Q3 2025 Viasat Inc Earnings Call
Please standby your program is about to begin my name is Megan and I will be your conference I feel like the third this afternoon.
At this time I would like to welcome everyone device, that's third quarter fiscal year 'twenty to 'twenty five earnings specialist conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.
I would now like to turn the call over to MS. Lisa Curran, Vice President of Investor Relations. Ms. Curran you may begin your conference.
Thanks, Meg we will present certain non-GAAP financial measures on today's call information required by the SEC relating to these non-GAAP financial measure is available on our Q3 fiscal year 'twenty five shareholder letter on the Investor Relations section of our website during.
During the presentation, we will describe certain of the more significant factors that impacted year over year performance. We will also make forward looking statements within the meaning of the federal securities laws, including statements regarding events or developments that we expect or anticipate will or may occur in the future.
These forward looking statements are subject to a number of risks and uncertainty and actual results might differ materially from any forward looking statements that we make today.
Information regarding these factors that may cause actual results to differ materially from these forward looking statements is available in our SEC filings and annual report on Form 10-K.
Forward looking statements speak only as of the date. They are made and we do not assume any obligation to update any forward looking statements.
Speaker Change: With that I'll turn it over to Mark Thanks, Bergh, Chairman and CEO.
Speaker Change: Good afternoon, and thanks for joining us today with me along with Lisa Gary Chase, Our Chief Financial Officer, Shawn Duffy, our Chief Accounting Officer.
Speaker Change: As always we encourage reading the shareholder letter.
Speaker Change: Referencing the slides we posted on our website earlier this afternoon for more details.
Speaker Change: Our third quarter fiscal year 2025 results are good and moderately better than expectations and we remain on track for our full year guidance.
Speaker Change: Gary will go into more details on those results, which are a blend of good growth in our strongest target market.
Speaker Change: <unk> to enhance value propositions in maritime and expected declines in fixed broadband.
Speaker Change: Ill give a quick overview of some of the factors, enabling our growth and progress on areas, we can sustain and accelerate that growth.
Speaker Change: We will show that we are also making steady progress in achieving capital synergies and operating cost efficiencies supporting earnings and driving cash conversion.
Speaker Change: We intend to sustain and enhance already strong positions in attractive and growing satellite services and technology markets.
Gary: Spend a few minutes on this and then Gary.
Gary: Cover the financial results and our growth outlook before we take questions.
Gary: In aviation commercial in flight connectivity aircraft in service grew about 13% year over year business gets grew about 18% and backlog grew even faster at 22% year over year.
Gary: <unk> continues to be an attractive growth market for us we have a compelling value proposition and if I could.
Gary: Connectivity.
Gary: Clearly our customer base, both in the U S and internationally.
Gary: We've made very steady progress integrating capacity from multiple satellite operator partners.
Gary: Spanned our coverage and capacity.
Gary: Winning new airlines as well as new fleets with existing customers.
Gary: And going increasingly global with a full fast and free service plans for those airlines choosing that business model and we're meeting service level agreements, even on the busiest routes and at major airports.
Gary: Customers are responding and for instance, as we just announced we're very pleased to expand our full fleet with Starbucks in Asia Pacific.
Gary: You'll also see in our online material a report from our Hawaii travel news website.
Gary: Recently described their experience with.
Gary: Hi Fi on a United 737 Max.
Gary: Los Angeles to Hawaii, Hey.
Gary: We've got 130 megabit per second speeds on a viasat three serve claim that's testing our newest Wi Fi technology free to passengers.
Gary: We're anticipating even better performance with Viasat three slides two and three.
I've had 351 and its ability dedicated satellite beam to each individual play has served over 10000 clients today.
Gary: In business aviation, we're upgrading legacy inmarsat that uncapped speeds and usage volume and continuing to grow claimed in service.
Gary: Our depends on advanced technologies segment grew revenues almost 20% year over year in the third quarter with each of its four business areas are increasing following exceptional new orders in the second quarter.
Gary: Patton.
Gary: The backlog is up year over year.
Gary: Our cumulative and awarded.
Gary: Definite delivery and definite quantity.
Gary: Trillium.
Gary: We're pleased to see very positive customer feedback.
Gary: Geo and Leo multi orbit enterprise Maritime services Cognex is Wade.
Gary: Going step by step after launching beta service last fall, we have grown our order pipeline turned the leading edge of that into firm backlog and this quarter, we're accelerating turning backlog into ships in service.
Gary: Then chips in service into revenue.
Based on our order pipeline customer service plan selection and feedback from direct customers Global distribution partners. We are targeting a return to growth in our maritime business This coming fiscal year 'twenty six.
Gary: We've been aggressive and ambitious informing key partnerships with multiple geosynchronous and non GSE synchronous satellite operators and are integrating multiple new satellites into a more highly integrated version of the Inmarsat and Viasat satellite fleets to deliver state of the art services.
Gary: Made a ton of progress and techniques to expand geographic coverage and optimize resources to serve our mobility customers. That's contributed a portion of the Capex savings this year.
Gary: Still expanding total platforms and service.
Gary: Increasing bandwidth per platforms, and reducing near term schedule risk for the Viasat threes.
Gary: And we've also made steady progress on getting those viasat threes into service as we get closer to completion schedule risk is diminishing.
Gary: Anticipate by two to be completed and shipped to Cape Canaveral.
Gary: And in service late calendar year, 'twenty five to as expected.
Gary: Despite three manufacturing schedule outlook is unchanged from last quarter, but given our significantly increased coverage and capacity resources, we've chosen a less capital intensive launched configuration that slightly extends the orbit raising time.
Gary: <unk> will likely shift the in service date into calendar 2006.
Gary: We're also making good progress on our collaborative approach to transforming our L band networks, we're very pleased.
Speaker Change: European Space Agency has established an agreement with the mobile satellite services Association and a new contract with Viasat intended to support and promote European participation and a standards based open architecture Leo constellation that can augment existing geos.
Speaker Change: Emily Director device satellite services.
Speaker Change: We see global engagement and participation indirectly device is a critical element in delivering <unk> non terrestrial network services.
Speaker Change: National Telecommunications architectures.
Speaker Change: Supporting their sovereignty and security and ensuring regulatory compliance.
Speaker Change: We believe it's a differentiated strategy that promote global interest in participating in the space of economy technology.
Speaker Change: Innovation, and a safe and sustainable space environment.
Speaker Change: We and our partners in the mobile satellite services Association or excited about.
Speaker Change: The European space agency's involvement.
Speaker Change: The open architecture standards based multi tenant space infrastructure, bringing proven business models from terrestrial mobile networks, we will reduce cost and we will help countries and companies compete effectively.
Speaker Change: Its own perspective, it helps reduce future capital.
Speaker Change: While enabling state of the art networks and services.
Speaker Change: Lastly, we believe recent directly device transactions help underscore the value of our mobile satellite services spectrum and the benefits of supporting terrestrial three GPP standard for a narrow band Internet of things directed device services on our existing fleet.
Speaker Change: Overall, we are making steady progress building, our mid to long term outlook and we remain focused on growth cash conversion and deleverage. We continue to believe we have a portfolio and strategic optionality in the means of the sequences in which we address our challenges and opportunities and we will keep you updated as developments.
Speaker Change: With that I'll hand, it to Gary.
Gary: Thanks, Mark and good afternoon to everyone on the line in the third quarter, we delivered solid results with revenue of $1 2 billion adjusted EBITDA of $393 million and a 35% adjusted EBITDA margin.
Gary: Fortunately, we are beginning to make progress on our capital efficiency and cash generation initiatives.
Gary: I am incredibly thankful for the hard work of the Viasat team that delivered these results we've positioned ourselves to close out the year strongly and with a quarter to go we have a high degree of confidence in our fiscal 'twenty five guidance.
Gary: My excitement is ground in the few months that I've been here.
Gary: <unk> continues to win in key markets, including defense and aviation and build great franchises with durable competitive modes, while demonstrating financial and strategic discipline.
Gary: The path ahead has become clear here are three key priorities that we're focused on first building our franchises earnings power and customer lifetime value, while investing with discipline in our future.
Gary: By way of example, every 10 or so commercial aircraft, we install is worth roughly $4 million to $5 million in discounted lifetime, EBITDA contribution, which highlights the future value of the 570 aircrafts in our aviation backlog.
Gary: Early 100 maritime vessels represent a lifetime adjusted EBITDA contribution of about $3 million.
Gary: Our second priority, reducing our leverage which we believe is pressuring our debt and equity, we're not ready to share and state leverage targets, yet, but it is clear our debt level needs to be substantially lower so paying down debt is our top priority for capital allocation.
Gary: And finally generating free cash flow, we are examining a variety of mechanisms to accelerate deleveraging. However, generating free cash flow is the best means of.
Gary: Sustainably achieving that objective and highest quality path to free cash flow has continued franchise development that I noted we are focused on delivering that.
Gary: We're now working collectively to get organized for execution in fiscal 'twenty, six and to ensure that it will be a true and sustained turning point on all three of these fronts a big driver of my excitement comes from the response, our bias that team has had in getting this work done and the progress we've made over the last few months and coming together to solve problems I'll speak.
Gary: The Capex prioritization, which is a great example of that a few minutes.
Speaker Change: Here are some recent developments that exciting on the longer term development of our franchise as we focused on optimizing our capacity in the time before viasat three launches we've uncovered a variety of opportunities to enhance our coverage capacity and the performance we deliver to our customers Mark mentioned this IGN his remarks too good and <unk>.
Speaker Change: <unk> examples are first and Reconfiguring, our ground network to allow cross farming between the Viasat Inmarsat networks. Among other things, we should see a meaningful gain in the bandwidth we can offer our customers and business aviation at virtually no incremental cost to us and with no collateral impact on our existing customer franchises.
Speaker Change: We havent evolve past the secure targeted capacity from third parties that will reinforce some important coverage areas and enable more growth with better outcomes for our customers. When viasat three slides two and three entered commercial services services. These purchases will offer continued and complementary support in some critical parts of our network the <unk>.
Speaker Change: Changes reduced capex, but more importantly, enhance our ability to serve our broad and growing customer base for the long term.
Speaker Change: Fiscal 'twenty five continues to see expansion of our multi band multi orbit positions across the global defense market with opportunities and applications in the U S and globally in the third quarter government Satcom won new awards on Recompete and captured a new line fit positioned to deliver dual band global Aero terminals for the <unk>.
Speaker Change: <unk> hundred 90, multi mission air lifter Viasat multi band multi orbit multi network terminals will be integrated into the aircraft leveraging our decade plus development of these hardware networking capabilities that enable new networks to be easily integrated.
Speaker Change: Customers across our portfolio are increasingly interested in multi orbit solutions and our growing capabilities in that area will serve us well in the future.
Speaker Change: There are too many great stories in our business to cover on this call, but let me highlight one part our encryption business. Our KC 142 products have continued to see record awards in fiscal 'twenty five with $135 million in the fiscal year to date through the third quarter.
Speaker Change: These awards are also the result of long term investments beginning 10 years ago to develop and certify this current family of crypto products the.
Speaker Change: The revenues are further expanding our installed base of products as we prepare to participate and compete for the next generation encryption market, where we will leverage our current capabilities along with new technologies to provide high assurance encryption from the tactical edge and cloud connectivity, while looking to expand into space.
Speaker Change: Zeroing in on the near term now we face continued challenges and create revenue pressure in our U S fixed broadband business as we focus capacity towards meeting the growing demand from our higher value commercial aviation business Maritime revenue was also down 2 million sequentially due to incremental <unk> pressure and continued L band migration.
Speaker Change: Ahead of our wider rollout of Nexus way.
Speaker Change: We expect the rollout of Nexus wave and the answer is yes.
Speaker Change: And Viasat three flight to enter service will help turn these trends around beginning late in fiscal 2006.
Speaker Change: Meanwhile, we are building earnings power and our other franchises and aviation our Windsor translating into more craft more aircraft in service and New awards are sufficient to leave us with a growing backlog of future installs.
Speaker Change: <unk> service revenue increased approximately 12% year over year, and we ended the quarter with 30 950 aircraft in service up about 130 sequentially and a contracted backlog of approximately <unk> hundred 70, aircrafts up about 60% sequentially.
Speaker Change: While we're confident in the growth outlook and the trajectory for aviation our near term results continue to be impacted by a slow recovery of OEM deliveries as a result, we believe we will be a little bit below our prior target of 4200 aircraft in service by the end of the fiscal year.
Speaker Change: Further diversifying our earnings power into non transmission, our sponsorship monetization, while Nathan is great for our customers and is beginning to generate high value revenue with exciting future potential there.
Speaker Change: Fiscal 'twenty six is an important year for this business as we prepare to scale and are better able to size future market opportunities.
Speaker Change: Our defense and advanced Technology segment is a standout again this quarter with all businesses growing well.
Speaker Change: <unk>, the leading indicators continue to single signal strong growth in the year ahead secular trends are favorable product cycles, and white space product launches are supportive and awards are up 49% backlog up 26% and sole source <unk> up 13% year over year.
Speaker Change: On the capital side as we approach our long term planning process in December we ran a prioritization exercise across the company to drive real focused on the most essential work for fiscal 'twenty six and a few things that emerge from that process led to opportunities to better focus even in the remainder of this fiscal year, which helped to reduce and spend.
Speaker Change: Also as noted last quarter, we've been pushing hard to refine timing of our capital spent advancing customer critical items and deferring anything not critical to defer both capital spend and operating expense impacts.
Speaker Change: As we undertook this process we found several opportunities to purposefully move spend out reduce some sand altogether <unk> established a more refined view of when we might hit key milestones on the space and Brown side.
Speaker Change: The combined impact of these efforts was a large reduction in satellite spend and a reduction of projected growth in our run rate stands on things like software and other capex for a total of the $200 million reduction from the low end of prior guidance at.
Speaker Change: At the same time, we were able to hold future spend flat. So our free cash flow will benefit from all of that reduction.
Speaker Change: Now I'll cover two topics in more detail financial performance during the third quarter and our outlook for the fourth quarter and fiscal 'twenty six.
Speaker Change: Let's begin with the financial results all of my statements. In this section will reference the third quarter of fiscal 'twenty five in the prior year period, the third quarter of fiscal 'twenty. Four awards were one 8 billion led by our defense and advanced technologies segment and aviation connectivity.
Speaker Change: Backlog was $3 5 billion down $181 million.
Speaker Change: Log decline due to the removal of the energy services system integration backlog with the sale of that business.
Speaker Change: Along with declining subscribers in our U S fixed broadband business and fewer long term contracts in that business rare.
Speaker Change: Revenue was $1, one 2 billion essentially flat compared to the prior year quarter, reflecting declines in fixed broadband in product revenue within communications services.
Speaker Change: Offset by strong growth in aviation and information security space in mission systems, and tactical networking in our defense and advanced technologies segment.
Speaker Change: Net loss of $158 million increase from the net loss of $124 million a year ago, principally due to the $97 million noncash loss on extinguishment of the Inmarsat 26 senior secured notes as we frame, we refinanced the debt to extend maturities.
Speaker Change: Adjusted EBITDA was $393 million, an increase of 3% primarily driven by growth in our.
Speaker Change: Segment, reflecting $15 million of higher than anticipated tactical data radio licensing benefits, partially offset by fixed broadband in maritime within communication services.
Speaker Change: Operating cash flow was $219 million up more than 60%, despite absorbing approximately $30 million related to facility rationalization outflows. The improvement was primarily driven by decreased working capital and lower cash taxes.
Speaker Change: Capex was $253 million down 40% year over year from $421 million.
Speaker Change: We also collected an additional $42 $5 million of satellite insurance proceeds and have now cumulatively received about 97% of an anticipated.
Speaker Change: $170 million.
Speaker Change: Please note collection of these proceeds has no impact on our free cash flow calculation.
Speaker Change: Consistent with our ongoing portfolio review, we completed the sale of the energy services system integration business, which was included in fixed services and other within the communications services segment, the business generated approximately $50 million in revenue annually, but had minimal strategic synergies with our core businesses.
Speaker Change: Finally, net leverage was slightly lower year over year and slightly higher sequentially at about three seven times trailing 12 months adjusted EBITDA.
Speaker Change: The sequential increase is due to the commencement of Gx 10, AMB finance leases, which increased our debt by about $150 million.
Now, let's turn to some segment highlights and again in this section all references will be to the third quarter of fiscal 25 compared to the third quarter of fiscal 'twenty four.
Speaker Change: And communication services revenue was $820 million down 6%, reflecting the anticipated decline in our U S fixed broadband services and products, partially offset by strong growth in aviation and government Satcom.
Speaker Change: Aviation grew 12% led by a 13% increase in commercial aircraft in service our government Satcom business grew revenues, 4% strong demand for connectivity remains a top budget priority.
Speaker Change: Maritime revenue declined 8% as legacy L band offerings continued to decline and we see incremental broadband our pud pressure fixed.
Speaker Change: Fixed services and other revenue was down 21% as U S. Fixed broadband subscribers continued to decline as expected those revenue impacts drove EBITDA of $330 million down just 1% year over year.
Speaker Change: Turning to defense and advanced technologies, our DHA performance Awards.
Speaker Change: Awards of $327 million increased approximately 49% versus $220 million.
Speaker Change: Revenue was $303 million up 20% compared to $254 million.
Speaker Change: We saw broad strength across the segment, including information security space emission systems and tactical networking.
Speaker Change: Info second cyber defense space in mission systems product revenues were up 24, and 19% respectively, driven by strong product sales similar to the last two quarters. The tactical networking business line benefited by about $20 million in revenue and $15 million and adjusted EBITDA.
Speaker Change: The activation of certain product upgrades, along with new radio shipments once activated we recognized IP licensing revenue on these products that have been sold in prior periods.
Speaker Change: <unk> of new capabilities from prior periods shipments are difficult to forecast and we project future new shipment license revenues at lower levels and were recognized year to date.
Speaker Change: Defense and advanced technologies, adjusted EBITDA was 64 million up 27% compared to $50 million, reflecting the strong revenue growth across the segment.
Speaker Change: Overall, we continue to make good progress against our fiscal 'twenty five planned driving solid growth in cash from operations. While Capex continues to come in lower than expected as a result, Q3 and year to date cash burn has been lower than previously anticipated.
Speaker Change: Now, let me turn to our outlook challenges.
Speaker Change: <unk> lenses continue but the biocide team is rising to meet those challenges. We continue to expect fiscal 'twenty five revenue to be flat to slightly up year over year with adjusted EBITDA growth in the mid single digits.
Speaker Change: Given our results thus far our confidence in achieving our fiscal 'twenty five EBITDA guidance has clearly increased and we've provided additional segment level detail in the outlook section of our shareholder letter and slides.
Speaker Change: We've talked a lot about FX today, the sum of all the efforts I've mentioned.
Speaker Change: Leaves us with an expectation that fiscal 'twenty, five capex will be $200 million lower than the low end of our last fiscal 'twenty five guidance at approximately $1 1 billion. We recently completed our multiyear strategic plan and are now mobilizing to refine our fiscal 'twenty six outlook and resource the initiatives that will support it.
Speaker Change: In addition to the challenges we face as we exit fiscal 'twenty five we will have the remaining $250 million of Capex and about $80 million of recurring opex related to the build of our viasat three space and ground assets that won't generate material incremental revenue until late in the year.
Speaker Change: For fiscal 2006, we expect year over year revenue growth and modest adjusted EBITDA growth. Despite the $200 million reduction in fiscal 'twenty five Capex expected 26, Capex is essentially flat to prior implied guidance at about one 3 billion.
Speaker Change: With the timing shifts we now anticipate around Capex, we believe free cash flow inflection will occur in the second half of our fiscal year as we get beyond the elevated capex related to the development of our bias at three space and ground networks. However for the sake of clarity with adjusted EBITDA, essentially unchanged and capex $200 million lower than the mid.
Speaker Change: Point of our prior guidance our outlook for cash generation across fiscal 'twenty five 'twenty six combined has improved by about $200 million.
Speaker Change: We're making progress, but we know we have a lot more work to do to further improve cash generation.
Speaker Change: In closing the quarter's operational performance was good for capturing our share of large and growing markets and remain focused on improving operational productivity and capital efficiency fiscal.
Speaker Change: Fiscal 'twenty six is a very important year for us one where nexus wave and the launch of our Viasat three satellites will help turn the trends in maritime and fixed broadband around.
Speaker Change: While at the same time, we continue to build our earnings power and aviation government Satcom and.
Speaker Change: Leveraging the backlogs our teams continue to build the.
Mark Bergh: The <unk> team is up to these challenges and I'm honored to be part of it is we worked tirelessly to deliver improving outcomes for our people our customers and for you our owners with that I'd like to hand, the call back over to Mark.
Mark Bergh: Thanks, Gary.
Speaker Change: I continue to feel very good about that runway to business growth opportunities. We remain a leading player in the satellite communications industry with a very thorough understanding of the competitive environment and believe our technology and business model approach to global partnership and cooperation and space is a very appealing option for a growing number.
Speaker Change: Of nations and companies that want to sustain and contribute to a healthy space ecosystem.
Speaker Change: We're intent on achieving that while steadily demonstrating financial and strategic discipline and a deep commitment to growing shareholder value.
Greg: Greg Let's open it up for questions now.
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Speaker Change: Our first question comes from the line of Ric Prentiss with Raymond James Your line is open.
Speaker Change: Good afternoon everybody.
Speaker Change: Great helpful.
Speaker Change: Hey couple of questions for you all.
Speaker Change: First I appreciate the update on the on the fly to flight III could you get a.
Speaker Change: Our launch date on slide two and a slight slip out on slide three but it looks like it will.
Speaker Change: I'll save some money there.
Speaker Change: To get at is where do you think slide two and slide three are going to go what areas are they going to cover with the haul anomaly with slide one you'll how should we think about what <unk> two flights right. What are they going to cover and then now that slide three is kind of more early calendar 'twenty six has there been any impact on in flight connectivity.
Speaker Change: In contrast, as you kind of compete out there.
Speaker Change: Okay.
Speaker Change: So.
Speaker Change: First of all in terms of the locations of the satellites. All the satellites were designed so that each of the three can be operated in each part of the world. So real.
Speaker Change: Our real approach to how we locate them and think of it as we have flexibility.
Speaker Change: Where we put them in.
Speaker Change: We see premier remove them as really just responding to customer demand.
Speaker Change: Two big areas, where we need more.
Speaker Change: A lot of demand and we'll get the most value out of the satellites are in the Americas and in Asia Pacific. So those are the plans for the locations of two and three.
Speaker Change: Yes.
Speaker Change: FY two being planned for the Americas on slide three for Asia Pacific.
Speaker Change: <unk>.
Speaker Change: And then in terms of.
Speaker Change: The timing of the.
Speaker Change: In service, we were one of the thing.
Speaker Change: That we have been doing a lot.
Speaker Change: For the last 18 months is working on some of the technical approaches that we described for optimizing the use of the capacity one of the things. We described as we do that well we actually can increase.
Speaker Change: <unk> capacity of the existing satellites pretty substantially on the order of 2030% or more and so.
Speaker Change: So we've done that.
Speaker Change: That's been working measure, but we have one of the things we emphasized over and over again.
Speaker Change: Measurable results and measurable service statistics for our customers. So we're getting we're getting the benefits of that we've also incorporated.
Speaker Change: Substantial amount of third party capacity into the networks and the upshot of all that is.
Speaker Change: We and our customers understand that we have.
Speaker Change: We've kind of de risks the launch dates.
Speaker Change: Two and three.
Speaker Change: The bandwidth supply that we have and our ability to acquire.
Speaker Change: No.
Speaker Change: And I think our customer customers are seeing that so they're comfortable with it.
Speaker Change: The upshot is well.
Speaker Change: Well we ended up doing is we opted for we're looking at a few different launch configurations provide three which I'll. It shows a lower cost one.
Speaker Change: A delay to that is yes.
Speaker Change: A couple of months orbit raising time.
Speaker Change: And it saved us.
It will take a lot of money compared to the alternative and were putting that money to use.
Speaker Change: But for our customers and for our shareholders.
Speaker Change: Great.
Speaker Change: Okay.
Speaker Change: Well I was just going to say I think that the.
Speaker Change: No.
Speaker Change: Confidence that we're seeing from our customers.
Speaker Change: It's kind of.
Speaker Change: Indicated by the Starbucks contract that we just announced because.
Speaker Change: In Asia Pacific Airlines.
And they were able to test.
Speaker Change: They were able to get a preview of it.
Speaker Change: For some of their price deck.
Speaker Change: Go into <unk>.
Speaker Change: <unk> had three one territory. They were really pleased with that and the upshot is we got a full fleet order from them.
Speaker Change: Yes, Rick as you properly.
Speaker Change: Herb from Mark's comments, no impact on the customer side or on.
Speaker Change: Great question, Gary one for you.
Speaker Change: And the early signaling on fiscal 'twenty six revenue growth, but then calling out now modest adjusted EBITDA growth in fiscal 'twenty six.
Speaker Change: Assume that revenue grows faster than EBITDA and what would cause.
Speaker Change: Not as much money flowing through on the conversion from revenue to EBITDA.
Speaker Change: I wouldn't I wouldn't read that much into it Rick we've just gotten closer to it and are able to give a bit more color as to what the expectations are.
Speaker Change: Still looking and working on 26, and we will have more to say about it in a few months one way when we wrap the fiscal year.
Speaker Change: Okay and last one from me, obviously, you talked a lot about directed device spectrum in the MSS.
Speaker Change: The recent transaction legato and ASP.
Speaker Change: Can you help us make sure everybody understands what's happening there how we should on packet what the benefit to you all could be and then a philosophical wonder <unk> bin.
Speaker Change: <unk> been around since the birth of wireless and the birth of the tower industry and we get the question I got it again today.
Speaker Change: Can always kind of figure out the value of cellular spectrum versus Pcs spectrum, because okay, you need more cell sites and youre going to be more capex or any more opex that would allow you to kind of figure out cellular spectrum was worth more than Pcs spectrum for a terrestrial network footprint NTN non terrestrial network, how should we think about the spectrum assets you have how it compares to leos.
Speaker Change: How it compares to Geos just people are wanting that kind of philosophical understanding given what's happening in the competitive space.
Speaker Change: The first part of that was just kind of help us unpack the legato afcs went a little bit.
Speaker Change: Okay. So I think.
Speaker Change: We're not the main thing.
Speaker Change: Main point on the Ocado transaction as that.
Speaker Change: That day.
Speaker Change: Tend to perform on the contract that they had with.
Speaker Change: In March.
Speaker Change: Co op agreement and that <unk> would assume that obligation so.
Speaker Change: From.
Speaker Change: Basically what's going on.
Speaker Change: The.
Speaker Change: What that would mean is.
Speaker Change: Essentially.
Speaker Change: The current agreement transaction.
Speaker Change: Eventually would conclude.
Speaker Change: I think thats corporate what's going on I think.
Speaker Change: The clear clear messages.
Speaker Change: Asti values this spectrum at the value of the Coop agreement.
Speaker Change: So I think that I think that's what your takeaway when you look at the.
Speaker Change: I think the way we think about it is really the dividing the primary dividing line is whether you do non terrestrial networks using terrestrial spectrum or licensed MSS spectrum with the main difference there being that.
Speaker Change: If you use terrestrial spectrum, either you're limited to locations.
Speaker Change: Have no terrestrial coverage.
Speaker Change: Which is.
Speaker Change: Pretty constraining view of the value.
Speaker Change: These non terrestrial networks.
Speaker Change: Sure.
Speaker Change: You can augment the terrestrial spectrum.
Speaker Change: With license satellite spectrum, and I think that I think that that's the way that people are starting to look at it.
Speaker Change: So what.
Speaker Change: And then ultimately we think that.
Speaker Change: If the direct device market.
Speaker Change: Plays out and we're optimistic but remember we have a pretty substantial MSS business already that's our real focus is making that MFS.
Speaker Change: This better the main thing that.
Speaker Change: Non terrestrial networks or the DVD market does it is it standardizes the network, which we think is a good thing at a lower cost. It enables open architecture that lowers cost it enables MSS operators to share infrastructure.
Speaker Change: Lowers cost for everybody.
Speaker Change: And the other big thing is that.
Speaker Change: That people are looking at and regulators are looking to improve much higher power levels on the ground, which means we can get a lot higher speeds more bandwidth at lower cost so.
Speaker Change: And remember that the MSS spectrum is license based on a public interest basis, we definitely haven't really strong public interest basis, with our maritime and aeronautical safety services, there's a lot of demand for that or improvements.
Speaker Change: So when we think about it we think is.
Speaker Change: The transaction is really.
Speaker Change: Illustrating the value of licensed MSS spectrum.
Speaker Change: And our position what we want.
Speaker Change: A relatively unique global player, but we're also looking to cooperate.
Speaker Change: With other licensed MSS spectrum holders in a way that reduces cost for everybody and grows the market.
Speaker Change: That helps.
Edison: And our next question comes from the line of Edison you with Deutsche Bank. Your line is open.
Edison: Great. Thank you for taking our questions.
Edison: To ask about the <unk>.
Edison: Syed obviously back in the summer.
Edison: Quite a bit of <unk>.
Edison: Think excitement around potentially selling some assets do we have any updates on the progress of that have there been any discussions that that's gotten any deeper.
Edison: Well, we're not going to comment on any individual transactions.
Edison: We have we are continuing to make progress on.
Edison: On.
Both creating alternatives and options and evaluating those.
Edison: And we've done.
Edison: Yes.
Edison: Dennis small transaction, we expect to do we expect that.
Edison: Okay.
Speaker Change: Of going through this is really to deal with what the point that Gary mentioned in his prepared remarks, which is we want to reduce our debt right. So that's.
Edison: That's what we have very specific financial objectives.
Edison: Certainly focused on preserving our competitive position and so we're looking at the right.
Edison: The right combination of.
Edison: Maneuvers to help us do both of those two things I'd say.
Edison: And the point of that is it should do.
Edison: Doing things aimed at unlocking value in our equity.
Edison: That's what the focus is so that we will keep working until we do it but we're not going to.
Edison: Comment on any particular transaction until it.
Edison: Closer to fruition.
Edison: Understood understood and I wanted to also come back on the L band question before.
Edison: Do you have sort of a framework.
Edison: And how you decide I guess the best return.
Edison: On the spectrum, you alluded to the ASC.
Edison: With like auto we also have something where you can deploy as I sort of into the network is there some kind of framework are you thinking hey.
Edison: If someone's willing to pass this much with L band, we would rather just kind of sell it versus trying to actually deploy it in some way.
Edison: Yes of course, I mean, I think that Youre on the right track. We are we have business models.
Edison: Think of it as is.
Edison: Kind of.
Edison: Let's say put it in a few different buckets, we have existing.
Edison: Fairly significant existing legacy business in L band, which is not only profitable in its own right, but the value that adding L band.
Edison: Bundle to Eric Aviation customers Maritime customers is also important so we have that clearly given the higher power levels that were anticipating.
Edison: For the next generation of satellites.
Edison: We can improve those value proposition substantially and we think that that will grow.
Edison: That's what's really going to trigger growth in the L band Mobile satellite services market and we think of think of it.
Edison: The distinction between the mobile satellite services market in the DVD market isn't really the service that you get like the speed or the airtime pricing. It's a device that you use the DVD market.
Edison: Essentially youre delivering those services into a terrestrial heliocentric device in the <unk>.
Edison: S market.
Edison: Those services into a device that was intended to connect to a satellite which actually makes those devices in general.
Edison: Convenient, but a lot more cost effective predict getting those same services. So what we're doing as we're modeling out.
Edison: All of those different.
Edison: Those different monetization options closing at the time frames and then we will make a prudent decision.
Edison: Some monetizing.
Edison: Monetizing versus thinking even if it is developing.
Edison: And also <unk>.
Edison: People should think of that in different buckets, where we don't have to do.
Edison: Nothing decision we can monetize.
Edison: And again remember because there is a public interest benefit we're not looking at it on a purely transactional basis.
Edison: So we have to but we do have some maneuvering room and how we deal with the services that we offer in different geographic markets at different times and so that's.
Just the other dimension, which we're doing the analysis.
Understood if I can sneak a quick housekeeping one did.
Edison: Did you disclose the proceeds from the energy.
Edison: It's 50 million, but was there a proceed amount got it.
Edison: We.
Edison: Yeah, Yeah, Okay, Yeah, we have.
Edison: But you'll see in our cash flow right youll see a little bit of other investing activities.
Edison: Some tens of million dollars.
Edison: Okay. Thank you so much.
Edison: Not specifically disclosed we didn't break it out.
Edison: You can find it.
Edison: Next question is from Sebastiano Petti with Jpmorgan. Your line is open.
Edison: Okay.
Speaker Change: Hi, This is Nick on for <unk>. Thanks for taking my question.
Edison: Maybe if I could follow up once on the assets.
Speaker Change: Mark are there are there any businesses within that segment that you think are synergistic to keep with the satellite portfolio.
Speaker Change: For whatever reason, maybe go to market or anything like that.
Speaker Change: And then second just any update on the discussions with Telesat that you brought up last quarter.
Speaker Change: And generally any kind of use cases or end markets, where youre thinking about that incremental capacity.
Speaker Change: Okay, Yes.
Speaker Change: On the data assets pretty much everything that we do from a.
Speaker Change: From a technology perspective.
Speaker Change: Woes at one time or will be in the future. It was intended to be synergistic with our with our satellite businesses over time, sometimes some of those synergies ebb and flow.
Speaker Change: But.
Speaker Change: You can see it's fairly clear things that we do that involve technology development on satellite terminals.
Speaker Change: Okay phased array technology processes based class things those are the kinds of things often tend to be pretty synergistic things that we do that are a little more roots removed.
Speaker Change: Tactical data networks tactical data links so we sold tend to be less.
Speaker Change: And so that that would be some of the ingredients that would go into.
Speaker Change: Any decisions, how we do it.
Speaker Change: Is it tactical data networks, so that was our link 16.
Speaker Change: 16 sale that we did.
Speaker Change: It's not that there were no synergies, it's just that relative to the value of the business.
Speaker Change: Ongoing investment profile compared to what others might do.
Speaker Change: We felt that we could we could derive.
Speaker Change: <unk>.
Speaker Change: We could sell it for a price that was equivalent to the net present value or greater of the future cash flows and then use that capital to <unk>.
Speaker Change: Debt until we may make that decision for other assets as well, but thats. The I'm just going to tell you kind of a thought process. We're using road not identify any particular business.
Speaker Change: This is our transactions.
Speaker Change: On the Telesat front.
Speaker Change: We're right now we're still in advanced negotiations with them I think that the.
Speaker Change: They are converging.
Speaker Change: And we have a good.
Speaker Change: Sure.
Speaker Change: I think I think we have.
Speaker Change: A good foundation for win win business.
Speaker Change: Initially focused on the aviation market.
Speaker Change: And I think that's it.
Speaker Change: Both we and tell us how to disclose that to grab a meeting of the minds here I think it will be.
Speaker Change: We will have an agreement with them well in advance of when the satellites and service and we're already working together on being sure that the terminals. We are deploying now are capable of working on the on the Lightspeed network, which is.
Speaker Change: The bigger attraction for a lot of our customers as well.
Speaker Change: Great. Thanks for the color.
Speaker Change: Thank you.
Speaker Change: Next question from Colin Canfield bid Khanfar Your line is open.
Colin Canfield: Hey, Thanks for the question.
Speaker Change: I'm, passing the $200 million savings a bit more it sounds like.
Most of the savings are coming from the launch site and just doing some rough math on the price Delta. It seems like maybe re booking like the orbit raising language, maybe a little bit of rebooking from like an analyst or a Bakken to two o'clock at night. So so maybe if you could talk about which of your satellites have losses booked in backlog and.
Speaker Change: And where you can find potential savings similar to what we saw in the guidance move today.
Speaker Change: Thanks.
Speaker Change: Yes.
Speaker Change: So it doesn't account for the majority of the capital it's a relatively small amount. The main the main thing. We did was we were deciding among different configurations of the St. Lawrence vehicle and the configuration, we chose as a corporate.
Speaker Change: Orbit raising time that is good enough for a fairly significant savings, but it's low tens of millions of dollars in that range.
Speaker Change: It's a piece of the Capex savings, but not.
Speaker Change: Yes, Rick I mean, theres been a lot that has gone into driving that.
Speaker Change: Driving that $200 million out.
Colin Canfield: The sorry Collyn.
Speaker Change: Alright, so that you can point.
Speaker Change: Thank you.
Speaker Change: Okay.
Speaker Change: The longer orbit raise was definitely.
Speaker Change: A large single piece of it but there were a lot of other factors.
Speaker Change: We talked in the prepared remarks about synergies between Viasat in March that we leveraged some of that to drive savings out and there is also just been a much broader effort here around capital efficiency and productivity last time, we were on a call I mentioned challenging timing to make sure that we really scrubbed.
Speaker Change: Understood Didnt spend any money before we needed to do.
Speaker Change: Didn't bring on any operating expenses before we really needed to meet the schedules and the customer expectations that we had and we also went and refocused after our strategic plan on the things that we really need to deliver on our customer critical for fiscal 'twenty six.
Speaker Change: And while at the same time, making sure that we fund our future, but we.
Speaker Change: <unk> ourselves to stay within our budget and we feel really good about where we sit on the other side of that.
Speaker Change: Sure.
Speaker Change: Sure.
We're in a place where we're balancing what we need to do to drive the earnings power that I talked about in the near term.
Speaker Change: And that we've got a we got real capital efficiency in what we're investing and so to me that just comes back to what we're really trying to drive.
Speaker Change: More EBITDA.
Speaker Change: More free cash flow and.
Speaker Change: Again, it's just kind of goes back to those pillars, everybody are sick of hearing me say it.
Speaker Change: Get our earnings power up get our debt down drive sustained cash flow.
Speaker Change: And I did just to be clear.
Speaker Change: Just to be clear on the launch vehicles.
Speaker Change: Signed our launch vehicle contracts quite a while ago haven't changed those.
Speaker Change: So two really it was just the configuration that a launch vehicle that we're evaluating.
From a guy that's all good heavy sale bucket, maybe or is it within the ferry is what youre, saying.
Speaker Change: It was just the difference in figures there are different configurations of the P&L right.
Speaker Change: Yes got it okay.
Speaker Change: And then maybe circling in on the Space Force Award for <unk> out talking a little bit about how you expect the on ramp onto that.
Speaker Change: And maybe a little bit about the pipe.
Speaker Change: Central contracts beyond that the.
Speaker Change: <unk> seems like it's kind of off the shelf, but a lot of the capabilities that <unk> has it seems like they align well for infection and the like.
Speaker Change: So maybe talking a little bit about the.
Speaker Change: The pipe between expanding on the <unk> contract, which has obviously had a really high ceiling.
Speaker Change: And doing more.
Speaker Change: In terms of encrypted Tom's in the like for the DMD community.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Generally a lot of the end users.
Speaker Change: That contract and vehicle are looking for applications that apply to that.
From our perspective.
Speaker Change: Now, mostly what we're doing is.
Speaker Change: Packaging.
Speaker Change: Leo services for those applications and generally we'd be augmenting them with some of their functionality.
Speaker Change: Technology needed to deliver the missions for those customers. So we work with multiple different and GSO and Leo.
Speaker Change: <unk>.
Speaker Change: Providers, so that that gives us some opportunity. We also are looking at leos to augment our own.
Speaker Change: Geo satellite systems and the longer term.
Speaker Change: And I think youll see us over time.
Speaker Change: Participate using their own assets as well as with partner assets.
Speaker Change: Got it got it and then last question for me, maybe talking a little bit about how inmarsat is participating in alternative PMT and if you have suppliers or customers with people people have kind of obtaining partners across.
Speaker Change: The on crude space or other military assets that you consider a good opportunity.
Speaker Change: I'm sorry for PMT is that.
Speaker Change: Yes.
Speaker Change: The context is focusing on like the growth Avenue for alternative P&C within the <unk> portfolio and kind of your ability to participate in NATO or Vod or are there other places.
Speaker Change: Yes, we have done we have done some of that.
Speaker Change: Often for international customers that are looking for ways to have some form of.
Speaker Change: Maybe regional as opposed to global PMT services or to augment.
Speaker Change: <unk> services or to have more confidence in the accuracy of the PMT services they get from third parties.
Speaker Change: Some of those that have involved either hosted payloads or specific applications of pieces of art payload.
Speaker Change: It is an interesting area, especially.
Speaker Change: I mean right now it is.
Speaker Change: No secret that there is a lot Jeremy.
Speaker Change: Navigation systems, and so things that can be used to augment those either.
Speaker Change: Some cases, even just doing that regionally is sufficiently valuable to create business opportunities.
Speaker Change: So those are those are more of the kinds of things that we're going after as opposed to building a complete alternative global.
Speaker Change: Standalone PNT system.
Speaker Change: Got it okay. Thank you appreciate it.
Tom: Thanks, Tom.
Speaker Change: Our next question comes from the line of Simon Flannery with Morgan Stanley. Your line is open.
Simon Flannery: Thank you very much good evening, Gary just coming back to the Capex good to see the progress Theyre looking at for FY 'twenty six number can you give us a sense of how much of that is really related to some of the launches we're seeing and what we might expect as sort of a maintenance capex number from a longer term plan is that more in the sort of $1 billion range any color.
Simon Flannery: Around the accuracy would be great and then Mark you did a management reorganization a couple of weeks back perhaps you could just talk about.
Simon Flannery: If it goes bad.
Simon Flannery: What we should be expecting from that the new roles.
Simon Flannery: The team has taken over.
Simon Flannery: Well I'll start Simon your first question I believe was around.
Simon Flannery: What related to the launches in <unk>.
Simon Flannery: The Capex guide for 2006.
Simon Flannery: Everything around Viasat three is contained in there in my prepared remarks, I mentioned, we're spending on the capital side about $250 million.
You mentioned $80 million on the operating side as we bring as we bring the satellites into service.
Simon Flannery: That 250 million is that that is the spend attached to viasat three.
Environment is maintenance capital.
Simon Flannery: Brian.
Simon Flannery: In terms of maintenance Capex.
Simon Flannery: We've used in the past the one third two thirds, we were talking about this previously with the total number coming down as it has.
Simon Flannery: It's probably in the one third of the numbers that we were talking about previously. So you can continue to use that benchmark. The one third you just got to watch.
Simon Flannery: With the baseline changing as much as it has.
Simon Flannery: You just want to make sure you adjust for that.
Simon Flannery: Okay, but should we expect a drop in in the out years beyond 'twenty six.
Simon Flannery: We do expect that well I mean, we're not going to get into longer term guidance. Here. We'll do same were going to continue optimizing the way we have the same kind of work that went into.
Simon Flannery: I wouldn't even call it cutting the capital budget. This is really about making sure that we were spending on the right things one of the results was that it ended up being reduced but we're going to we're going to do that ongoing as we move through the year and at the right time, we'll give you a lot more flavor about how.
Simon Flannery: Now.
Simon Flannery: How that should trend over the next few years.
Simon Flannery: Great.
Simon Flannery: On the management Okay.
Simon Flannery: Yes.
Simon Flannery: And just to be clear, we're working through a big bulge in capex spending with the deployment.
Threes.
Simon Flannery: So and we have.
Simon Flannery: One of the things.
Simon Flannery: Enabled us to spend less in the future are these partnerships that we're forming as well as.
Simon Flannery: Packaging some of those innovations into smaller bite capital sizes.
Simon Flannery: So we do definitely have an objective of driving down our capex.
Simon Flannery: The other thing that I did want to say.
Simon Flannery: I understand you're retiring Simon so I did.
Speaker Change: Well I'd say first of all I was trying to talk to you in your official duties that we really appreciate it here.
Speaker Change: Your support and your average along the way.
Speaker Change: Thanks for that Mark.
Speaker Change: And then just on the management.
Speaker Change: What we talked about publicly is we reached.
Speaker Change: An amicable settlement.
Speaker Change: Amicable parting.
Speaker Change: With Guru he took on some really hard stuff, including a lot of.
Speaker Change: Logistics or the integration with Inmarsat.
Speaker Change: And that's largely done and we just on the theme of simplifying and reducing costs anticipate.
Speaker Change: To have one of the people that were reporting to him transitioned to me once we have that new organization setup.
Speaker Change: Okay. Thank you.
Speaker Change: Okay.
Speaker Change: Next question comes from the line of Brian <unk> with Needham <unk> Company. Your line is open.
Matt: Hi, This is Matt on for Brian Thanks for the question.
Matt: On Nexus waves, you mentioned a target for maritime to return to growth in fiscal 'twenty six could you expand on the demand you are currently seen for that service and how you're expecting that to ramp over the next couple of quarters.
Matt: Yes, I think.
Matt: What we alluded to last quarter was really positive reception in.
Matt: Maritime market for those.
Matt: Uh huh.
Matt: Targets that we were aiming for which definitely heavy enterprise, especially those <unk>.
Matt: Carriers that were large enough for direct.
Matt: For us to approach direct but the reception has been really good.
Matt: I think we talked about a pipeline of over 4000 vessels last quarter Thats actually continued to grow I mean, there are some there is.
Matt: Both in terms of some things, leaving but more much more coming into the pipeline.
Matt: James leaving so that part's really encouraging thats. The thing we've been most focused on is making sure that we had a value proposition that was going to get the interest of the target market.
Matt: That pipeline has turned into.
Matt: Orders in the low hundreds right now our target is to get in the low hundreds in stock this quarter that would be the next thing I think our objective would be to grow that fairly substantially in the next year.
Matt: But still probably in the low thousands not.
Matt: We're not going to be able to turn that whole pipeline in but we think we can grow at fairly significantly during the course of FY 'twenty six youll see I think what has if you look at our results what you should see.
Matt: First is growth.
Matt: As stopping the decline net peso is growing that vessels and then revenue coming along with that afterwards, and then venture.
Matt: Eventually we will hit the EBITDA growth client as well as the sequence and we think that will play out during the course of FY 'twenty six.
Matt: Got it thank you I'll leave it there.
Speaker Change: Hey, Brian.
Speaker Change: And our last question comes from the line of Mike Crawford with B Riley. Thank you Ricky Your line is open.
Mike Crawford: Thank you I'd like to go back to legato to make sure I understand this correctly so I believe.
Speaker Change: Unsecured claim in the bankruptcy proceeding is about $550 million plus theirs.
Speaker Change: Co op agreement, where there is a contract for $80 million a year lease payment.
That still has some 75 years running.
Speaker Change: And that.
Speaker Change: The the legato has an ability to either.
Speaker Change: Theft or reject.
Speaker Change: The contract here and if they accept it then they have to pay that to you, but if they reject it then they wouldn't have access to your 12 megahertz of spectrum. That's interleaved among some of the spectrum holdings that legato itself has making it perhaps difficult to use as opposed to being aggregated in.
Speaker Change: Contiguous block is that do we have that right.
Speaker Change: So.
Speaker Change: Well, we would do is refer.
Speaker Change: People wanted to do it.
Speaker Change: All of that all the information that you're citing I think is available in the public filings associated with the bankruptcy case and I think I think it sounds like you've been reading those.
Speaker Change: We're not really we're not really going to comment on them, but I think <unk> been I think things, we would recommend to investors is to refer to that.
Speaker Change: Can't really comment on an active.
Speaker Change: Active litigation.
Speaker Change: Maybe if I just unpack the last part of that.
Speaker Change: Sure.
Speaker Change: The.
Speaker Change: Can you describe it.
Speaker Change: Your spectrum and how it.
Speaker Change: Interacts with the legato spectrum and weather.
Speaker Change: That was.
Speaker Change: L band spectrum would have.
Speaker Change: Same utility or.
Speaker Change: <unk> been aggregated contiguously.
Speaker Change: The okay. So one.
Speaker Change: <unk>.
Speaker Change: Yeah.
Speaker Change: Mike I think you're very astute observer, so I think that some of the use of some of the things that werent issue had to do with the coordination of the spectrum all that stuff.
Speaker Change: Basically his throne.
Speaker Change: Now in the hands of the courts, and it's really difficult for us to comment on them.
Speaker Change: I think that the types of issues that you are raising.
Speaker Change: Our validation to be resolved in the litigation. It just makes it really hard for us to comment on them outside of the court filings.
Mike Crawford: Okay. Thank you Mike Thank you.
Speaker Change: Thanks, Mike.
Speaker Change: That concludes our question and answer session I would like to turn the call back over to Mark backward for closing remarks.
Speaker Change: Okay.
Speaker Change: So that concludes our <unk>.
Speaker Change: Q&A session in our prepared remarks, thanks, a lot everybody for participating.
Speaker Change: Speaking with you again next quarter.
Speaker Change: Ladies and gentlemen. This concludes today's conference call you may now disconnect.
Speaker Change: [music].
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