ViaSat, Inc.

Please stand by. Your program is about to begin. My name is Meg, and I will be your conference facilitator this afternoon. At this time, I would like to welcome everyone to Viasat's first quarter fiscal year 2025 earnings results conference call. All lines have been placed on mute 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 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 measures is available in our Q1 FY25 shareholder letter on the investor relations section of our website. Please note that to provide a more meaningful comparison of our results of operations year over year, Results for the first quarter of FY 2025 are compared against supplemental combined results for the prior year period. These supplemental combined results are based on the combination of Viasat's historical reported results with Inmarsat's historical reported results for periods prior to the acquisition, with adjustments to reflect purchase price accounting, the conversion of Inmarsat's results from IFRS to GAAP, and conforming changes to reflect Viasat's presentation of its results. This supplemental combined financial information was prepared to better illustrate for investors the performance of our business following our acquisition of MRSAT. Unless otherwise noted, the presented financial measures reflect year-over-year increases or decreases relative to the supplemental combined financial data in our Q1 FY25 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 security 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 uncertainties, 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. These 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 Dankbert, Chairman and CEO.

Good afternoon, and thanks for joining us today. With me, along with Lisa, we have Guru Gaurapan, our President, and Sean Duffy, our CFO. We encourage reading the shareholder letter and referencing the slides we posted on our website earlier this afternoon for more details.

I'll give a quick overview of the shareholder letter. Guru will cover the financial results and highlights and our growth outlook, and then we'll take questions. Our first quarter fiscal year 2025 results were a little better than expected in terms of year-over-year revenue and adjusted EBITDA growth. on a combined basis as described in the shareholder letter exercise. We also continued to take actions to strengthen our capital structure while thoughtfully investing in positioning for a promising future. Our ongoing services revenue, coupled with expected activations in aviation, good defense and advanced technology orders, existing and new backlog, and order pipeline enable us to increase our outlook for fiscal year 2025.

We're pleased with the financial results this quarter, but remain focused on our agenda of both near and long-term goals, including overcoming the VICE Act 3.1 anomaly. We're making steady progress at supporting the improvements in our growth outlook. While these points are all very important, the headway we're making on multiple fronts creates optionality in the ways and sequences in which we address our challenges and opportunities.

So that list is first get our satellites under construction into service and holistically address our capital structure and trim our leverage ratios from current levels. We want to continue to groom our business portfolio to the highest leverage satellite and network technologies that attract customers and partners and ultimately yield attractive recurring revenue.

We want to continue the Marsat integration to drive higher returns on our network and harmonize our services and operations and achieve our cash flow and collection objectives.

We want to cultivate an enduring and economically accretive satellite operator partnership ecosystem to augment coverage and capacity and increase multi-orbit capability. We want to continue to win and execute new defense and advanced technology programs with attractive growth potential. and durable competitive advantages in key technologies such as ground networks, unique free space optical applications, mission-specific phased array terminals, space-based cybersecurity, and others. We can leverage these technologies into recurring revenues for commercial and government customers, and we can use these technologies to help create and promote a competitive ecosystem of partners. And finally, we want to capture a leadership position in the emerging directed device services market by leveraging our substantial installed base of aero, maritime, and mobile users, emerging 3GPP standards, open architectures, and our existing resources.

We want to foster innovative business models, serving an extremely large base of satellite-enabled mobile devices and platforms, optimizing our mobile satellite services spectrum licenses, and evolving L-band to create value for the millions of people that depend on our services for safety and connectivity in the air, at sea, and on land.

Some of the near-term satellite milestones include BIOSAT-3 Flight 3 completed thermal vacuum testing. That's an important integrated satellite testing milestone. We announced this week that BISAT-3 Flight 1 entered into commercial service over the American. We've achieved operational speeds well over 200 megabits per second to in-flight aircraft, and it's now in use for in-flight connectivity. It will both cover new routes and enhance services on existing coverage areas. And we've been able to prove dynamic beamforming and terabit per second payload technology that it works. We expect our partner, EOSAT, to launch our two KA band polar coverage payloads, GX10 A and B, very shortly. They're expected to enter service in early to mid 2025.

As a reminder, our financial results have been reframed to give investors more insight into the business areas already yielding attractive growth, those with attractive potential but are currently challenged, and a place for emerging areas such as the direct-to-device and other advanced technologies that we believe merit and fester attention. Google will provide more detailed information on the composition of our new segments and the segment revenue breakouts that we have added for our quarterly performance updates.

While we're very focused on executing in the near term, Biosat has always planned for the long term. That's enabled us to sustain growth for decades, build key franchise businesses, and evolve our technology, business models, and market segments to sustain competitive advantages even in the presence of generational technology evolutions and consistently shifting playing fields in competitive environments. We're balancing those near and long-term challenges and opportunities. With that, I'll hand it over to Guru.

Great. Thanks, Mark. I will cover three topics, financial performance, our new segment structure, and an update to our outlook. YSI generated good financial performance during Q1 FY25. We earned combined revenue growth of 6% year-over-year and combined adjusted EBITDA growth of 16% year-over-year, driven by defense and advanced technologies and aviation. The positive operating leverage reflects strong revenue flow through from IP licensing and practical networking and advanced technologies and the continued benefit from our acquisition-related operating synergies. Now some color on the financial results. Q1 FY25 revenue was $1.1 billion, up 44% compared to $780 million in Q1 FY24. Combined revenue was up 6% year over year, largely driven by growth in our defense and advanced technology segment and aviation. Net loss of 33 million for Q1 FY25 improved compared to the net loss of 77 million in Q1 FY24, primarily due to improved operating performance, which was partially offset by higher interest and tax expenses. Q1 FY25 adjusted EBITDA was $404 million, an increase of 120% year-over-year. Adjusted EBITDA increased by 16% year-over-year from the incremental revenue flow through in defense and advanced technologies, which more than offset expected declines in fixed broadband service revenue and higher R&D expenditures. Q1 FY25 capital expenditures declined 20% year-over-year to $301 million. Combined capital expenditures decreased 33% year-over-year, primarily due to lower satellite expenditures, customer premise equipment, and general infrastructure costs. Sequentially, net leverage declined 0.1 times to approximately 3.5 times LTM adjusted EBITDA as of Q1 FY25. which is substantially favorable to the plan at the time the Inmarsat acquisition was announced. We ended the quarter with $2.9 billion of liquidity, including $1.8 billion cash and cash equivalents at quarter end, and we have a fully funded path to our positive free cash flow inflection by end of Q1 FY26. And finally, subsequent to quarter end, Wiresat deployed approximately $150 million of cash to repurchase $152 million principal amount of Inmarsat and Wiresat nodes in the open market. We opportunistically repurchased $102 million principal amount of Inmarsat 2026 secured nodes at an average price of $98.2 and $50 million principal amount of Wiresat 2025 unsecured nodes at an average price of $99.2. Before we go further, I want to provide a bit more color on our new segments, communication services and defense and advanced technologies. We initiated the new segment reporting structure to give additional insight into our portfolio and drivers of value. Last month, we provided historical financials for the new segments and business lines. Our communication services segment includes all the businesses using our satellite network for connectivity services. All the Inmarsat businesses are included in this segment. Communication services is comprised of aviation, government satcom, maritime, and fixed services and other, or FSNO. FSNO includes U.S. and international residential fixed broadband, energy, and enterprise. The majority of the segment is recurring service revenue. The product revenue is primarily related to terminal sales supporting services. The majority of our capex is for our satellite network, which includes space and ground, enabling these services. The defense and advanced technology segment has four business lines. Information security and cyber defense, which sells our type 1 encryption products. Space and mission systems, which includes antenna systems. Tactical networking, which is mostly our trellisware subsidiary, of which we own approximately 60%. And advanced technologies is another, which includes IP licensing revenue. Most of the revenue in the segment is product revenue, which includes IP licensing and can be lumpy quarter to quarter. The service revenue in the segment is primarily warranty and support for the products. The defense and advanced technologies business lines have a low capital intensity. And we appreciate the feedback investors provided in this process. It is an important step in raising the visibility of our valuable franchisees. We will continue to work to highlight and unlock the value that Viasat is creating for its shareholders. Now let's take a closer look at communication services performance during the quarter. Aviation continues to compete very well in the market. Commercial IFC ended the quarter with 3,750 aircraft in service, up about 16% year over year, with over 1,460 aircraft in contracted backlog. We're also in the contractual process of adding about 350 incremental aircraft to the backlog, including from six new airlines. We achieved mid-teens year-over-year growth in both the number of commercial and business aviation aircraft in service. And while we are confident in the year-over-year growth outlook and trajectory for aviation, it's worth noting that we expect quarter-over-quarter results to reflect continued OEM delays and some impact due to the effects of the recent global cybersecurity software outage impacting our customers. U.S. fixed broadband revenue declined as expected, driven by fewer residential subscribers. We continue to de-emphasize U.S. fixed broadband to support our rapid and higher margin commercial IFC in aviation. Our government SATCOM business line announced we are expanding work with Airbus Defense and Space to integrate YSS dual-band broadband terminal, which is called the GAT-5530, into the Spanish MOD's C-295 maritime patrol aircraft fleet to provide a highly flexible multi-band, multi-orbit broadband SATCOM capability to support missions utilizing next-generation PANESAT-NG satellites. We are excited because the Airbus C-295 aircraft is operated by 37 countries around the world with hundreds of aircraft in operation and hundreds more on order. We are seeing more international government product and service opportunities within Marsat. During the quarter, we began collaborating with UAvionics, a pioneer in certified avionics for crewed and uncrewed aviation, to integrate Wiresat's Welliris module into its compact, multi-linked airborne radio system. Welliris provides secure, resilient L-band communications for commercial UAVs and enables real-time monitoring for beyond visual line of site UAV operations. We believe L-band unmanned vehicles of all types are an exciting growth opportunity, especially as we modernize our L-band capabilities. Nexus Wave, Maritime's new hybrid multi-orbit managed service targeting commercial shipping customers, brings global coverage, speed, capacity, security, and resilience to meet enterprise class operational needs and crew welfare. Nexus Wave is building anticipation in the market, and we expect to launch beta service during Q2 FY25. In Q1 FY25, communications services revenue was $827 million, up 48% compared to $560 million in Q1 FY24. Combined revenue was down 2% year-over-year, driven by the expected decline in U.S. fixed broadband services and segment product revenue. Q1 FY25 communication services electricity bid that was $308 million, an increase of 98% year-over-year. Combined electricity bid that declined 4% year-over-year, primarily from lower revenue flow through from U.S. fixed broadband in the FS&O business line and maritime services. Now to defense and advanced technologies performance during the quarter. Space and mission systems received awards of approximately 85 million related to multi-function phased array antennas, free space optics, and antenna systems infrastructure with supported services. Tactical networking received approval that allowed activation of certain product upgrades. Once activated, we recognized IC licensing revenue on these products that had been sold over the prior few years. The business is expected to benefit from the ongoing sales, but with substantially fewer units per quarter than were recognized in Q1 FY25. Advanced technologies also benefited from strong IP licensing revenue. There are two components to the current licensing revenue, an annual fee, which typically occurs in Q1 as it did this quarter, and a per unit sold fee, which is distributed throughout the year. During Q1 FY25, we benefited from both the annual license and the per unit components. And for remainder of FY25, we expect to generate revenue from the per-unit component only. Information Security and Cyber Defense won awards for Type 1 encryption products totaling over $45 million, largely reflecting growing data center demand driven by geographic expansion and AI applications. Q1 FY25 book-to-bill ratio was 1.2 times. with continued momentum into Q2 FY25. In Q1 FY25, defense and advanced technologies revenue was $300 million, up 37% compared to $220 million in Q1 FY24. Product revenue was up 45% year-over-year, driven by the strong IP licensing revenue in tactical networks and advanced technologies. Q1 FY25 defense and technology statistics, which that was 96 million, more than triple the year-ago period, reflecting the value of the technology portfolio. Strong operating leverage from revenue flow-through in both practical network and advanced technologies drove exceptional performance. Overall, it was a good quarter and a strong start to FY25. Next, we are raising our outlook slightly to reflect strong Q1 results, confidence in our market competitive positions and pipeline, and despite continued aircraft OEM delivery. Our first quarter financial performance reflects our competitive solutions and strong execution in our aviation and defense businesses. Within our defense and advanced technology segment, we generated high flow-through IP revenue in two businesses. Our tactical networking business benefited from a couple of years of retroactive product upgrades in the quarter. We expect the business to continue to benefit from upgraded product sales going forward at a normalized level. Advanced technology has benefited from annual licenses in the quarter. Throughout the year, we expect more modest per-unit licensing revenues. Finally, because this is only the first quarter of FY25, we are raising the low end of our FY25 revenue and are just a little bit doubtful in maintaining our view of FY26. For comparison purposes, we removed the 95 million revenue and 86 million adjusted EBITDA catch-up benefit from the litigation settlement from FY24 reference results. Therefore, our guidance is based on FY24 revenue of approximately 4.5 billion and adjusted EBITDA of approximately 1.5 billion. We now expect FY25 revenue to be flat to slightly up year-over-year. with year-over-year adjusted EBITDA growth in the mid-single digits. We believe FY25 revenue growth, excluding an expected decline in U.S. fixed broadband associated with the Viasat 3F1 anomaly, would have been up mid-single digits. We have also provided additional segment-level detail in the output section of our shareholder letter. We remain prudent with our top-line guide given uncertainties with delayed OEM commercial aircraft deliveries and airline overcapacity. In FY25, we expect capital expenditures to decline to a range of $1.4 billion to $1.5 billion. We include capitalized interest in our CapEx guidance, which is approximately $200 million per year, but will decline in future years as we place satellites into service. We continue to expect our investments in our satellite network projects and success-based CapEx to exceed two-thirds of our total capital spend with less than one-third associated with our maintenance and general CapEx activities. Looking forward, we expect our investments in growth CapEx to continue to decline and generate an improving pre-cash flow trend. In FY26, we continue to expect to grow revenue and adjusted EBITDA relative to FY25 as a majority of our $3.4 billion assets under construction go into commercial service. Capital expenditures for FY26 are expected to decline to a range of $1.1 billion to $1.2 billion. We believe FY25 provides the foundation for multi-year accelerated growth in revenue in our district EBITDA growth and continued step down in CAPEX in FY26. As Mark mentioned, we are making steady progress on multiple fronts in support of the improvements in our growth outing. We continue to expect an inflection point in positive free cash flow by end of first quarter FY26. Our path to positive free cash flow is expected to be driven by double-digit operating cash flow growth and continued declines in capital expenditures as we normalize capital expenditure in line with satellites going into commercial service. Before closing, let me provide an additional update. As we discussed earlier in our prepared remarks, our new reporting segment structure was designed to better reflect the diverse and attractive nature of the end market that the company serves. as well as introduce greater visibility into our performance and value drivers. As part of our initiative to provide additional transparency into our business, we will be holding a webcast teach-in on October 17th, focusing on the defense and advanced technology segment, which houses our information security and cyber defense, space and mission systems, tactical networking, and advanced technologies business lines. The feedback was overwhelming that you want to learn more about this valuable part of our portfolio. We plan to cover the breadth of our technology, products, and services in this segment, its unique business model, the market and competitive dynamics, and expected future growth drivers. As Mark mentioned, we believe we have proven, differentiated, and enduring competitive advantages with our attractive growth assets within this portfolio. Our objective is to help you become better equipped to value how our various businesses are contributing to YSAT's overall growth and profit profile. We hope that all of you will be able to join us via webcast. More details to follow later. In closing, Q1 FY25 operational performance was very good. We are capturing our share of large and growing markets and are focused on improving operational and capital productivity, which is yielding positive operating leverage. While IP revenue and tactical networking and advanced technologies was stronger in Q1 than we expect it to be in the coming quarters, we raised the low end of guidance to reflect the Q1 outperformance and underlying strength of our recurring aviation and government SATCOM businesses. Toward the rest of FY25, we expect to continue to make significant progress on our satellite roadmap and towards positive free cash flow with good increases in operating cash flow and moderated capex. With that, I would like to hand it back over to Mark.

Thanks, Guru. We feel we're off to a pretty good start for this fiscal year. Thanks to the Global Biosat team for all the work so far. There's been a lot of work on integration within Marsat and to overcome the VYSAT-3 Flight 1 issue, but we've made really good progress, especially in bringing that satellite into service and proving out the technology.

We also believe that progress on multiple fronts is building the bridges for the opportunities in front of us. Okay, Meg, let's open it up for questions now. Thanks.

Thank you. The floor is now open for questions. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask your question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Your first line comes from the line of, your first question comes from the line of Sebastiano Petty with JP Morgan. Please go ahead.

Hi, thank you for taking the question. Just wanted to touch on, I think there's a comment in the shareholder letter just, yeah, and I think you touched on it as well, Mark, in your prepared remarks, but working on, working to strengthen the capital structure through cash flow, debt maturity, extensions, and capital non-core portfolio monetization. I was wondering if you could perhaps elaborate on that. Is this a shift in tone or is this perhaps just a reflection of or related to some of the change in segment reporting and I think perhaps giving some visibility into non-satellite KPIs and businesses that I think looks pretty good on the surface and maybe was underappreciated. And then just a housekeeping question, in terms of the aircraft online, Are we still on track to reach the 4,200 goal, I think, exiting fiscal 2025? Obviously, recent developments, you know, are those having any bearing on you hitting that target just, you know, when considering, I guess, the healthy backlog that you have as well? Thank you.

Okay. So, thanks for the question. And on the first point, And really, we just wanted to make sure that investors know we're going to take a holistic view at how we address our capital structure. And so, in doing that, we just wanted to let people understand that we're looking across the board. And also, the fact that we're taking a broad view gives us options in terms of the way that we, you know, that we address it. And certainly, you know, and we're focused on creating durable competitive advantage and building shareholder value. But we're going to take a holistic view, and I think it's really more just to remind investors that we're taking that view as opposed to a change in the way we're approaching the problem. On the in-flight, yes, we still have our target of 4,200 aircraft in service

at the end of fy 25. thank you thank you your next question comes from the line of griffin boss with b riley securities please go ahead uh hi yes thanks for taking my question

So first for me, I'm curious to hear your thoughts on – if you have any thoughts on the viability of putting 12 small satellites in one geo-orbital slot like what Astranis is talking about. And then also along with that, could you compare the service levels that Viasat could bring to market versus what Astranis reportedly is talking about with perhaps up to 50 gigabits per second per Omega satellite? Sure.

Okay, so I don't really understand exactly what the astronomers strategy is, so it's a little bit hard to comment on it. The one thing I would say is that there are, so definitions of what a slot consists of can vary from organization to organization. guidelines, the regulations, but there are guidelines and regulations that are intended to preserve safety and to avoid collisions. So that would be an example of a consideration that anybody would have to deal with, depending on what they mean by a spot. I think that, you know, I think there's multiple strategies to trying to compete in space. We tend to be very open-minded between big and large satellites. And I think depending on what the competitive environment is, access to capital, what technologies you have in mind, different people will have different preferences. I can tell you we really like our strategies so far. And our strategies are really based each time on a... kind of a current assessment of the incremental value of any assets we put in space in the context of our whole fleet and the markets that we're serving. Those are more the measures we're using. One of the things I think you can sort of tell from our letter is as we've grown, you know, we've evolved our metrics of capital efficiency to reflect the performance of entire fleets. including those parts that we lease from others, as opposed to just looking at the capital efficiency of an individual satellite. And the theory is that by using it in a fleet, it makes individual satellites more effective than they would be on their own, and we're seeing that effect as we integrate more of the Inmarsat and third-party assets. Hopefully that answers that part.

Yeah, no, that was great. I appreciate the color, Mark. Thanks. And then, so next for me, could you compare and contrast Viasat's L-band spectrum holdings with other competitors and related just what the company has planned for Viasat's small geo L-band satellites that are currently ordered with Swiss 212 and the Humming Sats that are slated to launch in 2026?

Okay, yes. We've put a few things on our website in the past, including when we first announced the Inmarsat acquisition that kind of listed all of our L-band assets, spectrum assets. And we are in a pretty strong position, which is really an artifact of the mission that Inmarsat serves, of aeronautical and maritime safety. So we have a pretty significant inventory of L-band spectrum assets. We use a, right now we have a variety of assets that we use in space in Marsat. Prior to the BISAT acquisition, acquired, the most recent one was three from probably about 12 that make up the I8 portion of the constellation. So since that acquisition, and I think based on sort of what's going on in the market for directed device, open architecture solutions for space, and these emerging 3GPP standards, I think, you know, one of the things we've talked about is raising our sights on L-band modernization for existing customers and to be able to get into the directed device market, which is estimated to be pretty substantial. So we are, the one thing is we will be adding to our L-band fleet strategy. We just haven't yet disclosed how we'll do that. I think on the IH, just to be sure, we're expecting those to be in service in 2028.

Great. Thanks for all that color, Mark. Appreciate it. I'll pass it off, and thanks for taking my questions.

You're welcome.

Thank you.

Your next question comes from the line of Ryan Coons from Lidl and Company. Please go ahead.

Great. Thanks. You know, really nice progress on the IFC market there. and lots of commentary about slowing OEM deliveries. And I'm wondering to what effect you've already seen that impact in your current growth rates, or do you think that the growth rate for that business slows because of expected, you know, further problems in turning up and receiving new aircraft?

Okay. Good question. The real catalysts for the OEM deliveries have been around for, quite a while. So we're already seeing those effects. We have for at least a couple of quarters. And we haven't really seen that the delivery rates have been diminished over the last couple of months. So it's really more a projection of what we're seeing so far absent a change in the OEM delivery environment. A few issues on 737s. There are some issues. There's also going to be a couple of the wide bodies, and then there's been engine issues associated with Airbus planes. So those are really the dominant issues that have affected it, and they're not getting worse, but they're persisting.

Yeah, and maybe to add on to that, Mark, real quick, Brian, You know, I think, as Mark was saying, a little bit we've talked about is our, you know, deliveries to be a little bit more back-weighted. But I think just to keep in contact from the quarter-over-quarter performance, just from Q1 to Q2, you know, I just wanted to kind of put a couple things out there for everybody to kind of keep in mind. From Q1, you know, this quarter we had some really, you know, two unique royalty and licensing agreements. Our portfolio there is extending more of that in our portfolio, but we did get a little bit of an uptick in this quarter. So next quarter, we'll see that take down, but we will start to see benefits as some of the product revenues grow from Q1 to Q2, offsetting some of that. And then we'll see, you know, a bit of additional R&D expenses. But kind of net big picture is we'll see our revenues take down from, at $40 million, quarter over quarter, just related to that royalty component, and $50 million on the EBITDA. But we're going to continue to see growth in our IFC, and we'll see our product revenues and IFCs start to tick up as well, but more back-weighted in the year.

Great. That makes sense, Sean. I interpreted that, but that's great clarification. Thank you. Another question for Mark, just on kind of this integrated service offering. I know you've talked about historically when you announced with Inmarsat having kind of a unified service offering and then now your hybrid offering with Leo Partners. What sort of technical challenges? Obviously, I think there's business demand out there. What sort of technical challenge do you have with a truly unified offering to roll that out across your customer base, across both in Marsat and Viasat, as well as third parties. Thanks.

Okay. Yeah, the one thing is we are aiming to harmonize the offerings and then also to be able to extend them to the legacy in Marsat fleet and then kind of upgrade what the Viasat services are. Probably the single biggest one we have is that they were, you know, they originally were two different networks. There's the Global Express network at K-Band for Inmarsat, and FISAT had its own network. So that's what we're working on. There are intermediate things that we can do to improve, especially the legacy GX services, short of that. But that harmonization is probably going to occur over the next one or two years, it's a little bit harder in the aviation space because any type of changes have to go through FAA flight worthiness certifications. So that kind of extends that timeline. In the maritime front, we have a little more flexibility in implementing multi-terminal solutions. So that's one of the reasons that we can start harmonizing some of the maritime stuff, which we think will drive some improvement sooner, as early as next quarter is when we'll start that.

That's super helpful. Thanks for that. And just to follow on to that, do you look at things like WAN optimization and ESA antennas and these sorts of things as part of that solution for multi-orbit and multi... Yes.

I want to make a distinction, though, that there's really two parts to it. One part is how we harmonize all the existing fleet, whether it's aviation or maritime or government. So there, because there's a large installed base, we're very focused on doing that, bringing up the level of service across the existing fleet. And then we have another roadmap, which is what we're going to do for new installs. And there we work with customers. We have a lot of new installs, for instance, in the aviation market or line fit. So that gives us a roadmap for when we can install terminals that use things like phased arrays, like you just mentioned. But we also have the ability to upgrade the existing fleet with things like multi-orbit on many of the platforms, just taking advantage of the equipment that's on there already. We're using both of those. Okay, great. Thanks, Mark. Appreciate the insights.

That's it for me. Yeah, thank you.

Thank you. Your next question comes from the line of Rick Prentice with Raymond James. Please go ahead.

Thanks. Good afternoon, everybody, on a very busy earnings day.

Hi, Rick. Thanks for joining us.

You betcha. A couple of ones. I want to follow up. Sean, I think you said the royalty, but I wasn't sure if that was the royalty and the licensing. had about 40 million revenue, 15 million adjusted EBITDA that were kind of more almost out of period stuff that we should think about dropping off. Was that for both the items that Guru mentioned, the royalty and then the licensing?

Yeah, right. So let me clarify that for you. So in Q1, we had kind of a combination, both some that showed up in our tactical networking and some that showed up in advanced technologies. In total, that was about 60. And then what I wanted people to kind of understand is from a sequential basis, offsetting that as we go from Q1 into Q2, we'll see some other product revenue growth coming in. So the net revenue impact is 40 from Q1 to Q2. Hopefully that helps shape it up a little bit better.

That does. And the EBITDA effect was 50 million then compared to the 40 revenue. Is that right?

Yeah, then we kind of the flow through of that plus a little bit of incremental R&D. You could shape the EBITDA impact net about 50. Sure.

Okay, that helps. And then on the non-core question from earlier and in the latter, what would be considered non-core? Is it something that's not integrated in? Is it something that's not really using satellite capacity? But just trying to think of how would you slice up what you have right now as far as Broad strokes, what's kind of core versus non-core?

Well, the things that we're really focused on are the mobility markets and the government markets, especially government mobility. So, the main things we're looking for are technologies, and this is what we've cultivated. So, it's not like we have a lot of divergence and where we are now, what we've cultivated are technologies that, as an example, government customers might want, or in some cases commercial customers might pay us to develop, that enhance our ability to deliver those services. So a lot of those are, there can be ground technology, antenna technology, some of it might have to do, some of the things we're doing with phased arrays, optical feeder link, all those things are are pretty valuable, even especially, for instance, as cybersecurity becomes more of an issue in space, things that bear on what you can do for cyber defenses may become more strategic and have synergies with our services business. But over time, other technologies or other capabilities that we have may recede in importance. And so the main point I was just trying to make is that we're constantly evaluating those technologies and that we're not going to do things just because we did it that way in the past, that's all. As I mentioned when the question first came up, it's really more just a reminder of the way we think and less a signal that the way we're thinking is changing.

just open-minded and always watching. But core right now, at least, is mobility and government.

Yes.

Yep.

And technologies that will enhance our ability to compete there. And one of the things we, just from our own perspective, I mean, one of the things that we're excited about in the growth in the defense and advanced technology area is a fair amount of that we're winning on technologies that, in our view, are going to be really important in both the defense and the commercial markets, including in low Earth orbits or medium Earth orbits or geosynchronous orbits. We have new technology initiatives in all of those areas. And the fact that they're getting funded has always been one of the best indicators that the technology is competitive and valuable.

Makes sense. I apologize if this was asked earlier. But what, on the flight one, what capacity would you kind of earmark that you're actually able to get out of that one? And is there an update as far as where flight two will eventually cover, flight three would cover? Just wanted to get an update on that one. But again, I'm joining in progress.

Yeah, okay. When we first encountered the anomaly a little over a year ago, we estimated that we would might be able to get as much as up to 10 percent of the capacity. And things haven't changed. I think that we've been able to validate some of those assumptions. That's what we're working on. You know, some of that we've also reminded investors that we may need to make additional investments in ground equipment needed to get to those levels. So, that's pretty much it. That's what we expect as the outlook. The other thing is, that is important is even though the, you know, we had an intended deployment anomaly, that where we are now validates the rest of the payload technology. So that's really important. That'll help us bring the new assets into service faster. And it's also, we believe, a good indication that when those new satellites do get launched, we're going to get great value out of them. In terms of where they're going to go, probably the places where they will deliver the most value. The remaining two satellites are over the Americas and in Asia Pacific, and it's most likely that the existing satellite, the impaired one, will end up over the EMEA region here in Middle East Africa.

Okay, that helps. And as we think about the margins in the communications services business, are we seeing kind of the third party supply affect those margins since flight one was capacity constrained, we'll move some capacity over to the Americas at some point, but the third party usage, is that impacting margins to a noticeable amount on comm services?

Yeah, go ahead. Yeah, I think, I mean, the main thing, one of the things that, I just want to emphasize I've been very focused on return on capital. That's one of the things investors have emphasized with us. And so, one of the ways in which we can enhance return on capital is by leasing and not buying. What we're doing is we are doing that very judiciously, right? And one of the things that we've emphasized a lot, what we think is worth investor and analyst attention is, especially in the mobility markets, understanding those demand patterns and where there's bandwidth demand. What's really interesting is different. This is actually a pretty interesting phenomenon. Different operators with different customer bases will have different views of where those demands are. So if the operators trade with each other in ways where, hey, I've got a surplus here, but I have demand there, and you have complementary things, it can be a win-win situation. So one of the things we're really looking at is tools, tools that let us lease bandwidth. I would say strategically, it's not, I mean, the fact that we're, that we don't have all the bandwidth we expected with PISAT 3.1, that is a big issue for us. We are, we are firing more bandwidth to do that. But also I think that there's a strategic value to it as well.

Yeah, and Rick, if I was to add on to that real quickly, I think, you know, big picture is that our growth at size is, you know, more than offset that impact. It's been all factored into our outlook. I just want to make sure that's clear. Yes.

That makes sense. And one quick one, if I can squeeze one more in there. Earlier question about the L-band, but what about the S-band? And maybe frame out when do you think directed device becomes a ready for prime time noticeable material type of item?

Okay, so our spectrum holdings are primarily in L-band. We do have S-band in Europe that right now we use for the European Aviation Network. One of the things that we have led is creation of the Mobile Satellite Services Association, which is, we really encourage people to look into, but the underlying premise there is is that what's going to be most important in really scaling the direct device market is the amount of bandwidth that's available in the aggregate. And so, what we are creating, have created, is an industry association to try to leverage spectrum holdings from different spectrum holders, including L and S band, use that in a common way, that is with common standards, open architecture, in a way that benefits all operators in meeting customer demand at affordable prices. And also going back to one of your other points, it creates opportunities for shared space and ground infrastructure that can support multiple spectrum holdings. So that ties a little bit together into our strategy for how do we evolve into this market in a very capital-efficient way, meet our capital objectives, but still grow. On the when does that market arrive, one of the things that is exciting is it's already starting to happen. And that is there are devices being deployed. Some have been deployed already. Others will really start scaling this fall. which will have chips in them with the, you know, 3GPP, it's called narrowband IoT standard. And that standard will support things like SOS services, but also messaging, notifications that you can get on devices. So we, one of the things we talked about starting six or nine months ago was forming a partnership to support those devices starting in the U.S., and that's happening. We already are supporting devices. Right now they're more like emergency location and signaling devices, but the same chips that support that into the same infrastructure are coming in handsets, we expect, just within the next few months. So I think that's the way you'll see it start. The next big step is what's called the 5G new radio version of those chip standards. Those standards are still being defined, probably will start being deployed end of 25, 26. What we think is the number of devices that support the basic functions is going to start scaling fairly soon. The number of... the quality of the services of the speed and number of devices that can be supported will start scaling as these new chips come online and more of the spectrum in space is allocated to that function.

Great. It sounds like return on capital and positive free cash flow are the mantra, so appreciate all that extra info.

Thanks. Thanks.

Your next question comes from the line of Chris Quilty with Quilty's Place. Please go ahead.

Thanks, and thanks for all the additional disclosure and putting out the prior financials or the restated financials prior to the quarter. That was helpful. Quick question on the maritime business. It looks like the terminal count continues to go up, but revenues are going down. Is that ARPU compression primarily happening on the legacy L-band side, or are you seeing some on the GX? And can you talk about what you're seeing with Starlink competition in the market?

Yeah. So the majority of the revenue decline is not in K-band. It's certain of the L-band services. We have a pretty We have multiple different L-band services. Different services are seeing different effects. The one that is seeing the largest decline, and this has gone on for several years, is what's called fleet broadband, which is really the L-band broadband service. And that is, you know, we in Marset has known that that's going to be in decline. And so that is, that accounts for the bulk of the revenue. Actually, some of the L-band services may grow. Different L-band services may grow. On the KA band, that's still, that is still growing, but not as fast as we'd like it. And we need some, we have some work to do to turn that around. I think that the nexus wave is really the most obvious thing, near-term thing to do that. and then followed by the BISAT-3 bandwidth after that. So those are the things we're doing there. And I think the other thing I just want to emphasize is the things that we do to position us for directed device, we expect are going to have a pretty transformative impact and beneficial impact on all of our L-band services. But it's really going to take refreshing the space segment to do that. But all the things we're trying to do at LBAN are aligned. They'll all benefit from the same investments and the same types of agreements that we're looking to make building on these open standards and open architecture.

And then, Chris, I just want to also note real quick before we move up there. Just from a comparative perspective, when you're looking to last year, it was about $6 million of a take-or-pay benefit that came into revenue. So just wanted to make sure you guys had that as a, It's a one-time item, yeah.

Gotcha. And is Nexus Wave intended to be, I know it's multi-orbit, but is it multi-frequency? And what are you thinking about, you know, partnerships on KA non-geo?

Yes, it is maritime. And there are a couple of other places where multi-orbit can be done at multiband. So we're forming a partnership around that. We definitely want to take advantage of that. Others are going to perform way better and simpler with KA only. So we're working on that as well. So we do expect to have KA band multi-orbit partnerships as well. And actually, we do already in some cases. What we're really looking to do, what I would say is we're looking to expand it more broadly.

Gotcha. And that, I guess, brings us to the flat panel antenna or the ESA. Are you designing one for both maritime and aviation services?

So we, one of the things, one of the things we keep saying is we don't have to do everything ourselves. So we have some really good flat panel technology, which we can use Basically, one of the things I think people are discovering is that phased arrays and technology is not necessarily a product, and that the products need to be adapted to different market segments. It's like different for maritime versus aero versus ground, and then different in different types of platforms in each of those market segments. So we will do some ourselves. We think we have really good core technology. It is one of the areas where we're winning government contracts and commercial contracts on product. But we're also working with supplier partners who also have been working on phased arrays. And so what we expect is to have a mix of our own technology and third-party technology, probably segmented by application, band, and platform.

And if I can, final question. What are you doing in free space optics?

We're not going to talk about it too much, but I would say what we are doing is different than the... For instance, we're not going to go in and compete with the SDA's interoperable standard for inter-satellite optical crosslinks. We have some other pretty... interesting uh applications and actually it's an area we've worked on for a while and have had uh support from uh european space agency and now we're getting more support from the us as well we think it's a really interesting application but prefer not talk about it right now okay but these are space-based applications and not terrestrial applications We have both, actually. The technology base that we're working from has both terrestrial and space-based applications. Great.

Thanks, everybody. Thanks, Chris.

Your next question comes from the line of Louis de Palma with William Blair. Please go ahead.

Good afternoon. Hi, Louis.

Hi. Geopolitical conflicts have contributed to satellite broadband growth and tactical systems hardware growth for you and many others in the industry. What is the revenue exposure if U.S. funding were to subside under a new administration for... like weapons systems or communication systems for some of the ongoing conflicts. Would that, is that a risk for Viasat?

Yes, so there's lots of risks. I think that I would, look, there's competitive risks, there's program risks, there can be changes, risks due to changes in administration or policy. So we always have those risks. We try to factor them in to our outlook. And I think I would say that our outlook reflects our view of the likely go forward business in each of those areas.

That makes sense. Thanks. And Mark, you just hinted at a potential direct-to-device implementation in the U.S., perhaps in the second half of the year. In terms of Viasat's go-to market, will you need a roaming partnership with one of the big three U.S. wireless carriers, or will your implementation look similar to what Apple has with GlobalStar and Viasat will... get paid by either the handset OEM or a chip manufacturer?

Michael Heaney- Okay, no, so first of all, that's a really good question. I'm going to, first thing I'm going to say is we're the last ones to ask what Apple's going to do, so I can't comment on that. But what our perspective is, is that ultimately these will be roaming agreements. between carriers. And likely what we expect is just like roaming, like for instance, if you look at the way roaming works terrestrially now, you take your AT&T or Verizon T-Mobile plan and you go to Europe, there's a whole list of roaming partners that each one of those has. So what we expect is that probably the services will be relatively standardized and the And the big carriers will have roaming agreements with pretty much everybody who can fulfill them. And we think that's a good environment for us. So that's kind of what we're working towards, is anticipating that that will be the business arrangements.

Great. And do you already have a roaming partnership with one of the big three wireless carriers, or how is your implementation? How is your setup going to be implemented in the second half of the year?

What we expect is that when there are devices in the market that are supported by those carriers, that they will have, that they will be curious, that's the way I'd put it right now, as to what services can be delivered with what quality in what places at what prices. And that'll determine kind of what those roaming agreements are. And so that is still a little bit up in the air, partly because none of the major device makers have yet announced their devices with this capability and whether it's enabled. So that's kind of a gating item. There'll probably be announcements on that front over the next could be weeks to months. I think that that will open up or maybe sort of drive to closure the potential for roaming agreements with carriers.

Thanks.

And one final one, and I may have missed this from earlier, but what is the full year forecast for the IP licensing revenue i know you said that there was two different components one had the annual fee and then there was the per device fee but what um should we model for the general full year revenue well one thing i'd say and then sean can can add on is you know what we have is our different we have different forms of licensing agreements some of them some of the licensing agreements

We get revenue on in things like integrating a capability into a device that's sold. That'd be an example. Some of it would be annual fees. And then right now, the parts that are really going to drive what happens the rest of the year are shipment-based licenses. So as units are shipped or activated, we get a recurring fee. And so there's some uncertainty on that. forecast for it. I don't know that we're going to tell you exactly what those forecasts are. But, Shawn, do you want to add anything to what I just said?

Yeah, I can get a little bit of additional color. I think, you know, as Mark said, we have a lot of different agreements. And even the ones that come in a little lumpier do have longer-term multi-year recurring streams that may have lumpy timing. But I would say kind of going forward over the next few quarters, I'd expect that you know, kind of a quarterly rate to be more like, you know, taking down to like an annual rate of like 20 million, you know, for four quarters. And it's both in our advanced technologies and others as well as in our topical networking.

Great. That is helpful. Thanks, Sean. And thanks, Mark and Guru.

You're very welcome.

Since there are no more questions, I will now turn the conference back over to Mr. Mark Damper, Chairman and CEO, for closing remarks. Please go ahead.

Okay. So thanks, everybody, again, for joining our talk. We look forward to speaking again next quarter.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect. Thank you. © transcript Emily Beynon Music Playing you Thank you. Thank you.

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Please stand by. Your program is about to begin. My name is Meg, and I will be your conference facilitator this afternoon. At this time, I would like to welcome everyone to Viya Saad's first quarter fiscal year 2025 earnings results conference call. All lines have been placed on mute 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 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 measures is available in our Q1 FY25 shareholder letter on the investor relations section of our website. Please note that to provide a more meaningful comparison of our results of operations year over year, results for the first quarter of FY2025 are compared against supplemental combined results for the prior year period. These supplemental combined results are based on the combination of Viasat's historical reported results with Inmarsat's historical reported results for periods prior to the acquisition, with adjustments to reflect purchase price accounting, the conversion of Inmarsat's results from IFRS to GAAP, and conforming changes to reflect Viasat's presentation of its results. This supplemental combined financial information was prepared to better illustrate for investors the performance of our business following our acquisition of MRSAT. Unless otherwise noted, the presented financial measures reflect year-over-year increases or decreases relative to the supplemental combined financial data in our Q1 FY25 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 security 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 uncertainties, 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. These 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 Guru Gaurapan, our President, and Sean Duffy, our CFO.

We encourage reading the shareholder letter and referencing the slides we posted on our website earlier this afternoon for more details. I'll give a quick overview of the shareholder letter. Guru will cover the financial results and highlights and our growth outlook, and then we'll take questions. Our first quarter fiscal year 2025 results were a little better than expected in terms of year-over-year revenue and adjusted EBITDA growth on a combined basis as described in the shareholder letter at slides. We also continued to take actions to strengthen our capital structure while thoughtfully investing in positioning for a promising future. Our ongoing services revenue, coupled with expected activations in aviation, good defense and advanced technology orders, existing and new backlog, and order pipeline enable us to increase our outlook for fiscal year 2025. We're pleased with the financial results this quarter, but remain focused on our agenda of both near and long-term goals.

including overcoming the VICEF 3.1 anomaly. We're making steady progress at supporting the improvements in our growth outlook. While these points are all very important, the headway we're making on multiple fronts creates optionality in the ways and sequences in which we address our challenges and opportunities.

So that list is first, get our satellites under construction into service. And holistically address our capital structure. and trim our leverage ratios from current levels. We want to continue to groom our business portfolio to the highest leverage satellite and network technologies that attract customers and partners and ultimately yield attractive recurring revenue.

We want to continue the MRSAT integration to drive higher returns on our network and harmonize our services and operations and achieve our cash flow inflection objectives.

We want to cultivate an enduring and economically accretive satellite operator partnership ecosystem to augment coverage and capacity and increase multi-orbit capability.

We want to continue to win and execute new defense and advanced technology programs with attractive growth potential and durable competitive advantages in key technologies such as ground networks, unique free space optical applications,

mission-specific phased array terminals, space-based cybersecurity, and others. We can leverage these technologies into recurring revenues for commercial and government customers, and we can use these technologies to help create and promote a competitive ecosystem of partners. And finally, we want to capture a leadership position in the emerging directed device services market by leveraging our substantial installed base of aero, maritime, and mobile users, emerging 3GPP standards, open architectures, and our existing resources.

We want to foster innovative business models, interpreting an extremely large base of satellite-enabled mobile devices and platforms, optimizing our mobile satellite services spectrum licenses, and evolving LBAND to create value for the millions of people that depend on our services for safety and connectivity in the air, at sea, and on land.

Some of the near-term satellite milestones include BISAT-3 Flight 3 completed thermal vacuum testing. That's an important integrated satellite testing milestone. We announced this week that BISAT-3 Flight 1 entered into commercial service over the American. We've achieved operational speeds well over 200 megabits per second to in-flight aircraft, and it's now in use for in-flight time activity. It will both cover new routes and enhance services on existing coverage areas. And we've been able to prove the dynamic beamforming and terabit per second payload technology that it works. We expect our partner, EOSAT, to launch our two KA-band polar coverage payloads, GX-10A and B, very shortly. They're expected to enter service in early to mid 2025.

As a reminder, our financial results have been reframed to give investors more insight into the business areas already yielding attractive growth, those with attractive potential but are currently challenged, and a place for emerging areas such as the direct-to-device and other advanced technologies that we believe merit investor attention. Guru will provide more detailed information on the composition of our new segments and the segment revenue breakouts that we have added for our quarterly performance updates.

While we're very focused on executing in the near term, BISAT's always planned for the long term. That's enabled us to sustain growth for decades, build key franchise businesses, and evolve our technology, business models, and market segments to sustain growth. competitive advantages even in the presence of generational technology evolutions and consistently shifting playing fields in competitive environments. We're balancing those near and long-term challenges and opportunities. With that, I'll hand it over to Guru.

Great. Thanks, Mark. I will cover three topics, financial performance, our new segment structure, and an update to our outlook. Why has that generated good financial performance during Q1 FY25? We earned combined revenue growth of 6% year-over-year and combined adjusted EBITDA growth of 16% year-over-year, driven by defense and advanced technologies and aviation. The positive operating leverage reflects strong revenue flow-through from IP licensing and practical networking and advanced technologies and the continued benefit from our acquisition-related operating synergies. Now some color on the financial results. Q1 FY25 revenue was $1.1 billion, up 44% compared to $780 million in Q1 FY24. Combined revenue was up 6% year-over-year, largely driven by growth in our defense and advanced technology segment and aviation. Net loss of 33 million for Q1 FY25 improved compared to the net loss of 77 million in Q1 FY24, primarily due to improved operating performance, which was partially offset by higher interest and tax expenses. Q1 FY25 adjusted EBITDA was 404 million, an increase of 120% year-over-year. Just a little bit, that increased by 16% year-over-year from the incremental revenue flow through in defense and advanced technologies, which more than offset expected decline in fixed broadband service revenue and higher R&D expenditures. Q1 FY25 capital expenditures declined 20% year-over-year to $301 million. Combined capital expenditures decreased 33% year-over-year, primarily due to lower satellite expenditures, customer premise equipment, and general infrastructure costs. Sequentially, net leverage declined 0.1 times to approximately 3.5 times LTM adjusted EBITDA as of Q1 FY25, which is substantially favorable to the plan at the time the Inmarsat acquisition was announced. We ended the quarter with $2.9 billion of liquidity, including $1.8 billion cash and cash equivalents at quarter end, and we have a fully funded path to our positive free cash flow inflection by end of Q1, FY26. And finally, subsequent to quarter end, YSAT deployed approximately $150 million of cash to repurchase $152 million principal amount of Inmarsat and YSAT nodes in the open market. We opportunistically repurchased $102 million principal amount of Inmarsat 2026 secured notes at an average price of $98.2 and $50 million principal amount of Wiresat 2025 unsecured notes at an average price of $99.2. Before we go further, I want to provide a bit more color on our new sector, communication services and defense and advanced technologies. We initiated the new segment reporting structure to give additional insight into our portfolio and drivers of value. Last month, we provided historical financials for the new segments and business lines. Our communication services segment includes all the businesses using our satellite network for connectivity services. All the Inmarsat businesses are included in this segment. Communication services is comprised of aviation, government satcom, maritime, and fixed services and other, or FSNO. FSNO includes U.S. and international residential fixed broadband, energy, and enterprise. The majority of the segment is recurring service revenue. The product revenue is primarily related to terminal sales supporting services. The majority of our capex is for our satellite network, which includes space and ground enabling these services. The defense and advanced technology segment has four business lines. Information security and cyber defense, which sells our type one encryption products. Space and mission systems, which includes antenna systems. Tactical networking, which is mostly our Trellisware subsidiary, of which we own approximately 60%. And advanced technologies and other, which includes IP licensing revenue. Most of the revenue in this segment is product revenue, which includes IP licensing and can be lumpy quarter to quarter. The service revenue in this segment is primarily warranty and support for the products. The defense and advanced technologies business line have a low capital intensity. And we appreciate the feedback investors provided in this process. It is an important step in raising the visibility of our valuable franchisees. We will continue to work to highlight and unlock the value that Viasat is creating for its shareholders. Now let's take a closer look at communication services performance during the quarter. Aviation continues to compete very well in the market. Commercial IFC ended the quarter with 3,750 aircraft in service, up about 16% year over year, with over 1,460 aircraft in contracted backlog. We're also in the contractual process of adding about 350 incremental aircraft to the backlog, including from six new airlines. We achieved mid-teens year-over-year growth in both the number of commercial and business aviation aircraft in service. And while we are confident in the year-over-year growth outlook and trajectory for aviation, it's worth noting that we expect quarter-over-quarter results to reflect continued OEM delays and some impact due to the effects of the recent global cybersecurity software outage impacting our customers. U.S. fixed broadband revenue declined as expected, driven by fewer residential subscribers. We continue to de-emphasize U.S. fixed broadband to support our rapid and higher margin commercial IFC in aviation. Our government SATCOM business line announced we are expanding work with Airbus Defense and Space to integrate YSS dual-band broadband terminal, which is called the GAT-5530, into the Spanish MOD's C-295 maritime patrol aircraft fleet to provide a highly flexible multi-band, multi-orbit broadband SATCOM capability to support missions utilizing next-generation PANESAT-NG satellites. We are excited because the Airbus C-295 aircraft is operated by 37 countries around the world with hundreds of aircraft in operation and hundreds more on order. We are seeing more international government product and service opportunities within Marsat. During the quarter, we began collaborating with UAvionics, a pioneer in certified avionics for crewed and uncrewed aviation, to integrate Wiresat's Welliris module into its compact, multi-linked airborne radio system. Welliris provides secure, resilient L-band communications for commercial UAVs and enables real-time monitoring for beyond visual line of site UAV operations. We believe L-band unmanned vehicles of all types are an exciting growth opportunity, especially as we modernize our L-band capabilities. Nexus Wave, Maritime's new hybrid multi-orbit managed service targeting commercial shipping customers, brings global coverage, speed, capacity, security, and resilience to meet enterprise class operational needs and crew welfare. Nexus Wave is building anticipation in the market, and we expect to launch beta service during Q2 FY25. In Q1 FY25, communications services revenue was $827 million, up 48% compared to $560 million in Q1 FY24. Combined revenue was down 2% year-over-year, driven by the expected decline in U.S. fixed broadband services and segment product revenue. Q1 FY25 communication services electricity bid that was $308 million, an increase of 98% year-over-year. Combined electricity bid that declined 4% year-over-year, primarily from lower revenue flow through from U.S. fixed broadband in the FS&O business line and maritime services. Now to defense and advanced technologies performance during the quarter. Space and mission systems received awards of approximately 85 million related to multi-function phased array antennas, free space optics, and antenna systems infrastructure with supported services. Tactical networking received approval for the loud activation of certain product upgrades. Once activated, we recognized IC licensing revenue on these products that had been sold over the prior few years. The business is expected to benefit from the ongoing sales, but with substantially fewer units per quarter than were recognized in Q1 FY25. Advanced technologies also benefited from strong IP licensing revenue. There are two components to the current licensing revenue, an annual fee, which typically occurs in Q1 as it did this quarter, and a per-unit sold fee, which is distributed throughout the year. During Q1 FY25, we benefited from both the annual license and the per-unit components. And for remainder of FY25, we expect to generate revenue from the per unit component only. Information Security and Cyber Defense won awards for Type 1 encryption products totaling over $45 million, largely reflecting growing data center demand driven by geographic expansion and AI applications. Q1 FY25 book-to-bill ratio was 1.2 times. with continued momentum into Q2 FY25. In Q1 FY25, defense and advanced technologies revenue was 300 million, up 37% compared to 220 million in Q1 FY24. Product revenue was up 45% year-over-year, driven by the strong IP licensing revenue in tactical networks and advanced technologies. Q1 FY25 defense and technology statistics that was 96 million, more than triple the year-ago period, reflecting the value of the technology portfolio. Strong operating leverage from revenue flow-through in both practical network and advanced technologies drove exceptional performance. Overall, it was a good quarter and a strong start to FY25. Next, we are raising our outlook slightly to reflect strong Q1 results, confidence in our market competitive positions and pipeline, and despite continued aircraft OEM delivery. Our first quarter financial performance reflects our competitive solutions and strong execution in our aviation and defense businesses. Within our defense and advanced technology segment, we generated high flow-through IP revenue in two businesses. Our tactical networking business benefited from a couple of years of retroactive product upgrades in the quarter. We expect the business to continue to benefit from upgraded product sales going forward at a normalized level. Advanced technologies benefited from annual licenses in the quarter. Throughout the year, we expect more modest per-unit licensing revenues. Finally, because this is only the first quarter of FY25, we are raising the low end of our FY25 revenue and are just a little bit doubtful in maintaining our view of FY26. For comparison purposes, we removed the $95 million revenue and $86 million adjusted EBITDA catch-up benefit from the litigation settlement from FY24 reference results. Therefore, our guidance is based on FY24 revenue of approximately $4.5 billion and adjusted EBITDA of approximately $1.5 billion. We now expect FY25 revenue to be flat to slightly up year over year. with year-over-year adjusted EBITDA growth in the mid-single digits. We believe FY25 revenue growth, excluding an expected decline in U.S. fixed broadband associated with the Viasat 3F1 anomaly, would have been up mid-single digits. We have also provided additional segment-level detail in the Outlook section of our shareholder letter. We remain prudent with our top-line guide given uncertainties with delayed OEM commercial aircraft deliveries and airline overcapacity. In FY25, we expect capital expenditures to decline to a range of $1.4 billion to $1.5 billion. We include capitalized interest in our CapEx guidance, which is approximately $200 million per year, but will decline in future years as we place satellites into service. We continue to expect our investments in our satellite network projects and success-based CapEx to exceed two-thirds of our total capital spend with less than one-third associated with our maintenance and general CapEx activities. Looking forward, we expect our investments in growth CapEx to continue to decline and generate an improving free cash flow trend. In FY26, we continue to expect to grow revenue and adjusted EBITDA relative to FY25 as a majority of our $3.4 billion assets under construction go into commercial service. Capital expenditures for FY26 are expected to decline to a range of $1.1 billion to $1.2 billion. We believe FY25 provides the foundation for multi-year accelerated growth in revenue and electricity product growth and continued step down in CapEx in FY26. As Mark mentioned, we are making steady progress on multiple fronts in support of the improvements in our growth outlook. We continue to expect an inflection point in positive free cash flow by end of first quarter FY26. Our path to positive free cash flow is expected to be driven by double-digit operating cash flow growth and continued declines in capital expenditures as we normalize capital expenditure in line with satellites going into commercial service. Before closing, let me provide an additional update. As we discussed earlier in our prepared remarks, our new reporting segment structure was designed to better reflect the diverse and attractive nature of the end market that the company serves. as well as introduce greater visibility into our performance and value drivers. As part of our initiative to provide additional transparency into our business, we will be holding a webcast teach-in on October 17th, focusing on the defense and advanced technology segment, which houses our information security and cyber defense, space and mission systems, tactical networking, and advanced technologies business lines. The feedback was overwhelming that you want to learn more about this valuable part of our portfolio. We plan to cover the breadth of our technology, products, and services in this segment, its unique business model, the market and competitive dynamics, and expected future growth drivers. As Mark mentioned, we believe we have proven, differentiated, and enduring competitive advantages with our attractive growth assets within this portfolio. Our objective is to help you become better equipped to value how our various businesses are contributing to YSAT's overall growth and profit profile. We hope that all of you will be able to join us via webcast. More details to follow later. In closing, Q1 FY25 operational performance was very good. We are capturing our share of large and growing markets and are focused on improving operational and capital productivity, which is yielding positive operating leverage. While IP revenue and tactical networking and advanced technologies was stronger in Q1 than we expect it to be in the coming quarters, we raised the low end of guidance to reflect the Q1 outperformance and underlying strength of our recurring aviation and government SATCOM businesses. Toward the rest of FY25, we expect to continue to make significant progress on our satellite roadmap and towards positive free cash flow with good increases in operating cash flow and moderated capex. With that, I would like to hand it back over to Mark.

Thanks, Guru. We feel we're off to a pretty good start for this fiscal year. Thanks to the Global Biosat team for all the work so far. There's been a lot of work on integration within Marsat and to overcome the VYSAT-3 Flight 1 issue, but we've made really good progress, especially in bringing that satellite into service and proving out the technology.

We also believe that progress on multiple fronts is building the bridges for the opportunities in front of us. Okay, Meg, let's open it up for questions now. Thanks.

Thank you. The floor is now open for questions. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask your question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Your first line comes from the line of, your first question comes from the line of Sebastiano Petty with JP Morgan. Please go ahead.

Hi, thank you for taking the question. Just wanted to touch on, I think there's a comment in the shareholder letter just, yeah, and I think you touched on it as well, Mark, in your prepared remarks, but working on, working to strengthen the capital structure through cash flow, debt maturity, extensions, and capital non-core portfolio monetization. I was wondering if you could perhaps elaborate on that. Is this a shift in tone or is this perhaps just a reflection of or related to some of the change in segment reporting and I think perhaps giving some visibility into non-satellite KPIs and businesses that I think looks pretty good on the surface and maybe was underappreciated. And then just a housekeeping question, in terms of the aircraft online, Are we still on track to reach the 4,200 goal, I think, exiting fiscal 2025? Obviously, recent developments, you know, are those having any bearing on you hitting that target just, you know, when considering, I guess, the healthy backlog that you have as well? Thank you.

Okay. So, thanks for the question. And on the first point, Really, we just wanted to make sure that investors know we're going to take a holistic view at how we address our capital structure. And so, in doing that, we just wanted to let people understand that we're looking across the board. And also, the fact that we're taking a broad view gives us options in terms of the way that we, you know, that we address it. And certainly, you know, we're going to, and we're focused on creating durable competitive advantage and building shareholder value. But we're going to take a holistic view, and I think it's really more just to remind investors that we're taking that view as opposed to a change in the way we're approaching the problem. On the in-flight, yes, we still have our target of 4,200 aircraft in service at the end of FY25. Thank you.

Thank you. Your next question comes from the line of Griffin Boss with B Reilly Securities. Please go ahead.

Hi, yes, thanks for taking my question. So first for me, I'm curious to hear your thoughts on – if you have any thoughts on the viability of putting 12 small satellites in one geo-orbital slot like what Astranis is talking about. And then also along with that, could you compare the service levels that Viasat could bring to market versus what Astranis reportedly is talking about with perhaps up to 50 gigabits per second per omega satellites?

okay uh so uh i don't really understand exactly what the astronomers strategy is so it's a little bit hard to to comment on it the one thing i would say is that uh there are so definitions of what a slot consists of can vary from uh from uh organization to organization there are itu uh guidelines, you know, the regulations, but there are guidelines and regulations that are intended to preserve safety and to avoid collisions. So that would be an example of a consideration that anybody would have to deal with depending on what they mean by a spot. I think that, you know, I think there's multiple strategies to trying to compete in space. We tend to be very open-minded between big and large satellites. And I think depending on what the competitive environment is, access to capital, what technologies you have in mind, different people will have different preferences. I can tell you we really like our strategies so far. And our strategies are really based each time on a kind of a current assessment of the incremental value of any assets we put in space in the context of our whole fleet and the markets that we're serving. Those are more of the measures we're using. One of the things I think you can sort of tell from our letter is as we've grown, you know, we've evolved our metrics of capital efficiency to reflect the performance of entire fleets. including those parts that we lease from others, as opposed to just looking at the capital efficiency of an individual satellite. And the theory is that by using it in a fleet, it makes individual satellites more effective than they would be on their own, and we're seeing that effect as we integrate more of the Inmarsat and third-party assets. Hopefully that answers that part.

Yeah, no, that was great. I appreciate the color, Mark. Thanks. And then so next for me, could you compare and contrast Viasat's L-band spectrum holdings with other competitors and related just what the company has planned for Viasat's small geo L-band satellites that are currently ordered with Swiss 212 and the Humming Sats that are slated to launch in 2026?

Okay, yes, when we, we've put a few things on our website in the past, including when we first announced the Inmarsat acquisition that kind of listed all of our L-band assets, spectrum assets. And we're, we are in a pretty strong position, which is really an artifact of the mission that Inmarsat serves, of aeronautical and maritime safety. So we have a pretty significant inventory of L-band spectrum assets. We use a, right now we have a variety of assets that we use in space in MARSAT prior to the BISAT acquisition acquired. The most recent one was three many satellites from probably about 12 that make up the I8 portion of the constellation. Since that acquisition, and I think based on sort of what's going on in the market for directed device, open architecture solutions for space, and these emerging 3GPP standards, I think, you know, one of the things we've talked about is raising our sights on L-band modernization for existing customers and to be able to get into the directed device market, which is estimated to be pretty substantial. So, we are, the one thing is we will be adding to our L-band fleet strategy. We just haven't yet disclosed how we'll do that. I think on the IH, just to be sure, we're expecting those to be in service in 2028.

Great. Thanks for all that color, Mark. Appreciate it. I'll pass it off, and thanks for taking my questions.

You're welcome. Thank you.

Your next question comes from the line of Ryan Coons from Leadham & Company. Please go ahead.

Great. Thanks. You know, really nice progress on the IFC market there. and lots of commentary about slowing OEM deliveries. And I'm wondering to what effect you've already seen that impact in your current growth rates, or do you think that the growth rate for that business slows because of expected, you know, further problems in turning up and receiving new aircraft?

Okay. Good question. The real catalyst for the OEM deliveries have been around for, quite a while. So we're already seeing those effects. We have for at least a couple of quarters. And we haven't really seen that the delivery rates have been diminished over the last couple of months. So it's really more a projection of what we're seeing so far absent a change in the OEM delivery environment. A few issues on 737s. There are some issues. There's also a couple of the wide bodies. And then there's been engine issues associated with Airbus planes. So those are really the dominant issues that have affected it. And they're not getting worse, but they're persisting.

And maybe to add on to that, Mark, real quick, Brian, You know, I think as Mark was saying, a little bit we've talked about is our, you know, deliveries to be a little bit more evacuated. But I think just to keep in contact from the quarter-over-quarter performance, just from Q1 to Q2, you know, I just wanted to kind of put a couple things out there for everybody to kind of keep in mind. From Q1, you know, this quarter we had some really, you know, two unique royalty and licensing agreements. Our portfolio there is extending more of that in our portfolio, but we did get a little bit of an uptick in this quarter. So next quarter, we'll see that tick down, but we will start to see benefits as some of the product revenues grow from Q1 to Q2, offsetting some of that. And then we'll see, you know, a bit of additional R&D expenses. But kind of net big picture is we'll see our revenues take down from, at $40 million, quarter over quarter, just related to that royalty component, and $50 million on the EBITDA. But we're going to continue to see growth in our IFC, and we'll see our product revenues and IFCs start to tick up as well, but more back-weighted in the year.

Great. That makes sense, Sean. I interpreted that, but that's great clarification. Thank you. Another question for Mark, just on kind of this integrated service offering. I know you've talked about historically when you announced with Inmarsat having kind of a unified service offering and then now your hybrid offering with Leo Partners. What sort of technical challenges? Obviously, I think there's business demand out there. What sort of technical challenge do you have with a truly unified offering to roll that out across your customer base, across both in Marsat and Viasat, as well as third parties. Thanks.

Okay. Yeah, the one thing is we are aiming to harmonize the offerings and then also to be able to extend them to the legacy in Marsat fleet and then kind of upgrade what the Viasat services are. Probably the single biggest one we have is But they were, you know, they originally were two different networks. There's the Global Express network at K-Band for Inmarsat, and FISAT had its own network. So that's what we're working on. There are intermediate things that we can do to improve, especially the legacy GX services, short of that. But that harmonization is probably going to occur over the next one or two years it's a little bit harder in the aviation space because every any type of changes have to go through fa flight worthiness certifications so that kind of extends that timeline in the maritime front we have a little more flexibility in implementing multi-terminal solutions so that's one of the reasons that we can start harmonizing some of the maritime stuff which we think will will drive some improvement sooner, as early as next quarter is when we'll start that.

That's super helpful. Thanks for that. And just to follow on to that, do you look at things like WAN optimization and ESA antennas and these sorts of things as part of that solution for multi-orbit and multi... Yes.

I want to make a distinction, though, that there's really two parts to it. One part is how we harmonize all the existing fleet, whether it's aviation or maritime or government. So there, because there's a large installed base, we're very focused on doing that, bringing up the level of service across the existing fleet. And then we have another roadmap, which is what we're going to do for new installs. And there we work with customers. We have a lot more, you know, a lot of new installs, for instance, in the aviation market or line fit. So that gives us a roadmap for when we can install terminals that use things like phased arrays, like you just mentioned. But we also have the ability to upgrade the existing fleet with things like multi-orbit on many of the platforms, just taking advantage of the equipment that's on there already. So we're using both of those. Okay, great. Thanks, Mark. Appreciate the insights.

That's it for me. Yeah, thank you.

Thank you. Your next question comes from the line of Rick Prentice with Raymond James. Please go ahead.

Thanks. Good afternoon, everybody, on a very busy earnings day.

Yep. Hi, Rick. Thanks for joining us.

Hey. You betcha. A couple of ones. I want to follow up. Sean, I think you said the royalty, but I wasn't sure if that was the royalty and the licensing. had about 40 million revenue, 15 million adjusted EBITDA that were kind of more almost out of period, stuff that we should think about dropping off. Was that for both the items that Guru mentioned, the royalty and then the licensing?

Yeah, Rick. Let me clarify that for you. So in Q1, we had kind of a combination, both some that showed up in our tactical networking and some that showed up in advanced technologies. In total, that was about 60. And then what I wanted people to kind of understand is from a sequential basis, offsetting that as we go from Q1 into Q2, we'll see some other product revenue growth coming in. So the net revenue impact is 40 from Q1 to Q2. Hopefully that helps shape it up a little bit better.

That does. And the EBITDA effect was 50 million then compared to the 40 revenue. Is that right?

Yes, kind of the flow-through of that plus a little bit of incremental R&D. You could shape the EBITDA impact net about 50. Sure.

Okay, that helps. And then on the non-core question from earlier and then the latter, what would be considered non-core? Is it something that's not integrated in? Is it something that's not really using satellite capacity? But just trying to think of how would you slice up what you have right now as far as Broad strokes, what's kind of core versus non-core?

Well, the things that we're really focused on are the mobility markets and the government markets, especially government mobility. So the main things we're looking for are technologies, and this is what we've cultivated. So it's not like we have a lot of divergence and where we are now, what we've cultivated are technologies that, as an example, government customers might want, or in some cases commercial customers might pay us to develop, that enhance our ability to deliver those services. So a lot of those are, there can be ground technology, antenna technology, some of it might have to do, you know, some of the things we're doing with phased arrays, optical feeder link, all those things are are pretty valuable, even especially, for instance, as cybersecurity becomes more of an issue in space, things that bear on what you can do for cyber defenses may become more strategic and have synergies with our services business. But over time, other technologies or other capabilities that we have may recede in importance. And so the main point I was just trying to make is that we're constantly evaluating those technologies and that we're not going to do things just because we did it that way in the past, that's all. As I mentioned when the question first came up, it's really more just a reminder of the way we think and less a signal that the way we're thinking is changing.

just open-minded and always watching. But core right now at least is mobility and government.

Yes.

Yep.

And technologies that will enhance our ability to compete there. And one of the things we, just from our own perspective, I mean, one of the things that we're excited about in the growth in the defense and advanced technology area is a fair amount of that we're winning on technologies that in our view are going to be really important in both the defense and the commercial markets, including in low Earth orbits or medium Earth orbits or geosynchronous orbits. We have new technology initiatives in all of those areas. And the fact that they're getting funded has always been one of the best indicators that the technology's competitive and valuable.

Makes sense. I apologize if this was asked earlier. But what, on the flight one, what capacity would you kind of earmark that you're actually able to get out of that one? And is there an update as far as where flight two will eventually cover, flight three would cover? Just wanted to get an update on that one. But again, I'm joining in progress.

Yeah, okay. When we first encountered the anomaly a little over a year ago, we estimated that we would might be able to get as much as up to 10 percent of the capacity. And things haven't changed. I think that we've been able to validate some of those assumptions. That's what we're working on. You know, some of that we've also reminded investors that we may need to make additional investments in ground equipment needed to get to those levels. So, that's pretty much it. That's what we expect of the outlook. The other thing is, That is important, is even though the, you know, we had an intended deployment anomaly, that where we are now validates the rest of the payload technology. So that's really important. That'll help us bring the new assets into service faster. And it's also, we believe, a good indication that when those new satellites do get launched, we're going to get great value out of them. In terms of where they're going to go, Probably the places where they will deliver the most value, the remaining two satellites, are over the Americas and in Asia Pacific. And it's most likely that the existing satellite, the impaired one, will end up over the EMEA region here in Middle East Africa.

Okay. That helps. And as we think about the margins in the communications services business, are we seeing kind of the third party supply affect those margins since flight one was capacity constrained, we'll move some capacity over to the Americas at some point, but the third party usage, is that impacting margins to a noticeable amount on comms services?

Yeah, go ahead. Yeah, I think, I mean, the main thing, one of the things that, I just want to emphasize I'm very focused on return on capital. That's one of the things investors have emphasized with us. And so, one of the ways in which we can enhance return on capital is by leasing and not buying. What we're doing is we are doing that very judiciously, right? And one of the things that we've emphasized a lot, what we think is worth investor and analyst attention is especially in the mobility markets is understanding those demand patterns and where where there's bandwidth demand what's really interesting is different this is actually a pretty interesting phenomenon different operators with different customer bases will have different views of where those demands are so by if the operators trade with each other in ways where hey i've got a surplus here but you've got but I have demand there and you have complementary things, it can be a win-win situation. So one of the things we're really looking at is tools, tools that let us lease bandwidth. I would say strategically, it's not, I mean, the fact that we're, that we don't have all the bandwidth we expected with PISAT 3.1, that is a big issue for us. We are, we are firing more bandwidth. to do that, but also I think that there's a strategic value to it as well.

Yeah, and Rick, if I was to add on to that real quickly, I think, you know, a big factor is that our growth size is, you know, more than offset that impact. It's been all factored into our outlook. I just want to make sure that's clear. Yes.

That makes sense. And one quick one, if I can squeeze one more in there. Earlier question about the L band, but what about the S band? and maybe frame out when do you think directed device becomes a ready for prime time, noticeable material type of item?

Okay, so our spectrum holdings are primarily in L-band. We do have S-band in Europe that right now we use for the European Aviation Network. One of the things that we have led is creation of the Mobile Satellite Services Association, which is, we really encourage people to look into, but the underlying premise there is that what's going to be most important in really scaling the direct device market is the amount of bandwidth that's available in the aggregate. And so, what we are creating, have created, is an industry association to try to leverage spectrum holdings from different spectrum holders, including L and S-band, to use that in a common way, that is with common standards, open architecture, in a way that benefits all operators in meeting customer demand at affordable prices. And also, going back to one of your other points, It creates opportunities for shared space and ground infrastructure that can support multiple spectrum holdings. So that ties a little bit together into our strategy for how do we evolve into this market in a very capital-efficient way, meet our capital objectives, but still grow. On when does that market arrive, one of the things that is exciting is it's already starting to happen. And that is there are devices being deployed. Some have been deployed already. Others will really start scaling this fall, which will have chips in them with the 3GPP, what's called narrowband IoT standard. And that standard will support things like SOS services, but also messaging, It was like notifications that you can get on devices. So we, one of the things we talked about starting six or nine months ago was forming a partnership to support those devices starting in the U.S., and that's happening. We already are supporting devices. Right now they're more like emergency location and signaling devices, but The same chips that support that into the same infrastructure are coming in handsets, we expect, just within the next few months. So I think that's the way you'll see it start. The next big step is what's called the 5G new radio version of those chip standards. Those standards are still being defined, probably will start being deployed end of 25, 26. What we think is the number of devices that can support the basic functions is going to start scaling fairly soon. The number of the quality of the services of the speed and number of devices that can be supported will start scaling as these new chips come online and more of the spectrum in space is allocated to that function.

Great. It sounds like return on capital and positive free cash flow are the mantra, so appreciate all that extra info. Thanks.

Thanks.

Your next question comes from the line of Chris Quilty with Quilty's Place. Please go ahead.

Thanks, and thanks for all the additional disclosure and putting out the prior financials or the restated financials prior to the quarter. That was helpful. Quick question on the maritime business. It looks like the terminal count continues to go up, but revenues are going down. Is that ARPU compression primarily happening on the legacy L-band side, or are you seeing some on the GX? And can you talk about what you're seeing with Starlink competition in the market?

Yeah. So, the majority of the revenue decline is not in K-band. It's certain of the L-band services. We have a pretty, we have multiple different L-band services. Different services are seeing different effects. The one that is seeing the largest decline, and this has gone on for several years, is what's called fleet broadband, which is really the L-band broadband service. that is you know we we in marsat has known that that's going to be in decline uh and so that is that that accounts for the bulk of the revenue uh so actually some of the l-band services may grow different l-band services may grow on the ka band that's still that is still growing but not as fast as we'd like it and we we need some we have some work to do to turn that around i think that the nexus way is really the most obvious thing, near-term thing to do that, and then followed by the BISAT-3 bandwidth after that. So those are the things we're doing there. And I think the other thing I just want to emphasize is the things that we do to position us for directed device, we expect are going to have a pretty transformative effect impact and beneficial impact on all of our LBAN services. But it's really going to take a refresh in the space segment to do that. But all the things we're trying to do at LBAN are aligned. They'll all benefit from the same investments and the same types of agreements that we're looking to make building on these open standards and open architecture.

And then, Chris, I just want to Also note real quick before we move up there, just from a comparative perspective, when you're looking to last year, it was about $6 million of a take or pay benefit that came into revenue. So just wanted to make sure you guys had that as a one-time item.

Gotcha. And is Nexus Wave intended to be, I know it's multi-orbit, but is it multi-frequency? And what are you thinking about, you know, partnerships on KA non-geo?

So, yes, it is maritime, and there are a couple of other places where multi-orbit can be done at multi-band. So, we're forming a partnership around that. We definitely want to take advantage of that. Others are going to be, are going to perform way better and simpler with KA only. So, we're working on that as well. So, we do expect to have KA band multi-orbit partnerships as well. And actually, we do already, in some cases, what we're really looking to do. I should, what I would say is we're looking to expand it more broadly.

Gotcha. And that, I guess, brings us to the flat panel antenna or the ESA. Are you designing one for both maritime and aviation services?

So we, one of the things is, One of the things we keep saying is we don't have to do everything ourselves. So we have some really good flat panel technology which we can use. I mean, basically one of the things I think people are discovering is that, you know, phased arrays and technology is not necessarily a product and that the products need to be adapted to different market segments. It's like different for maritime versus aero versus ground. and in different types of platforms in each of those market segments. So, we will do some ourselves. We think we have really good core technology. It is one of the areas where we're winning government contracts and commercial contracts on product. But we're also working with supplier partners who also have been working on phased arrays. And so, what we expect is to have a mix of our own technology and third-party technology probably segmented by application band and platform and if i can final question what are you doing in free space optics uh uh we're not going to talk about it too much but i would say is what we are doing is different than uh the i thought for instance we're not going to go in and compete with the sda's uh interoperable standard for for inter-satellite optical crosslinks. We have some other pretty interesting applications, and actually it's an area we've worked on for a while and have had support from European Space Agency, and now we're getting more support from the U.S. as well. We think it's a really interesting application, but we prefer not to talk about it right now.

Okay. But these are space-based applications and not terrestrial applications?

We have both, actually. The technology base that we're working from has both terrestrial and space-based applications. Great.

Thanks, everybody. Thanks, Chris.

Your next question comes from the line of Louis de Palma with William Blair. Please go ahead.

Good afternoon. Hi, Louis.

Hi. Geopolitical conflicts have contributed to satellite broadband growth and tactical systems hardware growth for you and many others in the industry. What is the revenue exposure if U.S. funding were to subside under a new administration for... like weapons systems or communication systems for some of the ongoing conflicts. Would that, is that a risk for Viasat?

Yes, so there's lots of risks. I think that I would, look, there's competitive risks, there's program risks, there can be changes, risks due to changes in administration or policy. So we always have those risks. We try to factor them in to our outlook. And I think I would say that our outlook reflects our view of the likely go forward business in each of those areas.

That makes sense. Thanks. And Mark, you just hinted at a potential direct-to-device implementation in the U.S., perhaps in the second half of the year. In terms of Viasat's go-to market, will you need a roaming partnership with one of the big three U.S. wireless carriers, or will your implementation look similar to what Apple has with GlobalStar and Viasat will... get paid by either the handset OEM or a chip manufacturer?

Michael Heaney- Okay, no, so first of all, that's a really good question. I'm going to, first thing I'm going to say is we're the last ones to ask what Apple's going to do, so I can't comment on that. But what our perspective is, is that ultimately these will be roaming agreements. between carriers and likely what we expect is just like roaming, like for instance, if you look at the way roaming works terrestrially now, you take your AT&T or Verizon T-Mobile plan and you go to Europe, there's a whole list of roaming partners that each one of those has. So what we expect is that probably the services will be relatively standardized and the And the big carriers will have roaming agreements with pretty much everybody who can fulfill them. And we think that's a good environment for us. So that's kind of what we're working towards, is anticipating that that will be the business arrangements.

Great. And do you already have a roaming partnership with one of the big three wireless carriers, or how is your implementation? How is your setup going to be implemented in the second half of the year?

What we expect is that when there are devices in the market that are supported by those carriers, that they will have, that they will be curious, so I'd put it right now, as to what services can be delivered with what quality in what places at what prices and that'll determine kind of what those roaming agreements are and so that is still that is still a little bit up in the air partly because the none of the major device makers have yet announced their devices with this capability and whether it's enabled so that's kind of a gating item uh there'll probably be announcements on that front you know over the next could be weeks to months. I think that that will open up or maybe sort of drive to closure the potential for roaming agreements with carriers.

Thanks.

And one final one, and I may have missed this from earlier, but what is the full year forecast for the IP licensing I know you said that there was two different components. One had the annual fee, and then there was the per device fee. But what should we model for the general full year revenue?

Well, one thing I'd say, and then Sean can add on, is, you know, what we have is our different, we have different forms of licensing agreements. Some of them, some of the licensing agreements We get revenue on in things like integrating a capability into a device that's sold. That'd be an example. Some of it would be annual fees. And then right now, the parts that are really going to drive what happens the rest of the year are shipment-based licenses. So as units are shipped or activated, we get a recurring fee. And so there's some uncertainty on that. forecast for it. I don't know that we're going to tell you exactly what those forecasts are. But, Shawn, do you want to add anything to what I just said?

Yeah, I can get a little bit of additional color. I think, you know, as Mark said, we have a lot of different agreements. And even the ones that come in a little lumpier do have longer-term multi-year recurring streams that may have lumpy timing. But I would say kind of going forward over the next few quarters, I'd expect that you know, kind of a quarterly rate to be more like, you know, taking down to like an annual rate of like 20 million, you know, for four quarters. And it's both in our advanced technologies and others as well as in our topical networking.

Great. That is helpful. Thanks, Sean. And thanks, Mark and Guru.

You're very welcome.

Since there are no more questions, I will now turn the conference back over to Mr. Mark Tamper, Chairman and CEO, for closing remarks. Please go ahead.

Okay. So thanks, everybody, again, for joining our call. We look forward to speaking again next quarter.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.