ViaSat(US:VSAT)2025-11-07 23:32Financial Data and Key Metrics Changes - For Q2 FY 2026, the company reported a net loss of $61 million, an improvement from a net loss of $138 million in Q2 FY 2025, primarily due to a favorable service revenue mix, lower depreciation and amortization, and reduced SG&A expenses [5][17] - Revenue grew by 2% year-over-year to $1.1 billion, with adjusted EBITDA increasing by 3% to $385 million, resulting in a 34% adjusted EBITDA margin [15][17] - Free cash flow for the quarter was $69 million, contributing to a trailing 12-month free cash flow of $147 million, marking three consecutive quarters of positive free cash flow [13][16] Business Line Data and Key Metrics Changes - In the Communication Services segment, awards increased by 35% to $1.03 billion, while revenue grew by 1% to $837 million, driven by growth in Aviation and Government Satcom [18][21] - The Defense and Advanced Technologies (DAT) segment saw awards decline by 9% to $467 million, but revenue increased by 3% to $304 million, supported by growth in InfoSec and Cyber [21][23] - Fixed Services and Other revenue decreased by 16% due to a decline in U.S. fixed broadband subscribers, ending the quarter with 150,000 subscribers [20][17] Market Data and Key Metrics Changes - The backlog increased to $3.9 billion, up approximately $140 million year-over-year, despite the sale of the energy system integration business [17][12] - The DAT segment backlog reached a record of $1.2 billion, up 31% year-over-year and 14% sequentially [7][17] - The company noted a significant uptick in interest for commercial mobile space networks, indicating a growing market for direct-to-consumer device connectivity [9] Company Strategy and Development Direction - The company is focused on launching the ViaSat-3 satellites, which are expected to significantly enhance bandwidth capacity and drive growth in Communication Services [7][8] - A strategic review is ongoing regarding capital allocation and the potential separation of government and commercial businesses to enhance competitive positioning [10][29] - The company aims to optimize its capital structure and reduce leverage, targeting a leverage ratio of 3x net debt adjusted EBITDA or lower [14][11] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the long-term growth trajectory supported by increased reliance on space-based assets for national security and growing demand for resilient communications [8][24] - The company anticipates continued variability in quarterly performance but expects fiscal 2026 revenue to increase by low single digits year-over-year [23][24] - Management highlighted the potential impact of a U.S. government shutdown on DAT awards and adjusted EBITDA, estimating a delay of up to $100 million in awards [25] Other Important Information - The company plans to spend approximately $1.2 billion in capital expenditures for the year, with a significant portion allocated to the completion of ViaSat-3 [26][28] - The company has moved $175 million in cash from Inmarsat to Viasat, with expectations to transfer a total of $400 million to $500 million over time [28] Q&A Session Summary Question: Update on evaluating the possibility of a split and vertical integration opportunities - Management indicated that they are continuously evaluating options for vertical integration and dual-use systems, with no specific timeline for completion [32][33] Question: Spectrum ownership and monetization strategies - Management confirmed that their spectrum position is substantial and globally coordinated, and they are exploring ways to derive value from it while fulfilling public interest obligations [36][39] Question: Details on the Equatys project and ideal customers - The Equatys project aims to modernize infrastructure for spectrum allocations, with discussions ongoing with regional operators and the European Space Agency [40][43] Question: Backlog growth and recognition cadence - Management emphasized that backlog growth is strong, and they are focused on converting this into future revenue, particularly with the upcoming capacity from Flight 2 [52][54] Question: Defense bookings and demand signals in Europe - Management noted increasing demand for sovereign capabilities in national security, particularly in Europe, and expects this trend to continue [90][91]