ViaSat, Inc.

Please stand by, your program is about to begin. My name is Franz and I will be your conference facilitator this afternoon. At this time, I would like to welcome everyone to Viasat's fourth quarter and 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 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, France.

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 Q4 fiscal year 2025 shareholder letter and today's conference call slides that are available on the investor relations section of our website. During the presentation, we will describe certain of the more significant factors that impacted year-over-year performance. We will also make forward-looking statements within the meaning of the federal securities 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 pilings 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 Dangbrook, Chairman and CEO.

Good afternoon, and thanks for joining us today. With me, along with Lisa, We have Gary Chase, our Chief Financial Officer, and Sean Duffy, our Chief Accounting Officer. As always, we encourage reading the shareholder letter and referencing the slides we posted on our website earlier this afternoon for more details. Our fiscal 2025 was a pivotal year, creating the foundation for multi-year accelerated growth and sustained cash flow through increased earnings and decreasing capital intensity. We're pleased with our operational performance and very appreciative of the accomplishments of our team towards our strategic goals that we set for the year. We met or beat our guidance metrics, achieved record new contract awards growth, made significant progress on our capital structure, integrated the first Biosat-3, Biosat-1 into our global network, demonstrating the expected benefits to user experience and network efficiency. We completed critical milestones on our satellite roadmap, earned an inspiring reception to the new multi-orbit Nexus Wave maritime broadband service, introduced several network optimization innovations, delivering substantial efficiency and user experience gains. We reached new win-win third-party network agreements, including using LEO capacity to reduce latency for all mobility users while also enhancing capital efficiency. And we made organizational changes to further improve speed, agility, and greater structural optionality. We enhanced financial transparency with new reporting segments and accompanying disclosures. We're also bringing major innovations to our unique and valuable spectrum rights in the mobile satellite services market segment at LBAND and the new MSS service capabilities they enable for our customers. Working with the Mobile Satellite Services Association, or MSSA, We're laying the foundation for an open architecture, standards-based ecosystem for non-terrestrial networks, or NGN, extensions to the 5G and 6G networks of the future. Existing and emerging 3GPP standards foster interoperability for consumer mobile devices between terrestrial and a single individual satellite network. The MSSA's framework builds on those standards, enabling choice, scale, and substantially lower costs by creating an approach to NTN interoperability with and among all of the participating space networks. That approach, as adopted by space and terrestrial ecosystem participants, means mobile phones, cars, drones, and virtually any standard compliant device can use a much more cost-effective aggregation-coordinated satellite spectrum globally versus depending on a single capricious constellation. Piosat is focused on three major LBAN business objectives. First is substantially reducing capital and operating costs for mobile satellite services, non-terrestrial network, open architecture, and standards-based space systems. Second, supporting, transitioning, and evolving our critical government, maritime, and aeronautical safety services to the enhanced capabilities they'll need in the fully connected, autonomous, unmanned AI future by leveraging those next generation space assets. And third, transitioning our nascent, global, direct-to-device NTN business from the existing narrowband Internet of Things emergency and messaging standards to the emerging 5G new radio services market as new chips and devices enter and penetrate the market over the next few years. I can give a little color on a few key important topics before Gary goes into more detail on the financial and operational results. Of course, one of our highest priorities is getting FISAT 3 flights 2 and 3 into service and we've been maintaining status on our satellite roadmap. For Flight 2, the critical path has been corrective actions and testing the reflectors and integrating with the rest of the spacecraft. We are still planning to ship the spacecraft to the launch site this summer. We've adjusted the in-service date in the roadmap to better reflect various potential schedule uncertainties after we ship it. The F3's scheduled critical path goes through antenna subsystem integration, But that uses a different manufacturer design, not requiring any corrective actions. Our BISAT-3 Flight 1 usage has been scaling steadily, and we have really good results there. Even with the antenna anomaly, we have almost 2,000 planes that are served by that BISAT-3 Flight 1 satellite, tens of thousands of cumulative flights, and hundreds more every day. We commissioned a survey to compare our service on Hawaii routes, which is what that satellite is serving in particular, so we could benchmark user experience against the LEO competition. The results are very favorable and shown on page 10 of our online slides. They support our view that competition is primarily about delivering measurably reliable and consistent free Wi-Fi while also providing single interface for airlines. help manage monetize and integrate all the passenger entertainment and connectivity services we've been a leader in innovating delivering and measuring those services and are increasingly confident that the combination of our existing and planned satellite fleet with our third-party partners will compete very well in our target markets of course we can still improve by judiciously integrating Moraleo networks to both further optimize latency-sensitive traffic and improve economics, while meeting industry-leading service quality and reliability metrics. Nexus Wave, the multi-orbit maritime service, is already off to a good start. The terms of our Telesat Lightspeed Agreement, blended with our existing and forthcoming owned and third-party fleets, and our existing and planned user terminals and network capabilities can improve user experiences and extend market access for all our mobility customers, enhance our competitive position, and reduce capital intensity. Finally, we can't comment much on ongoing court proceedings related to the Logado bankruptcy. As you may know, Logado voluntarily dismissed its lawsuit against Inmarsat when faced with our motion to dismiss. While Legato subsequently refiled a similar case in New York, our position remains that Legato's case has no legal merit and is replete with unfounded allegations of fact that are directly contradicted by Legato's sworn statements to other courts, including the Bankruptcy Court. We'll continue to vigorously pursue our claims in the bankruptcy and defend against Legato's meritless lawsuit. Until then... Any future cash payments from Legato have been excluded from our financial outlook, and they remain as upside. We exit fiscal 2025 stronger than when we entered, as you can see by our healthy backlog, growing operating cash flow, moderating capital expenses, and continued awards growth in key businesses. And we believe that growth is durable. It's supported by market fruit points in our accompanying earnings presentation. including American Airlines selecting us to scale to free Wi-Fi, several very successful free Wi-Fi domestic trials, new global airline awards, and third-party survey data showing Biosat 3 delivering world-class passenger in-flight Wi-Fi experience and satisfaction on Biosat 3 Flight 1 flights between Hawaii and the U.S. Looking ahead, we know success in fiscal 2026 is more than just getting numbers. It's about accelerating growth and securing our future. We've got a comprehensive plan for reducing capital intensity, generating sustainable, compelling, operating in free cash flow, reinforcing our competitive positions, unlocking portfolio value, and driving returns and shareholder value. As we wrap up fiscal 25, fiscal 26 is a year to position for growth. We know there will be challenges, but we're playing to win.

So now Gary will go into more depth on financial and operating results.

Thank you, Mark, and good afternoon, everyone, and joining us on the call. Before I start, let me thank the Viasat team for the hard work that created solid results for the year. Thank you for delivering for our customers and owners. Let me start by recapping our top financial priorities. First, build our franchise's earnings power and customer lifetime value, which leads to sustained and growing free cash flow. That's a function of profitable growth and disciplined investment in our future. Sustained free cash flow then allows us to reduce the leverage that's pressuring our debt equity prices. Paying down debt is our top priority for capital allocation. Now let me briefly recap the fourth quarter and fiscal 25 results. The team delivered solid results for the quarter and the year and met our full year plan. In the fourth quarter, we delivered revenue of $1.15 billion, gap net income, of $246 million loss and adjusted EBITDA of $375 million for a 32.7% adjusted EBITDA margin. Adjusted EBITDA included a $6 million foreign exchange loss and $18 million of non-cash write-offs. Excluding these items, margins would have been about two points higher. The charges resulted primarily from efficiencies integrating the Biasat and Marsat networks and helped reduce cap spending in the years ahead. Mark noted our push to take further advantage of such opportunities, and I'll speak to their future impacts in my remarks on the outlook. We also produced about $50 million of free cash flow, our biggest focus, with solid double-digit growth in operating cash flow and lower CapEx than our last guidance, with no impact on next year's expected spend. In the last two quarters, we've reduced combined fiscal 25 and 26 CapEx by close to $300 million. Awards were solid at $1.2 billion, including European Space Agency's Moonlight Program, expanded scope with Etihad Airways, and multiple Nexus Wave awards as highlights. We took a $160 million write-down in our communication services segment related to the exit of certain EMEA ground network assets and related contracts as we continued integration of legacy networks. In communication services, revenue declined 4%, primarily driven by the decline in fixed services and other end product revenue, partially offset by strength in government, SATCOM, and aviation service revenue. Our commercial aviation business showed continued growth in a quarter, then service aircraft of 4,030, up 10%, despite slower deliveries and backlog of 1,600, up 18%. That backlog underpins our growth outlook for this business over the next few years. Business aviation and service aircraft were more than 2,000, up 12% year-over-year. Maritime revenue was down 8%, as we expected to trough in the fourth quarter. We're making progress scaling Nexus Wave installs and ended the quarter with more than 100 shifts in active service and orders for nearly 500 more. In governments.com, we had revenue growth of 16%. Our U.S. fixed broadband revenue continued to be challenged with capacity constraints. Fixed services and other revenue was down 19% year over year. Our debt business continues to enjoy great momentum with revenue up 11% for the quarter and 17% for the year, including the $95 million one-time revenue impact of last year's legal settlement. Our InfoSec and cyber business is the largest franchise in our DAT segment. Fourth quarter product revenue was $97 million, up 8%. Awards more than doubled, driven by favorable secular trends, product cycles, and white space product launches. For fiscal year 25, we delivered revenue of $4.5 billion, a gap net loss of $575 million, adjusted EBITDA of $1.55 billion, for a 34.2% adjusted EBITDA margins. Adjusted EBITDA grew 4% over the $1,488,000,000 prior year base referenced in the supplemental information section of our investor website. Growth of 4% in the face of almost $200 million of revenue declines in our fixed services and other business areas is a testament to the diversity and resiliency of our overall business portfolio. Turning to our fiscal 26 outlook, we expect modest revenue growth with flattish adjusted EBITDA, which we expect will be plus or minus 1%. from the $1,547,000,000 delivered in fiscal 25. To put more context around FLADISH, let me delineate some of the items we'll be overcoming this year. We'll incur about $60 million of additional third-party bandwidth expense versus the prior year to meet customer needs in the present and future. We'll face $30 million of additional operating costs, $80 million in total, to ready our BIAS Act III ground network for the service entry of flights two and three. Recall as well that fiscal 25 benefited from very high and lucrative Prelateware royalty revenues, and we do not expect these revenues to continue at the rates we realized in fiscal 25. Offsetting these items are growth in our aviation, government, SATCOM, and DAT franchises, along with about $40 million reduced operating costs from our fiscal 25 voluntary retirement program. While we continue to expect top-line growth, double-digit cash flow growth, and free cash flow inflection, Our adjusted EBITDA guidance is slightly reduced from prior, and the reason is that fiscal 26 has begun with headwinds in our aviation business from continued OEM delivery delays and increases in aircraft out of service as our customers face declines in traffic levels. Our annualized exposure to current tariffs is relatively minor at $25 million, but we've already been affected by a portion of that amount. Where we fall in the guidance range will depend largely on how the remainder of the year progresses on these macro fronts. Regardless of how much or little impact we face from the macro headwind, we expect to deliver on some critical outcomes that help our fiscal 26 results, but more importantly, position us for higher growth levels in the years ahead. Meaningful growth in our capacity with the launches of flights two and three of our Biosat-3 constellation and targeted integration of third-party capacity. Continued growth in our aviation, governments.com, and DAS franchises. A return to growth in our maritime business. and a bottoming out of our fixed services franchise with capacity Viasat 3 Flight 2 is expected to bring. We've started the year facing risks to our EBITDA outlook, but our confidence in achieving sustained free cash flow generation by the second half remains high. The business momentum we create during the year, combined with reduced capital requirements following the launch of Viasat 3, position us for meaningful free cash flow growth in the years beyond fiscal 26. During fiscal 26, we'll maintain our focus on capital efficiency and reducing the capital intensity of our business model and have confidence our CapEx for the year will be about $1.3 billion, inclusive of $250 million for the completion of the Viasat 3 constellation. Our cash focus hasn't been limited to EBITDA and CapEx. Fiscal 25, we generated more than $900 million of operating cash flow, more than 30% growth from fiscal 24. Our teams are sharpening their focus on key elements of our working capital, and when combined with less severance and restructuring-related charges, we expect operating cash flow growth to again be solidly in the double digits during fiscal 26. The additional steps we're taking to streamline our organization and take better advantage of integration and other portfolio opportunities will make us more nimble and competitive while driving growth and expanding margins. Our focus for this process will be in accessing more network synergies to better share capacity that will reduce future capex, better leveraging our combined scale to drive sourcing and non-labor savings, rationalizing our spend with third-party staffing contractors, and simplifying our work processes so we can operate with high velocity, take advantage of normal attrition rates to boost operating leverage. The fiscal 26 impact will be negligible, but we see that some of these opportunities boosting margins by an incremental 200 basis points or more over a three-year horizon. Now let me add a little flavor on how we see our businesses developing through the year. We expect fiscal 26 will see continued growth in both our aviation sub-segments, despite the macro headwinds noted. The team's been working to deliver improving customer experiences and the integration of third-party capacity through the year to support even higher service levels as our demand continues to grow. We continue to develop Amara, our next-generation IFC multi-network solution and multi-orbit roadmap that will deliver the best customer experiences for the future. Amara will leverage the unique experiences and economics that a blend of LEO and Geo capacity can deliver, including network redundancy and guaranteed quality of experience, flexible business models, and industry-leading digital offerings. As Mark mentioned, we signed a multi-year agreement with Telesat for LEO capacity. We're hard at work developing a proprietary electronically steered antenna terminal, Viasat AERA, that will seamlessly integrate capacity from multiple bands and orbits to deliver superior experiences. In government SATCOM, we should see sustained higher levels of activity and margin expansion on a higher margin business mix, including the use of the valuable steerable beams we have on our GX fleet. While much of our business is in backlog for fiscal 26, recent new awards and renewals are encouraging the future. Nexus Wave product performance has been strong, and the services are performing well. I'm proud of the maritime team for their work in developing a multi-overth solution that will meet growing customer needs for the future. We plan to increase the rate of installations and expect to drive slight sequential growth in maritime revenue in the first quarter of fiscal 26. Year-over-year growth is expected late in the fiscal year. In fixed broadband, Flight 2 will be pivotal to turning the tide, but we're not waiting. In advance, we're testing new offerings and targeting areas where we have available capacity, which is helping to stabilize growth ads and reduce churn. Continued subscriber pressure is expected in fiscal 26, but with Flight 2 service entry, we expect this business to stabilize by year end with an ability to grow beyond the year. In DAP, we expect another year of double-digit growth in revenues driven by information security and space emission systems. We're competing for the next generation encryption market where we'll leverage our current capabilities along with new technologies to provide high assurance encryption from the tactical edge and cloud connectivity while looking to expand into space. During fiscal 26, we expect growth in our InfoSec and cyber business to meaningfully outpace overall DAT segment revenue growth. We expect more normalized levels of royalty revenues at Trellisware in fiscal 26, and as a result, DAT-adjusted EBITDA growth we expect will be less than revenue growth. Absent the Trellisware impact, DAT margins would be improving. I'll turn now to how we're thinking about addressing our debt. Our two-step plan is to begin using available cash to redeem near-term maturity and then to leverage the momentum we built during fiscal 26 to address our longer-term debt structure. Any potential proceeds from our strategic review or legato will be prioritized for debt repayment, which may accelerate our process. At quarter end, we carried available cash of $1.6 billion at the consolidated level. We've begun using that liquidity to early redeem some of our outstanding debt. Following quarter end, we redeemed the remainder of our 25 notes for $443 million. During fiscal 26, with confidence and sustained cash flow generation by year end, we expect to pay down the remainder of the MRSAT term loan fee of about $300 million from available cash. With the business momentum we expect to build in fiscal 26, we'll be well positioned to grow our earnings and free cash flow in the years ahead. As we exit the fiscal year, we'll begin work to address our longer-term maturities and expect to have a variety of compelling options to do so. As we get closer to the end of the fiscal year, we'll provide some additional direction as to our objectives and intent. As part of managing through this transitory period of elevated capital spending, primarily within the Biosat silo, and as we approach sustained free cash flow, we expect to upstream approximately 400 to 500 million of cash from our InMarsat debt silo up to the Biosat level. We want to be transparent about the total quantum expected, But this process should play out over time, beginning most likely in the next quarter or so. In conclusion, I hope you now understand why I'm so excited for the opportunities ahead of us in fiscal 26. Key outcomes for the year will be modest revenue growth, flattish adjusted EBITDA, and free cash flow inflection later in the year. But those outcomes mask a much more meaningful transformation in our business. We look to emerge from fiscal 26 with substantially more capacity to deliver for our customers in the years ahead. We expect continued growth in key parts of our business and trends in some of the areas that have been weighing on near-term results to bottom or return to growth. The positioning of our franchises for sustained and profitable growth, in combination with easing capital requirements following the launch of BISAP 3, lead us to expect rising free cash flow in the years ahead. Against that backdrop, we'll look to begin refinancing and optimizing our debt structure for the future. I'm excited to be part of the Biosaf team as we work to realize all our opportunities in fiscal 26. And with that, operator, I'll turn the call back to you to begin the Q&A.

Thank you. We will now begin the question and answer session. At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. We will just pause for a moment to compile the Q&A roster. Your first question comes from the line of Sebastiano Petty with JP Morgan. Your line is open.

Hi. Thank you for taking the question, and thanks for all the color there at a segment level. Super helpful. I was wondering if you could update us. I don't know if you touched upon it in your prepared remarks, but any update on the process, the strategic review process for the defense and advanced technology segment? I think that's something you guys have alluded to in subsequent quarters, wanted to know if Any update there or how you guys are thinking about that? Is that process still ongoing? Perhaps any update on timing would be super helpful. And then I guess just in regards to the satellite launch for F2, I guess what gives you confidence in early 2026 at this point? And is part of the softer perhaps EBITDA you did touch upon getting additional ground network costs in? It's part of the software EBITDA guide than previously anticipated a function of just having to wear more of those ground network costs before getting kind of any revenue benefits from there. That would be super helpful if you can comment. Thank you.

Okay. Sure. Thanks. I'll take your questions in order. On the defense and strategic review that is still underway, things – you know, the – The way I put it is that business is doing really well, so we're constantly assessing what we think the value of that, of each part of those businesses are relative to what our expectations are of their future cash flows. And I think they're evolving favorably. We are also at the same time looking at ways in which some of the things that fall out of that evaluation that are things that we can do to enhance their value and their competitiveness, we're doing those at the same time. But the review is still underway, and I think you should just look for us to make any statements if there's any material change in how we're thinking about that. Second part on Fight 2's schedule. Remember, a lot of what's been going on over the last couple years has really been about understanding the source of the anomaly and the corrective action process. That's where a lot of the uncertainty has been. We're reaching the conclusion of that. That entire reflector sub-assembly will be delivered to Spacecraft Prime fairly soon, and then it's a lot more straightforward, and we're going through processes that we already did on Flight 1 in terms of spacecraft integration. We're still on track to deliver the complete satellite to the launch site this summer, as we expected before. And right now, with our focus having been on delivering the satellite, we're also looking at what the activities will be post-delivery. There's a variety of activities there, some of which are kind of beyond our control. So we felt it was prudent just to update investors and let them know that there was some probability that it could fall into early calendar 26. The other thing that we'd remind you of is that part of the reason that we use satellite in service in our roadmap is that's really what defines how it's going to affect our financial outlook, and there's really no material change to our financial outlook as a result of that slip. For the third point on the EBITDA, I'll let Gary address that one.

Yeah, we'd actually previewed that number, I think, a quarter prior, so there's no impact from the ground network policy you're referencing. That was not a driver in the guidance.

Thanks, everybody.

Your next question comes from the line of Rick Prentice with Raymond James. Your line is open.

Thanks. Good afternoon, everybody. A couple questions. Can you hear me okay? Yep. Okay. Great. First question, obviously you can't talk a lot about Legato, but is there some timeline you can at least actually kind of lay out for us of what we should be watching On the timeline of legato, is there any way to put some goalposts around what the magnitude might be? And I think, Gary, you mentioned if there were proceeds, it would most likely go towards delevering.

I don't know if you have a follow-up. Okay.

You know, we are participating in a litigation. You know, one of the main things that we would refer investors to and analysts as well is just to look through the public record. It's in the docket. And you can get a little bit of sense of how things are progressing. Just in terms of what's at stake and what is upside for us is it's also part of the public record that the amount of cash that we're owed is in excess of $500 million and that, according to the bankruptcy plan, the entity intends to consummate the transaction that that's based on. So those are the things that we're working towards. But it's hard.

It's very difficult for us to comment any further than that at this point. And anything as far as magnitude?

Well, the main thing I say is just, you know, I think the thing to keep in mind is what's the amount that we're owed, which is, you know, right now it's a matter of public record. So that's something to, you know, it's just a way to frame the problem.

Yeah. Or the opportunity. Yeah. Thanks, Rick.

Yeah. And Gary, you mentioned proceeds might go to de-levering. Is there kind of a target zone of where you'd like to see leverage get to over the next couple of years, given Logado, given potential unlocking a portfolio value?

Well, yeah. Let's start with lower, which is what we're working on urgently. You know, I think we've done the research on this, and I think as is consistent with a lot of asset-intensive businesses, when you When you get to around three times, that's where two things start to happen. You know, that's where, first of all, your cost of debt capital starts to flatten out and where equity value is maximized. So, clearly, that is an initial resting point. We're working at least to get there. And I think once we get there, you know, we'll see what we want to do next. What you see from us, though, is, you know, again, we're acting today. We're not necessarily trying to be scientific about it. We're working as hard as we can to drive free cash flow, which is the best way for us to get there.

Okay. Last one for me. Obviously, airlines are looking at solutions for in-flight connectivity, particularly free Wi-Fi. We've been hearing from some of the airlines that the Viasat solution for the narrow body is really good. Starlink isn't as well. but there's some debate on the wide body. Have you been hearing anything similar from the airline customers of where Starlink might have a solution that they feel is more competitive in a wide body versus narrow body? But just kind of update a little bit there. I know you've posted something with the presentation today, but it's something we've just been hearing from airlines is narrow body versus wide body and LEO versus GEO.

Okay, so that's a good question. One of the things that we have really been emphasizing with our airline customers are quantitative metrics of performance for all their flights. And those metrics, you know, can vary depending on routes, and they can vary depending on, or think of it as the big thing with wide bodies is the number of people on board, which leads to the number of users. So we, you know, we've been pretty focused. Actually, we re-record, and we can sort those metrics multiple ways, by route, by fleet type and by wide body versus narrow body. So I think it's a fair question. I tell you, our data is such right now that for wide bodies and narrow bodies, our performance is very close. Narrow bodies, a little bit easier. But if you look at the thresholds that our most knowledgeable customers have set, we're meeting those thresholds for both types of planes. The other thing that I'd bring up here, and we talked a little bit about, well, we mentioned some of the survey results that we got for our BISAT-3 Flight 1. And one of the really good things about that BISAT-3 architecture is that we have beams that follow each plane individually. So the amount of bandwidth that we can put into those beams is huge. It's certainly sufficient to serve the largest wide bodies with free offering. So that's, you know, we've given, we have some of our global customers that are already applying on Viasat 3 with wide bodies. They're seeing those results. I can tell you the customers that we're working with are very pleased with our results with Viasat 3s. One of the points that we like to make is that not all gigabits or not all terabits are the same. You get lots of points for the gigabits that happen to be right over or right on the planes that are being served. That's the whole point of what we're doing with our new satellites.

Great. That's helpful. Thanks, Mark. Thanks, Richard.

You're next. Your next question comes from the line of Edison Yu with Deutsche Bank. Your line is open.

Hey, thank you. First question, Mark, maybe a longer term one. You mentioned in the prepared remarks you are, you know, playing to win. And I'm wondering what exactly does that really mean if we think about, you know, two, three, four years from now, what bias that looks like? Is that purely financial? Is it maybe getting back some of these market share, NIC, maritime? What does that look exactly to you winning?

Well, the big thing that we're looking for is growth. Winning is growth for us. I think that the markets that we're focused on still have a lot of growth in them. We've had very strong market shares in both commercial aviation and maritime. Those are tough benchmarks to try to improve on as those markets grow. So we're really focused on growth. I think we'll do well in market share. But the big thing, I think the big thing that we'd like to communicate is it's becoming more and more evident that this is really an economic competition, that we can deliver the levels of service that people want. And you think about how that's part of what we're talking about in measuring the Hawaii routes, which is interesting because as we bring more bandwidth to market, we will have lots of bandwidth to apply to our customers in these mobility markets. That's our main emphasis, which includes government, aviation, maritime, and we expect to extend that into land mobile markets. So then the way the competition actually plays out is once you're in an environment where you have unlimited free Wi-Fi for your customers, really the main issue then is who runs out of bandwidth. As long as you don't run out of bandwidth, customers are really happy. So one of the things that we have emphasized for quite a few years is understanding how what those geographic and temporal patterns are of demand. And that's what we're intending to serve. That's going to let us compete really effectively. The other part of it is once you know what kind of the market pricing is in these markets, whether it's like per boarded passenger, per ship, you can work backwards and figure out what it takes to be able to serve those price points at a profit. And so that's one of the things that we've been really focused on as well is having sufficient bandwidth every place and being able to be able to blend our own bandwidth with third-party bandwidth, match the utilization between supply and demand, and compete. So that's part of the playing to win. The last part of it that is, I think, really important is one of the distinctions in the way we do free for airlines versus the way some others do is that we give the airlines discretion about how to do that. We provide all the platforms that really give them control over the experience. And so you'll see, you know, as an example in the quote that we have for American Airlines, you know, they want to be able to provide those incentives to their best customers. And the airlines get advantages by having those customers be members of their frequent flyer program, for instance. So we give them the tools to manage all their communication and their connectivity and their entertainment in a way that helps them basically monetize them and to come out with a better overall economic solution in an environment where the passengers still get free Wi-Fi. And that's really an example of non-price value. That's a way that we're really helping the airlines do that. We have very similar strategies in the way we work with our maritime customers and government. I know it's a long answer, but I just wanted to give you a sense of both what it means for us to win and that we feel we have a path to being able to do that as we complete some of the you know, the items that we've been working on for quite a while.

I appreciate the, you know, the comprehensive response. Follow up on the, on the L band, obviously, you know, you have a, a lot of it and, you know, you've articulated earlier on your, on your desire to get more involved in an amazing way D to D. But I think you would, you would probably agree that, that, the providers or the DDD people are trying to do DDD competitors is already pretty crowded. And many of them have much lower cost of capital while at the same time spectrum is very scarce. So what kind of conditions would you need to see to maybe try to monetize the actual spectrum itself as opposed to trying to utilize it for a service?

Okay, so there's a lot in there. Here's what we'd say. One is, from our perspective, one of the good things is we have a pretty significant existing business base in LBAN with mobile satellite services. I think it's becoming more clear that having licensed satellite spectrum is really valuable, and it's essential in performing the public safety requirements missions that we do. Right now, lots of emphasis on aeronautical safety. That's one of our important missions. More and more emphasis on maritime safety, certainly national security applications. All those things benefit from licensed satellite spectrum. It's also clear that there can be crossover benefits into these D2D markets with that as well. But one of the points I want to make is that because of the public service obligations that we have, or the public interest obligations that we have, which we take seriously, being able to evolve those to what their future requirements is, we think is important. We're undertaking that. I think it's a good foundation from which to expand our markets into the other ones. In terms of how you differentiate going to market, One of the main points that we've made, and I mean, I'd say one of the main points that we've learned in talking to mobile network operators, automotive manufacturers, all of the big users of what's likely to be a non-terrestrial network component to 5G, they want standards-based open architecture solutions so that they don't get locked into a single choice. And so one of the main things that we've been doing is basically to turn this into a competitive environment that's more than who has the most money at any instance of time. What we're really trying to do is address the customer's needs or desires for those open architecture standards-based solutions. And that is the main reason we helped form the mobile satellite services program Association to create the standards that not only allow a terrestrial network to operate with a particular satellite network, but to do it with all of them, right? And that they can roam among all those, maintain that choice. So, you know, I think that the ingredients that we're bringing, and I just want to add one more component that we've talked about there, which has been very important in the terrestrial environment, I think is a big equalizer when it comes to the capital environment is that of having shared infrastructure, which you see just the way the terrestrial market evolved is that each individual carrier in a nation doesn't have to fund all of the capital, all of the capital itself. That shared capital helps reduce capital intensity and allows us to compete. So what I would say is Big three ingredients we talked about is serving our public interest through these aeronautical, maritime, and national security requirements, helping to facilitate this open architecture standards-based environment, and then reducing capital intensity through shared infrastructure. I think that we're getting really good feedback that that's a good message to some of the biggest users and customers for the D2D environment.

Thank you very much. Thanks for the question.

Your next question comes from the line of Ryan Kuntz with Needham & Company. Your line is open.

Hi, this is Matt on for Ryan. Thank you for the question. Your 2026 outlook is calling for a double-digit strong growth in both the information security and cyber defense and the space and mission systems businesses. Could you maybe just provide some color on what the underlying growth drivers are for those particular business segments? Sure.

You know, in the – let's see. You mentioned three. So space and mission systems, encryption, and – I'm sorry, what was the third one? Oh, those two. Yeah, those two. Yeah, yeah. Okay. Yeah, so I'll address each of them. So the encryption business, you know, one of the – I think one of the ways that this problem is being framed is quantum-resistant encryption, right? And that's contained within the U.S. Department of Defense Next Generation Encryption Initiative. So, again, the big issue here is carrying over a very large installed base, mission-critical equipment, and migrating that to the next-generation equipment. through a refresh cycle. But one of the things that we've talked about and we're starting to see is there is a use by date or an expiration date for the current generation of equipment. So there is right now a big focus on refreshing that base as quickly as possible because there is exposure even I mean, as we speak, I would say security issues that are associated with quantum computing. So there's a lot of emphasis on that. So that is a big driver. And then the other thing that is also a good tailwind for us and one where we've been quite successful is it's become quite evident that if you look at these very large constellations, that cybersecurity is, it is a single mode of failure that affects the entire constellation. So there is a big focus on cybersecurity for space, and that is an area that we have a very strong position in. The second one on the space and mission systems, there's a number of things, and you can see some of the programs we've been successful on in this, is it's not just, satellite services that people are looking for in space. But there's definitely needs for technology insertions. And so we've been really quite successful in some missions include replacing some of the NASA services for space relay. That's an area that we've gotten off to a good start. There's initiatives on standardization of optical intersatellite links. We've been very successful in a number of situations with high bandwidth radio frequency inter-satellite links. There's also some specific missions that can't be served by, I'd say, more commercial dual-use satellites. We've been successful in those areas as well. One of the areas we're pretty excited about on the international front is working with the European Space Agency on the lunar space on the lunar relay communications applications as the Moonlight Program. And then there are also some unique opportunities for us and for other operators that we're participating with for national security applications of some of the bands that we can use for dual-use applications, including L-band. So that's kind of run down to some of the drivers for us.

Great, thank you for the caller. That's it for me.

Your next question comes from the line of Colin Canfield with Cantor Fitzgerald. Your line is open.

Hey, thanks for the question. Maybe focusing on introduction of new geostationary satellites, could you just kind of walk us through how we should think about the kind of revenue addition of ISAT-3, F2, and F3 in 27? And maybe just walk us through kind of how you think about the moving pieces of volume versus pricing growth. And then just, again, walking that all back to the multi-year EBITDA margin expansion of 200 bps of margin. So it seems like if you think about assuming a relatively flat volume versus price outcome and a little bit of EBITDA, it feels like low single digit is the right earnings growth number for 27.

But maybe walk us through kind of how you think about that.

I think I'm going to address the question about the 200 basis points around, you know, how we're thinking about it. You know, across a variety of things that we've seen, you know, we've had, you know, the conviction that we've got more to go, we've got more opportunity to go through the integration. And, you know, when you think about the magnitude of opportunities that we've got in front of us, the importance of the year, in order to maximize those opportunities, we think we really need to move towards more clarity, simplicity, being nimble. And we've had, you know, in a couple instances, I mean, first you saw some of the ways in which, you know, we're looking at, you know, managing integration to reduce capital needs for the future. We've also had some scrums internally on some tough problems that we've worked through. And it's led us to believe that, you know, we can operate like that much more routinely. And we've engaged some outsiders to help us think through what the magnitude of opportunity would be. And we're really comfortable that, you know, across that two or three year time horizon, you know, we'll be able to achieve numbers that would have us, you know, would have us in that range in terms of additional margin contribution.

Just in terms of the ramp, one thing just to put in perspective is each of the

Flight 2 and Flight 3, each alone, have more bandwidth, more capacity than all of the rest of our existing fleet put together. So those are big increases in capacity for us. And then the really big things about those two satellites is really nothing else like them on the market in their ability to see, kind of each of them can see a third of the world and has the ability to put bandwidth together. right in the places where the demand is. So the way that we're growing, first of all, two things, right? I think one is, how is demand growing? We're winning more platforms, and as you can see, as things like aviation market goes free, or the maritime market through use becomes a dominant use as opposed to operational use, the amount of bandwidth required per platform is growing substantially. And also, what we are seeing is they were delivering a lot of service. There's improved productivity from the customer's perspective. But just like in the terrestrial world, you're seeing average revenue per platform grow over that time, right? That's how we come out ahead. But think of it as the real competition is not so much who has the most total bandwidth. It's who has the most bandwidth in the right place at the right time. And you can see, you know what I mean? Look, everybody knows Starlink is the one that's trying to lead these markets. But you just look at their own maps that they have on their website, and they'll tell you that they have bandwidth punches in a number of places. And some of those places are really important transportation hubs for maritime and for aviation. So the big thing for us is, you know, we're growing demand. through more platforms, more bandwidth per platform, and then we have the flexibility to aim all that capacity right on the platforms that need it at the times that they need it. I think that's a pretty simple formula, but it's actually – I think it's a little differentiated in the market.

Got it. Got it. And I appreciate that color. One thing I just want to make sure we understand in terms of clarity. So, like, in terms of contracted – so, like, we think of these coming online in 26 – And in terms of the full kind of contracted revenue increments from F2 and F3, is there a fair way to think about the contracted additions of revenue growth versus base state numbers?

Yeah, so think of it as we're not like, you know, the traditional satellite operators that usually would talk about, we're buying a new satellite, here's our backlog commitments or the commitments we have on a transponder by transponder basis for this amount of utilization. The way our business really works is what you want to look at is how many platforms we have, what the usage and revenue is per platform. And think of it as, as we bring more bandwidth to market, we're constantly growing the number of platforms. And as we go to, you know, as we get more applications per platform, those drive revenue per platform. And that's really the way in which we fill it up. So where we are, think of it as what's really important is to look at those trend lines. And clearly what you can see, if there's one thing that should be evident, you know, from what Starlink's doing is that when you decrease the unit cost of bandwidth, the market's grown very substantially, right? That's what they're, that's, and that, that was our premise as well. So we've been a little bit handcuffed, uh, or handicapped as we're waiting for these satellites to come out. But, uh, But that's really going to unlock that for us. I think we've been addressing it effectively in the meantime through adding third-party bandwidth. We're continuing to do that with both LEO and GeoBandwidth. But, you know, we've got a lot of that CapEx is behind us, right? So that's what the opportunity is, is that we're getting through this bulk in CapEx, but we're getting a lot of inventory. And that's what's going to help drive the cash flow. It's a big part of what you and Gary's discussion about. That's what we're focused on.

Got it. Got it. And just to ask the third question, maybe walk us through the free cash flow building box for 27. It seems like the fair way to think about just taking the numbers that you've given us, if we assume like 30% of OCF growth and the CapEx number you've given us, that gets us to maybe $100 to $200 million of burn in 26. And then with the tailwind, so the number you gave us on Biosaf 3 stepping down, so 250, and at some level of margins and working capital, maybe roughly 300 total. So is it fair to assume that we could be looking at like a low single-digit hundreds of millions of dollars opportunity for pre-cash flow in 27 by that math, not getting you to sign up for guidance, but just making sure our math is correct?

Well, we're not necessarily going to validate your math or your guidance, but you clearly are educated on what some of the right building blocks are. You know, one of the things that we have been really focused on, and you've seen it in Mark's prepared remarks, in mine, it's about the magnitude of opportunity and the underlying meaning of what we're setting out to accomplish in fiscal 26 to position ourselves for a lot of growth beyond that, right? So, you know, I think you all know how to think through some of those factors. You know, in terms of what they might look like on the EBITDA line, as Mark just said, we're going to have a big lump of CapEx, you know, in Biasat 3 behind us. And one of the things you've seen, you know, we didn't talk about it on this call, it was more of a focus last time. You know, the team here has had a tremendous amount of focus on CapEx even in the here and now. And, you know, we're all, you know, driving towards this goal of reducing the capital intensity of the business. It's resulted in almost $300 million less CapEx over the course of fiscal 25 and 26 from where we started several quarters ago. We're going to continue with that focus. The teams are getting trained on working capital. So the things that you're talking about are in line with the kinds of trends that we expect to see EBITDA growth focus on things like networking capital, being really disciplined with our capital spending. Those are things that you should expect to continue to see.

Got it.

Your next question comes from the line of Louis de Palma with William Blair. Your line is open.

Good afternoon. Following up on the prior question, based on what you conveyed with Approximately $250 million in Viasat 3 CapEx this year is $1 billion, a good benchmark for fiscal 2027 CapEx. And would that include $200 million of capitalized interest?

Again, we're not going to give guidance on where we'll land in fiscal 27 just yet. Actually, this year, what your numbers were, you know, we didn't have the $250 million of CapEx around the closure of the VIA-SAT-3 system that we'll have next in this current fiscal year, fiscal 26. The spending was around $1 billion in total, and there was about $200 million of capitalized interest in that number. So bear in mind, the capitalized interest is something that we do think will trend down a bit. But we still have satellites under construction, so that's not something that's going to disappear from the capital line.

Right. Thanks. And secondly, what provides confidence that maritime will inflect in late fiscal 26? Is there continued upsell from your L-band customers? And are you also taking share from like KU band maritime competitors?

Okay. So the first thing that was providing confidence is we've been, you know, we went through beta trials. We've gone into production. We have a very attractive backlog. It's growing fast, even while the installation rates are growing on, you know, on what we're calling Nexus Wave, which is the multi-band one. So right now, what we're really looking at, and we're still early days, but I'd say that the orders, the rate of which we've got orders, the size of the pipeline, the rate of installs, the existing backlog, all of those are pointing to kind of the sequence of events that we talked about last quarter, which is we should see net vessels stabilize and grow. Then we'll see the revenue come from those vessels, and we'll get there. On the revenue side, one of the big things that we've talked about, I think everybody's talked about, is the increased usage on board ships going from not just operational but to crew use. So that's really driving, you know, think of it as an inflow of revenue into the maritime business. which Nexus Wave is really our first opportunity to capitalize on, right, and to provide that integrated service. So we're seeing good growth in revenue per ship given the service plan that our customers are adopting. So I think now where that's coming from, it's pretty clear that, you know, conventional KU band doesn't have, just like in aviation, you're going to see as the demand for vessel increases and then you look at the patterns about where those vessels aggregate, there's really not a lot of future in that, we think. And so we do think that that's one of the ways in which we'll be able to compete really effectively. It's still complicated. I think the thing that is really encouraging about what we're doing now is most of our growth is coming directly in our direct sales to fleets. And one of the good things there is it's really a way for us to be close to the customer and just understand what the pull through is for the parts of our business that go through distribution. So one of the things that we're working with is we're working with some of our indirect distributors to be able to have them understand what's going on and to be able to make win-win deals and have them come along with us. That's also on our list. That's another way I think that we're starting to see some progress and we'll see sustained growth. So we're talking about kind of going up sequentially in the first half, Q1, Q2, but we should get later in the year, we should start showing year-over-year revenue growth in Maritime. I think that's going to be a really good proof point for, you know, what we were talking about is how we can compete in these markets.

Did that cover all those, Jed? Definitely. Definitely, Mark. And one final one. Do you expect to play a role in Golden Dome? Yes.

Yes.

I think that, you know, I mean, the big thing there is the government is not going to outsource they're not going to outsource everything is that. At the end, there's going to be a very substantial component across a whole range of technologies that includes cyber security, sensor fusion, cloud communications. There's going to be a lot of business across a number of disciplines. A lot of that can be in technology, services, and we're well positioned across those areas. So we're seeing opportunity there as well.

Excellent. Thanks, everyone. Thanks, Louis.

Our next question comes from the line of Justin Lang with Morgan Stanley. Your line is open.

Hi, Mark and Gary. Thanks for taking the questions. I'll try to be quick here. Just one on governments.com. I think you mentioned good visibility from the backlog. The business was a nice grower in 25, and I guess the question is, do you see that growth sort of repeating here in 26th? or should it taper a bit just given tougher comps? Just sort of curious how much of an offset covers that common is to communication services this year, given some of the early aviation pressures you noted and the dynamics playing out in maritime and fixed broadband, which I think you outlined clearly. So thanks.

Yeah, we expect the growth to taper, but we do think it'll be up slightly. So, and at sustained much higher levels of activity, This is a nice margin part of the portfolio, so it'll be a big contributor this year.

Okay, great. And then just a quick housekeeping, Gary. Maybe I missed it, but you mentioned leverage should tick up, I think, here modestly in 26. You've got flat-ish EBITDA, and you've got this second-half free cash flow inflection. So I guess how should I square that with the sort of delevering priority you laid out?

Well, the de-levering is something that we've got to build. We do need to get through this year and achieve those outcomes that we described. We think once we get beyond this fiscal year and some of the impact of that BISAP3 CapEx, you know, we'll be on a much different path in terms of the direction that we're heading. Over the course of this year, we do think that amounts to a slight uptick in that, you know, EBITDA over or net debt over EBITDA.

Great. Thank you.

Thank you. I'm not showing any further questions in the queue. I would now like to turn the call over to Mark for closing remarks.

Okay. Thank you. So we've covered a lot of ground, got a lot of good questions. I'd just like to just kind of rattle off some of the main themes that we think are really important that we're trying to communicate this quarter. One is we're making good progress. We're steady progress. We're on the Flight 2 and Flight 3, Advise Act 3. And we've got really good data that we think demonstrates the effectiveness of that architecture and the way that we use it on Flight 1, even though, you know, Flight 1 is certainly impaired. It demonstrates the way that we're going to use the satellites. And I think it also helps demonstrate that not all gigabits or all terabits are the same. You only get points for that bandwidth that is in the place that you need it when you need it. I think that on these mobility markets, it's a really important thing to remember. We're seeing, you know, we're already seeing good results from that in aviation, and we're having opportunities in government. Maritime, we're off to a really good start on the multi-orbit Nexus Wave service. L-band, I think we're... making progress starting in the D2D space, but really focused on these next generation safety services in aviation, maritime, and the national security components, and then being able to apply these principles that we described before in open architecture, standards-based, the value of dedicated satellite spectrum, and then bringing that to market in ways that allow us to reduce capital intensity through multi-tenant shared infrastructure, same as what's happened in the terrestrial space. So that is one of the ways in which we're looking to make sure that we can continue to drive up cash flow through reduced capital intensity. We're pretty proud of things. Things are still in flux, but for FY25, We had record revenue, record EBITDA, record awards. We see good opportunities for growth and operating cash flow that Gary's gone through a lot of detail on how we're going to use that to better and to improve our capital structure. Even this year, we had two quarters of positive free cash flow. Next year, our objective is to exit the year with that sustained positive free cash flow. We've talked about a flattish FY26. There's some challenges in the macro environment. Mary spoke about impact of tariffs, also the issue about OEM deliveries and aviation. That's kind of a macro that we're dealing with, but we feel we're well positioned for growth. We think it is becoming more clear that we can thrive and win in the markets we're targeting. Last thing I just want to say is, you know, There's a lot of work, obviously, behind all the things we're talking about. I want to thank all of our employees and teams for the work that they're doing. So thanks again for participating in our call. We'll speak again next quarter.

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