Viasat Inc 2027 Q1 Earnings Call

Thank you, Tina. 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 on our Q1 fiscal year 2027 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 certain 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. Actual results might differ materially from any forward-looking statements that we will 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 and annual report on Form 10-K.

These forward-looking statements speak only as of the day they are made. 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. Thanks for joining us today. I'm Mark Dankberg, CEO and Chairman of Viasat. With me, along with Lisa, we have Gary Chase, our Chief Financial Officer. As always, we encourage reading the shareholder letter and referencing the slides we posted on our website earlier this afternoon for more details. I'll start with two areas upfront. Gary will review our first quarter results and outlook for fiscal year 2027. We'll take questions. I'll cover our top-level first quarter financial results, our near-term objectives, and operational strategic initiatives, including Viasat-3. The first quarter of fiscal year 2027 showed disciplined execution, continued operational progress, and milestones building our confidence in the long-term outlook. Gary will discuss the financial results in more detail, but some of the highlights include record new awards and backlog in the Defense & Advanced Technologies, or DAT, segment.

Most notably, we won the next phase of the Protected Tactical SATCOM-Global, or PTSG, program. It's important for two key reasons. First, it indicates the importance of a multi-orbit national security strategy, including a new approach to proliferated geosynchronous satellites. Second, it also indicates the competitive advantages of integration across space and technology and dual-use satellite services such as Viasat has. We also continued to drive good cash performance, with positive free cash flow of $72 million, up 19%, driven by operating cash flow of $291 million. Third, our government SATCOM services grew 10% year-over-year this quarter. More of our solutions combine multi-orbit orchestration, close integration with specific mission systems, data analytics, and dual-use infrastructure to augment and enhance those SATCOM systems. The mission systems aspect leverages our extensive experience with our diversified customer base and helps drive both technology and recurring service revenue.

Leveraging dual use both significantly benefits our customers and is expected to benefit our focus on improving return on invested capital. Finally, successful deployments for ViaSat-3's Flights 2 and 3 are important for ongoing Communication Services businesses, but also for the unique technology and functional capabilities that those satellites bring. We believe validation of the underlying technologies will contribute to near-term growth in data, including in new multi-orbit space systems that leverage those technologies. On the near-term operational and strategic initiative front, we entered fiscal year 2027 focused on three priorities: selecting and competing effectively in attractive growth markets, leveraging new technology to reduce our effective airtime costs by using greater geographic coverage flexibility to drive more resilient, efficient, and effective satellite usage, and continuing to integrate AI and machine learning in multi-orbit network optimization. We're seeing both near-term and longer-term benefit from those three initiatives.

One overarching theme is the growing convergence of communications, cybersecurity, networking, data analytics, and proliferated, resilient, dual-use space infrastructure. From a national security perspective, there's an emphasis on integrated mission outcomes over just standalone products. We believe Viasat is uniquely positioned to compete in a number of important application areas. Another very important key theme is a renewed focus on the mobile satellite services frequency bands. There's a lot of attention on direct-to-device because of the integration of 3GPP satellite non-terrestrial network capability into terrestrial mobile devices and networks. As a leading player in the existing mobile satellite services markets, such as mobile voice, aeronautical and maritime safety, and rapidly growing converged space and terrestrial Internet of Things applications, we also see opportunities to capture growth in those enterprise areas beyond just the consumer markets.

We anticipate introduction of AI-driven autonomy into land, sea, and air platforms will also be a growth catalyst. We continue to believe that our leading role serving the critical safety services, combined with our ability to reliably and quickly evolve our user base to next-generation space resources, our globally coordinated spectrum and market access licenses, and our approaches to highly efficient spectrum utilization and the application of proven shared infrastructure technology and business models will all help us compete effectively in a broad range of mobile satellite services applications, including D2D. Our teams delivered solid operational performance during the first quarter, maintaining financial discipline while achieving our adjusted EBITDA objectives despite ongoing headwinds in portions of our portfolio. We maintained a strong focus on cost discipline, operational productivity, and cash flow generation while continuing to invest selectively in strategic growth initiatives.

We do understand that some segments of the market are clearly going to be significantly more competitive than in the past. We believe we can continue to be a healthy competitor, leveraging new ViaSat-3 technologies along with multi-band, multi-orbit integration. Rapid evolutions in payload, system, and mission technology are creating very substantial additional new technology and services market opportunities, especially for companies that integrate across commercial and national security applications and can invent and scale those new technologies. We're beginning to see evidence of the opportunities for Viasat in those areas, and we see growth in DAT awards, in particular, as leading indicators building confidence in that approach. Turning to next generation of connectivity, we did successfully complete all deployments in the bus in-orbit test phase on ViaSat-3 flight 2.

Subsequent to quarter end, we successfully completed reflector and boom deployment on ViaSat-3 flight 3 and entered the in-orbit test phase ahead of expected service entry over the Asia-Pacific region in late August or early September of this year. The continued integration of multi-orbit capabilities and the development of next-generation terminals and network architectures are all designed to improve bandwidth productivity. That is more usable bandwidth per unit capital and operational spend and increased network flexibility and resilience while further decreasing the proportion of those costs that are associated with launch. These capabilities allow us to place capacity where and when it's needed, improve capacity utilization, improve customer experience, and support attractive returns on invested capital while remaining highly competitive in our target market. In maritime, NexusWave continues to demonstrate customer interest and acceptance as effective multi-orbit solutions.

In aviation, we remain focused on using our latest satellites to enhance customer experience and service reliability and advancing our next-generation connectivity roadmap. We continue to work closely with airline partners as the market more closely integrates and optimizes the entire onboard experience across connectivity and passenger entertainment and engagement. From a longer-term perspective, we see increasing convergence in dual-use commercial and national security uses of space. Some key indicators of that include increased targeting of civil and commercial infrastructure of all types, telecom, navigation and timing, energy, and computing, even in the earliest stages of geopolitical conflict. That requires increased resilience and adaptability for all forms of satellite communication.

The rapid pace of new technology introduction evolve in all forms in geopolitical conflict is putting a premium not just on new technology, but the ability to integrate new technologies into operations and mission success. We believe Viasat is exceptionally well-positioned to capture these opportunities through our unique combination of space and ground network technologies, resilient space and terrestrial radio and multimedia networking, link and network security and cyber defense, and mission and operational expertise. While that will often be the first place growth in those areas will be manifested, we see good potential for ongoing conversion to both government and commercial recurring satellite services. These DAT contracts can include operational demonstration phases. This quarter also highlights that we have good growth in recurring government satellite services revenue.

In summary, we are seeing evolution in our portfolio of government and commercial technologies and recurring services businesses. Overall, we recognize the effects of greater competition in our legacy commercial services. We are seeing growth in emerging segments of dual-use, multi-orbit, multi-band, driven by underlying new technologies where we can be among the few leaders. We believe the balance suggests overall good growth opportunities with DAT awards and Government Communication Services as leading indicators, and those trends becoming increasingly clear even in the balance of this fiscal year. We are continuing to manage our business, generate cash, continue to de-lever and strengthen the balance sheet while reducing capital intensity and investing prudently in underlying new technologies. With that, I will turn it over to Gary for more information on our first quarter financial results and our outlook for fiscal 2027.

Thank you, Mark, and thanks to all of you who are joining us. Most important of all, thank you to the Viasat team for the hard work that went into producing these results. We remain focused on the three pillars of our financial journey, building our franchises, generating cash, and reducing our leverage. Using that lens, let us discuss our first quarter results and our outlook for the year. All my statements that follow in this section will refer to the first quarter of fiscal 2027 compared to the prior year period, the first quarter of fiscal 2026. Before I start, let me call out two items that impact comparisons to the prior year. First, we completed the sale of our equity interest in Navarino in the fourth quarter of 2026. Navarino contributed $3 million of adjusted EBITDA to Communication Services in the prior year period.