Viasat, Inc. (VSAT) Q1 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary and Q&A indicate a positive outlook. Viasat achieved strategic goals, integrated new services, and has a strong fiscal 2026 revenue outlook. The Q&A highlights growth in encryption and maritime services, and a focus on shared infrastructure for cost efficiency. Despite some uncertainties, the overall sentiment is optimistic with expected growth in cash flow and strategic initiatives.
Key Financial Performance
Net Loss $56 million compared to a net loss of $33 million in the first quarter of fiscal 2025, primarily due to improved operating performance offset by an increase in depreciation and amortization and a higher income tax provision.
Revenue $1.17 billion, a 4% year-over-year increase, driven largely by double-digit growth in the Defense and Advanced Technologies segment.
Adjusted EBITDA $408 million, a 1% year-over-year increase, primarily from double-digit adjusted EBITDA growth in information security and cyber defense, partially offset by lower intellectual property licensing revenue and declines in maritime.
Free Cash Flow $60 million positive free cash flow this quarter, bringing the trailing 12-month tally to $88 million, with double-digit growth in operating cash flow and a double-digit decline in CapEx.
Net Leverage Flat year-over-year at approximately 3.6x trailing 12 months adjusted EBITDA, reflecting strong free cash flow generation.
Communications Services Revenue $827 million, flat year-over-year, with growth in aviation and government SATCOM offset by declines in maritime and U.S. fixed broadband.
Aviation Revenue Grew 14%, led by a 9% year-over-year increase in commercial aircraft in service and higher average revenue per aircraft.
Government SATCOM Revenue Grew 4% year-over-year, primarily reflecting maritime services for U.S. government satellite services.
Maritime Revenue Declined 5% year-over-year as vessels in service were down, but grew 3% sequentially.
Fixed Services and Other Revenue Down 13% year-over-year as U.S. fixed broadband subscribers declined to 172,000 with $115 average revenue per user.
Defense and Advanced Technologies Revenue $344 million, up 15% year-over-year, driven by growth in infosec and cyber defense, space and mission systems, partially offset by lower IP-related revenue.
Infosec and Cyber Defense Product Revenues Up 84% year-over-year, driven by high assurance encryption products.
Space and Mission Systems Revenues Up 20% year-over-year, driven by antenna systems.
Tactical Networking Revenues Down 4% year-over-year, driven by lower IP-related revenue.
Advanced Technology and Other Revenues Down $9 million year-over-year, driven by lower IP-related revenue from forward error correction technology used in optical networking.
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Operating Highlights
ViaSat-3 Satellites: Progress on Flights 2 and 3 of the ViaSat-3 series, with Flight 2 expected to ship to the launch site by September 2025. These satellites are designed to provide more bandwidth capacity than the entire existing fleet.
NexusWave Maritime Product: Surpassed 1,000 orders since its introduction, with 190 vessels installed in Q1 FY26, more than double the prior quarter's rate.
Viasat Amara Service: Selected by LATAM Group for wide-body long-haul aircraft, offering high-speed, low-latency internet and operational optimization.
Defense and Advanced Technologies (DAT) Growth: Revenue grew 15% year-over-year, driven by infosec and cyber defense, space and mission systems.
Aviation Segment Growth: Revenue grew 14% year-over-year, driven by a 9% increase in commercial aircraft in service and higher average revenue per aircraft.
Revenue Growth: Revenue increased by 4% year-over-year to $1.17 billion, driven by growth in Defense and Advanced Technologies.
Adjusted EBITDA: Increased by 1% year-over-year to $408 million, with a 35% margin.
Free Cash Flow: Generated $60 million in Q1 FY26, with a trailing 12-month total of $88 million.
Debt Reduction Plan: Focus on repaying $300 million Inmarsat 2026 term loan B to reduce cash interest expense and improve free cash flow.
Capital Expenditure Reduction: FY26 CapEx guidance reduced by $100 million to $1.2 billion, reflecting lower spending on ViaSat-3 constellation and Inmarsat.
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Risk or Challenges
OEM aircraft delivery rates: OEM aircraft delivery rates are recovering slowly, which could impact the company's ability to grow its aviation business.
Grounded aircraft by airline partners: Airline partners have increased the number of grounded aircraft due to macroeconomic uncertainties, potentially affecting aviation revenue.
U.S. fixed broadband business: The U.S. fixed broadband business remains under pressure until the ViaSat-3 Flight 2 satellite is operational, impacting revenue in this segment.
Lower IP licensing revenue: The company experienced lower intellectual property licensing revenue, which negatively affects overall financial performance.
Foreign exchange impacts: Adverse foreign exchange impacts have been noted, which could affect profitability.
Legal costs related to Ligado: Elevated legal costs related to Ligado are adding to operational expenses.
Maritime business performance: The maritime business has seen declines in revenue and vessels in service, though efforts are being made to reverse this trend.
Debt and leverage: High leverage and debt levels are pressuring the company's debt and equity prices, necessitating a focus on deleveraging.
Capital expenditures: Elevated capital expenditures, particularly for the ViaSat-3 constellation, are straining cash flow.
Schedule risks for ViaSat-3 satellites: There are schedule risks associated with the deployment of ViaSat-3 satellites, which could delay revenue generation from these assets.
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Guidance & Outlook
Revenue Growth: Fiscal '26 revenue is expected to grow in low single digits year-over-year.
Adjusted EBITDA: Year-over-year adjusted EBITDA growth is expected to be flat, with some variability quarter-to-quarter.
Capital Expenditures: Capital expenditures for fiscal '26 are expected to be approximately $1.2 billion, including $250 million for the completion of the ViaSat-3 constellation and $400 million for Inmarsat. This is an improvement of $100 million from prior guidance.
Free Cash Flow: Sustainable positive free cash flow inflection is anticipated in the second half of fiscal '26 as elevated CapEx related to ViaSat-3 development subsides.
Debt Reduction: The company plans to repay the $300 million Inmarsat 2026 term loan B as a priority, aiming to reduce cash interest expense and leverage. Long-term leverage ratio target is below 3x EBITDA.
ViaSat-3 Satellite Deployment: ViaSat-3 Flight 2 is expected to be shipped to the launch site by September 2025, with Flight 3 progressing through testing and preparation. These satellites are anticipated to significantly increase bandwidth capacity and support growth in franchise businesses.
Maritime Business: The maritime business is expected to return to year-over-year growth by the end of fiscal '26, supported by the NexusWave product.
Fixed Broadband Business: The fixed broadband business is expected to bottom out with the capacity brought by ViaSat-3 Flight 2.
Aviation and Government SATCOM Growth: Continued growth is expected in aviation and government SATCOM franchises, supported by increased capacity and new program wins.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:How does TrellisWare compare with mobile ad hoc networking and tactical networking peers, and what are the major industry dynamics for TrellisWare's growth?
A:TrellisWare operates in the mobile ad hoc mesh networking space, similar to Silvus Technologies. TrellisWare uses a proprietary networking waveform designed for ad hoc mesh networking, while Silvus is mostly Wi-Fi-based. TrellisWare's growth is driven by the U.S. government and allied adoption of its waveforms as standards for radio communications. It has been widely adopted for individual soldiers, small teams, vehicles, and aircraft. There are additional markets where TrellisWare's technology could be impactful, but a direct comparison with Silvus was not provided.
Q:Can TrellisWare's waveform be used for aerial platforms, weapon systems, IoT, and drones?
A:Yes, TrellisWare's waveform can be extended to unmanned aerial vehicles, land vehicles, and drones. However, its initial focus has been on U.S. Army programs for individual soldiers, teams, and platforms. Emerging markets like IoT and drones have less standardization, and TrellisWare has not focused heavily on these areas yet.
Q:What is the general penetration of next-generation encryption products, and is there a large upgrade cycle happening?
A:There is a large upgrade cycle driven by the need to make national security encryption systems robust against quantum computing. The data center market, particularly secure cloud data centers, is growing fast, driven by AI and sensor data fusion. Key discriminators for encryption products include security certifications, next-generation encryption standards, and higher speeds. Tactical users accessing cloud centers also present growth opportunities.
Q:Would the adoption of encryption services increase with the rollout of AI systems and software platforms like Palantir's Maven Smart System?
A:Yes, the adoption of encryption services is expected to increase as AI systems and software platforms like Palantir's Maven Smart System are rolled out. These systems require secure data fusion and decision-making in data centers, creating opportunities for encryption services on both the data center and tactical user sides.
Q:What are the pros and cons of separating businesses, and what is Viasat's philosophical framework for such decisions?
A:Viasat evaluates business separation based on synergy between businesses, capital needs, and value proposition for investors. For example, decreasing synergy in tactical datalinks led to divestment, while increasing synergy in cybersecurity and space integration supports keeping them together. Reducing capital intensity in satellite services is also a factor in evaluating spin-offs.
Q:How does Viasat view the market for S-band spectrum and its potential for direct-to-device (D2D) services?
A:Viasat does not see a $5 billion capital investment as consistent with reducing capital intensity. Instead, it focuses on shared infrastructure among operators to reduce costs and increase efficiency. Viasat's strong presence in L-band and S-band, combined with its technology for wideband systems, positions it well for D2D services, especially for small platforms and unmanned vehicles.
Q:What is the status of Ligado's bankruptcy court approval and its potential impact on Viasat?
A:The approval process is still ongoing, and there could be delays. Viasat has conditioned its financial information on the approval by the bankruptcy court and will provide updates once the process is complete.
Q:What is Viasat's philosophy for value creation, particularly in the Defense and Advanced Technologies (DAT) segment?
A:Viasat focuses on increasing the present value of future cash flows and improving competitive positions. It also considers the packaging of businesses into investable units for debt and equity holders. The company is reviewing its portfolio to evaluate synergies, capital intensity, and value propositions for investors.
Q:What role does Viasat see for itself in the Golden Dome program?
A:Viasat sees opportunities in sensing, cryptography, data fusion, kill chain automation, ground networks, and space infrastructure. Hybrid networking, including multi-orbit satellite communications and combining terrestrial and space communications, is another area of involvement.
Q:What drove the strong EBITDA performance in the Communications Services segment?
A:The strong performance was driven by favorable business mix, including aviation terminal deliveries, and timing benefits. These factors contributed to leverage and improved margins.
Q:What is Viasat's approach to the competitive landscape in direct-to-device (D2D) services?
A:Viasat focuses on shared infrastructure to aggregate spectrum and reduce costs. It emphasizes the importance of high power flux density on the ground for D2D services and aims to create a utility-like infrastructure that is capital efficient and attractive to multiple spectrum holders.
Q:What is driving growth in Viasat's maritime business?
A:Growth is driven by the NexusWave hybrid LEO/GEO system, which offers higher bandwidth and supports both operational and crew services. The system has led to increased average revenue per vessel and a growing number of ships under contract.
Q:Review of Unclear Management Responses
A:Management avoided providing a direct comparison between TrellisWare and Silvus Technologies, citing limited information on Silvus' valuation and market dynamics. Additionally, they did not provide a clear timeline for Ligado's bankruptcy court approval or specific details on organizational announcements related to shared infrastructure efforts.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Advanced Technologies
Co Research
Dustin
IP
LLC Research
Research Division
TrellisWare
ViaSat Flight
amortization income
balance
business cash
capital intensity
cash generation
cyber defense
decline maritime
depreciation amortization
encryption product
franchise cash
government SATCOM
headwind
income tax
increase depreciation
infosec cyber
integration
launch campaign
loss increase
market capital
month
networking
property licensing
reflector process
road map
service vessel
tax provision
testing
VSAT Transcript
Viasat, Inc. (VSAT) Q3 2026 Earnings Call Transcript
Positive2-5
The earnings call highlighted a 15% revenue growth and strong performance in key segments like DAT, despite some declines in maritime and fixed services. The launch of ViaSat-3 Flights 2 and 3, along with strategic focus on growth markets and deleveraging, are positive indicators. While there are concerns about government asset management and revenue inflection timelines, the overall sentiment is bolstered by optimistic guidance and strategic initiatives. Given the company's small-cap status, these factors suggest a positive stock price movement in the short term.
Viasat, Inc. (VSAT) Q2 2026 Earnings Call Transcript
Positive11-7
The earnings call summary indicates a positive outlook with expected revenue growth, improved capital expenditures, and sustainable positive free cash flow. The Q&A section reveals optimism in new projects and partnerships, with an emphasis on increased bandwidth and market expansion. Despite some uncertainties in specific project timelines and CapEx details, the overall sentiment is bolstered by the anticipated growth in various business segments and the strategic focus on debt reduction and shareholder value. Given the market cap, this is likely to result in a positive stock price movement.
Viasat, Inc. (VSAT) Q1 2026 Earnings Call Transcript
Positive8-6
The earnings call summary and Q&A indicate a positive outlook. Viasat achieved strategic goals, integrated new services, and has a strong fiscal 2026 revenue outlook. The Q&A highlights growth in encryption and maritime services, and a focus on shared infrastructure for cost efficiency. Despite some uncertainties, the overall sentiment is optimistic with expected growth in cash flow and strategic initiatives.
Viasat, Inc. (NASDAQ:VSAT) Q4 2025 Earnings Call Transcript
Unknown5-21
While Viasat shows some positive aspects like aviation revenue growth and a solid backlog, the financial health is concerning with a significant net loss and debt management challenges. The Q&A section reveals uncertainties, especially with the Ligado litigation and lack of clarity on growth drivers. Moreover, competitive pressures and economic headwinds add to the negative sentiment. The market cap suggests a moderate reaction, but overall, the negative factors outweigh the positives, leading to a likely stock price decline of -2% to -8% over the next two weeks.
VSAT Slides
VSAT Report
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