ViaSat(VSAT) - 2026 Q3 - Quarterly Report

Aircraft and Connectivity - As of December 31, 2025, the company had approximately 4,460 commercial aircraft equipped with in-flight connectivity (IFC) systems, with an expectation of adding 1,100 more under existing agreements[179] - The company provided Ka-band communication services to approximately 13,400 vessels as of December 31, 2025[179] - The company leverages its satellite fleet and partnerships to provide high-quality broadband and narrowband connectivity solutions across various sectors, including aviation, maritime, and government[177] Financial Performance - Total revenues for the three months ended December 31, 2025, increased by $33.3 million to $1,157.0 million, driven by a 2% increase in service revenues and a 6% increase in product revenues[214] - Total revenues for the nine months ended December 31, 2025, increased by $96.5 million to $3,469.0 million, with service revenues up by $42.3 million and product revenues up by $54.2 million[227] - Total revenues for the communication services segment increased by $15.8 million, or 1%, from $2,473.5 million in 2024 to $2,489.4 million in 2025, with service revenues up by $39.1 million[235] - The defense and advanced technologies segment revenues increased by $80.7 million, or 9%, from $899.0 million in 2024 to $979.6 million in 2025, driven by a $77.5 million increase in product revenues[237] Cost and Expenses - Cost of revenues for the three months ended December 31, 2025, rose by $16.3 million to $778.3 million, with a 2% increase in cost of service revenues and a 3% increase in cost of product revenues[215] - Total cost of revenues for the nine months ended December 31, 2025, increased by $48.0 million to $2,295.9 million, with a 7% increase in cost of product revenues[228] - Selling, general and administrative (SG&A) expenses decreased by $16.3 million, or 2%, from $761.6 million in 2024 to $745.3 million in 2025, primarily due to a $13.7 million decrease in selling costs[229] - Independent research and development (IR&D) expenses increased by $10.2 million, or 28%, to $46.9 million, supporting multi-orbit initiatives and next-generation encryption products[217] - Independent research and development (IR&D) expenses increased by $14.7 million, or 14%, from $108.7 million in 2024 to $123.4 million in 2025, driven by efforts supporting next-generation encryption products[230] Debt and Interest - Interest income surged by $147.9 million due to the recognition of $152.5 million from a lump sum payment received from Ligado[219] - Interest expense decreased by $7.0 million, reflecting a reduction in total outstanding indebtedness from $7.2 billion in 2024 to $6.4 billion in 2025[220] - Interest income rose by $128.0 million, primarily due to a $152.5 million recognition from a $420.0 million lump sum payment from Ligado, despite lower interest earned from reduced average invested balance[232] - Interest expense decreased by $34.3 million, attributed to a reduction in total outstanding indebtedness from $7.2 billion in 2024 to $6.4 billion in 2025[233] Taxation - The effective tax rate for the three months ended December 31, 2025, was 63%, compared to an effective tax rate of 7% in the prior year[221] - The company is subject to income taxes in the U.S. and various foreign jurisdictions, with potential changes in tax laws affecting the income tax provision[211] - Cash paid for income taxes during the first nine months of fiscal year 2026 was $79.2 million, down from $174.6 million in the prior year[253] Contracts and Revenue Recognition - Almost all revenues are derived from fixed-price contracts, with a small portion from cost-reimbursement contracts primarily in the defense segment[184] - The revenue recognition model applied is based on the five-step process under ASC 606, impacting how revenues are reported and recognized[189] - U.S. Government contracts typically involve performance-based payments (PBPs) or progress payments, with revenue recognized in excess of billings, leading to unbilled accounts receivable[192] - Revenue for long-term contracts is recognized over time based on the cost-to-cost measure of progress, which requires management estimates of total costs at completion[193] - A one percent variance in future cost estimates on open fixed-price contracts as of December 31, 2025, would change income (loss) before income taxes by an insignificant amount[193] - The evaluation of transaction price for performance obligations may require significant judgments, including estimating variable consideration based on performance metrics and customer discretion[194] - The purchase price for business combinations is allocated to the estimated fair values of acquired assets and liabilities, with goodwill recorded when consideration exceeds fair value[203] Cash Flow and Investments - Cash and cash equivalents stood at $1.3 billion as of December 31, 2025, with no outstanding borrowings and $594.8 million available under the revolving credit facility[245] - Cash provided by operating activities for the first nine months of fiscal year 2026 was $1.3 billion, a $657.8 million increase from $609.7 million in the prior year period[253] - Cash used in investing activities increased to approximately $663.7 million in the first nine months of fiscal year 2026, compared to $524.9 million in the prior year period, reflecting a $138.8 million increase[254] - Cash used in financing activities for the first nine months of fiscal year 2026 was approximately $867.5 million, an increase of $431.6 million from $435.9 million in the prior year period, primarily due to early repayment of debt[255] Strategic Changes and Future Outlook - The company completed the divestiture of its energy services system integration business in December 2024, which had minimal strategic synergies with core growth businesses[180] - The company anticipates future growth opportunities in markets prioritizing technology solutions, although predicting contract awards remains challenging[187] - The firm backlog as of December 31, 2025, totaled $3,967.3 million, with $2,790.8 million in communication services and $1,176.5 million in defense and advanced technologies[240] - Total new awards for the nine months ended December 31, 2025, were approximately $3.7 billion, compared to $3.5 billion for the same period in 2024[242] - The company expects to incur additional operating costs when launching new satellites, similar to the ramp-up period experienced with ViaSat-2[261] - The company anticipates continued investment in IR&D to support leadership in satellite and space technologies, with investment levels depending on various factors[258] Currency Risk Management - The company conducts its business primarily in U.S. dollars but is exposed to fluctuations in foreign currency exchange rates due to international operations[273] - A five percent variance in foreign currencies would result in an insignificant change in income (loss) before income taxes for the three and nine months ended December 31, 2025 and 2024[273] - The company's objective in managing foreign currency risk is to reduce earnings and cash flow volatility associated with exchange rate fluctuations[273] - The company may enter into foreign currency forward contracts to mitigate risks related to foreign currency denominated assets, liabilities, and transactions[273] Asset Valuation and Impairments - No material impairments were recorded for the three and nine months ended December 31, 2025 and 2024, indicating stable asset valuations[204] - The company assesses the realizability of deferred tax assets quarterly, establishing a valuation allowance if it is more likely than not that some deferred tax assets will not be realized[208] - Accruals for uncertain tax positions are recognized only if it is more likely than not that the tax position will be sustained upon examination by taxing authorities[210] Indebtedness - As of December 31, 2025, total outstanding indebtedness was $6.4 billion, including various senior secured notes and term loan facilities[262] - The effective interest rates on outstanding borrowings as of December 31, 2025 were 8.87% for the 2022 Term Loan Facility, 9.34% for the 2023 Term Loan Facility, and 9.55% for the Inmarsat Term Loan Facility[272] - The company recorded a loss of $11.6 million and $11.9 million in (loss) gain on extinguishment of debt for the three and nine months ended December 31, 2025, respectively[251]