Viasat Q2 Earnings Call Highlights

Key Points

• Q2 revenue rose 3% to $1.2 billion, with Defense and Advanced Technologies revenue up 20% offsetting a 3% decline in Communication Services. Adjusted EBITDA fell 4% to $370 million, while free cash flow increased 14% to $78 million.
• Viasat expects fiscal 2027 adjusted EBITDA to be roughly flat year over year, with more than $225 million in free cash flow and $850 million to $900 million in capital expenditures. It forecasts mid-single-digit total revenue growth, including mid-to-high-teens growth in Defense and Advanced Technologies.
• Commercial aviation revenue is expected to decline in fiscal 2028; customer announcements are expected to affect 15% to 20% of aviation revenue over time, though not abruptly. Viasat said it is assessing the outlook and potential cost mitigation.

Viasat NASDAQ: VSAT reported fiscal second-quarter revenue growth driven by its defense business, but said commercial aviation revenue is expected to decline in fiscal 2028 as customer announcements affect part of its business over time.

The satellite communications company also said it now expects fiscal 2027 adjusted EBITDA to be approximately flat year over year, while forecasting more than $225 million in free cash flow and capital expenditures of $850 million to $900 million.

Chief Financial Officer Gary Chase said Communication Services faced near-term pressure, even as momentum accelerated in Defense and Advanced Technologies, or DAT. The company continues to expect total fiscal-year revenue growth in the mid-single digits.

Defense growth offsets communications weakness

Second-quarter revenue rose 3% from a year earlier to $1.2 billion. DAT revenue increased 20% to $365 million, while Communication Services revenue fell 3% to $815 million.

Viasat reported a net loss of $129 million, a $68 million decline from the prior-year result. Chase attributed the change primarily to a higher income tax provision, increased research and development spending and higher stock-based compensation expense. Adjusted EBITDA fell 4% to $370 million.

Free cash flow increased 14% to $78 million, with operating cash flow of $285 million and capital expenditures of $207 million. Net debt relative to trailing adjusted EBITDA was approximately 3.2 times, an improvement of 0.3 times from a year earlier.

Companywide awards totaled about $1.1 billion, down 24% from a year earlier, when the figure included a $234 million SouthPAN award. Backlog rose 7% to $4.2 billion, led by 20% growth in DAT backlog.

DAT adjusted EBITDA climbed 57% to $76 million. Tactical networking revenue rose 31%, while InfoSec and cyber product revenue grew 27%. CEO and Chairman Mark Dankberg said the company expects about $2 billion in DAT awards for the full fiscal year, compared with $1.6 billion last year.

Aviation outlook reflects customer announcements

Communication Services results reflected growth in aviation and government satellite communications, offset by declines in maritime and residential fixed broadband.

Aviation revenue increased 8% in the quarter. Viasat ended the period with approximately 4,490 commercial aircraft in service, up 6% year over year but down slightly from the previous quarter. Average revenue per aircraft increased 3% from a year earlier.

Chase said the company expects aviation revenue to decline in fiscal 2028 from fiscal 2027 levels and is evaluating the trajectory and potential cost mitigation. In response to an analyst’s question, he said customer announcements would ultimately affect 15% to 20% of aviation revenue, but that the impact was not expected to be abrupt.

Viasat ended the quarter with an in-flight connectivity backlog of about 660 commercial aircraft, after installations and removals based on recent customer announcements. Chase said the company expects continued installations and awards in the second half of fiscal 2027, although it also expects slight sequential declines in aircraft counts.

Maritime revenue fell 8% as vessels in service declined. Viasat ended the quarter with 1,990 NexusWave vessels in service and an outstanding order book exceeding 1,500 vessels. Fixed services and other revenue dropped 23%, as U.S. fixed broadband subscribers continued to decline during the summer. The company ended the quarter with 100,000 subscribers.

ViaSat-3 enters service as spending eases

Dankberg said both ViaSat-3 flights two and three are in service and performing as expected. The company is adding ground-network capacity and migrating more terminals to the satellites, he said.

Following the residential service launch of ViaSat-3 Flight 2 in early October, Viasat began targeted plans to use its improved performance to stabilize the fixed broadband business over the next few quarters, Chase said. Dankberg cautioned that the U.S. residential market remains competitive and volatile.

Management said the company is shifting from infrastructure construction toward monetization and cash generation. Its fiscal 2027 capital expenditure forecast includes $75 million for ViaSat-3, most of which was incurred in the first quarter.

For the full year, Viasat expects Communication Services revenue to be roughly flat and DAT revenue to grow in the mid-to-high teens. Chase said the company expects stronger DAT revenue, adjusted EBITDA and free cash flow in the second half as awards and backlog convert into sales.

Strategic review and Equatys plans continue

Dankberg confirmed that Viasat’s strategic review remains active. He said the company is evaluating a variety of options to create shareholder value and that the review committee’s role has not changed.

The company is also pursuing mobile satellite opportunities through Equatys, a planned shared network infrastructure company that Viasat and Space42 agreed to establish in September. Dankberg said Equatys still needs regulatory approvals and that the company would disclose more about its technical solution and service schedule after key milestones are reached.

Dankberg said potential participants could subscribe to capacity, trade capacity from their own satellites or invest in Equatys. He did not provide a timetable for announcing additional partners or launching satellites.

About Viasat (NASDAQ:VSAT)

Viasat, Inc is a communications technology company that provides satellite-based connectivity and related services to commercial, government and consumer customers. The company's offerings include high-speed broadband, satellite communications, network services and connectivity solutions designed for locations where terrestrial networks may be limited or unavailable.

Viasat serves the aviation, maritime, residential broadband, enterprise and government markets. Its services support in-flight internet for commercial and business aircraft, connectivity for ships and offshore operations, broadband access for homes and communities, and secure communications for government and defense customers.

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