Viasat, Inc. (VSAT) Earnings

Management highlights

- **Quarterly Core Achievements**: • Achieved record new awards and backlog in the DAT segment, highlighted by winning the next phase of the U.S. government's Protected Tactical Satcom Global (PTSG) program, which validates the firm's competitive advantage in multi-orbit, dual-use integrated satellite solutions. • Generated positive free cash flow of $72 million, up 19% YoY, driven by $291 million in operating cash flow (up 13% YoY). • Successfully completed in-orbit testing for Viasat 3 Flight 2, and completed reflector and boom deployment for Viasat 3 Flight 3 post-quarter end; Viasat 3 Flight 3 is on track to enter service over the Asia-Pacific region in late August or early September 2027. • Improved net debt leverage ratio to 3.2x trailing EBITDA, a 0.4x improvement YoY, from ongoing debt paydown. - **Strategic Priorities & Themes**: • Three core near-term priorities: compete effectively in high-growth attractive markets, leverage new Viasat 3 technology to reduce effective airtime costs and improve network resilience/efficiency, and integrate AI and machine learning for multi-orbit network optimization. • Key overarching trend: growing convergence of communications, cybersecurity, networking, data analytics, and proliferated resilient dual-use space infrastructure, with national security customers prioritizing integrated mission outcomes over standalone products. • Growing opportunity in mobile satellite services (MSS), driven by 3GPP non-terrestrial network (NTN) integration into terrestrial mobile networks and AI-driven autonomy for land, sea, and air platforms. The firm is positioned to capture growth in consumer and enterprise direct-to-device (D2D) applications leveraging its existing spectrum, safety service experience, and shared infrastructure. • Dual-use positioning: converging commercial and national security space use creates demand for shared resilient infrastructure; the firm's ability to integrate technology development, production, and long-term operations creates a competitive advantage that drives both near-term DAT awards and long-term recurring government service revenue.

Guidance

- Full fiscal year 2027 financial guidance is unchanged from prior disclosure. • Consolidated revenue is expected to grow mid-single digits YoY, with communication services revenue growing low single digits and DAT revenue growing mid-teens YoY. • Adjusted EBITDA is expected to be flat to slightly up YoY. • Consolidated capital expenditures are projected to be between $950 million and $1 billion, which includes $250 million to $300 million in Inmarsat capital expenditures. Free cash flow for full fiscal 2027 is expected to be approximately $180 million. • Within communication services: aviation revenue is expected to grow YoY but with a moderated growth rate relative to recent years; maritime total vessels in service are expected to decline modestly YoY, but Nexus Wave installed base will grow significantly; fixed broadband subscriber declines are expected to continue until Viasat 3 Flight 2 enters service, when stabilization is expected; government SATCOM revenue is expected to grow for the full year. • Within DAT: InfoSec and CyberDefense, space and mission systems, and tactical networking are all expected to deliver strong full-year growth despite the first quarter decline, driven by a strong award pipeline.

Segment performance

1. **Communication Services**: Total awards were $774 million, up 3% year-over-year (YoY); total revenue was $825 million, flat YoY, representing 68.75% of total company revenue. Aviation revenue grew 11% YoY, ending the quarter with 4,530 commercial aircraft in service (up 10% YoY) with higher average revenue per aircraft. Government SATCOM revenue grew 10% YoY, accelerating from prior periods. Maritime revenue declined 7% YoY, with the segment ending at over 1,700 Nexus Wave vessels in service and an order backlog exceeding 1,400 vessels. Fixed broadband and other revenue declined 27% YoY, ending with 115,000 subscribers and $111 average revenue per user. Adjusted EBITDA for the segment was $311 million, down 3% YoY, impacted by the prior-year sale of the Navarino equity interest. 2. **Defense and Advanced Technologies (DAT/DAS)**: Total awards were $524 million, up 22% YoY; total revenue was $331 million, down 4% YoY, representing 27.58% of total company revenue. Excluding the impact of declining legacy IP licensing revenue, revenue would have been up approximately 2% YoY. Tactical networking revenue grew 36% YoY, driven by product sales to international customers. InfoSec and CyberDefense product revenue declined 8% YoY due to timing of customer delivery schedules. Space and mission systems revenue declined 24% YoY due to a single program supplier delay and a development-to-production transition. Advanced technologies and other revenue declined $17 million YoY due to the continuing decline of legacy IP licensing revenue. Adjusted EBITDA for the segment was $70 million, down 20% YoY, almost entirely driven by the IP licensing revenue decline; adjusted EBITDA would have been slightly up excluding this impact.

Risks & headwinds

- Increased competition in legacy commercial segments, particularly residential fixed broadband and some maritime mobility markets, is creating downward pressure on revenue in those portions of the portfolio. • S-band spectrum national market access rights outside the U.S. face potential regulatory uncertainty, as other stakeholders have pushed to reallocate currently licensed spectrum; while the firm is the only incumbent actively using its licensed European S-band for its intended purpose, the outcome of regulatory discussions is uncertain. • Supplier delays can impact quarter-to-quarter DAT revenue delivery, as seen in the first quarter 2027 space and mission systems segment decline. • Quarter-to-quarter revenue and EBITDA for DAT product segments can be volatile due to variability in customer delivery scheduling. • The current space and defense market is highly dynamic, with rapidly changing competitive and geopolitical conditions that could impact the timing and value of awards and strategic initiatives.

Analyst Q&A

• Q: What is the status of the firm's S-band and L-band spectrum rights globally, and what is the firm's strategy for L-band spectrum use vs. potential sale/lease for D2D services? /

  A: S-band rights are primarily granted on a national level, rather than globally coordinated. The firm retains licensed rights for its European S-band, which it already uses for the licensed purpose, giving it a strong position in ongoing regulatory discussions, though outcomes are not guaranteed. For L-band, the firm uses its spectrum to fulfill critical safety missions (maritime and aeronautical) that require international cooperation, and growing demand for existing mission bandwidth matches the firm's current spectrum holdings. The existing spectrum also fits well with emerging D2D applications, so the firm currently plans to use its spectrum for these growing existing and new missions.

• Q: How will the new capacity from Viasat 3 Flights 2 and 3 be split between existing and new customers, and what will drive revenue growth from these new satellites? /

  A: The majority of the new capacity will go to existing core mobility markets: commercial and general aviation, maritime enterprise, and government mobility. Growth will come from both adding more connected platforms in these segments and increasing average bandwidth usage and revenue per platform, as lower per-unit bandwidth costs drive higher consumption. A portion of the new capacity will also be used to serve fixed consumer and fixed enterprise markets, creating incremental growth alongside the core mobility focus.

• Q: What is the current status of the DAT segment strategic separation review, and why has the review taken an extended period of time? /

  A: The review's core goal remains delivering maximum shareholder value, and the firm is not rushing a premature decision amid the dynamic current market and geopolitical environment. The firm is currently seeing strong growth in the DAT segment, with recurring themes of integrated dual-use technology and operations that create synergies with the firm's existing communication services business. The firm is focused on capturing growing contract opportunities first, and will only move forward with separation if it delivers more value than keeping the segments combined. The evolving competitive landscape for MSS spectrum, particularly for D2D, is also part of the ongoing evaluation.

• Q: Can you expand on how AI-driven autonomy across domains acts as a growth catalyst for the firm? /

  A: AI-driven autonomous vehicles (air, land, and sea) create new demand for uninterrupted, resilient satellite command and control connectivity, which the firm is positioned to provide. For autonomous drones and unmanned aerial vehicles, regulatory requirements mandate backup connectivity beyond terrestrial networks to ensure safety, which overlaps with the firm's existing aeronautical safety mission. Autonomous ground vehicles and government autonomous platforms also create additional demand for satellite-augmented connectivity, creating a new adjacent growth market aligned with the firm's existing capabilities.

• Q: How should the market understand the $4 billion ceiling on the PTSG award, and how will revenue from this contract be recognized? /

  A: The $4 billion is the total ceiling for the overall multi-year IDIQ contract vehicle, not the amount currently awarded. The firm only adds firm delivery orders to backlog, so only the current base award is included in Q1 2027 backlog, with options and future task orders added as they are awarded. Revenue will be recognized on a percentage-of-completion basis, consistent with the firm's accounting for similar long-term defense contracts, with revenue ramping as work progresses on future task orders.