Q1 2025 Viasat Inc Earnings Call
Please stand by your program is about to begin.
My name is Dustin and I will be your conference facilitator. This afternoon.
Bias at the first quarter fiscal year, 2026 earnings results conference call.
All lines have been placed on you to prevent any background noise.
After the speaker's remarks, there will be a question and answer session.
I would now like to turn the call over to Miss Lisa Curran, current Vice President of Investor Relations. Miss Trent, you may begin your conference.
Thanks Justin. We will present certain non-gaap Financial measures on today's call information required by the SEC relating to these non-gaap Financial measures is available in our q1 fiscal year, 26 shareholder letter on the investor relations section of our website.
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 Law, including statements regarding events or developments that we expect or anticipate will or may ask for in the future. These forward-looking statements are subject to a number of risks and uncertainty and actual results might differ materially for many 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 filing 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 with that. I'll turn it over to Mark Dankberg, Chairman and CEO.
Good afternoon, and thanks for joining us today with me, along with Lisa, we have Gary chase, our Chief Financial Officer and Sean Duffy our chief accounting officer.
As always, we encourage reading the shareholder letter we posted on our website in reference to these slides. We also posted earlier this afternoon for more details.
Our first quarter fiscal year 2026 results yielded a bit stronger than expected year-over-year, revenue and adjusted ebit dog growth.
Our first quarter of performance, reflected healthy, market demand, in our most important business lines, more than offsetting lower IP, right? Well, intellectual property, licensing revenue and expected pressures in fixed Broadband businesses as well as a good cash generation.
For q1 uh, fiscal 2026. We had a net loss of 56 million compared to a net loss of 33 million in the first quarter of fiscal 2025.
And that was primarily due to improved operating performance. That was offset by an increase in depreciation and amortization and a higher income tax provision.
Revenue, grew 4% year-over-year driven largely from double-digit growth in the defense and advanced technology segment, which reflects a strength and diversity of our unique technology portfolio, strong Market positions and attractive. Secular drivers adjusted. Eva increased by 1% year-over-year primarily from double digits adjusted to the ebit, uh, growth in information security and cyber defense, partially offset, by lower industrial properties licensing, revenue and declines in maritime.
1 of our highest priorities remains getting pipes 2 and 3 of the Via Cent 3 Series into service and our progress is reflected in the updated accompanying satellite road map.
Each of the new ViaSat 3 satellites is designed to enable more bandwidth capacity than our entire existing Fleet creating opportunities to grow in each of our franchise businesses.
For Flight 2, we completed implementation and testing of the corrective actions for the deployable reflectors and have begun the process of final flight installations and closeouts.
We've also completed ground operations, defined launch campaign schedules, and launched operational plans with our launch partners.
We expect to ship Flight 2 to the launch site, by the end of next month, which would be September of 2025.
For 5 3. We also completed testing of the Deployable reflectors and began the process of preparing the spacecraft for mechanical environmental testing.
We continue to monitor the launch manifest and range priorities for our launch vehicles at Cape Canaveral.
As previously shared as we achieve satellite integration and test. Milestones on the spacecraft, we reduce the magnitude of the bring in to service schedule risk. But of course, that doesn't eliminate schedule risks extrinsic to our own spacecraft or launch campaign.
Post shipment for flight 3.
I had 3 flight, 1 Services. Continue to scale steadily with more than 60,000 flights occurred to date while fulfilling high performance service level agreements, delivering, fast and free Wi-Fi.
We've pioneered, many of these services and business models and are continuing to win in our Target markets, leveraging. A combination of our existing and planned Fleet with our third party bandwidth partners
We also continue to advocate for and support an open architecture standards-based approach to non-terrestrial network (NTN) roaming and interoperability with terrestrials using a significantly more cost-effective, aggregated, coordinated mobile satellite spectrum. Our approach is designed to leverage the 5G ecosystem, which can substantially reduce capital and operating costs for operators and other operating partners, and should reduce costs for consumers, helping to drive broader non-terrestrial network adoption.
The strong start to the first quarter is affirming our ability to position fiscal 2026 as a launch year. We are focused on continuing to more thoroughly optimize the integration of bias at Inmarsat resources and establish the growth opportunities and associated earnings power of our franchises to yield attractive results.
With cash conversion.
We see opportunities to sustain and enhance durable competitive positions while simultaneously reducing Capital intensity.
We're balancing investing for growth and Target markets while continuing to opportunistically strengthen. Our capital structure via cash flow improvements addressing debt maturities and ongoing portfolio reviews all intended to help develop our balance sheet. We're determined to exit the fiscal 2026 with a solid foundation for Accelerated and sustained growth and cash generation.
We have a comprar comprehensive plan to reinforce our competitive positions.
Portfolio value and drive returns and shareholder value.
Fiscal. 26, is the year to reposition for growth.
As I said before, there will be challenges, but we're planning to win.
But that I'll hand it over to Gary.
Thanks Mark.
And good afternoon to everyone, joining us on the call. I want to start by thanking the ViaSat team for all the hard work that went into delivering our fiscal 26 first quarter results.
Last time we were together, I noted that we were starting the year facing some headwinds that we're working to address. OEM aircraft delivery rates continue to recover. Slowly, in addition, Airline Partners have increased the number of grounded aircraft as they managed to macro, uncertainties and US, fixed Broadband remains pressured. Until we bring ViaSat 3 flight to into service.
During the quarter while benefiting from a bit of timing. We also absorb lower IP licensing, revenue from caresphere
Sale of our Energy Systems integration business, our bias at $3 billion, building out related Opex.
Adverse warrant exchange impacts and elevated legal costs, related to legato.
In the first quarter, despite these headwinds, we generated revenue of $1.17 billion, and adjusted EBITDA reached $48 million.
Up. 1% year-over-year for a 35% adjusted. Eva dog margin.
Grows in the face of these headwinds as a testament to the commitment of our teams to deliver for our customers.
I'm pleased, we're off to a good start but we need to stay focused to deliver on the year. You all know fiscal 26 is an important 1 for us. As we position the business for higher earnings power in the years ahead.
We're expecting to add substantially to our capacity base, with 255, South 3, satellite, and judiciously, adding third-party capacity continuing to grow. Our Aviation governments that calm and death franchises return. Our Maritime business to growth with Nexus wave and expect our fixed Broadband business will bottom out with the capacity by set 3 Flight 2.
Expected to bring.
Executing on these opportunities will drive the 3 key pillars of our financial Journey.
First building our franchise increasing earnings power, while investing in our future with discipline.
Second generating sustained and growing free, cash flow.
Which is the best means of achieving our third objective, which is reducing the leverage, that's pressuring our debt and Equity prices.
Our teams focus on execution and fiscal 26 targeting, a sustained turning point on all three of these fronts, leading us into an exciting fiscal 27 and beyond.
Mark spoke to the progress we’re making on bias at 3 and the other ways in which we’re building our capacity.
We need to monetize that capacity and grow profitably.
With PAM groups selected by us at tomorrow's service on widebody, long-haul aircraft, this transformative next-generation connectivity service will utilize a multi-orbital network of GEO and LEO satellites.
Ensuring a high-speed High, resiliency low latency internet connection, with global coverage.
In addition to benefiting passengers, I had a tomorrow that will optimize operations with real-time communication between crew and ground teams, data transmission for predictive aircraft maintenance, and route optimization via cockpit connectivity. Our maritime product, Nexus Wave, surpassed a thousand orders since its introduction for the fully managed high-speed, bonded connectivity service.
In the first quarter of 26, we installed the 190 best more than double the rate of the prior quarter.
Service has gained momentum in its first six months on the market, with global adoptions by customers adopting Nexus Wave for their fleet.
Our teams are now working to satisfy that demand and continue to steadily. Increase installation rates.
So, we exit the year with a substantial Nexus wave installed base.
We received info seconds, cyber defense Awards of 224 million. This quarter, an increase of 225% year-over-year and a book to Bill of 2.2 times in this business Area awards, reflect sustained, strength and demand for various eye Insurance, encryption products from customers to meet Network and data center security needs.
Specially as more benefits are realized through data fusion and AI.
Now let's turn to the financial results for the first quarter, all of my statements will reference, the first quarter physical 26 and the prior year period. The first quarter of fiscal 25 awards were 1.2 billion led by our debt segment.
Net loss was 56 million, an increase of 24 million from the prior year period principally due to an increase in depreciation and amortization and a higher income tax provision adjusted by was 4008 million. The 1% increase year-over-year driven by infosec cyber defense and Aviation partially offset by Maritime and lower IP related Revenue in tactical networking and advanced technology and other
free cash flow is a critical Focus area for us. We generated 60 million of positive free cash flow at this quarter, bringing our trailing 12 months tally to a positive 88 million with another quarter of double digit growth and operating cash flow and a double digit decline in capex.
Continue working to find ways, to improve operating, cash, flows and lower the capital intensity of our businesses. We're laser focused on driving the sustained and growing free cash flow in the years ahead.
Finally, net leverage was flat year-over-year, reflecting strong free cash flow generation at the end of the quarter. Approximately 3.6 times trailing 12 months adjusted EBITDA.
Now it's turned to some segments highlights in the first quarter of fiscal, 26 communication Services. Revenue was 827 million.
Flat with the prior year, period reflecting growth in aviation and government. Stock offset by the sale of our Energy System integration business, along with expected, declines in Maritime and US fixed broadband.
Aviation grew 14% led by a 9% year-over-year, increase in commercial, aircraft in service. Combined, with higher, average, revenue per aircraft.
With continued growth in arms fault base. We did see our backlog. Decline slightly on a sequential basis to about 1580 aircraft
down from 1600.
Our government, satcom revenue, grew 4%, year-over-year primarily reflecting airtime, services for US Government satellite services.
Maritime revenue declined 5% every year as vessels and service were down.
Non-safety standalone LB band offerings continue to migrate to multi-band, multi-orbit solutions, like our Nexus Wave offering. Our Maritime business grew 3% sequentially, and we continue to expect a return to year-over-year growth in Maritime by the end of fiscal 2026.
Fixed services and other Revenue was down, 13%. Year-over-year is US fixed Broadband subscribers, continue to decline. We enter the quarter with 172,000 subscribers and 115 average revenue per user.
These Revenue impacts along with lower segment R&D drove communication Services segment, adjusted Eva 322 million.
Up 5% year-over-year.
To defense and Advanced Technologies performance during the quarter, our defense in advanced technology segment Awards of 428 million, increased 22% versus the prior period led by INF and cyber defense.
Revenue was 344 million up. 15% compared to 300 million in q1, fiscal 25.
Driven by growth in infosec cyber defense, based emission systems partially offset by lower IP related Revenue.
Driven by high Assurance encryption products.
Based on mission systems, revenues were up year-over-year. Twenty percent was driven by antenna systems. Tactical networking revenues, including TrellisWare, were down year-over-year by 4%, driven by lower IP-related revenue. As a reminder, in the first quarter of fiscal 2025, we benefited from a large order for upgraded licenses across radios already deployed.
By us and Allied Forces for a $205 million revenue uplift in the prior year period, advanced technology and other revenues were down $9 million year-over-year, driven by lower IP-related revenue from our forward error correction technology use and optical networking.
First quarter 26, tat adjusted, uh was 87 million down 9 million compared to the first quarter of fiscal. 25 reflecting less high margin IP related Revenue flow through.
Excluding the approximately $25 million impact of lower IP-related revenue from T Square adjusted, EVA would have increased year over year.
Overall, the first quarter was a good start to fiscal 26, with a balance of growth past generation and efficient investment. In our future, we saw strength and data and Aviation exciting new program wins and very strong awards for data.
We generated positive free cash flow while both our Viasat staff and three satellites continue to progress.
All of which positions us well for the future.
Let me now move on to our Outlook continue to expect fiscal, 26 Revenue to be up low. Single digits year-over-year with flattish year-over-year, adjusted dog growth. And we do expect some variability in quarter to quarter. We're pleased to have started the year with modest growth in our first quarter. We remain focused on delivering not just the numbers, but the business outcomes that TF stronger performance in the years ahead.
We provided additional segment level detail in the Outlook section of our shareholder letter and slides.
Our focus on cash flow remains as is our focus on reducing the capital intensity of our business. And we, now expect Capital expenditures for the year to be about 1.2 billion, including 250 million for the completion of the vice after 3 constellations and approximately 400 million for narat.
1.2 billion is an improvement of 100 million from our guidance. Last quarter, we continue to believe sustainable positive free cash flow inspection. Won't current the second half of our fiscal year. As we get beyond the elevated capex, relative to the related to the development of our ViaSat 3 space and ground Networks.
Guidance does not include the anticipated impact from Legato settlement payments.
See the related press release for additional details.
Post the bankruptcy court confirmation hearing of reorganization we can finalize the financial implications.
For closing. I want to touch on our framework, for reducing the leverage, that's impacting our debt and Equity prices. Our goal is to improve our cost of capital while maintaining flexibility.
Our first priority will be to repay. Our 3 million in Mar set 2026 Term Loan B,
that will reduce our cash interest expense in driving incremental free cash flow, which in turn can be used for further pay down debt. That's The Virtuous cycle. We're determined to initiate generating free cash flow and using it to retire debt is the best way to reduce the capital base in our business and drive returns higher.
After addressing the mRAT term loan, B will turn our attention towards achieving our desired long-term capital structure, which we know will start with a long-term leverage ratio below 3 times. Even so, we will be opportunistic. Given market conditions, we will also be purposely working to achieve a value-maximizing end state, providing that our shareholders in closing our first quarter fiscal 2026. Operational performance is good. We're capturing our share of large and growing markets and remain focused on improving operational and capital productivity. Fiscal 2026 remains on track with a number of important catalysts ahead. We continue to leverage our backlog, earnings power growth, and our Aviation, government, SATCOM, and DEBT franchises.
We plan to accelerate the rollout of Nexus Wave and deploy bias at Flights 2 and 3, which will help to reverse downward trends in Maritime and U.S. fixed broadband.
Thank you. As we work to deliver our commitments and position our franchises for sustained and profitable growth in free cash flow, we are also easing capital requirements following the deployment of our Viasat 3 constellation. I'm thankful and excited to be part of the Viasat team. We work together to realize all the opportunities ahead.
With that, let me turn the call back to Mark. Thanks, Gary.
Before opening the line for questions, I'll briefly address last week's letter from Carronade Capital Management, which consistently engages in dialogue with its shareholders and welcomes constructive input aimed at driving intrinsic shareholder value.
Operating in free cash flow and reducing leverage. While we continue our previously announced active review of our portfolio.
We believe there's tremendous value in our franchise's assets as a leader in satellite infrastructure and connectivity, including critical military and government communication. Our businesses are well positioned to compete globally.
The board and management team are carefully evaluating Carronade ideas.
We look forward to continuing constructive and collaborative dialogue with all our stakeholders, including care needs.
So with that, Dustin, let's please open it up for questions.
Thank you.
If you would like to ask a question, please press star and the number 1 on your telephone keypad.
Also, if you'd like to withdraw your question, please press Star 1 again.
We'll be opening up the floor.
Of question and answers. And the first question comes from the line of Louie De Palma from William Blair.
The lines open.
Great, thanks. Um, Mark, Gary, Lisa, and Peter, good afternoon.
Hi.
Um Motorola Solutions, which is 1 of the companies that I cover they recently announced a deal to acquire Silver's Technologies for 5 billion dollars and many investors were wondering and I was wondering as well how does trellis wear compared with mobile ad hoc networking and and tactical networking peers and what are the major industry Dynamics for trellis words growth and do those overlap with what's been taking place with Silvis?
Okay, cool. So that's a broad question. Uh I can tell you, they're both of them are in the mobile ad. Hoc National Med, mobile ad hoc match networking space, which you described, which is basically a way for, you know, large large, large relatively large numbers of terminals, to communicate with each other. Uh, and in some self-forming architecture, the
The the Silver's approach our, our understanding is it's uh mostly Wi-Fi based whereas the trellis where system is based on a a proprietary uh uh networking way for them, specifically designed for ad hoc Mesh networking. You know, we can't really comment that much on what, you know what services valuation is.
What what they're you know?
What drives their value? I think for for trustworthy the main operating mode has been licensing uh, because we're also sells Hardware that implements their networking. But the main, the main growth drivers for trustworth, has been that the US government and a number of allies have adopted the trellis, trellis Square waveforms as standards for their radio communications.
So that, uh, so that's really been what the driver is for growth. Has the U.S. and those...
In our and allies, especially those that want to interoperate with. The US have been, uh, acquiring radio that are capable of running the Travis square waveform. And then uh and then the original equipment manufacturer for those radios includes uh includes strong work, you know that. So that those are some of the differences. There's I think there's other differences in terms of applications and
Uh, and distribution, there are clearly differences in Motorola's, uh, markets compared to the markets of U.S. government suppliers. Um, we think, you know, clearly, Charlesbourg is on a good growth trajectory. It's been.
Very, uh, widely adopted for uh, basically for individual soldiers or small teams of soldiers and for vehicles and aircraft, there's there are a number of additional markets that Charles where is uh is uh both attracted to and where their technology would be really, really interesting. And uh, so we we see really good growth potential uh, with with Charles square. But, you know, it's I'd say, we're not really the ones to make it direct at that comparison between them.
Great, that makes a ton of sense. Um,
and,
Related to that, um, you talked about the further growth prospects in terms of.
Trellis: where and the waveform being used for?
Other platforms.
Um, could also be used for aerial platforms and
And like weapon systems, in terms of Internet of Things and on drones as well.
Yes, it can. Uh, those weren't really the initial Focus for Charles wear the, uh, a lot of, a lot of what fellas were has done were
You know, we've had a lot of success in those markets, and the waveform is also good. You could see extensions to unmanned aerial vehicles and unmanned vehicle areas like that, where...
We think a lot of the same features that have made the waveform successful for...
Uh, for these radio applications, it would also be beneficial. But, you know, the distribution strategy for TrellisWare has so far really been based on government standards. That is, they want all these radios to interoperate. There's less, uh, I'd say there's been less focus on standardization in some of these new emerging markets. And so, uh, that doesn't mean that there won't be. I think to the extent that there is, there's opportunity there, but it's just been kind of a, the market's developed in different ways and so far we've not been as focused on it.
Great, thanks. And you, um, for the broader Defence and Advanced Technologies segment, you announced very strong bookings, and I think you highlighted...
Certain large awards for, um, cybersecurity. And, um,
I believe it was an encryption. What is the general penetration of your next-generation encryption products? And is there a large upgrade cycle going on?
Okay, yes, so first off, there is definitely a large upgrade cycle going on. We've talked about that with is, which really has to do? I mean, the fundamental of it are the the, you know, making uh, National Security, encryption systems, robust to, uh, Quantum Computing, that that is a big driver. And so that is been accelerating sales in for encryption products due to that recycle that refresh. But the, the other then we're kind of in 2 different. Think of it as 2, different domains, the, the 1 of the domains. That that, uh, we have really good market share in and has been growing. Fast is the data center side. So think of that, as the
Secure cloud data centers. Our devices are used for inter Data Center Communications like which is really important for things like fusing different sources of information that comes into different data centers. So the more and more the work that's been done on Fusion of of different sensor data is really driving demand.
The uh the other really big thing is the use of uh AI in in cloud computing centers which means that there's lots of inbound inquiries and lot, probably more data sources, that'll be combined. So those things are uh think think of it as the markets growing the data center, the data center Market is clearly growing uh the the market for type 1. Secure data centers is growing. And uh so what we're you know, the things that are really discriminating, those pro products are number 1, having security certifications, which is that. That's a, you know, that's a a big discriminating feature. And then the other 1 is building in the the uh
Next Generation equipment. The Next Generation encryption standards. So we've received rewards on there, that's another discriminator for us. And then finally the the last big 1 is uh given the volume of information higher and higher speeds. So those represent your value for for the users. They also save on power data center space. All those things are are key drivers. It's, you know, this is 1 that we've been working on for a long time, but uh, we, we think that the kind of the secular drivers are about as strong as they've ever been. If it's not stronger in that particular Market, the other Market is is kind of the Tactical part of it, which would be think of it as less than Cloud Center side.
but the users who want access to those cloud centers, either to
That are going on. We see lots of good opportunity to gain market share there as well.
Yeah. We also cover, um,
pal palantir, which is
They've experienced rapid growth with their Maven smart system, and that seems to be related to this sensor to Shooter. There's also a program with the Army for a Tactical Intelligence Targeting Access Node with power and Andor, and that seems to also be.
Related, at least as you describe it. So, as these software platforms that connect to AI systems get rolled out, would the adoption of your encryption services continue to increase?
Yes, we think that's really what the driver is and what talent here.
Does often is they, you, they combined, uh, data from disparate sources and, you know, an effective ways. And that's, you know, that's a good example of why there's more sensor data coming in. And then that more of the decisions that are being made are coming out of these data centers. And so I think there there's a big opportunity on both the data center side and on the Tactical user side. And there are very
Very few companies that have the, you know, the certifications and the skills uh for these markets. So it's we think it's, you know, we think it's a good growth business. It's 1 that we've been grooming for a while.
Excellent. Uh, that's it for me. I know those are a lot of questions.
Defense related questions. But
It's a very interesting business, given everything that's happening geopolitically. So thank you, Mark, and thanks, everybody.
Thanks. Bye.
Thank you.
Our next question comes from the line of Rick Apprentice from Raymond James.
The line's open, excellent.
Yeah, thanks. Good afternoon, everybody.
Um, we are seeing a lot of spin codes in our coverage zone. Um, I know you can't talk specifically, but philosophically, can you kind of tee up for us the pros and cons as companies think about separating?
Their businesses, obviously, something might be growth or something, might need different capitals; something might need different leverage. But is there any philosophical framework you can help us understand that at Viasat?
Okay, yeah, well, so we'll talk about a couple of things. One is, you know what? So one of the lenses that we use when we look at our portfolio of businesses that we've talked about a fair amount of synergy is, you know, are there...
Are there really benefits for keeping 2 businesses under the same roof and generally you know what we're seeing is space. You know, space capabilities are being integrated more and more into in into a number of different systems, both commercially and and government wise. So that's what 1 example and and and some of the you know, some of these areas, you know sometimes the synergies increase, sometimes they decrease 1 area where there was decreasing Synergy and and we acted was on the Tactical data links area where uh there was quite a bit of uh
New work going on in there. We had chosen to invest in other areas and and it made sense to the test. It, I'll give you an example of a couple areas that are converging. 1 is uh some of the work we just talked about about encryption with 2 which is really about cyber security and space where you know, it's become more and more evident that especially for sing, you know, for large constellations.
1 of the, the single failure modes, common to an entire constellation is cyber security. And so our, you know, 1 of the elements of our crypto business that that deals with, uh, the intersection of cyber and space that that's 1 where there's could be an example of increasing Synergy another. But another lens, besides the Synergy lens that we use is the 1 that you mentioned which is the capital needs of each of our businesses 1, you know, 1 of the things is that our satellite services businesses have intent have you know historically been
On a government businesses have been capitalized but 1 of the things that we that we are working on is we've talked about a number of times is reducing the capital intensity of our satellite services businesses, to try to try, try to make the 2, uh, maybe have more common, Capital needs and and as we're as we, you know, evaluate how well we can do there. That'll be a factor in how we think about spin-offs,
Those are two of the lenses that we've used in the past.
and I've talked about,
Great. Um speaking of capital efficiency and capital intensity um 1 of the other satellite operators who has pretty Maple sban Spectrum around the globe and some AWS 4 patches up Spectrum wise terrestrial. Really, kind of surprised. A bunch of people last week, throwing out a 5 billion dollar Peak funding for a an NTN D2D. Leo, I'll throw as many acronyms out there I guess as I can. But help us understand. You know, at at as as the cusp of positive free cash flow and that focuses Gary was talking about pretty cash flow generation.
Help us understand. Do you guys have Espon 2? Where do you see that market going, and how it might be more effective for you to compete in that marketplace?
Yeah, okay, so 1 is, uh, I can tell you, uh, it doesn't strike us that a $5 billion capital investment is consistent with reducing the capital intensity of our business. So that's not, I can tell you, that's not what we're looking at. I mean, what we are looking at is...
Uh, that we have. We have a strong presence in lb band and sband. Uh, we see big opportunities for evolving our, our existing lb band mobile satellite services businesses, where we have strong positions in especially, uh, Aviation safety. Maritime safety. And there, there are unique benefits to L and S span, especially for small platforms, and those environments, and especially as uh, the there's going to be a growth of uh unmanned uh Vehicles, air Land and Sea. Those are all really good Target markets.
What, uh, what we 1 of the things that we have been talking about and and we've been working with other operators on is a is a concept that's been very successful in the terrestrial World, which is to create shared infrastructure among multiple operators and think about it. You know, in the in the talk about this before, in the terrestrial world,
50 operators that see a large Market have decided that there's no point in trying to distinguish their business by Steel and concrete Towers or utilitarian fiber networks. So, there's opportunities to do the same thing in Satellite traditionally, you know, all of the
Mobile satellite services operators have all looked at each other as our 10 ms. I think that now there's an opportunity to come up with, especially as that business becomes, uh,
Becomes more focused on open architecture and standards the 3gpp standards. There's you know there's just doesn't seem to be a reason that each operator has to have uh space infrastructure. That's unique to their space segment and that they're you know, we 1 of the things that we have is really good technology for Building, wideband Systems, that can serve multiple operators, and still be able to do all the beam forming work. That's needed to make the to get the D2D Powers. Uh, you know, power flux density, you need on the ground and uh, sensitivities you need in space. So that that's what we're working towards and our objective is really a, to be able to build a system.
At at much substantially lower cost than than the 5 billion number that you mentioned. And then also to be able to share that, uh, infrastructure among multiple operators, which would further reduce the capital Investments required by each individual operator? We think that's, we think that's good for us. We think it's good for other operators. We've got interest from other operators who see the same benefits that we do. Uh, and that's what we're working towards.
Should we be thinking of that as where the Legato payments would come into?
yeah, I
I think it's early, Rick, for us to, you know, make that determination. You know, assuming that we're in that position, we'll, uh, you know, we'll update all the financial implications as we, you know, as we get through the, uh, the end of it, if we do.
Okay, thanks, guys. Have a good evening. Thank you.
Thank you.
All right. Next question comes from the line of Edison Yu from Deutsche Bank.
Lines open.
Hey, thank you. Good afternoon, everyone. I wanted to follow up on the previous question about philosophy and kind of your philosophy, Mark, for value creation. If we look at, um,
Just so you know, I think you would agree, and many investors agree, that it's not clearly undervalued.
Do you think that is more a perception issue or more structural?
and I mean this in the context of perception being.
You’re obviously delivering very good growth.
There's a lot of backlog, and eventually that value will be realized within the current structure, or do you think it's...
It's naturally, I guess.
Um, going to be constrained by the current situation.
Uh, any thoughts you have about that would be great.
Well, okay, so, uh, we're in the operating business. We're not in the investing business, so it's a little bit hard for us to read the minds of investors and how they interpret it. I mean, for us, it's pretty, I think, I think,
The thing that we're really focused on is increasing the present value of future cash flows. I mean, that's that is kind of the foundation for, you know, equity and and debt, uh, capitalization. I think that we've been, you know, we've got some challenges due to the delay in terms of the satellite programs. Especially that's, you know, that's increased the amount of debt and inhibited, our cash flow and increased our Capital spending. So, right now the thing that we're really, really the most focused on is for each of our businesses. First of all is is just doing what I just described which is increasing the present value of future cash flows. It's really based on the competitive positions. I'd say we acknowledge that think of it as a packaging element to that as well. You know, can we organize that into
Uh, and you know, into investable bites for debt and equity holders. And that's kind of, I think, when we talk about our portfolio review, things that we're looking at in our portfolio review are the synergy element I mentioned before, the capital intensity of each of the businesses, and then there's another consideration, which is what is the value proposition for investors. And so, we are looking at that as part of our portfolio review.
Understood, understood. And then just a more, I guess, strategic question. I'm sure you've seen the excitement around Golden Dome and what data could potentially do. Do you have some initial thoughts on what kind of role advice that might play?
Yes. Uh, we do. I mean, uh, I don't know that I'm going to—I can't.
Yes, we do. The short answer is yes, we do. Some of it has to do with, think of it as there's a sensing portion of it. There's certainly a strong cryptographic component to it all. The stuff that we talked about regarding data centers, Fusion, and the kill chain—all of that has to be automated in real time, in very complex systems. So there's definitely an element for us in that. We think there are some really interesting opportunities for us in ground networks and space infrastructure. But those would be...
I'd say those are just some of the top-level areas.
That we have, uh, environment another area that we've talked about, uh, as well.
The in the context of commercial and government applications is hybrid networking and hybrid networking, being 1 of 1 form of that, being multi- orbit satellite Communications. So for, for golden dome, there's definitely a number of applications that are going to use, uh,
Multiple and diverse communications. And then the other area is combining both Linus and terrestrial communications.
Opportunities there as well.
I’d say those are some of the, you know, most obvious areas where I think we'll be involved.
If I could sneak in just a financial 1 for, for Gary, the, it seemed like the margin but the performance in in Comm Services was very strong. Both in a in a quarter quarter and and year-over-year basis. If you just look at the, the revenue, right? It was, it was flat-ish. But actually, even though went up a lot, um, do you have any sense? What can you give us a sense, what drove that and what were they 1 time items?
Uh, yeah. Well, some of it is, uh, Edison. We were referencing this in terms of a little bit of timing benefit. We did have a good business mix in the quarter, both in terms of product versus service revenue.
uh, and then actually
Excuse me, even within, uh, the communication Services segment, you know, for example, we just had, you know, a really, uh, you know, favorable mix of Aviation terminal. Deliveries is the way the timing played out for us during the quarter. So those are the things that you see that drove the leverage, you just described
Great. Thank you.
Thanks guys.
Thank you.
I will. Next question comes from the line of Sebastiano Petty from J.P. Morgan.
The line is open.
Hi. Thank you for taking the question. I guess just kind of following up on Rick's question there. Um, or just, you know, thought process in terms of the direct the device, I mean, mark, it sounds like, you know, a shared infrastructure model and you know maximizing value for, you know, you believe is not through a, you know, a big capex program, like a 5 billion dollar program, but through shared infrastructure but
Given all the competition in the space, I mean, does that, you know, I guess how do you think about the puts and takes on why shared infrastructure might work versus maybe against some of the GOAT alone Leo constellations and other directed device kind of satellites? Uh, sure, yeah. Yep, there, yeah.
No, that’s a good question. Let's look on the directed device, saying.
1 of the 1 of the things that people are paying a lot of attention to are the data rates that you can deliver to off-the-shelf devices. And and so, if you look at how do you get and I think of that as it's just like Broadband. It's really what is the total capacity of your constellation especially when you're delivering uh, service into these off-the-shelf? You know, mobile phones as as
So, uh, that is, you know, think, think of that.
Problem, what the discriminating 1 of the main discriminating features of that is you need more power on the ground in order to get those devices. So, 1 of the things, you know, 1 of the things that I think everybody's coming to realize is that a, a constellation? That doesn't have high power plugs densities on the ground, isn't going to work in the D2D environment, not for the Broadband speeds that the, you know, 5G new radio functions that people want
So, uh, that's part of what's driving interest in a low Earth orbit component to these systems.
The issue is, if you want to get.
High capacity, that is throughput. It's got to go back to the physics, which is, you know, that Shannon capacity. And what you, you know, what that tells you is that.
Uh, capacity grows linearly with spectrum, but only like the log of power, so it's not super surprising that the...
The contenders with the least or no spectrum are building systems with the highest power, but the systems that the operators have spectrum.
We are working to aggregate spectrum, but that is, if they can share their spectrum with others. That's a far, far more efficient way to develop and increase capacity. So that’s the principle. It's like—and think of it as like when you talk about the RAG power, that means you need.
like, you know, like
It's like multiple. I don't want, I don't want to speculate just depending on the amount of spectrum you have relative to say a 5, megahertz chunk, you can get an order of magnitude advantage in uh in capacity at the same Power by having Spectrum.
Oh, this is, uh... and then the other thing is.
1 of the big issues, 1 of the big regulatory issues has been the interference that those very high levels of satellite power, create on not only the other satellite services, but other terrestrial networks as well. That's 1 of the most contentious issues on these reuse of terrestrial Spectrum, so by, you know, by judiciously combining Spectrum or using the Spectrum portfolio, that Spectrum holders have now, uh, you can get, you can get really good Services into devices at much more economically that that's the principle and you only go through this with some other Spectrum holders that they're seeing it, it makes sense. So I I think we're, we're not done with that but we're getting, you know, we're working on it and I think it's a a
A, I think it makes a lot of sense from a physics perspective, from an economics perspective, but it's also usually capital efficient in a very capital-intensive industry.
That's how familiar, and one quick follow-up. I get to again on maybe, um, just to let Auto in the settlement. I think, is there any update in terms of the timeline of the, you know, court approval on the bankruptcy, court approval with Legato? And just thinking about, um, you know, there could be any slippage from the announced timeline in the payments that you...
In the July press release, thank you.
Uh, yeah, there could be clearly can be slippage from The Jive press, press release. That's why we've conditioned our, uh, you know, we've conditioned our all the information we've provided on, uh, approval by the bankruptcy court. And so that's still in process. And when it's, you know, when it's complete will will provide an update.
Thank you so much.
Thank you.
Our next question comes from the line of calling canceled from Canada. Fit schedule.
The lines open.
Hey, thank you for the question. Maybe, maybe focusing on kind of just like the going about the philosophy approach. Um, in terms of like Tech participation in the conversations with Spectrum holders, you just maybe talk about how kind of the the mega TMT Giants. Are are shaping the conversation both, with respect to kind of like appetite for providing capital?
Uh, is 1 bucket? The second bucket is kind of, you know, shared. We'll call it shared Spectrum support, cooperation on that.
And then the third bucket of potential restrictions, right? The concept that, um, they provide a blank check up front for capability and that's a wholly owned capacity. So, maybe if you can kind of flesh out those three dynamics with respect to the conversations with other spectrum holders, that’d be super helpful. Thank you. I just want to make sure the three things can... You know, the three things being...
Yeah, cash cash, cash spectrum, and restrictions, basically like the back end of, uh, we'll call it funded constellations. And, um, one of your peers having 85% of capacity restrictions and stuff like that.
Okay. So, uh
Yeah, well, I'm going to go back to the towers analogy. Right? What happened in the towers business is that it became evident that, you know, think of it as...
A Towers company that works with multiple different Spectrum holders really is pretty much insulated from a lot of the competitive factors that, you know, that the that Define competition. Among each of the characters right there. They're, they're, they're business is not dependent on the split of of market share among those or even the, you know, roof device. Refresh Cycles. It's really like a utility play. We're going to provide, you know, we're going to provide towers and fiber fiber infrastructure. So so
One of the things to do here is that you can see that multiple Spectrum holders participate, and there's an opportunity to bring in third-party capital. That's really less sensitive to the performance of any individual Spectrum holder and more sensitive to the demand in the market as a whole.
so,
that's so that's 1 of the things and and then basically think of it as if you think of different businesses uh uh you can think of the space infrastructure business especially if it's a utility as being Capital intensive but if it's
Susceptible to the competition among individual carriers, and more more sensitive to the demand in the market as a whole, then it can have less risk. I can, and that can Merit, uh, you know, that can be attracted to infrastructure type investors, and that sort of relieves the Spectrum holders from having to capitalize the things themselves and and confuse this sort of
low infrastructure investment in, you know, that that can be a utility like thing with the uh with the services that they offer. So that that basically is what the that's kind of what the value proposition is. And the terrestrial side. We think we can create similar value proposition in the space side. The the the key to doing that among the Spectrum holders is that they just want to be assured. That the infrastructure company is treating all Spectrum holders fairly that there's no competitive advantage and so to attribute of 1 that disadvantages the others relative to owning their own infrastructure. And that that's really a governance issue. And that's 1 of the main things that that we're working on on a an infrastructure uh based uh and and a utility like infrastructure.
that, that cover the
The points that you're asking about, or is there another one that I'm missing?
It it does in the kind of concept of the wolf called the large, third party infrastructure organizer. Um, and so I think that that that kind of data point is 1. I definitely want to hone in on um, and maybe if you can kind of talk about kind of
Maybe not less than the three-bucket concept. But assuming that there is a large infrastructure called "quarterback" in play for organizing play, maybe just discuss, kind of the high-level way that that participant thinks about price.
Especially in light of the echo star announcement. So, I think 1 of the concepts that folks that kind of honed in on is the idea that Echo start to peel away or potentially leap out or sell sband Holdings, right? And that it was kind of a spectrum amalgamation play, but now that they're going after a constellation. Um, I think it's maybe it's fair to assume that there's kind of like a price secretion dynamic or there's a increase scarcity around via sets sband and lb band Holdings so so maybe
Just talking to a high level, less than 3 buckets, but maybe the price sensitivity of, we'll call it, the large undisclosed.
Coordinator.
Okay. Um,
so I mean, in order for d Todd to work, you've got to make a sufficient power flux density on the ground, that that's a big thing. What that power front density needs to be in order to deliver certain speeds into handsets. Depends a lot on how much Spectrum you have. So, so 1 of the big advantages of of the approach that we're doing is we have a technical approach that covers a large amount of spectrum, the incremental, cost of spectrum compared to other components in. This is necessarily that high, so we can get a lot of economic benefits by covering large amounts of spectrum. That does that does pressure some of the beam forming elements. That's 1 of the things that we're really really good at. So I think when you're thinking about any particular system you got to think about 2 things 1 is think we always talk about in the Broadband space. We always talk about the productivity of of our of our satellite infrastructure.
That is like think about is how many gigabits of per second of throughput? Do we get per megabyte of capital investment? So 1 is you need a really good, you need High productivity on it. And then, then the other part is how you finance it and how you divide up that capital investment among others. So I think, I think, just based on what we're seeing from others, I think our technical approach,
It's very productive. And then, I think we're amplifying the benefits of that by being able to cover enough spectrum to share that among multiple spectrum holders. I think the other thing that we're trying to highlight here, which has become kind of evident, is especially in the D2D space, there are multiple industry participants besides just spectrum holders that would like to see.
But it reduces costs if you reduce the capital intensity, the airtime costs should be a lot more attractive, then kind of the kinds of thin numbers things that are being kicked around. Now I mean that's what you need to get the 5G new radio type services. So we we think that the thing that we're doing makes a lot of sense from from a business logic perspective and 1 of the key parts of the dose having technology, that's really focused on that particular uh constellation uh Mission purpose and it's different than what we've seen from anybody else. You know, I mean the architecture is different and so the Technical Solutions are different and and we think we've got 1, that makes a lot of sense.
Got it, got it. Thanks. You know, last one, maybe just like... is there a sense of timing where we might get?
Incremental color on, on, kind of like an organizational announcement.
of these kinds of things, this effort,
I don't want to comment on that yet. Uh,
But it's not way off in the future, but I think it wouldn't be appropriate to comment on that yet.
No worries. I appreciate the call; this has been super helpful. Thank you.
Thanks.
Thank you.
Our last question comes from the line of Ryan. P.S. from Needham & Co.
The lines. All right, thank you for squeezing me in. Yep. Um,
I was going to ask you about the competitive landscape and IFC Commercial, IFC, Mark, but that's maybe a total to Blue Sky for the ends. Maybe I'll just make it a layup here. Um, you know, if we look at your fixed broadband revenues, we saw an inflection to growth after.
A couple of years of steady decline. I'm wondering if you can unpack that and maybe explain what's going on there. Is this kind of revenue optimization among your existing subs? Are we seeing Starlink capacity exhaust, maybe less aggressive pricing? What's going on fixed? Thank you.
Yeah, we're not seeing that in fixed broadband, so it's not entirely clear.
Uh, what are you after there, butt?
We, we referring to, uh, sequential growth in Maritime. Is that what you're referring to? Yeah, I thought I thought I apologize. I heard fixed Broadband. Yeah, yeah, yeah. I'm a maritime side. It's really, uh, we're, you know, the, the, uh, Nexus wave. The, the hybrid Leo Geo system is, it's growing pretty fast. And it's, you know, we're getting
You know, we've got a lot of things we talked about is a few weeks ago, is a thousand ships under contract. We the install rates been ramping up, the average revenue per vessel is significantly higher because we're delivering way, way more bandwidth. And whereas the existing base was really geared towards operational. Applications only this current 1 is geared towards operational applications, plus crew, uh, services, and some additional, uh, services. So it's that, it's really the growth rate of the sequential growth rate in Nexus wave is what's driving the the the the, the sequential growth in Maritime. And like we said, we think that it's going to lead to year-over-year growth by the end of the year and and recall that's 1 of the critical about business outcomes that we've been focused on for, you know what, we call the importance of the year. We obviously have a lot of confidence given what Market
The first step in that journey was the sequential growth that we saw this quarter. So, feeling really good about how that panned out, and hats off to our teams for making that a reality.
And you've got confidence in the performance there with the 1 Web partnership.
Yeah, I think we have, I mean, 1 of the things we've been really focused on is understanding geographic distribution of demand. We have a good understanding of uh, what, what both the benefits and the constraints are for 1 Webb. But when we augment that 1 web with what, what's, what? We have in go and what's coming in, go? Uh, we've got we've got a good runway for growth there.
It's helpful. Thanks so much.
Thank you.
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