Viasat Inc (VSAT) 2023 Q1 法說會逐字稿

Welcome to Viasat's Fiscal Year 2023 First Quarter Earnings Conference Call. Your host for today's call is Mark Dankberg, Chairman and CEO.

You may proceed, Mr. Dankberg.

Okay, thanks. Thanks for joining us today.

We released our shareholder letter shortly after the market closed today, and it's available on our website. We will be referring to it on the call.

Joining me on the call today are Rick Baldridge, who's our Vice Chairman now; Kevin Harkenrider, our Chief Operating Officer; Shawn Duffy, our Chief Financial Officer; Robert Blair, our General Counsel; Paul Froelich, corporate development; and Peter Lopez in investor relations.

So I'll have Robert provide our safe harbor, first.

Thanks, Mark.

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

Thank you, Mark.

Okay, thanks.

Our results for the first quarter were consistent with the outlook that we described in our fiscal year '22 fourth quarter year-end call in May. Several factors, including seasonality, delays in certifying some of the new information security products and some transient supply chain issues, affected our sequential top line, but an improved revenue mix across our service networks and lower R&D spend in the quarter heavily offset the lower revenue as well as our growing ViaSat-3 ground infrastructure operating expenses that are in preparation for this fall's launch, so collectively resulting in only a slight sequential decline in adjusted EBITDA. It's worth noting that consolidated service revenue and Satellite Services segment revenue both achieved new records in the quarter, partially offset by the impact of product revenue from some of the factors I just described.

We expect our first quarter EBITDA to be the low point of the fiscal year, with good sequential growth from here throughout fiscal year '23 driven largely by scheduled in-flight connectivity installations and activations, significant government backlog and strong Government Systems orders in the first quarter and also so far in the second quarter.

We're expecting that we'll grow our fleet of active in-flight aircraft by about 500 over the remainder of this fiscal year on both new and retrofit aircraft for both new and existing customers. ViaSat-3 program is making good progress as the first satellite enters final assembly, [ending] mechanical, environmental testing. And the second payload is now with Boeing for spacecraft integration. Launch and in-service schedule targets for the first flight have been holding from last quarter.

We also wanted to add a little color on the point in the letter regarding the $62 million payment we collected just after the close of the first quarter from Acacia Communications. The payment is for Acacia's use of our intellectual property and it includes contractual and statutory interests. We previously won a jury verdict ordering Acacia to pay for its use of our technology and had subsequently obtained verdict [insurance] at an economical premium so that we can be certain of the payments. And that was prior to ultimately also winning an appellate court decision that upheld that verdict. While we didn't expect to receive the payment quite this soon, it was factored into our outlook for the year. In addition, the funds will help offset the pre-launch year-over-year ground infrastructure expenses that lead up to the ViaSat-3 launch and support additional discretionary investments in the significant growth opportunities we're targeting in both the fixed and mobile business areas.

So with that as a little bit of background, we'll open it up for questions.

(Operator Instructions) We will now take the first question from the line of Landon Park with Morgan Stanley.

I'm wondering if we can start on the government side of the business. There's obviously been some press releases about -- or sorry, not press releases -- news reports about potential strategic [drop-ins] for part of that business. I'm just wondering if you can update us on your views there in terms of willingness to part with portions of that business and maybe also just provide some disclosure around what is the right way [to think about the] size of the major pieces of that business and if there's any margin differentials within the different parts of that business. So I'll start with that, and then I just have one follow-up.

Okay, okay. So first, start with we don't comment on speculation or rumors about what we may or may not do around the business. I can give you the answers to the other parts of your question that are around what the makeup of the business is and the relative size. There's roughly kind of 3 main components to it. One is tactical data links. That's primarily business around what's called Link-16. So that's been a longtime and steadily growing part of the business. Think of it as in the range of maybe 1/3 of that business of the total government business. There's another piece [to that], which is information security-based, cybersecurity-based. That's a little less than 1/3 of the business. And then there is 1 more piece, which is satellite oriented, and that includes both technology products that we sell and Satellite Services. The kind of the fastest-growing part of the business has been the Satellite Services business that have the most synergy with the rest of our satellite services business. And that kind of describes the (inaudible).

Are there any margin differentials between the different portions of the business that you would highlight?

In general, the services businesses tend to have the highest margins. The -- but the businesses as a whole, it's not enormously disparate in terms of the margin characteristics of those businesses.

Okay. And I understand that you don't want to comment on press reports, but maybe can you just refresh us on your strategic view in terms of how you think about potential optionality for that business and your willingness to surface value if you don't feel like -- I don't know if you think you're getting full credit for the value of that business today, but how are you thinking about that?

Well, the main way we tend to think about all of our businesses is really in the way that they provide synergy with each other. We don't really like having just a collection of disparate businesses, and so far, that's paid off well for us. Clearly, of the defense business, as the one that's probably got the greatest amount of synergy with the overall direction of the company, it is the satellite part and the satellite services part, but the main thing in the -- I think that we've done well in order to grow is that we -- as we have over a long period of time is we've been pretty good at being able to determine the relative growth opportunities in our different areas and then put those emphasis on those with the greatest amount of growth. And that's -- I think, if you want to think about how we think strategically and how that drives the tactics, that's probably the underlying -- the most fundamental underlying factor in the way we deal with our businesses.

And how would you say that the encryption portion of the business figures into the long-term strategic view that you have for the company as a whole?

Well, just on the encryption part, what we've tended to think about is encryption as an overall component of cybersecurity. And there's a lot evolving in the cybersecurity space, in the cybersecurity segment. And what we believe is there is going to be more and more spillover on the cybersecurity side into commercial markets. And so that's an example of one of the areas where we're looking at synergies. There's -- I guess the way I'd put it is we wouldn't have the collection of businesses that we do if we didn't see synergy opportunities across them. The only thing I would say is that the degree of significance may vary over time and with circumstances, and it -- we will tend to respond to that. And sometimes, it's not so much that there's less opportunity in a given area. Sometimes, there's just way more opportunity in other areas. I think those are the things that we've done a good job of managing and that's what we're constantly trying to assess, I would say.

Okay, that is all very helpful, Mark. And just one last one for me, just switching gears to Inmarsat: I don't -- I might have missed it in the release, but can you give us your latest time line in terms of closing expectations and just maybe how you're thinking about the EU review that was recently announced, along with the other CMA and DOJ reviews that are ongoing?

Well, so I think we've made a pretty steady progress in achieving the milestones that [we have for us] based on the actions and activities that we need to do. We're entering into a period where we need some responses from the government, [that they] need to draw some conclusions or inferences from that. We have a little bit less control over that, but overall our target is still -- I mean we haven't learned anything that would say that we should deviate from the target that we had. Basically we still have to wait. We'll get more information over the next few months and so we're going to have to factor that in, but right now we're still aiming kind of [where we were]. Probably we'll -- I think we're closing in on 9 months, so it's probably going to be more biased towards the back end with that than it would be towards the front end.

The prior, I guess, idea was to close by the end of the calendar year. Is that still within the realm of possibilities?

That's a way to put it.

It's within the realm of...

Yes, it's within the realm of possibility. We -- it's hard for us to anticipate, especially on the regulatory side, how the responses will come back from the agencies given the information that we provided. So we will get a lot more information over the next 2 or 3 months, and it's possible that we can still close by the end of the year. It's possible that it would extend out to the 18 months. Or it's conceivable to go beyond. We -- just we will learn a lot more over the next few weeks, to a month or 2.

And the EU review, was that expected and anticipated? Or was there any surprise [in that]...

It's, yes, it was we expected it, yes. It was expected because, most of the activity that we have in these sectors, it covers both the EU and the U.K. So that's not surprising.

Your next question comes from the line of Philip Cusick with JPMorgan Chase.

Phil, you're on mute, if you're trying to talk. Maybe we should take a question from somebody else and come back to Phil.

The next question comes from Chris Quilty with Quilty Analytics.

Mark, I wanted to follow up on the I think you said you expect to add about 500 aircraft into the -- or 500 incremental orders going into the year. How much visibility do you have into that number? And does that include Southwest [Airlines]?

Yes. So yes, the 500 includes -- as I mentioned, it's a -- it includes both new planes and retrofits for both new and existing customers. And that would include new -- with Southwest in particular, we have new aircraft that are -- that we'll deliver equipment to that will be line fit. So they will take them as new. And we have -- I think that's a pretty reasonable target. There are factors that can drive it up or down [from that], and that's kind of a pretty reasonable estimate.

Got you. And given there's capacity shortages internationally -- and here in the U.S. it's a pretty saturated market in terms of airlines that have already picked solutions, so we're seeing some switching. When can you reasonably start to target more international airlines given the timing of the -- your second satellite coming online?

Okay. So first of all, roughly, ballpark, it's probably 30,000-ish aircraft. That's kind of a rough estimate of aircraft. So probably, all in, we're in the 15% to 20% penetration of existing aircraft. And that -- people think that's going to 40,000-ish aircraft kind of by the mid- to late '30s, so we think there's still a lot of growth in the market as a whole. We've been mostly successful in the U.S. market and in some international traffic to and from the U.S. And that's where most of the [installs are] coming in this current fiscal year. We've done well on international in the places where we have coverage, and that's really been the main -- kind of the main factor in determining our success. And so recently we've announced more transatlantic international.

So I think that airlines are looking at deployment on ViaSat-3. They see the progress that we're making. And I think that's really 1 of kind of -- I think, I suppose, kind of 2 factors. Factor one is getting the coverage on an international basis. In the places where we've had international coverage, we've done well. The other one is that airlines tend to see good in-flight connectivity as a competitive -- it's a competitive differentiator.

Differentiator.

Yes, that's a good word for it. And so in the U.S., where the -- it's most prevalent...

(inaudible).

It's really been a bigger competitive factor. And I think that's -- will be -- it's kind of been a factor on the major long-haul international airlines, intercontinental flights. I think there is still a lot of opportunity among -- or regional airlines. And that will become more and more a factor as you see the penetration grow. That's -- I think those are the things that we've got our eye on as the overall penetration in the commercial in-flight market expands.

And do you have or will you have an antenna product for those regional aircraft?

There are -- yes. Short answer is yes, okay? I think that the airlines' views of what the purpose is for outfitting regional aircraft is evolving. It's as they see having in-flight connectivity is sort of an integral product to their entire fleet and all of their services, including on connecting flights and on the shorter flights. So I think that their view of what's needed is evolving and I think we'll be well equipped to deal with that. And there are -- I'd say we're seeing more -- I'd say, more interest in outfitting regional jets with a more expansive view of what that means too as well. [Like a view, I mean, on] regional jets kind of going forward is probably different than the way you might have looked at it 2 or 3 or 4 years ago.

Great. And if I can, one final question. Last week, EchoStar talked about losing subs directly to Starlink, in part because of latency. And you're introducing a hybrid cellular-satellite solution to try to address that. And of course, we also had the acquisition announcement with Eutelsat and OneWeb and again, in part, Eutelsat trying to get a latency solution. Do you still feel that a GEO-only solution for consumer or IFC markets is sufficient? Or are you seeing an increasing need to do something to address [latency]?

So I guess I think our view hasn't really changed that much -- [and just to say] that I would say it's -- one of the unique things about satellite is we do think that there's a little bit of a trade-off between bandwidth and speed, on the one hand; and latency, on other. We think that we can manufacture bandwidth really efficiently from GEO and aim it into places where there's demand; and have the flexibility to move it around with that demand, especially in mobility, but the farther out you go from Earth, the longer the latency is. And so there is this trade-off where you just have to hit the right mix for each particular vertical market segment. And one of the things we said is we think that hybrid solutions are a good way to deal with that trade-off. And we can mix in lower-latency options, whether those will be satellite; or terrestrial options, wired or wireless for terrestrial options, to try to hit the sweet spot of each of the vertical markets and the geographic areas that we're trying to [serve in]. So we've done work on that. Right now what we think is, especially with the -- with just the booming growth in streaming and kind of more and more video entertainment hours switching from broadcast to streaming, I think that's -- a lot of what we see is going on in satellite industry is kind of a big pivot to being able to support data. And some of that is going to be through high throughput, to have high-capacity and high-throughput GEO satellites. Some of them might be, from a latency perspective, on NEO or [radomes].

So what we've been really focused on is that bandwidth component. We think that streaming is really driving substantial growth in demand. That's kind of 30-ish percent year-over-year on a per-subscriber basis, so we're really focused on being able to address that. We think that we'd like to be able to address low latency as kind of the next thing, most important thing behind that. Well, the other thing that we've been really interested in is hybrid solutions, including multi orbit. We've been working with several non-geosynchronous operators or prospective operators in order to be able to do that. We don't think that we necessarily need to own a non-geosynchronous constellation in order to be able to do hybrid solutions, hybrid multi-orbit solutions.

I do think that -- just to talk to hybrid a little bit more. There's some sense that, well, only the geosynchronous operators are saying that multi-orbit makes sense, but the non-geosynchronous operators don't think that there's a need for GEO (inaudible) -- that non-geosynchronous is just [obsolete] geosynchronous. And one of the things that's interesting about the OneWeb and Intelsat deal is that you've got a non-geosynchronous operator saying multi orbit as the right answers. Also -- and that's kind of not -- I mean that this might be the most -- first most explicit case of that, but you've also got SDS that's investing in both NEO and GEO satellites. You've got Telesat that's a significant GEO operator that's also doing multi orbiting. So what we think is that it just is indicative that multi orbit makes sense from either direction. And that's kind of how we see it as well, but I think that, the other point, just the OneWeb and Eutelsat, that -- sort of a highlight is one of the things that we've been looking at when we try to do this is to get as much commonality in the network infrastructure as we can. And so for instance, in choosing to acquire Inmarsat, one of the good things is their broadband network is Ka band just like ours is. And especially in the mobility space, where you've already got a need for tracking antennas, you can use phased array antennas. That's one of the things we've been working on and demonstrated there as well. It's a lot simpler to do them in the same operating bands, as opposed to doing it in 2 different bands.

And so that's an example of one of the things that we're looking to do when we do hybrids between GEO and non-GEO is try to get some of those same cost efficiencies; and the ability to work with the infrastructure from both sides in a more -- in a simpler, more unified way. That's -- those are kind of the main things that we've been taking. Things are still evolving in the space, but we still are interested in multi orbit, to the -- and again I want to emphasize it's to the extent that our customers are and that it delivers more value to them and to their users.

Your next question comes from the line of Ric Prentiss with Raymond James.

A couple of questions. One, a housekeeping one on the legal settlement, the $62 million. I assume that was a revenue. It sounded like you might have done some kind of payment to lock it in. What should we think the EBITDA effect of that legal settlement was?

Ric, this is Shawn. So yes, you're right. A good amount of it is going to come in the revenue line, but we do have some costs that are going to offset that, some of the insurance costs and some legal costs, so I would think of it as probably net around $50-ish million that should be EBITDA contributing.

In the second quarter (inaudible) second quarter (inaudible), yes. (inaudible)...

In the second quarter, yes, second quarter. [And let me] -- a little bit will go into interest income as well.

Sure, okay. And then Mark, kind of strategic thinking. We saw that the FCC voted 4-0 recently to have an effort on reviewing "the space race". What do you think the FCC is looking to do? And what would you like to see the outcome of that be? And then I have one final follow-up.

Look. I think that -- on the one hand, I think that the FCC is anticipating that, I think, the options of doing things in space are increasing. And I think that what they've said and what would make sense is to try and get ahead of that, to try to think about what regulations that they may have that could turn out to inhibit that or be bottlenecks and then try to address those in the context of preserving access to [space some]. And that's a good thing. I think [that's fine]. And we're interested in some -- there are some elements of structures in space that are really interesting for the kinds of things that we do, so we think it's good to be considering that.

I think that [the fact] -- I mean you asked what I would like to see. I think that a lot of the risk in space comes from very large numbers of relatively large [space path] that represent a lot of [mass], a lot of cross-sectional area. And that is really being dominated by these large mega constellations that are really communications oriented. And it's very difficult to see that the -- if you think about this notion that academics and other researchers and quite a few organizations are orienting around, which is the notion of carrying capacity, which is how much stuff in space is sustainable. How much is too much? How do you measure that? That's really likely to be driven by these mega constellations. And so what we'd like to see is that they don't look past the issue with the mega constellations to focus on something that's probably not likely to represent as much of a risk to congestion in the space environment as some of the issues that we're already dealing with.

Okay. And one more follow-up, on the government side. Help us understand on the tactical Link 16 side how -- what kind of synergies are you looking at there? What kind of opportunities between your different business segments do the tactical Link 16 kind of offer?

Well, so one of the -- so I mean a couple of things that are going on (inaudible). One of the biggest sort of long-term themes in defense communications and actually in sort of overall intelligence and battle management is -- different names for it, but one of the main names is what we call JADC2 or Joint All-Domain Command and Control [or training] communications. And what that is intended to do is to synthesize a number of disparate communications links and intelligent sources into a -- one sort of seamless [competence of a whole]. And so when you think about that, there are definitely things that you can do with terrestrial networks, Link 16 being an important one for that, yes, and in the way you combine that with space. So that's one of the avenues that we've been looking at and because we're familiar with what -- the space and the terrestrial parts of that. And I think we have quite a bit to contribute to that, and we've been pretty successful in participating in it.

One of the other areas that is -- it's got significant synergy opportunities is the notion of Link 16 from space. And we've been -- that's one of the areas that we've been pretty successful in as well, and as well the notion we think of space as a relay. There's other applications for space relay that we've been successful with as well. So there's definitely synergy opportunities there. I think, just to go back to what I said before in response to Landon's question, really the issue for us is just trying to assess all those different synergy opportunities. Which ones have the greatest growth opportunities? Where can we play? [Where it going to be] the most successful -- just make sure that we're focused on that, but there's definitely -- that's -- those are the 2 main threads when it comes to the tactical data links; and kind of the satellite services, space services mobility businesses that we're growing.

And final one for me. Then I'm sure Philip wants to get back in. The space industry has been trying for a long time to consolidate. All of a sudden, we're seeing a bunch of ones proposed, ViaSat, Inmarsat; Eutelsat, OneWeb; rumors of SES and Intelsat. What do you think the industry is looking at now that they're trying to solve for? And how do those differing potential permutations affect how you view your opportunity?

Okay, (inaudible) it's a big picture question. The one thing that I want to point out: When people talk about consolidation, a lot of times, what they kind of mean is, "Hey. Growth is slowing and we want to take advantage of the cost synergies." And what we see is -- think of it as like the age of satellites as a broadcast mechanism is sort of winding down, but the age of satellite as a data transmission medium is really just getting started. That's kind of how we look at it. And so with -- from our perspective, what we did is we took 2 companies, us and Inmarsat, that were never really in broadcast business. We're really focused on data. And we're trying to combine them in a way that creates more opportunities for growth. That was really the thesis for what we were trying to do. I think that there's another theme which is more among the large legacy operators, which is how did they more pivot from broadcast to data. And so a lot of the other combinations that are being -- that are either happening or being speculated on are really kind of around executing that, using maybe the broadcast business to charge up the data business.

And what we think is that the data business is -- it's so different from the broadcast business in almost every way. The analogy we -- that we always use is if you look at the companies that we're preeminent in using terrestrial broadcast frequencies. Those companies are the ones that have really been effective in the data, (inaudible) data business, which is primarily the mobile cellular business. So we just think they're really, really different. We've got really good skills in that. We've got good growth. We think Inmarsat has a great customer base, good assets that we can leverage. That's kind of our thoughts on it. I think there's -- theories behind some of the other combinations are a little bit different than that.

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

I want to ask your updated view of how we should think about the ViaSat-3 kind of revenue ramp here of next year. How long until you can fully monetize that capacity? What percentage is kind of spoken of -- spoken for today with your current business plans? And secondly, is there going to be any cannibalistic effect on your current business from a lower-priced, "lower cost per bit" platform?

Okay, yes. So just to review kind of what we've done with both ViaSat-1 and ViaSat-2. And we think things will play out fairly similarly on ViaSat-3. With 1 and 2, we really grew predominantly, at the beginning, on the residential base because that was the one that we could address the fastest. And a lot of times, what you've seen is if -- new operators trying to get into the data space. They've also tried to scale around the residential space. Then what we did with 1 and 2 was we really started growing the mobility business around that and some of the government business. So now coming to ViaSat-3: The mobility businesses for us have more scale than they did when we did 1 in 2. So we can scale those in -- by expanding them a little bit by using our existing business as a platform for that, by providing more services to some of our existing customers by making the -- some of the services that we'll do for existing customers. As we talked about before when it comes to competitive differentiation in the areas, being able to do streaming video is a really attractive feature for in-flight communications.

So that, I think we'll get more contribution early on from the mobility businesses with ViaSat-3 than we did with 1 or 2, but we also see big opportunities in the fixed and residential business as well. And just going to the point that you talked about, sort of like deterioration: Kind of the way we've framed this -- we didn't put it in this current letter, but [it's still in our] shareholder presentations. Kind of our main focus has been the productivity of bandwidth. So if we can get a lot more bandwidth for the same amount of capital investment -- what our strategy have been has been to share that with our customers. So what we can do is we can give existing customers more bandwidth for roughly the same amount of money. Or we may come up with different price tiers, but the theme will be more bandwidth valued per dollar, but as long as our productivity improvements are greater than what we shared with our customers, then it's like -- we both [factor from that]. So that's a theme. And it's that increased bandwidth value that what's enabled us to grow our customer base each time we've launched a new satellite with better economics. And so we see the same things here.

The other thing that we've been able to do pretty consistently, and we see that happening here as well, is kind of aim to have the satellite -- so you can say it's full. That is we've sold all the bandwidth within like 2 to 3 years, but then what we tend to do is we follow up by constantly evolving that user base towards more and more economically valuable applications, which helps to drive our margins and our revenue. And that's what we've done each time. So rather than -- one thing you can imagine as well: If I just sold a whole bunch of it through the life of the satellite at the beginning, maybe I'd be getting rid of risk, but on the other hand, my opportunity to sort of groom that base and identify the applications and the customers that place the most value on it or to use it in new markets where we can apply additional products and services to increase the value, that's what's really enabled us to grow the revenue and the margins on the existing satellites for the last 10, 11 years that we've been doing this. We see the same things happening this time.

That's helpful. That makes a lot of sense. And it sounds like a lot of the terminals you've shipped, at least for some of the recent past, is upgradable to support ViaSat-3.

Yes, yes. That's -- given that we've known what the architecture is, that's what we've been aiming to do. There are -- but basically, each time, what we've been able to do is we've been able to make -- the existing terminal [set] can be used on the new satellites, but the new terminal [sets] have additional features or capabilities that make them more useful or economical. Out of that comes -- one of the things I think that's a little bit underappreciated in this is what we're doing is we're mixing many different types of service-level agreements and value propositions on a satellite. And in order to do that efficiently, you need to be able to [what we call schedule. It's like] how do I fit together all these disparate types of services on an -- on the satellites so that we get very, very high efficiency of use.

And like one great example would be if you're in the airline mobility space and you have an airport with connecting clients from one airline or a bunch of different airlines. Several times a day, you have enormous demand at that airport for maybe an hour or so. And then in between that, the demand is way, way lower, so what you really want to do is you don't want to take all that other band without a service just because you're waiting for that next wave of use. So that, the idea there is how do you schedule your bandwidth resources to get high efficiency; and that those peak to average demand, especially in the mobility space, can be [after a 10] easily between high-peak areas and low-peak areas. So what we tend to do is we build into the network and the latest generation of terminals more and more capabilities that let us schedule it really, really efficiently. And that's -- those are some of the things that drive our ability to increase margins and revenues even after we build up the satellite.

Your next question comes from the line of Mike Crawford from B. Riley.

Just to go back to the Acacia award. Does that mean that Cisco, now Acacia, has a downstream license? Or do their customers like [Momentum] that use their DSP...

(technical difficulty)

Did you hear the first part of my question?

I think so. Robert, do you want to [begin with that]?

(inaudible). So I mean Acacia has downstream customers like [Momentum that uses] DSP. Do they need a license? Or is that incorporated in this agreement?

So there's -- just to be clear, Mike: There's no agreement. This was the result of a verdict. So they paid a judgment. And so those damages are for their use of our technology under an agreement that they did not pay us under, so they were ordered to pay us for the use of the technology through 2018. That's what that verdict is related to. So a license would have been provided under that agreement had they paid. They didn't. They were ordered to pay. So that's what the verdict covers. Does that answer your question?

Well, partially. So that's what I was getting at. So now you're paid out to 2018, but there's another 4 years under [past the bridge plus others] using that DSP, so is there an expectation you might be able to get some more out of this? Or is -- this issue, you've settled, in your opinion.

Yes. So we have 2 pending lawsuits against Acacia. They were [stayed], pending the outcome of the appeal. They are still [staying] and will be probably restarted in the next month or so. One of them relates to the same technology that was issued -- that was an issue in the first case from the period after the end of 2018 to the present. And the other one relates to additional technology. So those cases are still pending. And I'm not going to speculate on or comment on pending litigation and what might happen with those, but those things will be restarted here probably within -- certainly in this current quarter, hopefully, within the next month or so.

Excellent, great. That's kind of what I thought. And then just switching gears: With the luster failure on this Anik F2 satellite that powers some of your Northwest U.S. residential subscribers, I understand that satellite is going to move to an inclined orbit and [have an end] sooner than ended -- expected end of life, so what's the risk to your U.S. subscribers on that satellite? There's going to be a void in service, particularly since we don't appear to have an official launch date or window for ViaSat-3, although you do say that you hope to have that launched by the end of December.

Yes. It -- I mean Anik F2 has been a good -- it's been a good satellite for us for longer than its expected life, but just to put things in perspective: It's well under 1% of our satellite capacity. So that, we've been able to constantly make improvements. And we're going to constantly make improvements on the existing satellites and sort of make up for the variance (inaudible), but in the cases of individual customers who have terminals (inaudible) that satellite, what we'll do is we'll provide an upgrade path for those customers if we need to move them to a different satellite.

Okay. It was my understanding like, say my father in Picabo, Idaho, that, that was the only satellite that he could hit from ViaSat.

No, no, no. That's not -- no. WildBlue -- as an example, WildBlue overlaps [all] Anik F2. And we may have other resources in Idaho...

(inaudible).

Yes. And ViaSat-2 provides, yes. [The whole coverage] (inaudible).

Okay. And then final question is you talk about these robust tactical data link orders in this quarter. Does that include TrellisWare waveforms?

So the -- TrellisWare is a different -- it's a different waveform than what's [pending 16] is. And it's kind of a different application, different uses more for personal communications than machine to machine. There are some machines parts of it, but it's a different application...

(inaudible).

[The wave 16].

Right. And given that that's super high-margin revenue, I think mostly royalty revenue for you, can you characterize what's going on with TrellisWare right now?

Okay, yes. So TrellisWare, just to recap: It's a subsidiary. We own a little more than half of that subsidiary. One of their biggest businesses is they developed a waveform under a -- the government wanted [a library of licenses of] waveforms. And their wave 1 was one of the most popular in that library. So a fair amount of their revenue is license revenue for either modules or products that use that waveform. And there's -- so that revenue stream would continue on for quite a few years. I think we're relatively early in the process of deploying the radios that use that waveform. And there are multiple companies building radio products that use a TrellisWare waveform.

Okay.

Can I just -- Mike, I just want to clarify real quick. I think I might have -- misspoke on -- when I mentioned the [third] Acacia case. I said different technology, I think. It's the same technology, different Acacia products that are an issue. So I just want to clarify that.

Okay, thanks, Robert. I think that's all the questions that we have for today.

So just to summarize. We believe this is the low point in terms of quarterly financial performance, and we expect solid sequential organic growth throughout the rest of the year. We've got good revenue visibility in [high] communications and really good Government Systems awards. And we expect that those transient bottlenecks that really were more of a factor in the fourth quarter than the first quarter will be resolved and overall support our year-over-year and longer-term guidance.

So we're expecting the ViaSat-3 Americas launch should be coming up very shortly after our next earnings call. And we're making good progress on the Inmarsat integration. We think those are both really great catalysts for continued strong growth.

So from all the rest of our team, thanks for joining us this afternoon. And please don't hesitate to contact Peter Lopez or anybody on our team if you got other questions on our results or other than the topics that we discussed today.

So with that, I hand back to the operator.

This concludes today's call. You may now disconnect.