for more bandwidth, and a lot of that is being absorbed by customers that are upgrading to provide bandwidth. So we're seeing probably a few thousand, in the order of a few thousand fewer subscribers, but the subscribers 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 of ViaSat-3 – the return of teleconnectivity. So that is causing us to basically allocate our bandwidth in the way that paves 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 those are the kind of factors that are in play. In terms of overall demand, overall demand is really hot. And yes, of course, we can – we have tools where we can see that they start on just serving people in the market, but the overall demand is greater than at their so far, not really material.

Thank you to the last call, we indicated that we had expected a decline in subscribers in the U.S. market until list comes online. But in general, we think the revenue will be about flat year-over-year in that residential broadband segment.

That's helpful. I haven't seen any updates since the potential divestiture of part of the government business related to Link 16. Can you provide any insights on that? How should we be approaching this? Clearly, the trends in the Link 16 business and some of your other segments are still strong. Is there anything we should consider regarding the potential monetization of part of your government business?

No. If there was, we wouldn't say anything about it here. But we like – I mean, 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 where 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 the leasing 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 Shawn. 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 '22 would be great.

Yes, no problem. So I think what we talked about last quarter was on average kind of targeting that $300 million per quarter kind of mark. 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.

Our next question comes from the line of Rick Prentiss with Raymond James. Your line is open.

A couple of questions. Again, I 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 Shawn answer that.

That's correct.

When we consider the near-term revenue guidance, we anticipate an average annual revenue growth of around 20% and average annual EBITDA growth in the mid-teens. This fiscal year, we will benefit from the two acquisitions for 11 months. How should we assess the growth excluding M&A during that time? You mentioned the significant impact of M&A in the quarter.

Yes. So I think when we gave you that guidance, we kind of looked at the all in. But if you recall, last quarter, we talked about the kind of additives that we expected this year for RigNet, EBI. That was notionally about $40 million on the EBITDA line.

And it looks like RigNet does split between satellite services and product or our 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 the – I'm sorry, 90% 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 and what you might add to what you're telling so that you might take away from what you're telling us?

Sure. Yes. So 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 these different markets. And we've got to figure out how to allocate that across them. What we've – 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 really 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 say, look, here's what our focus is as 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 will get, the total bandwidth we will have, and the geographic flexibility that we will have at ViaSat 3. We want that to increase our revenue and earnings diversity, resilience, and robustness. So 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 what our growth will be. So we're getting to that. 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, which is 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, capture them holistically. And we'll probably introduce some other metrics over the next year, certainly, by the time we have ViaSat-3 in service.

And the one thing I don't hear a lot about probably because it's such a low goal is 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've got way more demand than supply right now?

Yes. So a lot of people find IoT businesses have low bandwidth things. There actually are some really interesting IoT businesses that we're working on, especially with the addition of our broadband applications. Those are – they're – basically, think of them as the recurring revenue is pretty high relative to the acquisition cost of the terminals. So that type of IoT stuff is really interesting to us. And there are a lot of those, you might imagine are things that are, say, video-intensive. Those types of IoT applications are bandwidth-intensive. So are things in monitoring certain industrial processes, drilling, mining, and so on. So those are absolutely in the near-term opportunity set for us. And also think of things that 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.

Our next question comes from the line of Mathieu Robilliard with Barclays. Your line is open.

I had a question first with regards to the guidance. Obviously, it's great that you give more clarity, but I guess we always want a bit more. 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? So 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 timeframe of X and then you had a month or two to that for launch preparation and then a couple three months for testing once it gets on orbit. But right now, we don't have a real reason to change the schedule we've given, but we might – something could happen in the interim.

Okay. So that's still Q1 2022 calendar kind of...

Q1, Q2 timeframe and that, I'd say, just given the schedule things, more likely Q2.

Yes, I had a second question about CapEx. And obviously, you've given indications over the years. And because phasing can be different from what we assume at some point in time. It's always difficult to hit its side on our side. But I just wanted to confirm that the kind of numbers you have given initially about the cost of the constellation, we're basically on track. And what I have noted down is like $550 million for ViaSat-3 Sunlite, plus maybe $150 million for ground. So that was the plan for ViaSat-3. I just want to confirm that still more or less what you guys had in mind? And whether or not you're already spending something on ViaSat-4, that is something that we should wait a little bit to start to incorporate in our estimates.

Yes. So I think there are a couple of things. As we've talked about, the full cost is for the full constellation, and the ranges there that have been about say, $2.3 billion for all 3 satellites. And so we're continuing to make progress. I'd say coming out of this.

That has launched, and I was just in ground and the satellite.

Yes. On the initial ground. So we need to make sure that you 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 to go over the next couple of years.

And on ViaSat-4, 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 looks like. But there is some real small spending. It's not significant.

We have started work on that, but it’s ramping up.

I have a final question. Recently, an article by Ookla reported on speed tests, and it seems that some Starlink speeds are reaching 100 megabits, while others are around 20 megabits. I understand this isn't a direct comparison since you're operating at full capacity and managing it as best as you can, along with a diverse customer base. I'm curious about your thoughts on these numbers and whether they align with your expectations. Additionally, how might we begin to consider what ViaSat-3 could deliver? It seems there's always a balance between volume, speed, and average revenue per user.

Yes. So $ is, yes, it is all these things, but the most obvious thing 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 speed. Though we have tens of thousands of customers with 50 or 100 megabit speeds. The speed that we deliver on those plans are above 100 megabits per second. And 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 1,500 megabit plan. So that would be a more relevant comparison of us versus anything. And the same is true; if you look at that 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 1 service tier. So that's really the part that I think people should pay the most attention to.

Our next question comes from the line of Simon Flannery with Morgan Stanley. Your line is open.

I wanted to talk about less a little bit. You talked about the Link-16 LEO going up. What is the process for the testing of that and 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 kind of 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?

Okay. So first, on the Link 16 LEO, there is definitely interest in U.S. DoD to extend the range of Link 16, which is 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 Link 16 is really, really valuable for a number of applications, including the 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 Link 16 in space. So how – what the ultimate anticipation of that is will depend a little bit on which organizations end up having the lead. Right now, we have an Air Force program; there's a 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, and what the functionality of the space it is, how to integrate with other data links. So overall, we see it as a really interesting and potentially a 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 Link 16, that's really been one of the reasons we've been so successful is our ability to work with end users and anticipate what their needs are. That's how we develop most of our Link 16 product line is through that type of nondevelopmental item. 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, nongeosynchronous orbit system, where we've proposed to lower the altitude from MEO to LEO in order to deliver latency that's in the sub-100 millisecond range. So that, we're still – it's still pending approval from the FCC. I don't say we're doing additional work on LEO. We're doing work on the LEO business models. We've done a ton of work on space sustainability, which is really, I think, is going to be a very big factor in how the entire LEO market develops, especially given filings for close to 100,000 new LEOs in the last couple of quarters. So I'd say just stay tuned for that. I think we'll come up – we're going to continue to evolve our plans. We also want to work with other NGSO partners to the extent that we can, that LEO is an area where, to our extent, we may rather work with others and just own everything ourselves. But that would allow us to deliver the services that we want through these hybrid models, which we think ultimately is still the way things are going to turn out.

Next question comes from the line of Mike Crawford with B. Riley Securities. Your line is open.

Further to the proliferation of all of these sensory satellite constellations going up that are just collecting ever-increasing amounts of data. Has there been any more progress on talking to anyone about using ViaSat-3 as sort of like a backhaul network where they could upload the data up to geo and then down back down to earth to get the data in 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 two 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 the same for government and commercial systems. One of the main issues is that there are no ground 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 that if they use a geosynchronous satellite as kind of a relay node. A number of governments and some billion satellites do just that already. It's very, very expensive when you use the government and like NASA or government satellites to do that. It can be far less expensive with satellites like ViaSat-3. So we're working with both government and commercial operators who are interested in doing that. There's – the other thing that we're doing as well is people are 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 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 or data information as to lower than geosynchronous. And then the other part is, especially building a number of really large ground earth stations, which would allow these sensing satellites to 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, 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 I do that as quickly as possible, from when I collect that data to get it back to the ground.

And then the final question for me just relates to CPE. So companies have invested billions 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-3? And if so, how soon? And would that just be with your own technology? Or are you looking at others as well?

Okay. So the rays are valuable when you have to constantly repoint. And that can be because you could have a fixed satellite and a moving platform, now it means you have to constantly 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. And you've got a lot of moving platforms at and moving terminals or satellites, and we're working on all of those modes. We recently did a flight test of a small phase array antenna on a business jet. We think mobility platforms are probably the first place that we would apply that type of phase array technology. We could also apply it to ground terminals. One of the other benefits of inert 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. For the type of hybrid services that we're talking about, having a phase 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-3 timeframe.

In addition to that, I mean, one of the things on the presidential stuff, you can do self-install; it doesn't have to be phased array and other low-cost things we're working on as well.

Our next question comes from the line of Caleb Henry with Quilty. Your line is open.

I had a question about the ViaSat-4 and the recent $950 million IDIQ contracts. I think there's 27 different companies on that. Can you share what exactly ViaSat's hold is amongst that group? And perhaps of the $950 million, do you have a percentage you think up for ViaSat to claim?

That value is not distributed equally among all parties. This pertains to the IDIQ contract for ViaSat. The task orders will transition from studies to specific contractual responsibilities, and there are many opportunities we can pursue during this timeframe. However, this is not shared value. Our experience in this area spans 30 years, focusing on simulations for various aircraft. We have been the leading developer and provider of simulators used to assess aircraft. It’s challenging to estimate the extent of our contribution, but we primarily provide communication simulators and others within the community. One of our significant markets includes advanced fighter jets that utilize our simulation equipment.

And then just a clarification from something you had said earlier, I wasn't heard right. Did you say that ViaSat-3 will have 3 months of testing once it's launched?

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 large antennas in the market right now. We have multiple programs going simultaneously right now.

There's two different elements to this. One is earth-providing antennas; two, customers that purchase 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 multiple systems as a service. There are others that provide a similar service, but the services can be differentiated in a number of ways by the size of antennas, by where they're located, and what RF band they operate in. Two, we've been oriented towards or more of the emerging markets, which are the higher frequency bands and placing those antennas in places where we think are 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 because I don't know what it is exactly. It's not enormous, but what matters a lot is capacity, the placement of those antennas, and what we think is the way the market emerges in which antennas and RF bands will have to be the most important. What we're really worried about is towards where we think the market is going, which is the higher bands and higher speeds.

Our next question comes from the line of Ryan Koontz with Needham & Company. Your line is open.

I want to ask about your supply chain and whether you're seeing much of an impact from the semiconductor shortage impacts on your terminals, costs, deliverables, sort of thing.

Yes. For deliveries to date, we have seen very little impact, but we are starting to notice effects across the business, particularly with longer lead items. We will face some challenges, but the positive aspect during the period when the impact was most significant is that we had fewer deliveries in that cycle and maintained a solid inventory. We have a good amount of inventory built on the government side. Therefore, we haven't encountered major issues so far, but we do anticipate additional impacts from delays in our outlook.

Our next question comes from the line of Gil Thorne with Jefferies. Your line is open.

Anyway, I want to come back to the question of LEO and LEO's mobility application rather than discussing the program. And this is a question in the past few weeks and months. One is installing in active discussions with several airlines and predicting that 90% of ISD traffic will be over LEO within 10 years, which is a big departure, I think, from what anyone else has been saying. Then obviously, you lost that with and having a multilayered network with different capability. So it would just be interesting to hear high-level comments on what you think about Internet business?

Okay. Well, it's not super surprising that a number that has only I would say that of the market will go to LEO operators. There are some really difficult challenges with doing mobility with especially low LEO satellites that have very small and we've kind of seen this in other NGSO systems, where think of it as I might have global coverage, and global coverage might mean I can be anywhere, but I can't be everywhere. I have especially when you think about some of the problems that are around how the airports, we have large numbers of airplanes that disperse in all directions or lots of different directions. Those are really hard problems for satellites with very small beams. Unless you have very, very large numbers of satellites. That's where I think this whole issue with space sustainability – how many satellites can be supported and how those should be allocated, it's 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 come to the conclusion that multi-orbit hybrid makes complete sense as One, we can say that I think that's a lot more likely long-term solution. And yes, in going to the Inmarsat could you make terrestrial into that? It's possible, certainly for mobile or land mobile or in view of land. Maybe you could. I think there are some challenges with that scale, but it's possible. What we would say is that having more tools in your toolkit to deliver a comprehensive service is good. And remember, those comprehensive services are going to include not just Internet access, but other probably media entertainment, and other forms of communications as well. Does that answer your question?

So I'd just add one thing. We still think the dimension of value that we have been successful at and that is delivering a lot of and in an area where there's high demand, that's the problem.

Yes. I mean, bandwidth is a dominant value in there's a dominant value proposition. The thing we've been the most focused on absolutely on the right track is most bandwidth in the right place for the lowest capital cost.

Remember, Gogo was a very low-latency network, and the underground that we compete against is lower latency than LEO, and that wasn't the right value.

In your probability, do you see yourself allocating capital into LEO from mobility in the medium term? It sounds like no. I mean, that's Link 16.

I said we're interested in NGSO. We're interested in hybrid networks. We have discussions going on with NGSO providers about cooperating. So that's one way it's one way to fulfill it. We've been pretty clear, and I think it is look at research from Cisco or others that the low latency component of total broadband traffic is not a very big traction of the total. So we can certainly enter the market using third-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. But lot of it will depend on when somebody can bring these things to market at scale and we get firm pricing on them, that will have an influence on whether or not we invest capital in it.

And our confidence that they're going to be there as we're counting on for the most part of our network.

Ladies and gentlemen, we have time for one more caller, and that call is from Louie DiPalma with William Blair. Your line is open.

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?

Yes. So it's a complicated question; the simple answer is our number one is yes. So the answer is yes, there's a limit to what going LEO. It's a little bit complicated because it's not only the number of – 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. But yes, there's limits. The FCC itself, when it comes to the U.S., has said, well, three times in proposed rule makings or other proceedings that yes, there's a limit to the number of objects that can be in LEO. I think it's only a question of time for people to start calculating what those limits are. I'd also refer you to research that others have published, including there's an NSS study that was done that calculated for the number – for satellites that are, let's say, have the same characteristics in the roughly 600-kilometer of 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 collision – so it's a real issue. It's not just us that are saying. I think we've been doing a lot of work to help compile and sort of correlate other people's inputs as well. But that is where things are headed. I think the main issue on the things that we're seeing with a lot of international operators, you're certainly seeing with Europe and 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 users what they're rights are? And that is, I think, a rapidly evolving situation, but I think we're headed on what you're saying, which is that there will be limits to what can be put in LEO. It's very, very similar to what's been done with orbital and geosynchronous.

The other thing I would just add, we want to make it really clear. We're not against. We're for responsible approach to all business in space. So back to underscore what Mark said.

And one last one. For Sean, you discussed how you have $600 million in liquidity; is that $600 million enough to fully fund the build-out of ViaSat-3? Or do you either need to raise more capital either from the debt market or as part of a potential divestiture?

Yes. So I think if you look at our performance, our operating performance and the 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 up kind of consistent to what we told you guys last quarter.

It might take a different form other than just using the revolver, but our cost of capital...

Ladies and gentlemen, that concludes our Q&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, and 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-3 capabilities to market. Our leadership team and our employees are diligently focused on executing 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, Shawn or if you guys have any other questions on our results or our topics today, and we look forward to updating you on our continued progress next quarter. So with that, I hand it back to the operator.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.