Matt Desch: Well, I mean, we really assess our constellation life every year. This year was the first year as we ran through it, and we said, it’s been five years, if you will, since we started launching it. Our satellites are performing much better than expected. We added five additional satellites in space to add even more in orbit spares than we were expecting. And really, we couldn’t deny that the simulations we were running weren’t pushing us out to at least 17.5 years even beyond that. So it sort of forced an update in the fourth quarter and all the implications that it had. I mean, we’ll continue to do that every year, probably around the fourth quarter is when we typically assess that. And it could very well happen in the coming years. If the network continues to perform this well, we’ll have to update that again. But for now, I think that would probably be the expectations for at least the next year or two.
Simon Flannery: Right. And then on the commercial broadband, the comments about some exposure from switching from a primary service to companion service, can you sort of size how much revenues are coming from use as a primary service that sort of usage exposure? And is that really your main exposure within that commercial broadband to some of these new LEOs or is there other exposure in other segments?
Matt Desch: That’s the most exposure we really see at this point. We’re not — we’re switching, I mean, we were always a — we’re primarily being used; I have to be careful to use that word too many times as a companion service. The majority of our installations out there are as a companion to a VSAT service. VSAT services, including Starlink, don’t work when it storms. They have to be turned off in ports for regulatory purposes often or other reasons, certainly coverage and we were — the majority of our installations have been used as a companion. To the extent, we are used as a primary, we’re seeing very low cost Starlink coming in, being offered particularly for, say, crew welfare and that sort of thing is sort of taking over that usage — that those primary usage. And they might in many cases switch over to a companion type application. But it’s in the single-digit.
Tom Fitzpatrick: Yes, I can size it. We see it, Simon. We see ARPU. If you look at full year ARPU in 2024 versus 2023, we see it 5% to 10% down in 2024 from 2023. But since it’s finite and kind of a small number of vessels, we think it runs its course in 2024. And then we get back to growth sometime in 2025.
Simon Flannery: Growth in ARPU?
Tom Fitzpatrick: Not necessarily growth in ARPU, but growth rates accelerated in 2025 because you’re going to be — you’re going to have the subscriber gains and not the ARPU dilution, which we’ll see in 2024.
Simon Flannery: Right. All right. That’s helpful. Thanks a lot.
Matt Desch: Thanks, Simon.
Operator: Our next question comes from Walter Piecyk with LightShed. Please go ahead.
Matt Desch: Are you there, Walt? Are you on mute?
Walter Piecyk: Can you hear me now? Can you hear me now?
Matt Desch: There you go.
Walter Piecyk: How about now? Sorry, I [indiscernible]. The $9 million from the accounting impact, if I just use simple math on the service revenue 585 or so for 2023, that’s 150 basis point impact of growth, right? So your mid-point is five. So even if you added that back, the guide is effectively 6.5%, no, so —
Tom Fitzpatrick: That’s right. You got that right.
Walter Piecyk: Yes. So that feels a bit slower on services than I think, what a lot of us thought you could — would grow in this business. So is that just this ARPU thing that you were referred to in the prepared comments? Are there other things you can comment there on that —
Tom Fitzpatrick: Certainly the ARPU in broadband is a headwind that’s influencing the service revenue. But if you think about our long-term guide that we issued in 2021, for average high-single-digits 2023 through 2025, you’re sitting on a 9.7 in 2023. And so getting to high-single-digits seems pretty easy and we’ll hit that long-term guide. So the answer to your question is yes, there’s a bit of a headwind from the broadband that’s kind of limited and it’s going to abate, as I said. But we feel very good.
Walter Piecyk: Why — can you just repeat — I’m sorry if I missed that. Can you repeat why it’s going to update in 2024 and somehow? Go ahead, yes.
Tom Fitzpatrick: So there’s a finite number of vessels where we’re primary and we think that they’ll move — they will convert to companion quickly because it’s in their interest to, because it’s a cheaper solution. And so a) it’s a small number of vessels, b) it’s in their interest to, and we think that the ARPU runs its course through 2024 and settles in 2025, and then what we’ll be left with in 2025 is just subscriber gains and flat ARPU.
Walter Piecyk: So the subscriber equipment revenue slowdown that occurred, understandable, obviously, given the backlog, yada, yada, all the things that we talked about in the last couple of quarters, seemed to be a pretty good predictor of this lower growth rate. So I guess, I’m curious on your subscriber equipment outlook for 2024, I guess you said more normalized levels. It was $16 million in the fourth quarter. So is this the run rate $15 million to $20 million that we’re expecting for equipment revenue? And then isn’t that an indicator of future service revenue growth?
