Q2 2025 Viasat Inc Earnings Call

In This Article:

Participants

Lisa Curran; Vice President, Investor Relations and Marketing; Viasat Inc

Mark Dankberg; Chairman of the Board, Chief Executive Officer; Viasat Inc

Kumara Gowrappan; President; Viasat Inc

Garrett Chase; Chief Financial Officer; Viasat Inc

Edison Yu; Analyst; Deutsche Bank

Ric Prentiss; Analyst; Raymond James & Associates

Sebastiano Petti; Analyst; JPMorgan Chase & Co

Simon Flannery; Analyst; Morgan Stanley

Michael Crawford; Analyst; B. Riley Securities

Chris Quilty; Analyst; Quilty Space Inc

Presentation

Operator

Thank you for standing by. My name is Meg and I will be your conference operator today. At this time, I would like to welcome everyone to the second quarter 2025 Viasat earnings conference call.
(Operator Instructions) And now I would like to turn the call over to Lisa Curran, Vice President, Investor Relations. Please go ahead.

Lisa Curran

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 Q2 fiscal year '25 Shareholder Letter on the Investor Relations section of our website. During the presentation, we will describe certain of the more significant factors that impacted year-over-year performance.
We will also make forward-looking statements within the meaning of the federal securities 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, including our 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.

Mark Dankberg

Good afternoon, and thanks for joining us today. With me, along with Lisa, we Gowrappan, our President; Gary Chase, our CFO; and Shawn Duffy, our Chief Accounting Officer. 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 briefly cover operations, and Gary will cover our financial results and highlight in our growth outlook, and then we'll take questions.
Our second quarter fiscal year 2025 results were better than expected in terms of revenue and adjusted EBITDA growth, as described in the shareholder letter and slides. We also continue to take actions to strengthen our capital structure, including an upsized refinancing of nearly $2 billion of 2026 secured notes.
New contract awards in the second quarter were a new record at about $1.3 billion and were led by Defense and Advanced Technologies, which doubled year-over-year awards led by cybersecurity ground systems and space and mission systems and by Aviation and connectivity services.
Our recent teach-in highlighted the attractive growth potential and durable competitive advantages in key technologies such as next-generation breeze-based optical technology, mission-specific phased array terminals, space-based cybersecurity and our Q2 Defense and advanced technology or DAT awards reinforce that we're on the right track, including the US government program, international government opportunities in certain commercial markets.
One of the unifying themes among our customers is access to diverse set of orbit spectrum and constellations and avoiding overdependence on single individual systems. Of course, we understand the intensity of competition in some of the core businesses that makes the size, competitive positioning and growth prospects of these GAAP opportunities, especially in [DAT]. We're open-minded about the best ways to capitalize on these opportunities and are actively evaluating alternatives, while those businesses are both delivering growth and increasing their potential.
We're also very pleased to have Gary Chase join us as our new CFO. Garry's leadership experience in strategic, operational and financial planning will augment our focus on cash conversion, return on capital, converting to a more balanced capital structure and operating financial profile.
Garry will provide additional experienced financial leadership in the areas we highlighted last quarter, including identifying, evaluating and executing the best alternatives to realize the value embedded business portfolio, leading detail business operations, financial reviews to ensure we're at peak operational productivity levels with corresponding margin performance and leading detailed capital allocation reviews to ensure we're optimizing return on capital in the near and long term.
The main point is we're exploring additional financial and capital structure perspective. We're also continuing to drive down capital intensity by augmenting our own satellites through both tactical and strategic third-party agreements. We're in advanced discussions with Telesat to buy Ka-band LEO (inaudible) by leveraging our own fleet and its unique capabilities, existing national operator partnerships and unique coverage and capabilities of additional third-party satellites and calculations, we can both ensure our customers are getting the performance with coverage they need and more explicitly measure and drive improved returns on capital.
Our satellite operator partners are often national-based Campion, key countries and geographic regions, and they're seeking a robust global space ecosystem to support their own national security and sovereignty. We're working with both GSO and NGSO systems, Garry will provide more color on capital spending in his remarks.
Other key corporate initiatives include evolving the L-band to create value for the millions of people that depend on its use for safety and connectivity, the air, sea and on land. We have a very significant opportunity to also concurrently greatly expand our addressable market through these evolved services and by leveraging the nonterrestrial network and to the high standards and open architecture, enabling multigen satellites.
We see multiple avenues to create value for our shareholders, customers and partners can continue to work with high-minded mobile satellite service operators through the Mobile Satellite Association. And last, but certainly not least, we're focused on getting our satellites under construction into service. We've already accumulated substantial in-flight connectivity, operational performance experience with ViaSat-3 F1 that reinforces the value of its dynamic beam-forming technology to apply all its bandwidth in the most important places, especially for mobility applications. It's clear that being able to effectively dedicated teams to airplanes drives performance. We continue to work on and make progress on our satellite road map.
Now touching on the business areas. Expected declines in fixed broadband remain our single biggest headwind, but that headwind is decelerating. We're seeing increased global enterprise fixed opportunities, and we'll report on those as they mature. We're seeing declines in maritime revenue, primarily in prior generation L-band fleet broadband, and that's been going on for several years.
The fleet broadband declines were meaningful, but also decelerating. Ka-band broadband maritime or Fleet Xpress is experiencing much more modest component in revenue while largely retaining net vessel count. The multi-orbit, multi-band NexusWave product is now in beta trials and doing well and already leading to full-scale deployments for some initial customers.
We already have an order pipeline of over 100 customers, representing about 3,500 vessels. About third of those are new customers, offering a good opportunity to increase net vessels. We'll continue to update the maritime outlet based on market data and installation rates, but our overall confidence is building.
Longer term, we see further maritime addressable market opportunities with Evolve L-band. Commercial and Business Aviation are growing well. New OEM aircraft delivery constraints are our bottleneck to active tail count and the Boeing strike added to that issue. We've been working through the near-term capacity challenges associated with the ViaSat-3 F1 antenna anomaly and are making steady progress with network reconfigurations and expansion to serve our customers and expected growth.
We've already been doing multi-orbit government aviation and are definitizing extending multi orbit -- multi band to all our aviation verticals. We believe that multi-orbit, combined with our existing and planned own and partner satellite fleet will be very, very competitive. US and international government are also growing well with opportunities for both technology and services businesses.
Key themes for us includes multi-orbit, open banned integration and management, product and technology solutions, advanced platform-specific phased array antennas, space-based cyber, next-generation Laserlink and space payload technologies. We see accelerating growth here, obviously reinforced by the exceptional second quarter awards. Gary will provide more color on the financial aspects of many of these points in his portion.
With that, I'll hand it over to Guru.

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