Viasat, Inc. Price & Performance (VSAT)

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 ks 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 Gary Chase, our Chief Financial Officer and Sean Guppy, our Chief Accounting Officer. As always, we encourage reading the shareholder letter and and referencing the slides we posted on our website earlier this afternoon for more details. Our third quarter year twenty twenty five results are good. And moderately better than expectations. And we remain on track for our full year guidance. Gary will go into more details on those results. Are a blend of good growth in our strongest target market, transitions to enhanced value propositions in maritime and expected declines at fixed broadband. I'll give a quick overview of some of the factors enabling our growth and progress on areas expect and sustain and accelerate that growth.

Terry will show that we are also making steady progress in achieving capital synergies, and operating cost efficiencies, supporting earnings and driving cash. Conversion. We intend to sustain and enhance already strong positions in attractive and growing satellite services and technology I'll spend a few minutes on this and then Gary will cover the financial results and our growth outlook before we take questions. In aviation, commercial in flight connectivity aircraft in service grew about 13% year over year. Business debts grew about 18% and backlog grew even faster at 22% year over year. Aviation continues to be an attractive growth market for us. We have a compelling value proposition in in flight connectivity, and are expanding our customer base both in The U. S. And internationally. We've made very steady progress in integrating capacity from multiple satellite operator partners to expand our coverage and capacity. We're winning new airlines as well as new fleets with existing customers and going increasingly global with our full fast and free service plans for those airlines choosing that business model. And we're meeting service level agreements even on the busiest routes and at major highway airports. Customers are responding and for instance, as we just announced, we're very pleased to expand the full fleet with Starbucks in Asia Pacific.

You'll also see in our online material a report from a Hawaii Travel News website recently described their experience with [indiscernible] on a United seven thirty seven MAX from Los Angeles to Hawaii. They got 130 megabit per second speeds on Avaya SAT-three serve plane testing our newest Wi Fi technology, free to passengers, we're anticipating even better performance with Fiosat III flights two and three. PHYASAT III, PHY-one and its ability to dedicate satellite beam to each individual plane has served over 10,000 flights today. On business aviation, we're upgrading legacy In March had guests, uncapped speeds and usage volume and continuing to grow planes in service. Our Defense and Advanced Technology segment grew revenues almost 20% year over year in the third quarter with each of its four business areas all increasing following exceptional new orders in the second quarter. Backlog is up year over year as is our cumulative unawarded indefinite delivery indefinite quantity portfolio. We're pleased to see very positive customer feedback on our GEO and LEO multi orbit enterprise maritime service called Next We're going step by step. After launching beta service last fall, we've grown our order pipeline turned the leading edge of path into firm backlog and this quarter we're accelerating turning backlog into ships in service.

And then ships in service into revenue. Based on our order pipeline, customer service plan selection and feedback from direct customers and global distribution partners, we're targeting a return to growth in our maritime business this coming fiscal year twenty twenty six. We've been aggressive and ambitious in forming key partnerships with with multiple geosynchronous and non geosynchronous synchronous satellite operators and are integrating multiple new satellites into a more highly integrated version of the Inmarsat and BioSat satellite fleets to deliver state of the art services We've made a ton of progress in techniques to expand geographic coverage and optimize resources to serve our mobility customers. That's contributed portion of the CapEx savings this year while still expanding total platforms and service and increasing bandwidth per platform and reducing near term schedule risk for the Viasat. And we've also made steady progress on getting those ViaSat-3s into service. As we get closer to completion, scheduled risk is diminishing. We anticipate five to be completed and shipped to Cape Canaveral this summer and in service late calendar year twenty twenty five as expected. The but given our significantly increased coverage and capacity resources, we've chosen a less capital intensive launch configuration that slightly extends the orbit raising time and will likely shift the in service date into calendar '26.

We're also making good progress on our collaborative approach We're very pleased that the European Space Agency has established an agreement with the Mobile Satellite Services Association, and a new contract with ViaSat, intended to support and promote European participation in a standards based open architecture LEO constellation that can augment existing GEO and LEO directed device satellite services We see global engagement and participation in direct to device as a critical element in delivering five gs non terrestrial network services that augment national telecommunications architectures while supporting their sovereignty and security and ensuring regulatory compliance. We believe it's a differentiated strategy that promotes global interest in participating in the space economy, technology, innovation and a safe and sustainable space environment. We and our partners in the Mobile Satellite Services Association are excited about European Space Agency's involvement. Shared Open Architecture standards based multi tenant space bring proven business models from terrestrial mobile networks. Will reduce costs will help countries and companies compete effectively. From ViaSat's own perspective, it helps reduce future capital outlays while enabling state of the art network [indiscernible] Lastly, we believe recent direct to device transactions help underscore the value of our mobile satellite services spectrum and the benefits of supporting terrestrial three gsPP standards for narrowband internet Things Directed Device Services on our existing fleet.

Overall, we're making steady progress building our mid- to long term outlook and we remain focused on growth cash conversion and deleverage. We continue to believe we have portfolio and strategic optionality in the means and sequences in which we address our challenges and opportunities and we'll keep you updated as developments occur. With that, I'll hand it to Gary. Thanks, Mark, and good afternoon to everyone on the line. In the third quarter, we delivered solid results with revenue of 1,120,000,000.00 adjusted EBITDA of $393,000,000 and a 35% adjusted EBITDA margin. Importantly, we're beginning to make progress on our capital efficiency and generation initiatives. We positioned ourselves to close out the year strongly and with a quarter to go, we have a high degree of confidence in our fiscal twenty twenty five guidance. My excitement has grown in the few months that I've been here. ViaSat continues to win in key markets, including defense, and aviation and build great franchises with durable competitive moats, while demonstrating financial and strategic discipline. The path ahead has become clear. Here are three key priorities that we're focused on. First, building our franchises, earnings power and customer lifetime value while investing with discipline in our future.

By way of example, every 10 or so commercial aircraft we install is worth roughly $4,000,000 to $5,000,000 in discounted lifetime EBITDA contribution. Which highlights the future value of the fifteen seventy aircraft in our aviation Similarly, 100 Maritime vessels represent a lifetime adjusted EBITDA contribution of about $3,000,000 Our second priority, reducing our leverage, which we believe is We're not ready to share end state leverage targets yet, but it's clear our debt level needs to be substantially lower. So paying down debt is our top priority for capital allocation. And finally, generating free cash flow. We are examining a variety of mechanisms to accelerate deleveraging However, generating free cash flow is the best means of sustainably achieving that objective and the highest quality path to free cash flow continued franchise development that I noted. We are focused on delivering at We're now working collectively to get organized for execution in fiscal twenty twenty six and to ensure that it will be a true and sustained turning point on all three of these fronts. A big driver of my excitement comes from the response our Viasat team has had in getting this work done and the progress we've made over the last few months in coming together to solve problems.

I'll speak to CapEx prioritization, which is a great example of that in a few minutes. Here are some recent developments excite me on the longer term development of our franchise. As we focused on optimizing our capacity in the time before ViaSat-three launches, We've uncovered a variety of opportunities to enhance our coverage, capacity and the performance we deliver to our customers. Mark mentioned this idea in his remarks. Two good and tangible examples are first, in reconfiguring our ground network to allow cross roaming between things, we should see a meaningful gain in the bandwidth we can offer our customers and business AVA aviation at virtually no incremental cost to us and with no collateral impact on our existing customer franchises. Second, we have an evolved path to secure targeted capacity from third parties will reinforce some important coverage areas, enable more growth with better outcomes for our [indiscernible] When ViaSat-three flights two and three enter commercial services, services, these purchases will offer continued and complementary The changes reduced CapEx but more importantly enhance our ability to serve our broadened growing customer base for the long term. Fiscal twenty twenty five continues to see expansion of our multi band, multi In the third quarter, government SATCOM won new awards on recompetes and captured a new line fit position to deliver dual band global aero terminals for the Embraer C390 multi mission airlifter.

ViaSat's multi band, multi orbit, multi network terminals will be integrated in [indiscernible] Leveraging our decade plus development of these hardware and networking capabilities, that enable new networks to be easily integrated. Customers across our portfolio are increasingly interested in multi orbit solutions and our growing capabilities in that area will serve us well in the future. There are too many great stories in our DAT business to cover on this call, but let me highlight one part.

Our encryption business. Our KG142 product have continued to see record awards in fiscal twenty twenty five with $135,000,000 in the fiscal year to date through the third quarter. These awards are also the result of long term These awards are also the result of long term investments beginning ten years ago to develop and certify this current family of crypto products. The revenues are further expanding our installed base, of products as we prepare to participate and compete 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. Zeroing in on the near term now, we face continued challenges that create revenue pressure in our U. S. Fixed broad business as we focus capacity towards meeting the growing demand from our higher value commercial aviation business. Maritime revenue was also down $2,000,000 sequentially due to incremental ARPU pressure and continued L band migration ahead of our wider rollout of Nexus Wave.

We expect the rollout of Nexus Wave and the entry of Viasat flight two into service will help turn these turns around beginning late in fiscal twenty twenty six. Meanwhile, we're building earnings power in our other franchises. In aviation, our wins are translating into more aircraft in service and new awards are sufficient to leave us with a growing backlog of future installs. Aviation service revenue increased approximately 12% year over year and we ended the quarter with 3,950 aircraft in service, up about 130 sequentially.

And a contracted backlog of approximately fifteen seventy aircraft up about 60 sequentially.

While we're confident in the growth outlook and the trajectory for Aviation, our near term results continue to be impacted by a slow recovery of OEM deliveries.

As a result, we believe we will be a little bit below our prior target of 4,200 aircraft in service by the end of the fiscal year. Further diversifying our earnings power into non transmission, our sponsorship monetization, while nascent, is great for our customers and is beginning to generate high value revenue with exciting future Fiscal twenty twenty six is an important year for this business as we prepare to scale and are better able to size future market opportunities. Our Defense and Advanced Technologies segment does a standout again this quarter with all business Importantly, the leading indicators continue to signal strong growth in the year ahead. Secular trends are favorable, product cycles and white space product launches are supportive and awards are up 49% backlog up 26% and sole source IDQ is up thirteen year over year. On the capital side, as we approached our long term planning process in December, we ran a prioritization exercise across the company to drive real focus on the most essential work for fiscal twenty twenty six and a few things that emerge from that process led to opportunities to better focus even in the remainder of this fiscal year, which helped to reduce some spend.

Also as noted last quarter, we've been pushing hard to refine timing of our capital Advancing customer critical items and deferring anything not critical to defer both capital spend and operating expense impacts. As we undertook this process, we found several opportunities to purposely move spend out, reduce some spend altogether and or establish a more refined view of when we might hit key milestones on the stage The combined impact of these efforts was a large reduction in satellite spend and a reduction of projected growth in our run rate spends on things like software and other CapEx for a total of a $200,000,000 reduction from the low end of prior guidance. At the same time, we were able to hold future spend flat. So our free cash flow will benefit from all of that reduction. Now I'll cover two topics in more detail. Financial performance during the third quarter and our outlook for the fourth quarter and fiscal twenty Let's begin with the financial results. All of my statements in this section will reference the third quarter of fiscal twenty twenty five and the prior year period the third quarter of fiscal twenty twenty four. Awards were $1,080,000,000 led by our Defense and Advanced Technologies segment and Aviation Connectivity.

Backlog was 3,500,000,000.0 down $181,000,000 Backlog declined due to the removal of the energy service Along with declining subscribers in our U. S. Fixed broadband business, and fewer long term contracts in that business. Revenue was 1,120,000,000.00 essentially flat compared to the prior year quarter reflecting the declines in fixed broadband and product revenue within communications services, offset by strong growth in aviation and information security, space mission systems and tactical networking in our defense and advanced technologies segment.

Net loss of $158,000,000 increased from the net loss of $124,000,000 a year ago, principally due to the $97,000,000 non cash loss on extinguishment of the Inmarsat-twenty six senior secured notes as we refinanced the debt to extend maturity. Adjusted EBITDA was $393,000,000 an increase of 3%. Primarily driven by growth in our DAT segment, reflecting $15,000,000 of higher than anticipated partially offset by fixed broadband and maritime within communications services. Operating cash flow was $219,000,000 up more than 60% despite absorbing The improvement was primarily driven by decreased working capital and lower cash taxes. 40% year over year from $421,000,000 We also collected an additional $42,500,000 of settlement insurance proceeds about 97% of an anticipated $770,000,000 Please note collection of these proceeds has no impact on our free cash flow calculation. Consistent with our ongoing portfolio review, we completed the sale of the Energy Services System Integration business, which included in Fixed Services and Other within the Communication Services segment. The business generated approximately $50,000,000 in revenue annually but had minimal strategic synergies with our core businesses. Finally, net leverage was slightly lower year over year and slightly higher at about 3.7 times trailing twelve months adjusted EBITDA, The sequential increase is due to the commencement of GXP 10A and B finance leases, which increased our debt by about 100 and million.

Now let's turn to some segment highlights. And again in this section, all references will be to the third quarter of fiscal twenty twenty five compared to the third quarter of fiscal 'twenty four. Communication Services, revenue was $820,000,000 down 6% with reflecting the anticipated decline in our U. S. Fixed broadband services and products partially offset by strong growth in aviation and government.com. Aviation grew 12% led by a 13% increase in commercial aircraft in service. Our government Com business grew revenue 4% as strong demand for connectivity remained a top budget [indiscernible] Maritime revenue declined 8% as legacy L band offerings continue to decline and we see incremental broadband ARPU pressure. Fixed services and other revenue was down 21% as U. S. Fixed broadband subscribers continued to decline as expected. Those revenue impacts drove EBITDA to $330,000,000 down just 1% year over year.

Turning to Defense and Advanced Technologies or DAT performance. Awards of $327,000,000 increased approximately 49% versus $220,000,000 Revenue was $3.00 $3,000,000 up 20% compared to $254,000,000 We saw broad strength across the segment including information security, space emission systems, and Tactical Networking. [indiscernible] Space Emission Systems product revenues were up 2419% respectively. Driven by strong product sales. Similar to the last two quarters, the Tactical Networking business line benefited by about $20,000,000 in revenue and $15,000,000 in adjusted EBITDA. From the activation of certain product upgrades along with new radio shipments. Once activated, we recognized the IP licensing revenue on these products that have been sold in prior period. Activations of new capabilities from prior period shipments are difficult to forecast recognized year to date. Defense and Advanced Technologies adjust EBITDA was $64,000,000 up 27% compared to $50,000,000 reflecting the strong revenue growth across the segment. Overall, we continue to make good progress against our fiscal twenty twenty five plan driving solid growth in cash from operations. While CapEx continues to come in lower than expected. As a result, Q3 and year to date cash burn has been lower than previously anticipated. Now let me turn to our outlook. Challenges continue, but the Viasat team is rising to meet those challenges.

We continue to expect fiscal twenty twenty five revenue to be flat to slightly up year over year with adjusted EBITDA growth in the mid single digits. Given results thus far, our confidence in achieving our fiscal twenty twenty five EBITDA guidance has clearly increased and we've provided additional segment level detail in the outlook section of our shareholder letter and slides. We've talked a lot about CapEx today. Some of all the efforts I've mentioned leaves us with an expectation that fiscal twenty twenty five CapEx will be $200,000,000 lower than the low end of our last fiscal twenty twenty five guidance at approximately $1,100,000,000 We recently completed our multiyear strategic plan and are now mobilizing to assign our fiscal 'twenty six outlook and resource the initiatives that will support it.

In addition to the challenges we face as we exit fiscal 'twenty five, we will have a remaining $250,000,000 of CapEx and about $80,000,000 of recurring OpEx related to the build of our ViaSat III space and ground assets that won't generate material incremental revenue in For fiscal twenty twenty six, we expect year over year revenue growth and modest adjusted EBITDA growth.

Despite the $200,000,000 reduction of fiscal twenty twenty five CapEx, expected 26 CapEx is essentially flat to prior implied guidance at about $1,300,000,000 With the timing shifts we now anticipate around CapEx, we believe free cash flow inflection will occur in the second half of our fiscal year as we get beyond the elevated CapEx related to the development of our ViaSat-three space and ground networks. However, for the sake of clarity, with adjusted EBITDA essentially unchanged unchanged and CapEx $200,000,000 lower than the midpoint of our prior guidance, Our outlook for cash generation across fiscal twenty twenty five and 2026 combined has improved by about $200,000,000 We're making progress but we know we have a lot more work to do to further improve cash generation. In closing, the quarter's operational performance was good. We're capturing our share of large and growing markets, remain focused on improving operational productivity and capital efficiency. Fiscal twenty twenty six is a very important year for us. One where Nexus Wave and the launch of our ViaSat-three satellites will help turn the trends in maritime and fixed broadband around, while at the same time, we continue to build our earnings power in aviation, government SAC OM and DAT, leveraging the backlogs our teams continue to build.

The ViaSat team is up to these challenges and I'm honored to be part of this as we work tirelessly to deliver improving outcomes for [indiscernible] our customers and for you, our homes. With that, I'd like to hand the call back over to Mark. Thanks, Gary. I continue to feel very good about Biasat's runway to business growth opportunities. We remain a leading player in the satellite community in the industry with a very thorough understanding of the competitive environment and believe our technology and business model are post global partnership and cooperation in space is a very appealing that want to sustain and contribute to a healthy space ecosystem. While steadily demonstrating financial strategic discipline, and a deep commitment to growing shareholder value. So, Meg, let's open up the questions now.

We will now begin the question and answer session.

Again, Our first question comes from the line of Rick Panties with Raymond James. Your line is open.

Thanks. Good afternoon, everybody. Great. Couple of questions for you all.

Appreciate the update on the flight two, flight three. Good to get a launch date on flight two and a slight slip out on flight three but it looks like it's we'll save some money there.

What I'd like to get at is where do you think Flight two and Flight three are going to go?

What areas are they going to cover? With the whole anomaly with Flight one? How should we think about what Flight one, Flight two, Flight three what are they going to cover? Then now that flight three is kind of more early calendar '26, has there been any impact on flight connectivity contracts as you kind of compete out there?

Okay. First of all, terms of the locations of the satellites, all the satellites were designed so that each of the three can be operated in each part of the world. So a real Our real approach to to how we locate them and think of it as we have flexibility in in where we put them And if we keep them there, remove them, it's really just responding to customer demand. And the two big areas where we need more we have a lot of demand and we'll get the most value out of satellites in The Americas and in Asia Pacific. So those are the plans for the locations. Of two and three. Our 5.2 being planned for The Americas and five three for Asia Pacific. And then in terms of The timing of the in service, one of the things that we have been doing a lot of for the last eighteen months is working on some of the the technical approaches that we described for optimizing use of the capacity, one of the things we described is we do that well we actually can increase the effective capacity of the existing satellites pretty substantially on the order 20%, 30% or more.

And so we've done that. That's That's been working measurable. We have one of the things we've emphasized over and over again is measurable results and measurable service statistics for our customers So we're getting the benefits of that. We've also incorporated a substantial amount of third party capacity into the networks. And the upshot of all that is we and our customers understand that we have we've kind of derisked the launch dates of February with the bandwidth supplies that we have and our ability to apply it. So and I think our customers are seeing that So they're comfortable with it. And really the upshot is what we ended up doing is we opted for we're looking at a few different launch configurations for Slide three it shows a lower cost one The delay to that is probably a couple of months and it's orbit raising time. And it saved us a it'll save a lot of money. Compared to the alternative and we're putting that money to use both for our customers and for our shareholders. Well, I was just going to say, I think that the the confidence that we're seeing from our customers and performance, it's kind of indicated by the Starlight Hox contract that we just announced because they're an Asia Pacific airline.

And they were able to test They were able to get a preview of it for some of their sites that go into [indiscernible] They were really pleased with that. And the upshot is we got a full fleet order from that And Rick, as you probably I inferred from Mark's comments, no impact on the customer side or on Great. And Gary, one for you. Kind of the early signaling on fiscal twenty six, revenue growth but then calling out now modest adjusted EBITDA growth in fiscal twenty twenty six So we then assume that revenue grows faster than EBITDA? And what would cause not as much money flowing through on the conversion from revenue to EBITDA? I wouldn't read that much into it, Rick. We've just gotten close [indiscernible] are able to give a bit more color as to what the expectations are. We're still looking and working on '26 and we'll have more to say about it in a few months when we wrap the fiscal year. Okay. The last one for me. Obviously, you talked a lot direct to device spectrum and the MSS. You had the recent transaction, Lagado and ASTS Can you help us make sure everybody understands what's happening there?

How we should unpack it? What the benefit to you all could be then a philosophical one to throw at you Mark, I've been around since the birth of wireless and the birth of the tower industry. We get the question, we got it again today. You could always kind of figure out the value of cellular spectrum versus PCS spectrum because okay, you need more cell sites and you're going to need more CapEx or you need more OpEx. That would allow you to kind of figure out cellular spectrum was worth more than PCS spectrum. For a terrestrial network. But for an NTN, a non terrestrial network, how should we think about the spectrum assets you have, how it compares to LEOs, how it compares to GEOs and just people are wanting that kind of philosophical understanding given what's happening in the competitive space, but the first part of that was just kind of help us unpack the Logato ASCS one a little bit.

Okay. So I think the the main thing main point on the Vergara transaction is that that they intend to perform on the contract that they had with Inmarshat, what's called the co op agreement. And that AST would assume that obligation So from that's basically what's going on. What that would mean is essentially The co op agreement transaction eventually would conclude and I think that's how to interpret what's going on. I think the clear message is that AST values this spectrum. At the value of the co op agreement So that's I think that's what you take away. When you look at I think the way we think about it is really the dividing the primary dividing line [indiscernible] whether you do non terrestrial networks using terrestrial spectrum or license MSS. With the main difference there being that if you use terrestrial spectrum either you're limited to locations that have no terrestrial coverage which is I would say a pretty constraining view of the value these nontrustional networks. Or you can augment the terrestrial spectrum [indiscernible] And I think that that's the way that people are starting to look at it. And so what and then ultimately we think that if the direct device market plays out and we're optimistic, but remember, we have a pretty substantial MSS business already.

That's our real focus is making that MSS business better. The main thing that the non terrestrial networks where the D2D market does is it standardizes the network, which we think is a good thing, had a lower cost It enables open architecture, that lowers cost It enables MSS operators to share infrastructure that lowers cost for everybody. And the other big thing is that people are looking at and regulators are looking to approve much higher power levels on the ground, which means we can get a lot higher speeds, more bandwidth at lower cost. So, and remember that MSS spectrum is licensed based on a public interest basis. We definitely have really strong public interest basis. With our maritime and aeronautical safety services, There's a lot of demand for that for improvements So when we think about it, what we think is The transaction is really illustrating the value of licensed MSS spectrum And in our position, what we want we're a relatively unique global player but we're also looking to cooperate with other licensed MSS spectrum holders in a way that reduces cost for everybody and grows the market. That helps.

And our next question comes from the line of Edison Yoo with Deutsche Bank. Your line is open.

Great.

Thank you for taking our questions. I wanted to ask about the DAT side Obviously, back in the summer, there was quite a bit of I think excitement around potentially selling some assets Do we have any updates on the progress of that? Have there been any discussions that have gotten any deeper? Well, we're not going to comment on any individual transactions. I think we have we are continuing to make progress on both creating alternatives and options and evaluating those And we've done we've done a small transaction. We expect to do we expect that we let's say the point of going through this is really the point that Gary mentioned in his prepared remarks, which is we want to reduce our debt, right? So that that's what we have very specific financial objectives We're certainly focused on preserving our competitive position And so we're looking at the right the right combination of maneuvers to help us do both of those two Viasat, I'd say. And the point of that is it should we're doing things aimed at unlocking value in our equity. That's what the focus is. So that's we'll keep working until we do it, but we're not going to comment on any particular transaction until it's closer to fruition.

Understood. Understood.

And I wanted to also come back on the O band question before. Do you have sort of a framework in how you decide I guess, the best return on the spectrum you alluded to the ASC deal with Lagotto. You also have something where you can deploy on some sort of DDD network. There some kind of framework you're thinking, hey, if it's if someone's willing to pay us this much for the L band, we would rather just kind of sell it versus try to actually deploy it in some way. Yes, of course. I mean, I think that you're on definitely the right track. We are we have business models and think of it as Let's say put it in a few different buckets. We have existing fairly significant existing legacy business in L band which is not only proper upon its own right, but the value that adding L band as a part of to air aviation customers and airtime customers is also important. Clearly, that clearly given the higher power levels that we're anticipating for the next generation of satellites we can improve those value proposition substantially. And we think that that will grow. That's what's really going to trigger growth in the L band mobile satellite services market.

And think of the distinction between the mobile satellite services market the D2D market isn't really the service that you get like the speed or the airtime pricing. It's the device that you use. D2D market is essentially you're delivering those services into what's a terrestrially centric device in the MSS market. You're just delivering those services into a device that was intended to connect to a satellite. Which actually makes those devices in general little less convenient, but a lot more cost effective predicting those same services. So what we're doing is we're modeling out all of those different those different monetization options, looking at the timeframes, and then we'll make a prudent decision on some monetizing monetizing versus thinking of it as developing. And also use what people should think of that in different buckets where we don't have to do an all or nothing decision. We can monetize Again, remember, because there is a public interest benefit we're not looking at it on a purely transactional basis. We're So we have to but we do have some maneuvering room in how we deal with the services that we offer in different geographic markets at different times. And so that's just the other depiction in which we're doing the analysis.

Understood. If I could see maybe a quick housekeeping one. Did you disclose the proceeds from the energy divest? I know you said it was $50,000,000 but was there a proceed amount [indiscernible] We haven't. But you'll see in our cash flow right, that we have you'll see a little bit of other investing activities and [indiscernible] all tens of millions Okay.

Thank you so much.

Not specifically disclosed.

We didn't break it out, but you could find it.

Next question from Sebas Petti with JPMorgan. Line is open.

Hi, this is Nick on for Sebastiano. Thanks for taking the question.

Maybe if I could follow-up once on the DAT assets. [indiscernible] Mark, are there any businesses within that segment that you think are synergistic to keep the satellite portfolio? For whatever reason, maybe go to market or anything like that?

And then second, just any update on the discussions with Telesat that you brought up last quarter and generally any kind of use cases or end markets where thinking about that incremental LEO capacity? Thanks.

Okay. [indiscernible] On the data assets, pretty much everything that we do from a From a technology perspective, was at one time or will be in the future it was intended to be synergistic with our satellite businesses. Over time, sometimes some of those synergies ebb and flow But you can see it's fairly clear things that we do that involve technology development on satellite terminals, Laser Array technology process, space class, those kinds of things often tend to be pretty synergistic, things that we do that are a little more removed like tactical data networks tactical data links that we sold tend to be less And so that would be some of the ingredients that we go into any decisions how we do [indiscernible] The swing sixteen sale that we did. It's not that there were no synergies, it's just that relative to the value of the business, and the ongoing investment profile compared to what others might do, we felt that we could derive [indiscernible] We could sell it for a price that was going to the net present value or greater of future cash flows and then use that capital to reduce debt. And so we may make that decision for other assets as well.

But that's the I'm just going to tell you kind of the thought process we're using, but not identify any particular businesses or transactions. On the Telesat front, we're right now we're still in advanced negotiations with them. I think that They're converging And we have a good I think we have a good foundation for a win win business. We've initially focused on the aviation market. And I think [indiscernible] both we and TELUS had to disclose that. I think we have a meeting of the minds there. And I think it will be we'll have an agreement with them well in advance of when the satellite is in service and we're already working together on being sure that the terminals we're deploying now are capable of working on the the light speed network, which is kind of a bigger attraction for a lot of our customers as well. Great.

Thanks for the color.

Thank you.

Next question from Collyn Canfield with Cantor. Your line is open. Hey, thanks for the question. Unpacking the $200,000,000 savings a bit more, it sounds like most of the savings are coming from the watch side. Just doing some rough math on the price delta, it seems like maybe rebooking like the orbit raising language maybe a little bit of rebooking from like an Atlas or a Vulcan to a Falcon nine. So maybe if you could talk about which of your satellites have launches booked in backlog and where you could find potential savings similar to what we saw in the guidance move today? Thanks. So it doesn't account for the The so it doesn't account for the majority of the capital. It's a relatively small amount. The main thing we did was we were deciding among different configurations of the same launch vehicle And the configuration we chose [indiscernible] operating time that is good enough for a fairly significant savings, but it's low tens of billions of dollars In that range, it's a piece of the CapEx savings, but not Yes, Rick, I mean there's been a lot that has gone into driving that driving that $200,000,000 out [indiscernible] The longer order raise was definitely a large single piece of it, but there were a lot of other factors We talked in the prepared remarks about synergies between Viasat and Marsat.

We leveraged some of that to drive savings out And there's also just been a much broader effort here around capital efficiency and productivity. Last time, we were on a call, I mentioned challenging timing to make sure that we really scrubbed and understood didn't spend any money before we needed to. Didn't bring on any operating expenses before we really needed to meet the schedules and the customer expectations. And we had We also went and refocused after our strategic plan on the things that we really need to deliver are customer critical for fiscal twenty twenty six, And while at the same time making sure that we fund our future, but [indiscernible] force ourselves to stay within a budget and we feel really good about where we sit on the other side of that, that we're we're in a place where we're balancing what we need to do to drive the earnings power that I talked about in the near term and that we've got real capital efficiency in what we're [indiscernible] more EBITDA, more free cash flow, And again, it just kind of goes back to those pillars. Everybody here sick of hearing me say it. Get our earnings power up, get our debt down, drive sustained cash flow.

And just to be clear, just to be clear on the launch vehicles, we signed our launch vehicle contracts quite a while ago, haven't changed those. So the it was just the configuration of a launch vehicle that we're evaluating. From a dockhead heavy to a dockhead nine maybe or is it within the fairing is what you're saying? It was just a different they have different configurations of each other. Okay. No worries. Never mind. Yes, you're going to get it. Okay. No worries.

And then maybe circling in on the Space Force award, for P. Leo, talking a little bit about how you expect to on ramp onto that. And maybe a little bit about the pipe potential contracts beyond that? So PVO seems like it's kind of off the shelf, but lot of the capabilities that ViaSat has seems like they align well for encryption and the like.

So maybe talking a little bit about the pipe between expanding on the P Leo contract, which obviously has a really high ceiling and doing more in terms of encrypted comms and the like for the DoD community? [indiscernible] Generally, a lot of the end users of that contracting vehicle are looking for applications that apply to them. So from our perspective, right now, mostly what we're doing is packaging LEO services for those applications. And generally, we'd be augmenting them with some other functionality or technology needed to deliver the missions for those customers. So we work multiple different NGSO, Leo, providers. So that gives us some opportunity We also are looking at LEOs to augment our own geosatellite systems in the longer And some and I think you'll see us over time participate using our own assets as well as with partner assets. Got it.

Got it. And then last question for me, but maybe talking a little bit about how MRSA is participating in alternative P and T? And if you have suppliers or customers or people of kind of keying partners across beyond crude space or other military assets that you consider a good opportunity?

I'm sorry, for P and T, is that [indiscernible] the context is focusing on like the growth avenue for alternative P and T within the Inmarts SAT portfolio and kind of your ability to participate in NATO or DoD or other Yes, we have done some of the Often for international customers, that are looking for ways to have some form of maybe regional as opposed to global PNT services or to augment PNT services or to have more confidence in the accuracy of the PNT services they get from third parties. So some of those have involved either hosted payloads or specific applications of pieces And it is an interesting area, especially [indiscernible] it's no secret that there's a lot of jamming. Of navigation systems. And so things that can be used to augment those either in some cases even just doing that regionally is sufficiently valuable to create business opportunities. So those are more of the kinds of things that we're going after as opposed to building a complete alternative global stand alone PNT system. Got it. Okay. Thank you.

Our next question comes from the line of Simon Flannery with Morgan Stanley. Your line is open. Thank you very much. Good evening. Gary, just coming back to the CapEx good to see the progress there. Looking at the FY 26 number, can you give us a sense of how much of that is really related to some of the launches we're seeing and what we might expect is sort of the maintenance CapEx number the longer term plan, is that more in the sort of $1,000,000,000 range? Any color around the out years would be great. And then Mark, you did a management reorganization a couple of weeks back, perhaps you could just talk about the goal to that and what they what we should be expecting from the new roles that you hit the team has taken over?

So I'll start, Simon. Your first question, I believe, was around what related to the launches is in the CapEx guide for 2026. Everything around ViaSat-three is contained in there. In my prepared remarks, I mentioned we're spending on the capital side about $250,000,000 also mentioned $80,000,000 on the operating side as we satellites into service. That $250,000,000 is That's That is the spend attached to Viasat III. In terms of maintenance capital? Ron? In terms of maintenance CapEx, we've used in the past the one third, two thirds. We were talking about this previously with the total number coming down as it has. Yes, it's probably in the one third of the numbers that we were talking about previous So you can continue to use that benchmark. The one third you just got to watch with the baseline changing as much as it has you just want to make sure you adjust for that.

Okay. But should we expect a drop then in the out years beyond 20 We do expect that. I mean, we're not going to get into longer term guidance here. We'll do same. We're going to continue optimizing the way we have the same kind of work that went into I wouldn't even call it cutting the capital budget. This is really about making sure that we were spending on the right things. One of the results was that it ended up being reduced, but we're going to do that ongoing as we move through the year and at the right time, we'll give you a lot more flavor about how how that should trend over the next few years.

Great.

Then on the management? [indiscernible] Yes. Just to be clear, we're working through a big bulge in CapEx spending with the deployment of a BioSat-3s. And so and we have one of the things that will enable us to spend less in the future are these partnerships that we're forming as well as packaging some of those innovations into smaller bite capital sizes. That's Those are so we do definitely have an objective of driving down our CapEx The other thing I did want to say, I understand you're retiring, Simon. So I did want to say first of all, this is last time I talked to you in your official duties at We really appreciated your your support and your good coverage along the way. Thanks for that, Mark. And then just on the management, what we talked about publicly is, we reached an amicable settlement, amicable parting with Guru. He took on some really hard stuff. Including a lot of logistics of the integration within Viasat. And that's largely done and we just on the theme of simplifying and reducing costs. It just made sense to have one of the people that were reporting to him transitioned to me once we had that new organization.

Great.

Thank you. Next question comes from the line of Brian Coons with Needham and Company.

Your line is open.

Hi, this is Matt on for Ryan. Thanks for the question.

On Nexus Wave, you mentioned a target for maritime return to growth in fiscal twenty twenty six. Could you expand on the demand you're currently seeing for that service? And are you expecting that to ramp over the next couple of quarters?

Yes. I think what we alluded to last was really positive reception in the maritime market for the targets that we were aiming for, which definitely heavy enterprise and especially those carriers that were large enough for direct for us to approach direct, but the reception has been really good. We I think we talked about a pipeline of over 4,000 vessels last quarter. That's actually continued to grow. I mean, there's some there's both in terms of some things leaving, but [indiscernible] more coming into the pipeline than leaving. So that part is really encouraging. That's the thing we've been most focused on is making sure that we had a value proposition that was going to get the interest of the target market. So that pipeline has turned into orders in the low hundreds right now. Our target is to get in the low hundreds installed. This quarter. Would be the next thing. I think our objective would be to grow that fairly substantially in the next year but still probably in the low thousands, not not we're not going to be able to turn that whole pipeline in, but we think we've can grow it fairly significantly. During the course of FY twenty twenty six.

You'll see think what has if you look at our results, what you should see first is growth is stopping the decline in net vessels, growing net vessels. And then revenue coming along with that afterwards. And then eventually we'll hit the EBITDA growth line as well. That's the sequence. We think that will play out during the course of FY 'twenty six. Got it.

Thank you. I'll leave it there.

And our last question comes from the line of Mike Crawford with B. Riley Securities. Your line is open.

Thank you. I'd like to go back to Lagotto to make sure we understand this. Correctly. So I believe your unsecured claim in the bankruptcy proceeding is about $550,000,000 plus there's this co op agreement where there's a contract lease payment that still has some seventy five years running And that the The Lagado has an ability to either accept or reject the contract here. And if they accept it, then they have to pay that to you But if they reject it, then they wouldn't have access to your 12 megahertz of spectrum that's interleaved among some of the spectrum holdings that Lagado itself has making it perhaps difficult to use as opposed to being aggregated in a contiguous block? Do we have that right?

So what we would do is people want to do it. All that the information that you're citing, I think is available in the public filings associated with the bank. [indiscernible] I think it sounds like you've been reading this. So we're not really going to comment on them, but I think even I think that things we'd recommend to investors is to refer to that because we can't really comment on an active active litigation. Maybe if I just unpack the last part of that, Mike. [indiscernible] describe It's Your spectrum and how It's interacts with the Megado spectrum and whether that LB inspection would have same utility or without being aggregated contiguously, The okay. So one, [indiscernible] I think you're a very astute observer. So I think that some of the youth some of the things that were at issue had to do with the coordination of the spectrum.

All that stuff basically is thrown now in the hands of the courts and it's really difficult for us to comment on them. But I think that the types of issues that you are raising are valid issues to be resolved in the litigation. It just makes it really hard for us to comment. On them outside of the court filings. Okay. Thank you, Mark.

Thank you. [indiscernible] That concludes the question and answer session. I would like to turn the call back over to Mark Dankberg for closing remarks. [indiscernible] [indiscernible] the Q and A session and our prepared remarks. Thanks a lot everybody for participating. We look forward to speaking with you again next quarter.

Ladies and gentlemen, this concludes today's conference. [indiscernible]