Viasat Inc (VSAT) 2023 Q2 法說會逐字稿

Welcome to ViaSat's Fiscal Year '23 Second Quarter Earnings Conference Call. Your host for today's call is Mark Dankberg, Chairman and CEO. You may proceed, Mr. Dankberg.

Thanks, and thanks, everybody, for joining us today. We released our shareholder letter shortly after market close and is available on our website. We'll be referring to that on this call. Joining me today on the call are Rick Balridge, our Vice Chairman; Kevin Harkenrider, our Chief Operating Officer; our Chief Financial Officer, Shawn Duffy; Robert Blair, our General Counsel; and Paul Froelich from Corporate Development; and Peter Lopez from Investor Relations. So first we'll have Robert provide our safe harbor discussion.

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. Back to you, Mark.

Okay. Thanks. So I'll briefly just touch on some of the main points we discussed in the letter before we take questions. So first, progress on the completion of the first ViaSat-3 satellite has been really good, and it's close to plan since last quarter.

It's completed and has its functional environmental and deployment tests. The deployment test use higher technic devices.

So the remaining tasks now are to inspect those, the deployables and restore the satellite to launch configuration. We expect the satellite will be ready for shipment to the launch site in December. Thus, though on schedules for some U.S. national priority launches that are contending for falcon heavy facilities have shifted since our previous conference call. So at this point, we can't give a specific launch window other than first quarter of Calendar '23 but we're targeting the early part of the quarter. And we're working with SpaceX to launch as soon as possible.

Financial results for the quarter were consistent with the outlook we have described during our last call. Also, as we previously reported, we executed an agreement to sell our Link 16 tactical data links business to L3 Harris for $1.96 billion in cash. The letter in our filings reflect separating those TDL results from our continuing operations.

The total second quarter revenue was $745 million, up 6% year-over-year, that's aided by the previously reported Acacia payment and 5% growth in overall services revenues with product shipments impacted by delayed deliveries of some new planes to some of our airline customers and supply chain and certification delays for some government products.

Adjusted EBITDA grew 21% year-over-year to $188 million, aided by the Acacia payment and very good growth in IFC services with headwinds from active in-flight activating more of the ViaSat-3 ground infrastructure in advance of the launch, constraints on available U.S. bandwidth on residential, including ongoing reallocations to in-flight connectivity in anticipation of a very substantial additional airplanes coming into service in the second half of this fiscal year and some impacts of supply chain stock shortages on component pricing and the resulting product margin impact.

Total new orders were excellent on quarter at over $1.1 billion. Backlog remains strong, as does our book of delivery orders and options and potential IDIQ value, even though we've consumed over about $400 million of that IDIQ order book on a year-over-year basis.

Our fiscal year '23 outlook is revised ultimate reflecting the cumulative effect of the ViaSat-3 launch delays, combined with the infrastructure network activations, delays to some portions of new aircraft activations due to those delayed deliveries to the airline customers. This avail with constraints on residential broadband and some supply chain impacts.

We do anticipate very good growth in the second half of the fiscal year in 5 connectivity claims and service as we described last quarter. That's going to be driven by retrofits and line fits and we also have growth in IFC terminal shipments and dominant growth. Our stand-alone estimate of doubling adjusted EBITDA by fiscal year '25 relative to fiscal year '20, including adjusting for the Link 16 sale remains intact.

As we previously described, Link 16 sales expected to result in about $1.8 billion of net cash proceeds, which will substantially reduce debt and leverage on both the stand-alone basis and post the Inmarsat transaction. The U.K. Competition and Markets Authority, or CMA, review of the Inmarsat transaction has entered Phase 2 they publish their findings from Phase 1, which had a kind of striking dismissal of all the other competitors in aviation productivity.

Our first steps are to meet with the new panel that was formed for Phase 2 and provide more facts on the nature of both incumbent and new entrant competition. We believe there is a strong case that substantial competition will be sustained on a go-forward basis, and the process can still be completed within the original timeline. So with that, we'll open it up for your questions.

(Operator Instructions) Richard Prentiss with Raymond James, your line is open.

A couple of questions. Two housekeeping ones first. On the '23 fiscal guidance, does that include the onetimer benefits? It looks like it's in there -- for commercial networks, I assume that's in there for all the type items.

Rich, this is Shawn. So yes, our guidance is included the Q2 results for Acacia.

Okay. Second kind of housekeeping one is previously, you bought also free cash flow policy timing shortly after a couple of quarters after the ViaSat-3 (EMEA) launched. Has the change in supply chain and information costs, et cetera, change any of your thoughts about when you turn free cash flow positive?

Rick, I think I would think of it as around the same timing with respect to how it's pegged to the EMEA satellite. We've said before that we need to get the satellite up and scale. And once we do that, thats kind of use the turning point. So it's very similar.

Okay. And then more a theoretical long-term question. We've seen a lot of discussion and announcements and events around satellite/smartphone communications. Can you share with us kind of your thoughts about how ViaSat would play in with or without Inmarsat looking at L-band, San urban services versus 5G just. What's happening in that part of the space?

Okay. So we do think it's a really, really interesting application for satellite. Obviously, to the extent that you can provide connectivity and interesting services, which are likely to go beyond SOS to include things like messaging, mail, probably web browsing, maybe a few others, or you can provide interesting services and you can do it to modify phones.

I mean it's a really, really attractive market. The things that are -- that interest us about it are, one, just respond to your breakdown of with and without Inmarsat. Number one is it's a very challenging connectivity technical problem. We think that it really plays to our strength in terms of high-capacity connectivity from space. And then in this case, to highly disadvantaged user devices.

We also think that what's going to be needed is to do that in some way that is sustainable in space, given all of the increased focus on those issues recently. And I think that those -- that's one area in which we're already doing work where we think we can partner with other holders of spectrum on that opportunity.

And the other one is with the Inmarsat transaction will be one of the largest holders of global mobile spectrum. And there are some really big advantages in terms of serving that market with wireless and Standard MSS spectrum as compared to trying to reuse terrestrial spectrum. So that another -- that's the other way in which we're aiming to participate. And the combination of having the spectrum and having the technology I think it's going to make us -- it's going to create really good opportunities for us.

Great. And then how should we think about the time frame of when this becomes real and meaningful?

Well, so I think that what you're already seeing with Globalstar and Apple is that -- let's say we put it in 2 buckets. One bucket is can it be done at all. And I think we're going to see, yes, it can be done. It can be done. The issue is really going to be what kind of links you can create reliably to devices with antennas, better like smartphones or other smart devices.

So the real issue that is going to be scale. And scale is going to mean speed and the number of simultaneous users because that's going to have a big impact on the types of services you can bring to market and doing it at higher speeds and greater scale, it's going to require new space systems to do that. And so that's for pretty much anybody is going to be I'd say 2 to 3 years at the least.

Landon Park with Morgan Stanley. Your line is open.

Maybe just following up on Mark, on your satellite smartphone comments. Can you maybe unpack your view in terms of the benefits of the MSS spectrum versus reauthorizing terrestrial spectrum. And on this type of service. Do you think it is practical that it can be done from GEO? Or would this require a different orbit from an investment standpoint?

Okay. Okay. So I'll give you opinions here. One is that the issue on the licensed MSS spectrum versus resin terrestrial spectrum, the reason the terrestrial spectrum is going to be very complicated in most markets because of the way that the terrestrial spectrum is allocated, where you have different carriers sometimes in different countries, very close together. And it's going to be hard, especially if operators are making exclusive deals with a carrier, for instance, in a region where that's going to require that another carriers that want to have the same service, has to have a different space system use its spectrum.

And as that kind of plays out the opportunities and the complexity and avoiding interference with terrestrial is it becomes a real problem. Also -- and just to jump to the other one is the real issue when it comes to connecting those types of devices is the power propensity that you can make on the ground.

And once you can make the power propensity, it's just a measure of how much power made from your satellite to the ground okay? So if you start from higher up, you need to start with more power or more antenna gain. But at the end, if you have the same power on the ground, it doesn't matter what altitude it comes from. So there's opportunities for both GEO and LEO systems.

We're looking at both. I think they both can deliver similar functional performance to the handsets. And then it's really just a question of economics of what does it'd cost you to deliver a certain amount of power to those areas that have the greatest demand, which is kind of the main issue that everybody deals within satellite services in general. What we think is that these markets will be geographically very concentrated because it's almost certainly going to be overland.

And also you're going to have this funny situation where a lot of the demand is near metro areas. Even though those aren't very rural, there's just so many homes near metro area is that there's going to be a lot of demand there.

And if you want things like emergency services and times of disaster or something, you're going to need a lot of capacity to connect a lot of phones. I think those are kind of the technical issues. And I think those are the ways some of the pluses and minuses of LEOs and GEOs and 2 different forms of spectrum.

On the stock Services segment, the revenue was down a decent bit sequentially. Can you just maybe unpack that for me? And on the broader IFC business, how are you guys thinking about business aviation at this point? We've seen some announcements recently from Starlink. So just wondering how you think that you can scale in that market with the ViaSat-3? And then just one last one for Shawn. On the fiscal '25 guide, I just want to make sure I'm understanding. Are you confirming it as if you had TDL still in fiscal '25? Or are you saying even without TDL, you will hit those targets? I wasn't entirely clear.

Okay. Just on the second one, that's pretty simple. If you took our FY '20 results and you excluded the TDL contribution to that adjusted EBITDA. And then you compare that to or FY '25. That's where you get the 2 to 1. And on the second one, so there -- from a revenue perspective, probably the main driver on services -- there's a couple of drivers on services.

One is, we still are expecting really strong growth in commercial aircraft in service this fiscal year. Though there have been delays we see in the second half, strong activations there. The second half is -- has a much higher proportion of retrofits, so we don't have the aircraft delivery issues and then also some of the aircraft deliveries that were delayed will go -- will come in the next second half.

But because of all that growth, we have to clear spectrum. I mean, we have a clear bandwidth on our satellites in advance of the growth in the F5 stuff. And that's a little bit behind that. So that's one issue. We still have -- we do have some headwinds in residential broadband, partly the economy as a whole and inflation, I think, is putting more pressure on higher ARPU broadband services. So that's one.

There is -- we do see more incursion from terrestrial wireless. And there is more in Starlinks the factor for sure as well. We -- what we're doing is we are going to be emphasizing especially with ViaSat-3, but in the we're going to start being able to offer plans that offer a lot more bandwidth for specific streaming services.

We have one really exciting partner in that, that we'll be launching -- we've been doing beta tests. And I think probably early the next quarter, we'll probably start offering more of that. That's one. And I think we -- I think now it's looking like the speeds that we're offering are going to be really competitive. And we think that will -- especially for those people that do out streaming, I think our volume consumption will be very competitive.

So I think that I would say depending on when ViaSat-3 comes into service, that's when I think you'll start to see that residential business come back. And the in-flight business is, we think, is going to grow really struggling and that in a longer term.

And then the other thing just on the margins and the EBITDA is we are getting hit by those infrastructure, the ground segment cost because as we get really close to launching the satellite, we're activating more and more of that ground network infrastructure. And it's expensive because it's intended to offer hundreds of gigabytes to a terabyte of capacity...

I'll ask -- as well. How are you thinking of that kind of opportunity longer term? business aviation longer term?

Business Aviation. Yes, this is aviation. That we really started with Ka-band in earnest. No, over probably in the last year or so, we had a focus on distribution with OEMs and then increasing our distribution, and that's been working. So it's growing pretty fast, both in terms of we want to migrate people from lease bandwidth to our own Ka-bandwidth. So the number of KA terminals is growing as a proportion of our total terminals.

But the number of KAs terminals is growing pretty well. I think that the -- and I think that the amount of bandwidth that we can offer in the SPs is looking very, very competitive. We're -- yes, we still think that's a completely fine market for us.

How (inaudible) today?

And then Amanda, this is Shawn. I have one quick thing to that. Just keep in mind that even though we move the satellite timing a little bit. We're not taking our foot off the gas with respect to the ground. We want to be ready. So all of those ramp-ups this year up in the tune of $50-plus million.

That's on an annualized basis, Shawn or in the year ?

Yes, annualized.

Mark, are you able to say how many BA tails you guys have between Canadian tenure today? And on the commercial IFC, you guys have targeted 2,400 aircraft previously, is it still that?

Yes. The commercial target is -- what we gave last quarter was 2,400 by the end of the year. Commercial business aviation is low hundreds. I don't -- try to be evasive. I think it's low hundreds. We don't have a split for you right now on KA versus Cape. It's getting to be majority , I think.

Mike Crawford with B. Riley Securities. Your line is open.

So Inmarsat just received a nice $410 million Blue Force Tracking extension award. Can you talk at all about any changes between your planned constellation build, assuming that you're able to consummate this transaction?

Yes. So what sort of things we still need more information on is the exact status of the payment schedules for the satellites that Inmarsat has on order for L-band. The main ones are the I6 They've launched one. There's another one lunch coming up in about a year. I think those are their newest L-band satellites. I think they will probably be planning more replenishments for L-band satellites. But what we think is that there's an opportunity, which is what we've been doing in the broadband sense -- in the broadband market, which is probably bore sophisticated satellites that a much, much greater value in terms of available bandwidth per dollar -- capital dollar.

And what we see with the I'd say the direct to handset market being a little bit of an extreme is -- we think there's quite a bit of elasticity for mobile satellite demand with lower airtime pricing. So that's going to be our main focus. I think you'll see a substantial improvement in kind of bandwidth delivered from MSS per airtime dollar. And I think that's going to pay off in government, maritime, aviation and in a lot of these new markets as well.

Okay. And I think related -- could you say like kind of percent complete of investment CapEx that you've put into say, ViaSat-3(EMEA), ViaSat-3(APAC) and ViaSat-4, those 3 satellites?

Yes, Mike. So the way we kind of look at it is across the ViaSat-3(APAC) as a whole. At the end of Q2, we're probably in a 74-ish percent complete right around there.

That's not biased thats pretty stunning but is that including the first 4 satellite? which I think you've started to invest in.

That's excluding that. And yes, we are making some investments in some traction there. We're metering it at this point, but yes, there are some spend there as well.

Okay. And right now, it's just one of those satellites that you've started or more of that R&D investment that would be applicable to similar other ViaSat-4 class satellites.

Two parts. We have a satellite. We have a construction contract for the satellite and the other -- but the main driver that we've been working on is the Payload, which we'll do and the payload is a more highly integrated version of ViaSat-3 also should be quite a bit easier to manufacture, assemble and integrate. So we have one of those under -- have started. I'd say most of the expenses so far have been in the payload. And as Shawn said, we're going to be -- we're just managing the CapEx spend rate to achieve our overall balance sheet and growth from JetPay.

And so that right now, it's floating a little bit, but it's -- Shawn, you know the target launch date do you want to add?

Yes, no, I think we're still -- I think we should talk about that a little in the future call, right? But we are making progress.

Okay. I have 2 other quick questions. One, can you remind us of the time period covered for the case of verdict? And then how much time and counting has accumulated where Cisco willfully continues to infringe on your IP.

Mike, this is Robert Blair. So the first case went through sales made through 2019. So the damages were through 2019. So any damages that were after that time frame for their use of our intellectual property would be for any time on the products that were an issue in that case, both January 1, 2020 forward and would continue to this day any sales they made on those products. So we have an additional case that relates to their use of intellectual property on different products that is just getting started. So following the appeal, it's just getting restarted. So that case is at its onset.

Okay. And that period that ended through 2019, when did that period start?

I don't recall when the agreement started, I want to say about 2014 or 2016

We can't draw a direct line though, right? So you can't just say, well, that time period represents the same amount of -- you can't take the due time periods and just draw a direct linear line in terms of product deliveries.

Okay. Well, I certainly wouldn't want to be in their position. And then final question, you talked about resolution of transient supply chain and certification bottlenecks is that happening? Do you expect that to happen? Or what can you further add regarding that?

The supply chain issues are a little bit like Guacamole. They tend to surface fairly suddenly. The kind of the main way we've been dealing. Dealing with them is resorting to spot markets to fill in any gaps. And -- Well, it's -- I don't -- I think we've done reasonably well, but I think overall, our situation is not much different than others that depend on -- especially for us, it's more often in -- I was going to say more often in high-end semiconductors, but that's not really the case. We're going to have shortages of commodity components that just show up as well.

In the cases where we can, we're basically paying higher -- paying the higher spot market prices and delivering step for our customers. And so that's the other failure mode that we'll see is some higher COGS for some of the products we're shipping. It's -- I think it's hard to declare an end to it.

Ryan Koontz with Needham & Company. Your line is open.

Just a quick follow-up on your IFC commentary there. And how should we think about your share opportunity moving forward beyond this fiscal year? It sounds like you're really executing well there in onboarding new customers and planes. And at what point do you think that the commercial business starts to saturate a bit in the U.S.? and talk briefly about the international opportunity for you?

Okay. The IFC market it's very dynamic. I think that the airlines -- go ahead, but the airlines are trying to respond to what they perceive is what their passengers want. And they're -- lots of different airlines are testing different things. And in some cases, but they're really looking -- think of it as what they are really looking for first passenger satisfaction. They're trying to figure out if they do that by curating onboard content by giving them a meal or a better meal or making connectivity available, giving connectivity away.

There's lots of different strategies. I think U.S. is a market that's pretty well connected on the ground and airline competition is pretty fierce. So I think that market is ahead of most -- I think there's going to be good growth in total number of planes connected to grow.

There's long-term growth in a number of claims. And I think we're going to compete well. I think what we've tended to do well is kind of try to help the airlines to come up with ways to use IFC that hit kind of with their overall market -- go-to-market strategies and how -- and we're also pretty flexible in the ways in which we'll offer the in-flight connectivity. We don't have a single mode there.

And in our willingness to integrate with in-flight entertainment part. And that's a funny situation because by far the highest -- the greatest use of bandwidth and in connectivity is for entertainment. So the airlines are resonating with that as well. But I think that there's -- most of the analysts expect the market's going to grow pretty substantially in the next 7 years, and I think we'll compete well based on the types of services that we can offer.

And I think the other thing that we've been -- that we've been pushing on a lot is that the airline have a measure of service availability, right, service reliability. Some of that would call service level agreement that's important. And I'm going to -- I'll give you -- one example is one way to tell how the impact connectivity is working is you pick some random planes fly somewhere and you do a speed test on it and see what the fastest speed you can get to the airplane is.

Another way would be, well, you have an airplane full of people. And what you look at is what's speed to each passenger gas. And that's the one that we've really been focused on because I think, ultimately, with passengers really wanted -- they want -- whatever it is that they're doing to work well, they're less concerned about what the speed is to the airplane, they're more concerned about being able to do whatever their objective is kind of throughout the flight. And that seems to be resonate, so far so good.

Super interesting. And just a quick follow-up on the streaming technology you talked about. Is this like a CDN software stack you've licensed, you're going to productize as part of the offering? Or how should we think about that new development, if you can talk at all about it.

Can't too much. But the basic idea is -- which is -- I think is getting -- there's some standards around this, which is really to push CDN out even further to the edge. So that more for the content can be delivered directly to end users. And the real trick there is doing that economically. And that's the part that goes beyond the standard sales is using the standards to accomplish that goal.

And that's that -- to the extent that, that is done well, it's a big, big multiplier to the usage that's available to subscribers that are streaming content users. That's, what 80% of all the bandwidth that's delivered over consumer broadband network. So there's a big opportunity in there.

Chris Quilty with Quilty Analytics. Your line is open.

I just wanted to follow up to Southwest, is that still scheduled for Q3 rollout? And should we expect -- I think when you guys initially launched on American, you went from like a dozen aircraft to over 100 a quarter the following quarter. Is that the sort of ramp we should be expecting?

So Southwest right now, our agreement with them is for their new aircraft deliveries. So that's going to be -- the pace is going to be metered by deliveries of those things from going. So that will be steady. And I think there's -- I think it's up to 700-ish total that's covered by that agreement. So it's good for us. What we'd like to do is offer them a service that's so attractive that they want to outfit their whole fleet. What they've said is right now, their plan is to work with a new mood to improve the service on their existing fleet.

So our immediate target is to do a really good job on these new planes. But the -- for other airlines, we do have a mix of retrofits and new plane deliveries. And I think in the next couple of quarters will see a big ramp because of the number of retrofits we have.

Got you. As the ViaSat-3 coverage expands and you probably move from more narrowband to widebody, are there any product developments that are needed to make that transition? Or is it pretty seamless to go after the larger aircraft?

So it's pretty seamless to go after the larger aircraft. We have outfit wide bodies already with KA and Ka/Ku, and we do now have some transatlantic widebodies in service as well. So I think we're well prepared for that.

Great. Final question. This was just a little bit subjective and you've talked about the supply chain issues, and it sounds like sort of a Whack-a-Mole type issue. That said, I mean, you've heard of force you throw out a number, are we -- is the supply chain issue back to 80% of where it was pre-pandemic or some number like that? And I guess the more important question is, are you seeing forward progress? Or are we stalling out in terms of some of these supply chain issues? Does that keep paring them quarter after quarter now?

Chris, this is Kevin Hart. Overall, the number of supply chain issues are declining. There are fewer this quarter than the last quarter. Unfortunately, when you have a component shortage, you got to get 100% of them in.

So instead of having 10 short, 2 short, it's 80% better, but you still can't deliver. But in general, as the market in terms of demand worldwide decline for integrated circuits, we are benefiting from it. So Q4 will be better than Q3. I can expect that trend to continue in the global macroeconomic sense. But to look at it from merely quantitative means like you are -- it's hard because it depends on the product or some may be pervasive across tire product line.

The other thing though -- Kevin, you can talk about this. But one of the things we've certainly seen is brokers or orders, they are a pretty significant contributor to these supply chain issues. And what they do is bad for the manufacturers and it's bad for us. So I think one of the things you'll see happening near the end of this is that all of a sudden, there's not going to be any market for brokers and then a lot of parts shortages will get solved pretty quickly. And -- but I think -- and I think we're getting closer to that. But a lot of it is driving the brokers out of the market.

I think you probably know that the orders are backed by the trial lawyers.

Louie DiPalma with William Blair. Your line is open.

What is the timeline for the U.K. CMA Phase II investigation? And what's the expected new timing for the close of the Inmarsat merger if the investigation goes in your favor?

Yes. So the Phase 2 has -- it has a basic period, which would be completed by March 30. It can be extended if need be, but it's intended to close by March 30. What we had said when we announced the transaction was 12 to 18 months, which would be in May. So that would be -- that's kind of what our expectation was. So we're working to get it done within that time frame, that March 30 time frame.

There's an opportunity, Louie, that they could not go the entire Phase 2 period. So there's a couple of milestones in there. We have -- we're going to talk to them next week to give our kind of view of this thing getting started. Since there's some another milestone in December and a couple early in next year. So I think we'll know more by January, February.

Great. And previously, when you announced the Inmarsat merger, I think you were targeting a pro forma net leverage of 5x on the deal close. And now you are divesting on L3 Harris and you just provided a new potential timing for the close. So I was wondering what the new co forma or pro forma net leverage should look like?

Louie, it's Shawn. So I think what we told you guys is if you kind of have both deals together, we'd expect the pro forma leverage to be about 70 basis points improved to what it was on just Inmarsat alone.

Okay. SO 4.3x, is that -- okay.

I think that's yes, we had originally set that back. So that's to get our Inmarsat.

Great. And for Mark or Rick, it seems that many of the big 4 U.S. airlines are moving forward with free WiFi though it may be contingent upon the activation of your ViaSat-3 satellite. A few years ago, Mark, you can just -- you conjectured that the economics of free WiFi may look something to the effect of $1 to $2 per passenger as a cost to the airlines. Do you still think that range is appropriate? And how do you think about how certain like third parties such as T-Mobile or others like Amazon may want to subsidize that cost for marketing purposes or to benefit their own subscriber base?

Okay. Okay. So just to review, I think one of the things that we have said in the past, is that the revenue -- the total revenue opportunity was in the range of $1 to $2 per board in passenger. And that's a little bit different than the price that we would charge the airline or a third party because different passengers different passengers may use the Internet in different ways under different terms, right?

You may have -- these are not representative any particular airline. But airlines may decide that certain classes of passengers like business class, premium economy might get the internet for free or they might do it for certain classes of frequent flyers. Or as we've done in the past, we've had sponsorship deals with entertainment or streaming companies, and we're doing more of those things.

So I think that the kind of the revenue opportunity is in that ballpark, $1 to $2. And some of that revenue may end up being shared with BMS an example, or in some sense, netting out against what their expenses might otherwise be. But I think that, that $1 to $2 of revenue per board in passenger, that's a good target. It's not where we're at yet, but it's a good target. Does that -- help on that?

Yes, as that makes sense. Another question, do you view any other defense assets as nonstrategic or along those lines, are you satisfied with your liquidity following the divestiture of L3 Harris and the close of the Inmarsat deal? Or the more steps need to be taken to improve the leverage and liquidity?

Well, so I don't -- we don't plan any other divestitures. I think the main thing we're doing to improve our leverage and liquidities we want to drive up our earnings by performing low in the markets that we're going after. I think that's the main thing. In terms of the kind of the synergies that we get in our business, the Link 16 business was and still is, it's a little bit complicated because it's a data link. And other participants in the data link market have synergies with other data links.

So L3 Harris in particular, is very strong in some particular data links by what's called common data link. So other participants in that ecosystem had synergies that we didn't -- obviously, we're still doing well there. We've been winning the wars. But long term, it was a investment stream that didn't really leverage the rest of what we're doing.

The -- so we're now becoming more satellite-centric. The one other area we have on the government side is really cryptography and cyber but those are very, very relevant to the space business. So we don't see -- we're not planning any divestiture there. I don't take any of this as specific guidance about what we will or won't do. I'm just going through this thought process about how we thought about the TDL business and whether or not those same dynamics apply to others of our existing businesses.

Great. And then the following on the smartphone line of questions, you addressed this a little bit, but Inmarsat has 68 megahertz of global L-band spectrum rights, which is significantly more bandwidth than Iridium and Globalstar combined. And both of those satellite operators are pursuing smartphone partnerships. What greater capabilities does Inmarsat or potentially you and Inmarsat have with that excess spectrum. And the answer to one of the questions, you mentioned potential partnerships. So I was wondering if you can elaborate like what do you mean by partnership with that L-band spectrum.

Okay. So one is -- so basically, one of the things is when we did the -- when we did our analysis around the Inmarsat acquisition, it was based on the existing business portfolios that we each have. We anticipated that there would be an opportunity in the direct to handset market, and we're still really interested in that.

I think that the combination of the spectrum that Inmarsat has and the technology that we have is -- when I talk about the technology that we have, you look at what we've done in ground-based beam forming for SkyTerra, we still work. We work close very closely with Ligado on the use of their existing satellite. And then you look at the technology that went into ViaSat-3, there's a lot of opportunity there as well. And some of those technologies that we did, they're applicable to non-GEO as well.

And so combining some of our technology with the things that Inmarsat has been working on for ORCHESTRA, those are really good opportunities for us. We do think that in the long run that, that market is -- there's going to be a lot of price elasticity in that market, having lots of spectrum and the right technology is really the way to drive cost down and to address a bigger market. So I think that opportunity seems to be playing out as well better than we hoped with when we announced the transaction.

Got you. And final one, is ViaSat-4 supposed to be a MEO has a medium earth orbit on the satellite? Or have you said what Orbit it's supposed to be in?

So, I had 4, just to recap, what we expect the ViaSat-4 is a 7 terabyte per second GEO satellite that would be Americas-focused and would be really give us a lot more really good economics, we're really good bandwidth we think super competitive in those markets for land-mobile arrow, residential business, all of those markets. We do have a filing for a small meal constellation, which we're working on as well. That's not going to be in the multi terabytes range. But I think we're going to get, and we should have an opportunity to get good value out of that as well.

Okay. Thanks, Louie. I think that's our last question. Just to give a quick summary. Satellite disruption is pretty close to done, but not work alone schedule with SpaceX for the first quarter. The delay -- that delay and the supply chain issues for us and for the airlines, is impacting our outlook a little bit, as we described in the letter in the near term. Long-term things don't -- seem really good. Our awards were really, really strong. We're very happy with that. I think the TDL transaction is progressing and that will greatly improve our balance sheet, reduce debt, group leverage and liquidity. And I think we've got a good approach to working the U.K. CMA approval for the Inmarsat transaction. So, thanks a lot, everybody, for joining us, and we look forward to speaking again next quarter.

This concludes today's call. Thank you for your participation. You may now disconnect.