ViaSat (VSAT) Q1 2021 Earnings Call Transcript

ViaSat (VSAT 3.98%)
Q1 2021 Earnings Call
Aug 07, 2020, 8:30 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Welcome to Viasat's FY '21 first-quarter earnings conference call. Your host for today's call is Mark Dankberg, chairman and CEO. You may proceed, Mr. Dankberg.

Mark Dankberg -- Chairman and Chief Executive Officer

Hey, thanks very much. So we published our shareholder letter last night that described our first-quarter results, and most of the details that we'll discuss is in there. I just want to make a few quick points before we go ahead and take questions. So overall, the results came in better than what we had expected, looking at things from the opening in March.

EBITDA grew about 8%. Just on revenue that was just slightly lower despite all the headwinds that we had from the COVID situation on -- especially on our commercial in-flight connectivity business. We've got, I think, very good diversity in our business space, and that was really what helped us have such strong results. Government business did really well.

Fixed broadband showed very significant demand, and that helped the results there and along with our cost management. In-flight connectivity business, it was actually probably a little worse than what we had expected in that first quarter, but we're still able to grow adjusted EBITDA. And overall, our new contract awards were really strong, which gave a lot of confidence for the rest of this year. That kind of leads into our second theme here, the second main point, which is opportunity for us.

We have a lot of opportunities in our government segment. I'm talking about very strong demand plus proposal activity and value. We see opportunities for our aeronautical business to grow out of the low point of the first quarter. And our international businesses, we expect to be able to start expanding after some delay that we encountered and our partners encountered during the first quarter, again, due to the COVID pandemic.

Last point that I want to make is just that we're making good progress on our ViaSat-3 satellite program. So the COVID pandemic is definitely creating some issues for us to overcome, but we continue to make good progress. We're at the point of the program where the payload integration is coming together. So we're testing larger and larger subsets of the payload, and we're making really good progress on those milestones.

We were aiming for being able to ship that payload at around the time that we reported next quarter. It doesn't look we will have shifted by then, but we'll be close enough to have a more definitive date that we can report -- when we report earnings next quarter. So with that, I'd be happy to take questions now.

Questions & Answers:

Operator

[Operator instructions]

June Harrison -- Investor Relations

Just to add quickly before we take questions. I'll just give you our safe harbor disclosures. As you know that this discussion will contain forward-looking statements. Just as 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. Now, to questions.

Operator

And your first question is from Philip Cusick with JP Morgan.

Philip Cusick -- J.P. Morgan -- Analyst

Hey, thanks for getting up early. I wonder if we can start with government. Last quarter, you had some delays from getting signings. What's the status of getting things signed off on at this point?

Mark Dankberg -- Chairman and Chief Executive Officer

I think the things that we highlighted last quarter, the biggest issues were on direct government prime contract, especially ones that involve security classification. We have the two main issues where, in some cases, just being able to get the contracts signed off, and the other was acceptance of products that required security. And I would say those kind of went as we expected, and it's better but not gone kind of the way I'd put it.

Philip Cusick -- J.P. Morgan -- Analyst

And how does that play into -- I noted in your shareholder letter this morning, you say that government systems momentum will build in the back half of the year. Do you anticipate those signing issues needing to be cleaned up for that or is that despite the signing issues?

Mark Dankberg -- Chairman and Chief Executive Officer

I think things continue on the trajectory that we're on, that's consistent with our outlook for that segment. And the other good thing is that the backlog that we've got is really good. I mean, we had just a good awards quarter. So we've got backlog going in.

So we always have, in each quarter, a fair amount of product orders that go against the IDIQ contracts that we have. So it's not like everything is all locked up. But based on the way things are going, the outlook, it seems good for us to continue to build revenue and earnings through the year as we usually have in that business.

Philip Cusick -- J.P. Morgan -- Analyst

OK. That's helpful. And then it sounds like ViaSat-3 timing getting pushed out a little bit. You mentioned some scheduling pressure and shipping a little bit later.

Should we look at that still being launched in calendar '21?

Mark Dankberg -- Chairman and Chief Executive Officer

Yes. That's what we're aiming for. Like we have said before, the shipping with payload back to Boeing is a really big milestone because then from there on, the rest of the program is really pretty straightforward as F&O two production program for them. And I think the last thing that we said was that we were aiming for around the middle of the year.

So I'd say we're certainly aiming to have a launch next year. But I think we feel a lot more comfortable giving the specifics next quarter because, at that point, we'll be quite close to being able to ship that payload back to Boeing.

Philip Cusick -- J.P. Morgan -- Analyst

Sounds good. And then last one if I can. The equity raise, $175 million very recently. Can you help us understand, number one, why you wanted to raise equity? And number two, the timing seems a little bit strange post the quarter pre-earnings release.

Why do it then? Thank you.

Mark Dankberg -- Chairman and Chief Executive Officer

OK. So the equity raise was with two investors, Intercorp and Baupost. And really, it was kind of catalyzed by our relationship with Intercorp, who we see as a really helpful partner in our international expansion. And so we have been working on it for quite a while, probably a few months, and it came together at the time that it did.

I would say the overall market environments are very dynamic. And so we've just figured that it will be better to execute the deal when it was ready as opposed to waiting even weeks just because markets are so volatile. That's what explains the timing once we put the deal together. Baupost expressed interest in participating in that same deal.

I would say...

June Harrison -- Investor Relations

It wasn't an outbound, and that's the key.

Mark Dankberg -- Chairman and Chief Executive Officer

Yeah. Yeah. That's fair. Yeah.

And I would say that just in terms of why, I mean, it's a volatile environment that we're in. We see a bunch of opportunity, and I think that having additional equity base gives us more maneuvering room to deal with that -- to deal with the opportunities that are coming a lot. And we never can say anything until things are done, but there are definitely opportunities out there where I think this will be helpful. And if they come to fruition, I think people will understand sort of what was that we're -- the kind of things that we are looking for.

Philip Cusick -- J.P. Morgan -- Analyst

Understood. Thanks very much.

Mark Dankberg -- Chairman and Chief Executive Officer

Thank you.

Operator

The next question is from Rick Prentiss with Raymond James.

Rick Prentiss -- Raymond James -- Analyst

Great. Yeah. Good early morning. I hope you guys are doing OK, your families, and employees as well in COVID-19.

It sounds like business is obviously doing well. Question and one follow-up on Phil's question there. Then, Mark, you mentioned there's opportunities out there. The shareholder letter talked about potential strategic growth opportunities in evaluating success-based investments.

Can you elaborate a little bit on that about what's interesting out there, what you might want, or what you might need in the array of your diversified portfolio?

Mark Dankberg -- Chairman and Chief Executive Officer

No. It's hard to give specifics. I think we have a pretty good track record of doing strategic transactions that generally, they're kind of tuck-in type things that help us either with specific elements of technology or in specific market segments or possibly in specific geographic areas. And those are, in general, the kinds of things we would look at.

It would be, in general, things that would be helpful to either defense to broadband services properly and possibly some things that we might do in the aeronautical thing. And then also, there's also some potential opportunities to make interesting value propositions in some of our markets that could be enabled by some of these potential transactions. I'd say that's kind of the theme that we're looking at.

Rick Prentiss -- Raymond James -- Analyst

OK. And obviously, a lot of discussion with the RDOF, the Rural Digital Opportunity Fund. You talked about it some last quarter. Other satellite operators have started talking about it as well.

Can you update us as far as where you think satellite providers can play in the RDOF given the latency requirements? But then also, Mark, if you could expand it more broadly into what's happening in the competitive universe. A lot of incoming calls about fiber moving deeper into the marketplace and also all the speculation on the new LEOs as far as what they'll be as far as a competitive dynamic particularly versus your businesses.

Mark Dankberg -- Chairman and Chief Executive Officer

OK. So those are all good and fair questions, Rick. The RDOF program has reached the point where none, no potential participant can make any comments on RDOF whatsoever. So we're taking that very seriously.

So I'm out to pasture pretty much everything you asked.

Rick Prentiss -- Raymond James -- Analyst

And how about the new LEOs as far as what competitive threat they might pose?

Mark Dankberg -- Chairman and Chief Executive Officer

Well, I'd say that the LEOs are kind of evolving the way that we expected. I don't think it's -- I don't think anybody should be surprised that the Amazon Hyper system got FCC approval. I think that's clearly going to complicate the LEO situation because just from an orbital-dynamics perspective, it's going to get crowded in that region of space. And then those are all -- those are things that I think we'll address to a little extent in the FCC's notice approval.

There's still some work to do. But I think that the main themes that we've been saying on LEO is that the cost of useful bandwidth is going to be quite a bit higher than it will be for our GEO satellites. And so we think that's a pretty strong advantage for us in most of the markets that we're in. We'll also have lots of coverage, especially in the ocean areas, probably before the LEO systems, too.

So we're comfortable with our situation. I think it will bring growth to the market. I think it will expand the market. And we've been anticipating, as we've done each time we've launched new satellites, that we'll be able to improve the amount of band with how we can deliver to our customers in each of those markets as we launch our satellites.

So I think that's kind of -- I don't think anything's changed in the last quarter relative to those major points.

Rick Prentiss -- Raymond James -- Analyst

And maybe one, you could elaborate a little deeper since I hit a couple of tough subjects. Obviously, military and government doing quite strong. Where are you at as far as maybe moving your product beyond like special forces into mainline forces in that backlog and the opportunity set for the government business?

Mark Dankberg -- Chairman and Chief Executive Officer

I'd say we're continuing to make good progress there. I think that's one of the underlying reasons that our business has been growing kind of so steadily for such a long time. The basic theme is the one that you said, which is to get into kind of the first responders, early adopters in a lot of these markets, and then have that example would be something that more the mainline forces can see and also adopt. And it takes work as one of the other themes that we've described a fair amount in our government business is that a lot of our business is not in what I call programs of record.

It's really showing operational capability is better. So important over valuable that our customer base is figuring out how to allocate lending to acquire that stuff. And so the main area and some of the examples that we've given are being able to first get into special forces, tactical air controllers with things like handheld Link 16 to be able to get what we call our small tactical terminal, again, for Link 16 onto rotary-wing platforms. More recently, we've been getting on more rotary-wing platforms for satellite broadband.

And in each case, it's generally some part of the special forces of each service that are adopting these things first and we see that continuing to go. Usually, those start small and they just continue to grow. There's not often like a major event that occurs. What you'll see is kind of the major event was getting on a particular platform for a particular application with a particular user group.

That's generally how these things start and then they expand. I would say the other thing that's going on is we are seeing -- I think there is this big theme of overall, I think, pivot to Asia Pacific or more focus on doing the near-peer and kind of the way that it's framed as near-peer competitors is shifting a lot of the priorities in DoD, and that's also creating really good opportunities for us. Some of those are bigger opportunities, but they also often generally start with some form of study or technical prototyping or demonstration. And if those go well, then they'll pass them into larger programs.

If we make progress on those, we may bring some of those out over the next few quarters.

Rick Prentiss -- Raymond James -- Analyst

OK. Great. Good to get your nose under the tent, and then wish you all well and your family, employees. Stay safe in these crazy times.

Mark Dankberg -- Chairman and Chief Executive Officer

Thank you very much. You, too.

Operator

Your next question is from Simon Flannery with Morgan Stanley.

Simon Flannery -- Morgan Stanley -- Analyst

Great. Thank you very much. Good morning. Mark, I wonder if you could talk a little bit more about IFC.

What have you been seeing for the last several months in terms of the ramp-up in that? It seems like you've got a few more planes flying perhaps than the industry overall. Is that continuing to build through the third quarter? And what about the pipeline? There's been a lot of focus about Delta's plans to go free WiFi and other potential opportunities in the pipeline. Is that all on hold given COVID and their kind of financial environment for the industry overall? But any color there would be great.

Mark Dankberg -- Chairman and Chief Executive Officer

OK. So this is obviously like the most challenging time ever for our commercial airline customers and the progression out of the bottom of the market is -- it's happening. It's happening slowly, but it's happening steadily. I think what -- for instance, one of the first things that we've seen, and you can see this a little bit from our report, is that the proportion of claims that are filed is a lot higher than the proportion of passengers that are on those planes.

And that's really the biggest issue for the airlines to deal with. Just from some statistics are, I think we looked at it -- if you use TSA checks as a metric, we saw those down 90% in May, about 80% in June and 75% in July. So things are coming back. I think as the planes fill up a little more, I think you'll see more planes coming back into service.

And then you'll see a little bit of back and forth on that, that's hopefully the way things will go. The airlines themselves have -- I mean, it's just a great empathy for them just because of the issues that they're dealing with. But I would say that there, the attention that they're paying to in-flight connectivity is significant. I mean, I think as anything they're seeing, this is probably even more important than it was before that people want to be connected while they're flying.

Clearly, we are a cost input for the airlines. And so we've had a lot of discussions with them about helping them through this time. But I'd say all those discussions have been constructive, and they're centered around how do they and we improve the offerings, make it more available and maybe expand the ways that it's offered. So I think we're making progress on that.

And then the last part, which is both -- the other part, I would say, is becoming more evident as one of the points that we made in there is that because -- in our levers, because we've been on newer planes, we're probably dealing with a lot of fewer retirements than some of the other IFC providers, which I think is going to help us coming out of that situation. Then to the last part, which is activity among airlines that either don't have it yet or were going to expand their service, expand their fleet or expand the markets where they offer service and potentially in the Delta case where airlines are talking about switching service providers. We are still seeing really robust activity. And we have a lot of virtual meetings now mostly, lots of virtual meetings with airlines.

And I'd say we're optimistic, but anything that we describe will be on a schedule that's convenient for our airline customers, and that's how we'll hopefully be able to announce things. But the other point that we made in the shareholder letter is that of the orders that we already had entering into the pandemic, pretty much all of those are still intact, and we still expect to deploy them once the market picks up again.

Simon Flannery -- Morgan Stanley -- Analyst

Great. And then turning to the consumer broadband, obviously, a very valuable product in a time like this. How is your capacity of availability to continue to satisfy demand there? Are you pushing up against the limits of ViaSat-2? Or do you think there's still room to continue to add subscribers?

Mark Dankberg -- Chairman and Chief Executive Officer

Well, the basic theme is what we've seen before, which is that the demand tends to be concentrated in high demand areas. And certainly, that's where we -- and I think that's what's happening in the industry is that in the places where there was high demand, now there's a lot more demand. And there's also more demand in the lower demand areas, but not the same as in the high demand areas. So we are supply constraint in meeting the demand.

I mean, that's been a factor. I think from our perspective, that's a good sign going into a launch of ViaSat-3 is that it will be able to offer plans to more people and a lot more attractive plans as we get more bandwidth. I think also though, we do have room for growth in what are the lower demand areas in the U.S., and we certainly have room for growth internationally. And so that's in the time interval between now and when we have ViaSat-3 in service, those will be the main areas that we're going to look for growth.

And we'll do that on the international side by being able to engage some of our distribution partners who mostly have been kind of temporarily sort of bounded or constrained because of the virus, but are now kind of you're seeing in the U.S. that people are kind of determined to open up their economies. So I think we'll see some on the international side, and I think we'll come up with some new plans and programs in the lower demand areas that will help us grow there. But in the overall, our long-term trend is going to be -- the long-term trend is going to be improving the service.

And so as the demand has increased, and we talked about demand increasing in two forms. One is the subscribers already have using more bandwidth and then lots of people with lower-end services switching to services that can offer higher speeds and higher bandwidth. That is creating some stress for us in the highest demand areas. So one of the things we're going to be focused on is maintaining service quality.

One of the things we talked about last quarter, we're pretty excited about is being in the top 10 in that U.S. news report for ISPs, and we'd like to preserve and build on that reputation. And so the demand that you're seeing now is definitely making that [Inaudible] a little bit harder.

Simon Flannery -- Morgan Stanley -- Analyst

Understood. Thanks, Mark.

Mark Dankberg -- Chairman and Chief Executive Officer

Thank you, Simon.

Operator

Next question is from Rich Valera with Needham & Company.

Unknown speaker

Hey, this is Chad [Inaudible] on for Rich Valera. I was just wondering in terms of the recent equity raise. If you could give us any more color around potential business opportunities in Latin America that could arise from it.

Mark Dankberg -- Chairman and Chief Executive Officer

OK. Well, so we mentioned Intercorp as a strategic partner in Latin America. And so that is -- we're looking to expand our relationship with them. And that will help us with service distribution in a number of markets and also in some of the specific services that we can bring to those markets.

And I think it's a little less that we needed funding in order to do it and a little more of that. We really value the strategic relationship and the skills and resources that Intercore brings to those markets. And so I wouldn't necessarily draw a connection between that and investment into Latin America. I would more think about it in terms of kind of what we think is a strategic relationship with a really strong partner in that region.

And then giving us more flexibility and maneuvering room for strategic opportunities or go overall globally across the businesses and across geographies.

Unknown speaker

Great. Thank you.

Operator

Your next question comes from Mathieu Robilliard with Barclays.

Mathieu Robilliard -- Barclays -- Analyst

Yes. Good morning. And also thank you for making that call early. It makes a difference when calling from Europe, so thanks for that.

I had a question about ARPU on the satellite service. Obviously, very impressive progression this quarter. And what I was trying to understand is how much is linked to some of your consumers topping up on their existing plan or other consumers actually moving up the ladder on the plans and taking bigger packages. What I'm really trying to understand is how sustainable that increase in the ARPU is.

Is it just a spike because of the current situation or do you think this is more structural?

Mark Dankberg -- Chairman and Chief Executive Officer

OK. So, you know, one of the main reasons – OK. So there's been ongoing reasons in the growth of ARPU over the last two years that we've talked about in the past, which is generally a higher proportion of retail subscribers, a lower proportion of wholesale subscribers. And then also the fact that we've aimed our services at kind of higher value, higher bandwidth plans.

But in the last quarter, there was an additional ingredient, which is the upgrades that you mentioned. And the way that our plans work, we tend to kind of minimize a top-up in terms of purchasing additional gigabytes during the course of a month and more having plans that have higher speed and more bandwidth allocation. And that's the trend that happened. We don't expect that ARPU is going to continue to rise, so the way it is, it has been.

I think it will be just the number of dynamics that are going to affect ARPU. One is we are -- especially as we go into the ViaSat-3 here, we expect that will, in general, offer service plans at lower price points than we do now. So I think we expect, over the longer-term, ARPU to come down. The other thing is that we expect that our international business will continue to grow, and that will have a mitigating impact on our total ARPU in the fixed broadband business.

And then also we'll be expanding our WiFi hotspot sites. And that has a little bit of a funny impact on ARPU. The individual users spend much, much less money per month, but there tend to be a lot of them per site. And so when you put all that stuff into the mix, our revenue per site which is kind of the way that we're starting to look at it as we get this mix of sites.

Our revenue per site, so I don't think it's going to -- I don't think it's going to move that dramatically in either direction. But it might trend up a little bit or it might trend down a little bit, just depending on the mix of growth in each of those categories over the next few quarters.

Mathieu Robilliard -- Barclays -- Analyst

Thanks. And just following up on the mechanics of the upgrade. So if I'm a consumer and I'm on a package, say, Liberty 25 or something like that, and I want to move up. Is it quite easy? I mean, there's no constraint, even though I may have been on -- OK.

And conversely, to come down, is that as easy?

Mark Dankberg -- Chairman and Chief Executive Officer

Yes, yes, yes. We give customers the ability to go up or down.

Mathieu Robilliard -- Barclays -- Analyst

Great. And then, actually, following up on one of your points in the emerging markets. Have you seen any noticeable pickup in volumes or in programs by governance that realize the importance of broadband connectivity in this time in some of the emerging markets where you operate?

Mark Dankberg -- Chairman and Chief Executive Officer

OK. We've definitely seen the issue of government interest in making broadband more universally available. But definitely seeing that in the U.S. at every level, whether it's federal, state, local municipalities, and counties, at every level.

There's interest in that. There's strong demand there. Internationally, I would say the same theme, maybe not with quite the same intensity, especially domestically, as we've gone to much more school from home and work from home that's really spiked that interest because of interest in fairness, universal education, an equality of opportunity. Those have been strong themes in the U.S.

I think we'll see similar themes internationally, but we're probably not as embedded in those markets to be able to discern them as quickly or to get the inbound as quickly as we have in the U.S. I think that we will see them. I mean, as an example, in Brazil, one of the main premises for our biggest program there was to reach rural schools and rural communities. So I think we will see it.

I think as we become more embedded in those markets, that will be more of a factor for us. But the notion of universal connectivity, I would say, is getting more and more attention on a global basis.

Mathieu Robilliard -- Barclays -- Analyst

That's great. Thank you very much.

Mark Dankberg -- Chairman and Chief Executive Officer

Sure. Thank you.

Operator

Your next question is from Mike Crawford with B. Riley.

Mike Crawford -- B. Riley FBR -- Analyst

Mark, were gross fixed broadband adds around 67,000 in the quarter?

Mark Dankberg -- Chairman and Chief Executive Officer

I'm sorry. Did you ask if gross adds were that or net -- did you mean net?

Mike Crawford -- B. Riley FBR -- Analyst

No. Net gross.

Mark Dankberg -- Chairman and Chief Executive Officer

The gross adds are always. You mean net adds?

Mike Crawford -- B. Riley FBR -- Analyst

The net adds were 9,000. I was wondering what the gross adds were.

Mark Dankberg -- Chairman and Chief Executive Officer

I would say churn has been relatively constant, slightly improving for us. And so for the net adds to go up by that amount, that eats up kind of a corresponding improvement in gross adds.

Mike Crawford -- B. Riley FBR -- Analyst

Right. So I was kind of wondering, and I know churn has been improving, especially as you have a better fit customer with these higher-value plans always. I was just wondering if I could sneak in what around where churn is.

Rick Baldridge -- Vice President and General Manager

So you're pretty close, Mike. I mean, we've kind of moved away from trying to get all these in. The actual gross of net adds in this space are becoming less and less an indicator where our business going, especially as we talk about brand enterprise customers, we're adding some of these other community Internet sites. And they all differ from a standpoint.

So right now, we don't have blended ARPU, but we will in the future, probably. So we're trying to figure out how to sort of give you guys some indicator of where that's going. It's probably not the current gross and net add numbers that are going to be critical.

Mike Crawford -- B. Riley FBR -- Analyst

OK. Thanks, Rick. And then switching gears. With your hybrid adaptive network concept that gives more roaming flexibility to particularly government customers.

Is there a chance you could get prebuys or precommitment on ViaSat-3 network before you actually launched ViaSat-3 from commitment from the DoD purchase capacity?

Mark Dankberg -- Chairman and Chief Executive Officer

Well, I'd say yes and no. I mean, the way -- look, so let me look into the government, the way the government business works. It's difficult for the government to make multiyear commitments. But in general, what you see is that when we go when -- let's say, we get onto new platforms, aero platforms or even with a lot of the ground-based terminals that we provide, the main reason often for our customers to acquire that equipment is to get the services that go along with that.

And so before that those usually come in are -- basically, they are either firm contracts with options or they can acquire service under these IDIQ contracts. So you wouldn't necessarily see us make an announcement that says X organization has purchased this amount of bandwidth over a five-year period. But what you will see is it will get a contract for a six- or seven-year period with a base year and a number of option years. And that's the form that that happened as that occurs.

So they're not exactly take-or-pay contracts because they may or may not execute the option years, but our experience has been that. That once they take those contracts, that's really been quite predictable after that. So that is the mechanism. The other point that I'd make, which goes along with this is that most defense activities take place outside of the Continental U.S.

or U.S. territories. And so the fact that we have ViaSat-3 coverage and that we have these global partnerships with other satellite operators means that one of the attractions is being able to use that bandwidth, wherever those forces may be. In some cases, they roam everywhere globally.

In other cases, they're more likely to be geographically predictable. And then the other part, I'd say that actually, a good thing for us is that kind of all I'd say almost all, I knew you're seeing this, but they're going to all is that one of the big benefits of our terminals are that they work on not only our assets or other commercial assets, but they work on the government's organic assets as well. So generally, they'll bake that into their plans, as well as what that access they expect to have or need on government systems like WGS and what they'll use on the commercial ones. But I do think that things play out well kind of on the path we're on that we'll have a pretty good amount of business lined up by the time these global satellites are launched.

But it will be in the form that I described. Did that help?

Mike Crawford -- B. Riley FBR -- Analyst

Yes, yes. Thank you. And then just since you mentioned the global coverage. So, I mean, we're going to get some form of LEO networks globally, which then also can be used as part of such, like I say, a hybrid adaptive network concept for a DoD customer.

But what about the repercussions of potential, let's say, aggression in that space where -- I mean, how hard -- sorry, I think it would take a pretty sophisticated nation-state to try to say directly target, say, a geostationary satellite fire up and not moving around. But if you had -- if there was a -- how many people would have the ability to say go in and mess up a whole orbital low-earth orbiting region? And what would be the repercussions or something like that?

Mark Dankberg -- Chairman and Chief Executive Officer

OK. OK. So, look, it wasn't -- I think the area that you're touching on is really -- so one phrase that the DoD uses for that now is resilience. And there's an acronym that's surfacing or becoming more common in the DoD for just about any of these situations where they'll talk about having primary communications and alternative and contingency and emergency communications.

And so they have different levels and they try to attribute different levels of resilience to those. So the notion of actually attacking assets in space that's pretty high on the scale. But that's absolutely one of the concerns in the most extreme cases. And I would say that the DoD assessments of different forms of assets are -- it's evolving because you're seeing that is one of the things we read out in the news every day, which is, as an example, especially recently, people are talking about using directed energy weapons against lower orbit satellites as an example, which brings the cost, so it brings the economic cost down.

Obviously, there's could be enormous geopolitical consequences of taking actions like that. So that goes into the more extreme space, attacking geosynchronous assets much more difficult, and there are targets that are, say, much more valuable than commercial assets in that space. But I think that the main theme, and you mentioned it at the beginning with our hybrid adaptive network is that the main theme across this is resilience, is being able to access a broad range of networks. And one of the things that we've been pulling together is being able to show defense customers, and we just had a very good, well-attended demonstration on this topic was that using a single network, any platforms could switch pretty seamlessly among a broad array of commercial and government assets in geosynchronous orbit, which are difficult to target.

And so I think that's a really attractive value proposition, especially when that can be done with terminals that are already highly proliferated throughout the force. So that's one of the main themes that we're working with. And I think that you'll see satellite operators from each orbital regime being interested in participating in, something like that, to the extent that you can get access to non-geosynchronous orbits on terminals that work well with both the government assets and the other commercial assets, that's kind of more of that current theme.

Mike Crawford -- B. Riley FBR -- Analyst

OK. OK. Thank you very much.

Mark Dankberg -- Chairman and Chief Executive Officer

Thanks, Mike.

Operator

Your next question is from Chris Quilty with Quilty Analytics.

Chris Quilty -- Quilty Analytics -- Analyst

Thanks. Mark, had a question on the backlog. I mean, in the old days, it was two-thirds MIDS. Can you give us a sense of kind of what it looks like nowadays in terms of the mix? And along those lines in the quarter, I mean, phenomenal orders, was that somewhat unexpected? Were these -- the government has been trying to accelerate orders in this difficult time? Or were most of these kind of on the schedule that you were expecting?

Mark Dankberg -- Chairman and Chief Executive Officer

OK. First, one of the points that I always make, we want to make it in both the good quarters and the back quarters is that orders are lumpy in DoD. And so I'd say that the things that the contracts that we received are all pretty much things that we've been working on. I mean, there's no bluebirds or things that temped out.

And it was a good awards quarter for us. I think that we have -- one of the point I would make, and we did before, I just want to reiterate is that proposal activities for us, both in terms of quantity and value are high. So I think that's a good thing. You're not going to get more orders than you submit proposals for.

In terms of the makeup of the backlog, it's definitely not two-thirds of MIDS. It's a much more diverse space than that. So just the Link 16 business itself has become a lot more diverse. So we have now multiple products within that.

And MIDS as a proportion of our total tactical data links has actually gone down a little bit because of the diversity of products in there. And then the other area that's -- the other areas that I think are growing for us in general, and I'm not intending to describe them as -- intending to describe the instantaneous makeup of the backlog today. But I can tell you, in general, the things that do get into backlog to some extent and are helping, one is the information assurance appliances, especially if the government goes more and more to cloud services that's an area that we're strong in. And then the satellite broadband part has been really good for us.

It's a very diverse space, more and more platforms. One of the things that we've talked about a couple of quarters ago was how our defense mobile broadband services business is as big as or bigger than the commercial aero one. And now, it's obviously -- it's at a run rate. It's substantially bigger than the commercial aero is.

And then the other area that is a good growth area for us is integration of satellite in terrestrial tactical networks and being able to merge those two together. It is something that's really interesting to a lot of our customers. And so that's been one of our fastest-growing product areas.

Chris Quilty -- Quilty Analytics -- Analyst

OK. On that point, what launch did you sneak that Link 16 small sat into orbit? And can you talk about real interesting networking opportunity there? But how does it play in currently to the thinking that DARPA or, I guess, more specifically, SDA has in terms of the information layers?

Mark Dankberg -- Chairman and Chief Executive Officer

OK. First thing is we do have our first small sat in orbit. It is not the Link 16 satellite. It was for a different mission.

That we can't describe the mission, but it was our first prime small sat. And it completed well over a year ago, but only was recently launched. And I think our customer is really pleased with the performance of it. And I think that creates additional opportunity for us in that particular market space.

So Link 16 satellite is probably maybe say a year-ish away from what I expect. OK. Going to DARPA and SDA, so there's one area of interest in small sats in general. One of the things SDA has talked about is the notion of a kind of a transport layer, which would work with a number of different sensor systems and targeting systems to provide transport among sensors and shooters.

And think of that as kind of a generic layer. What you've seen from them is -- and remember, there's multiple programs, and they're not necessarily totally coordinated among on themselves, but you've seen programs like Blackjack, where they're looking at sort of a bus that they could reuse for multiple missions. And now you're seeing interest in specific types of payloads. One of the main things that -- one of the main points that I would make is that the communication systems and the transmission systems that they're talking about, and these aren't necessarily what you would consider to be just plain old broadband systems, they're not necessarily looking for broadband pipes.

They're looking for specific connections among certain types of sensors and targeting or communication networks. That's definitely an interesting area. Right now, I would say, no, it's more in the research and proof-of-concept phase. But the other areas for us that we're really interested in is you're seeing more and more interest among a variety of government organizations interested in mission-specific small sats.

And good news is there's lots of different missions that are out there. Some of them would sort of shore up or replace or make more resilient systems that we've had for quite a while that are viewed to be more vulnerable to either physical or electronic countermeasures. Some of them is just -- with more individual satellites, can we have a greater presence and get more timely information? And so that's really the market that we're looking at. And a lot of that will come from kind of a good familiarity with the missions of the different organizations that are going to be involved.

It's less going to be kind of a single universal system that gets applied to all these things. Is that good? Did that help clarify that at all?

Chris Quilty -- Quilty Analytics -- Analyst

That does. And maybe just a quick clarification. Who, if you can remind us, is funding the current work on that Link 16 satellite?

Mark Dankberg -- Chairman and Chief Executive Officer

That's the Air Force Research Lab.

Chris Quilty -- Quilty Analytics -- Analyst

OK. Final question on the IFC market. I guess I'll just be blunt here, which is Global Eagle is for sale, Global Gogo's CA business can be bought. Everything else is a mess.

If we woke up one day and there's a press release that Viasat acquired something in that IFC sector -- again, generically, without responding to individual companies, why would it make sense? We can judge on price paid, whatnot, but the pluses and minuses in terms of industry consolidation here.

Mark Dankberg -- Chairman and Chief Executive Officer

OK. So I think I'm going to say things that I think we repeated the floor. Generally, the value proposition that we're offering is to be able to provide connectivity to everybody on the plane and basically to allow everybody in the plant to do it whatever they want on the Internet. And it's really difficult to do using the terminals that are on or out of the planes that some of the competitors have.

There's just not the space segment resources available to be able to fulfill that value proposition. And that's especially true given the high peak to average demand that a lot of these fleets see when they have hub airports or destinations that attract a lot of flights multiple times a day. So for us to acquire assets that don't align with that value proposition is probably not something that we'll do. Unless it's somehow part of a strategy that the airline wants us to use for transitioning or something like that.

But I would say right now, we feel like we are in a pretty good position. Our business base is diverse, the airlines have confidence that we'll be there to serve them. We've got a really good reputation for reliability. I think one of the other things that you've seen is that other terminals or installations have had reliability problems independent of bandwidth availability.

And the airlines are -- they're just generally very concerned about reliability and quality. So I think it plays well for us. I mean, I certainly don't want to come across as overconfident. But I think we have a good value proposition that people respect.

I think it's in demand, and we're seeing continued opportunity. So that's the more likely path that you'll see us take over the next few quarters and years. Look, now, the other thing I would say is there are going to be opportunities to present maybe some unique new value propositions for us that we're working on, and that can help us grow as well.

Chris Quilty -- Quilty Analytics -- Analyst

Understand. And I think you're partially talking about the amount of Ku capacity that exists and will be coming online in the next three years, which is pretty limited outside of LEO. You also have talked in the past about the potential of using a dual-band antenna as a way to, in the interim, sort of expand your airline coverage. Is that still a focus for you or are we getting close enough to the launch of the ViaSat-3 satellites that you're just pretty committed to staying on a pure Ka path?

Mark Dankberg -- Chairman and Chief Executive Officer

No. So we have -- OK, yes. So, yes, all of your observations are correct in terms of the availability of Ku bandwidth in general. We have shipped, and we have flying dual-band Ka/Ku in commercial air now.

We did only have it on government, but now we're fit on, again, on the newer wide-bodies, so that's good. I think that there could be opportunities in Ka/Ku. I think one of the things that we're also pretty focused on are building lower cost, lower profile antennas that are more agile and will bring not only all of our Ka band global satellites in, but we'll bring in some of these non-geosynchronous satellites as well. And we've already done that with existing antennas.

Some of the new terminal products that we're working on, we'll do that to a greater extent and bring in more non-geosynchronous systems as well. So we are doing those things. I think the general theme that I responded to Mike Crawford's question about the government and the adaptive network, that would let us move them on multiple satellites. I think that's a theme that you'll see play out in commercial markets as well.

Because as the number of participants grows, the peak to average demands increase and the number of places where they occur, increase. And so being able to access multiple orbital systems, it's a really valuable aspect of what we do, and having the agreements with those operators is good. I think the airlines appreciate it just in the same ways that the government do. I think that's a little bit less concerned about typical or jamming threats, but they are certainly sensitive to congestion and availability and reliability of the satellites.

All those factors still carry over into the commercial market.

Chris Quilty -- Quilty Analytics -- Analyst

Well, I appreciate it.

Mark Dankberg -- Chairman and Chief Executive Officer

Thanks, Chris.

Operator

And we'll take one more call, and that caller is Louie DiPalma of William Blair.

Louie DiPalma -- William Blair -- Analyst

Mark, Rick, Sean, and Bruce, good morning. Can you hear me?

Mark Dankberg -- Chairman and Chief Executive Officer

Yes, we can. Good morning.

Louie DiPalma -- William Blair -- Analyst

SES appears to be moving ahead with their mPOWER constellation with Boeing and a plan to target the U.S. Department of Defense. Can you discuss your partnership with SES for the terminals for that constellation? You and SES seem to be on fairly friendly terms relative to the other competitors? And was SES related to your bookings and the Satellite Systems group this quarter?

Mark Dankberg -- Chairman and Chief Executive Officer

OK. One, so, Louie, we're not going to announce any -- we're not going to give any more detail on backlog. One of the things on -- so just on mPOWER, one is we absolutely expect that they're going to deploy that system. I think that -- I think that the satellites will make sense that Boeing knows how to build them, and they'll fund and deploy them.

I think that there's -- I think it's a very interesting non-geosynchronous system. Just like any other, it's got its own strengths and weaknesses. We have worked with SES. We have worked with them on O3b for quite a while.

We've done demonstrations where for defense customers, in particular, where they've been able to switch among geosynchronous and non-geosynchronous satellites. I think that our customers like some of the features of their non-GEO systems and they like being able to access. They absolutely like having access to multiple different systems through common terminal hardware. So all those themes are true.

I think that SES partly because of their experience with O3b appreciates the value of being able to deliver services through a broad range of terminals, right? So from their perspective, having terminals in the market that can access their system is a plus. I think from our perspective to the extent that a partner that we cooperate with can deliver a service to a customer that's, in some cases, better than what we could do in some particular location or under certain particular conditions, that's a good thing for us and for our customers. I think that our focus is really on quantity of bandwidth, we'll have probably, with ViaSat-3, a little broader coverage than mPOWER will in terms of geography. The mPOWER might be able to -- just because of the way it operates, might be able to bring higher peak speeds to bear for specific platforms, for instance, in a particular area and being able to help do that is good.

The only other thing is that -- going back to your other question is one thing we announced quite a while ago was a relationship with SES for phased array terminals for mPOWER. And so that program has progressed really well. Generally, I think we don't talk about our phased array business as much as other people do. But I think we're probably the leader in low cost, high-performance phased arrays at Ka band now, and we may expand that into Ku as well.

But certainly, that's one of the things that we're working with, with both SES and other customers as well, is to be able to get those phased array terminals out there that will work better with these non-geosynchronous systems. So there's opportunity for us there. And I think we do have a good relationship with SES. We want to preserve that.

Louie DiPalma -- William Blair -- Analyst

Sounds good. And also during the quarter, you announced a partnership to bid on the Skynet Wrap services contract. Do you anticipate that Skynet in the future will like utilize ViaSat-3 as part of a multi-satellite commercial government-owned architecture?

Mark Dankberg -- Chairman and Chief Executive Officer

OK. So, yes, we do a lot of business with the U.K. Defense -- the Ministry of Defense. If you look at kind of our defense business, the main focus is the U.S., next focus is what's called the Five Eyes, which includes the U.K.

and interoperability among all the Five Eyes is certainly truly a high priority, and then we go to Europe, also with NATO. I would say, Skynet itself has a long history. I think the U.K. is working on trying to figure out, is there a way to transition from the current system to a broader -- to a system that's got, I'd say, more capability probably ties in more space assets and kind of a more comprehensive program than what they've had in the past.

I think fairly recently, really finally went ahead on kind of interim next generation. That's what's been anticipated for quite a while. But we think we're on a -- I think we're on a good team that's a good competitor for the long-term program that they envision, but it will probably be a little while before that long-term program comes to fruition. But yes.

And the short answer, though, is, yes, I think that in their vision of a long-term program, it would go beyond just a dedicated Skynet space asset, and I think that's one of the things that we bring to our team.

Louie DiPalma -- William Blair -- Analyst

Sounds good. Thanks.

Mark Dankberg -- Chairman and Chief Executive Officer

Thanks.

Operator

And I'll now turn the call back to Mark Dankberg for closing remarks.

Mark Dankberg -- Chairman and Chief Executive Officer

OK. So a lot of questions. Thanks a lot. Really appreciate everybody's interest and everybody joining us so early in the morning that we needed to do, and we'll look forward to speaking again next quarter.

Operator

[Operator signoff]

Duration: 67 minutes

Call participants:

Mark Dankberg -- Chairman and Chief Executive Officer

June Harrison -- Investor Relations

Philip Cusick -- J.P. Morgan -- Analyst

Rick Prentiss -- Raymond James -- Analyst

Simon Flannery -- Morgan Stanley -- Analyst

Unknown speaker

Mathieu Robilliard -- Barclays -- Analyst

Mike Crawford -- B. Riley FBR -- Analyst

Rick Baldridge -- Vice President and General Manager

Chris Quilty -- Quilty Analytics -- Analyst

Louie DiPalma -- William Blair -- Analyst

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