VIASAT INC Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Aviation Growth: Expanding customer base globally, integrating capacity from satellite operator partners to expand coverage and capacity, winning new airlines and fleets, and meeting service level agreements on busy routes.
• DAT Progress: Strong growth across all DAT businesses, with leading indicators signaling strong growth ahead. KG-142 products have seen record awards, building an installed base for next-generation encryption.
• Capital Efficiency: Making progress on capital synergies and operating cost efficiencies, reducing CapEx by $200 million, focusing on debt reduction and free cash flow generation.
• ViaSat-3 Satellites: Flight 2 expected to be completed and shipped to Cape Canaveral this summer, in-service late 2025. Flight 3 in-service shifted to 2026 due to a less capital-intensive launch configuration, saving costs while enhancing coverage and capacity.

Segment Performance

• Aviation: Commercial in-flight connectivity aircraft in service grew ~13% year-over-year, business jets grew ~18% year-over-year, and backlog grew 22% year-over-year. Aviation backlog is ~1,570 aircraft, with each 10 aircraft contributing ~$4M-$5M in discounted lifetime EBITDA contribution. Revenue in aviation service increased ~12% year-over-year, with 3,950 aircraft in service and a contracted backlog of ~1,570 aircraft.
• Defense and Advanced Technologies (DAT): Revenues grew almost 20% year-over-year in Q3. Info sec and cyber defense, space and mission systems product revenues were up 24% and 19% respectively. KG-142 products saw $135M in awards year-to-date through the third quarter.
• Communication Services: Revenue was $820 million, down 6%. U.S. fixed broadband declined, but aviation grew 12% (13% increase in commercial aircraft in service) and government SATCOM grew 4%. Maritime revenue declined 8% due to ARPU pressure and L-band migration ahead of NexusWave rollout.

Guidance

• Fiscal 2025: Expected revenue flat to slightly up year-over-year, with adjusted EBITDA growth in the mid-single digits. CapEx expected to be $200 million lower than prior guidance at approximately $1.1 billion.
• Fiscal 2026: Expect year-over-year revenue growth and modest adjusted EBITDA growth. Free cash flow inflection expected in the second half of the fiscal year as CapEx related to ViaSat-3 subsides, with expected 2026 CapEx essentially flat to prior implied guidance at about $1.3 billion.

Risks

• Fixed Broadband Challenges: Revenue pressure in U.S. fixed broadband due to capacity shift to commercial aviation.
• Maritime Revenue Decline: Sequential decline in maritime revenue due to ARPU pressure and L-band migration ahead of NexusWave rollout.
• Litigation and Spectrum Uncertainties: Uncertainties around Ligado bankruptcy proceedings and spectrum coordination issues, which could impact business operations and revenue.

Question and Answer

Q: On ViaSat-3 Flight 2, 3 locations and impact on in-flight connectivity contracts A: Flight 2 is planned for the Americas, Flight 3 for Asia Pacific. Customers are comfortable with delays due to capacity optimization and third-party capacity integration, with no impact on in-flight connectivity contracts.

Q: Unpacking Ligado, ASTS transaction A: Ligado intends to perform on the co-op agreement, with AST valuing the spectrum at the value of the co-op agreement. MSS spectrum augments terrestrial networks, enabling lower cost and open architecture.

Q: DAT assets and Telesat discussions A: Evaluating DAT assets for debt reduction, with advanced negotiations with Telesat focusing on the aviation market and working on compatible terminals.

Q: CapEx savings and launch vehicle configurations A: $200 million CapEx savings from launch vehicle configuration changes, focusing on capital efficiency and funding future growth.

Q: NexusWave maritime growth A: Positive demand in the maritime market with a pipeline of over 4,000 vessels, targeting low hundreds installed in the current quarter, expecting growth in FY2026.

Q: Ligado spectrum litigation A: Refer to public filings, with uncertainties around spectrum coordination issues part of ongoing proceedings, which cannot be commented on actively