Ryan Koontz: Yes. When you talk about complementary revenue that you — things like advertising in places like that where you can kind of boost revenue per seat? Or what sort of other monetization schemes are there?
Mark Dankberg: Yes. So the — well, one of the tricks is really the whole purpose of this is to increase passenger engagement and then basically think of in-flight connectivity is an amenity like other amenities and it’s got to carry its weight for those airlines, right. So the idea is come up with monetization strategies that are — that help overall with passenger engagement. Advertising is one mechanism, but there’s quite a few others that we’ve been testing with other airlines. And some of them involve promotions with interesting online services or destination-driven things. There’s just a very broad range of monetization opportunities. And I think our approach — and I think we’ve been fortunate here in working with some really savvy airlines that have different approaches to it.
I think one of the things you’re going to see pretty much by definition is if every airline does the same thing, then no airlines have a competitive advantage. So a lot of this is really around how they brand and monetize their operations in general and the partners that they use, which often are associated with their root structure and their — the values that their brand conveys. And I think we’ll give a little more detail on this, but it’s — I think it’s one of the biggest opportunities in in-flight connectivity.
Ryan Koontz: That’s really great. And any comments on the kind of wholesale needs you might have with other sat operators?
Mark Dankberg: Third-party? Yes. Especially, one of the main ways in which we’ve been working with third parties is on international markets where you have kind of flag carriers, and there doesn’t have to be a flag carrier, but basically local regional carriers and then you also have regional satellite operators that are often tied to their regional governments and their ambitions in space. And one of the things that we’ve been able to do is work with those partners. I think you can see more of this on a — think of it as a partnership, roaming wholesale basis where they can bring their space assets into service for their needs, and they can also address international flights where their own carriers go global and where other global carriers go to their regions.
And that — we think that’s a really interesting formula that also helps deal with this issue of reinforcing those hotspots. And it’s also very extensible into the maritime industry. So those are themes that really underpin a lot of these wholesale agreements or third-party partner agreements that we mentioned.
Operator: Your next question comes from the line of Chris Quilty with Quilty Space.
Christopher Quilty: Real quick first, a question for Shawn. I’m assuming the CapEx figures exclude capitalized interest?
Shawn Duffy: Yes. So thanks for asking, Chris. So the number that we gave you for both this year and next year do include that capitalized interest, which was about $200 million.
Christopher Quilty: Okay. Good. That’s even better then. Great. Second follow-up question on the I-8 satellites. Apparently, they’ve got electric propulsion, but that doesn’t prevent you from doing a direct injection if you want them to get to orbit quicker. Is that correct?
Mark Dankberg: Correct. Yes. We will do a launch mission that’s really based on when we need them in service, the services they’ll provide in the overall economics and trade-offs of that. But — right. We can — we have and can shorten the orbit raising time by choosing the launch vehicle. And we’re going to keep that option open.
Christopher Quilty: Got you. And the I6 F2, I think I got that right, is that fairly standard? I mean, you’re not going out on a limb and doing something major different with that replacement and it’s more of an off-the-shelf replacement from an existing or the existing vendor? Or do you see this as an opportunity to look to add new technology into that satellite?
Mark Dankberg: Okay. So there were some specific missions for Inmarsat that were combined on that satellite. The I6 satellites, as an example, combined both L-band and Ka-band payloads. So given where we are with the combined company and our other assets, what we’re really looking for is just the L-band portion of that payload. So — and that is — it’s — I wouldn’t call it commodity. But it’s — we could — there’s several different Inmarsat and other L-band satellites that we could use as the basis for that. Right now, we’re really just looking at our overall L-band fleet and our overall L-band needs and a migration strategy that’s around the safety services that are supported by our fleet, the aviation services which are expanding and supported by our fleet in making the decision on the best way to fulfill what that was — what that satellite was going to do.
And we’ll report on that, but we did think it was prudent to include a placeholder in FY ’25 for the cost that we would incur with the replacement.
Christopher Quilty: Got you. Final question, and it’s a little open-ended, but R&D like we very rarely talk about R&D as a line in the income statement more about specific projects. But when you look at the combination of the 2 company, there’s a lot of — 2 companies, there’s a lot of things you can do in terms of products, I think of terminals and gateways and modems and different things that need to be harmonized between the two. Are there any anticipated step-ups associated with R&D investments, forget the government stuff, which is funded R&D? Or do you just see sort of regular way investment consistent with what the 2 companies had been doing individually? Or is there a period of time here where you need to spend more to get some of the products and services to market quickly?
Mark Dankberg: Right now, the main — one of the main themes, as Guru described, it’s really operational synergies with R&D being an important component of that. So one example of that is we have 2 different networking systems, and we’re in the process of converging and that’s in our R&D plan. We also have a number of these improvements that we described that our networks operating more efficiently. But the overall — our overall R&D spend, we think, is going to stay in rough range of around 3.5% to 4%. And some — we’re basically aiming two big themes. One is synergies and then the other is productivity improvements and then think of it as service enhancements, a lot of which go around these missions that we described that our customers are doing.
That would be like for in-flight connectivity, that’s — the — think of it as a synthesis of the connectivity and the entertainment portions. There’s similar but different types of R&D activities that we’re doing for applications on the government side in the maritime space. But those are the main [indiscernible] drivers.
Operator: Your next question comes from the line of Edison Yu with Deutsche Bank.
Edison Yu: First, just housekeeping. Did I hear correctly about the Analyst Day that it is being pushed out? Is that what you were trying to communicate?
Kumara Gowrappan: This is Guru. Yes, so I’ll just say two things. One, we’ve had interactions with many of you, and we’ve had feedback on disclosures and overall reporting, and we’ve been taking that feedback and working through that. So our focus is really addressing some of the key questions that we are getting in, and we’ll address that in the next earnings, which means we are not going to do the Investor Day that we had originally thought of in March, and we are in parallel thinking to what a new Investor Day would look like. So we’ll come back to you when we have an update there. But we didn’t want to delay key questions that we’re getting around disclosures and overall reporting, which we’ll address in the next earnings call.
Edison Yu: Understand, understand. Just a couple on the business. Just curious on the cash flow. There were a couple of discrete items called out as a headwind. Any way you can kind of quantify what those were? And do those kind of headwinds go away sequentially?
Shawn Duffy: Yes, Edison, this is Shawn. Yes, I think that one of the things to keep in mind is, in Q3, we had kind of a lift in — our cash flow requirements related to the tax payments that we needed to do for the TDL transaction, and we had a little bit also over on the U.K. side. So when I think about it, kind of Q3 to Q4, I think I would — we’ll have our interest payments in that quarter, maybe that’s about $33 million. You could see our working capital requirement, probably around the $50-ish million or so in isolated there. But I don’t think we don’t have any material tax payments coming into Q4. So that’s a good way to think about it.
Edison Yu: All right, great. And then last question, just on the cost. I realized we boosted the savings potential to $100 million for 2 years. Are we looking at trying to maybe take more? Obviously, you had some more time to dig into the Inmarsat piece. Should we think about potentially some upside to that $100 million as we move forward?
