Prepared remarks
Please stand by. Your program is about to begin. My name is Franz, and I will be your conference facilitator this afternoon. At this time, I would like to welcome everyone to Viasat's Fourth Quarter and Fiscal Year 2025 Earnings Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. I would now like to turn the call over to Ms. Lisa Curran, Vice President of Investor Relations. Ms. Curran, you may begin your conference.
Thanks, Franz. 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 in our Q4 fiscal year 2025 shareholder letter and today's conference call slides that are available 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 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, and actual results might differ materially from any forward-looking statements that we 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 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 Shawn Duffy, our Chief Accounting Officer. As always, we encourage reading the shareholder letter and referencing the slides we posted on our website earlier this afternoon for more details. Our fiscal 2025 was a pivotal year, creating a foundation for multi-year accelerated growth and sustained cash flow through increased earnings and decreasing capital intensity. We're pleased with our operational performance and very appreciative of the accomplishments of our team towards our strategic goals that we set for the year. We met or beat our guidance metrics, achieved record new contract awards growth, made significant progress on our capital structure, integrated the first ViaSat-3 Flight 1 into our global network, demonstrating the expected benefits to user experience and network efficiency.
We completed critical milestones on our satellite roadmap, earned an inspiring reception to the new multi-orbit NexusWave maritime broadband service, and introduced several network optimization innovations, delivering substantial efficiency and user experience gains. We reached new win-win third-party network agreements, including using LEO capacity to reduce latency for all mobility users while also enhancing capital efficiency. We made organizational changes to further improve speed, agility, and greater structural optionality. We enhanced financial transparency with new reporting segments and accompanying disclosures. We're also bringing major innovations to our unique and valuable spectrum rights in the mobile satellite services market segment at L-band and the new MSS service capabilities that they enable for our customers. Working with the Mobile Satellite Services Association or MSSA, we're laying the foundation for an open architecture standards-based ecosystem for non-terrestrial networks or NTN extensions to the 5G and 6G networks of the future.
Existing and emerging 3GPP standards foster interoperability for consumer mobile devices between terrestrial and a single satellite network. The MSSA's framework builds on those standards, enabling choice, scale, and substantially lower costs by creating an approach to NTN interoperability with and among all of the participating space networks. That approach, as adopted by space and terrestrial ecosystem participants, means mobile phones, cars, drones, and virtually any standards-compliant device can use a much more cost-effective aggregation coordinated satellite spectrum globally versus depending on a single capricious constellation. Viasat is focused on three major L-band business objectives. First is substantially reducing capital and operating costs for mobile satellite services, non-terrestrial network open architecture, and standards-based space systems. Second, supporting, transitioning and evolving our critical government, maritime, and aeronautical safety services to the enhanced capabilities they'll need in the fully connected autonomous unmanned AI future by leveraging those next-generation space assets.
And third, transitioning our nascent global direct-to-device NTN business from the existing narrowband Internet-of-Things, emergency and messaging standards to the emerging 5G new radio services market as new chips and devices enter and penetrate the market over the next few years. I'll give a little color on a few key important topics before Gary goes into more detail on the financial and operational results. Of course, one of our highest priorities is getting ViaSat-3 Flight 2 and 3 into service, and we've been maintaining status on our satellite roadmap. For Flight 2, the critical path has been corrective actions and testing the reflectors and integrating with the rest of the spacecraft. We are still planning to shift the spacecraft to the launch site this summer. We've adjusted the in-service date in the roadmap to better reflect various potential schedule uncertainties after we ship it.
The F3's scheduled critical path goes through antenna subsystem integration, but that uses a different manufacturing design, not requiring any corrective actions. Our ViaSat-3 Flight 1 usage has been scaling steadily, and we have really good results there. Even with the antenna anomaly, we have almost 2,000 planes that are served by that ViaSat-3 Flight 1 satellite, tens of thousands of cumulative flights, and hundreds more every day. We commissioned a survey to compare our service on Hawaii routes, which is what that satellite is serving in particular, so we can benchmark user experience against the LEO competition. The results are very favorable and shown on Page 10 of our online slides. They support our view that competition is primarily about delivering measurably viable and consistent free Wi-Fi while also providing a single interface for airlines to help manage, monetize, and integrate all their passenger entertainment and connectivity services.
We've been a leader in innovating, delivering, and measuring those services and are increasingly confident that the combination of our existing and planned satellite fleet with our third-party partners will compete very well in our target markets. Of course, we can still improve by judiciously integrating more LEO networks to both further optimize latency-sensitive traffic and improve economics, while meeting industry-leading service quality and reliability metrics. NexusWave, the multi-orbit maritime service is already off to a good start. The terms of our Telesat Lightspeed agreement, blended with our existing and forthcoming owned and third-party fleets, and our existing and planned user terminals and network capabilities can improve user experiences, extend market access for all our mobility customers, enhance our competitive position, and reduce capital intensity. Finally, we can't comment much on ongoing court proceedings related to the Ligado bankruptcy.
As you may know, Ligado voluntarily dismissed its lawsuit against Inmarsat when faced with our motion to dismiss, while Ligado subsequently refiled a similar case in New York. Our position remains that Ligado's case has no legal merit and is replete with unfounded allegations of fact that are directly contradicted by Ligado's sworn statements to other courts, including the Bankruptcy Court. We'll continue to vigorously pursue our claims in the bankruptcy and defend against Ligado's meritless lawsuit. Until then, any future cash payments from Ligado have been excluded from our financial outlook, and they remain as upside. We exit fiscal 2025 stronger than when we entered, as you can see by our healthy backlog, growing operating cash flow, moderating capital expenses, and continued awards growth in key businesses. And we believe that growth is durable. It's supported by market proof points in our accompanying earnings presentation, including American Airlines selecting us to scale to free Wi-Fi, several very successful free Wi-Fi domestic trials, new global airline awards, and third-party survey data showing ViaSat-3 delivering world-class passenger in-flight Wi-Fi experience and satisfaction on ViaSat-3 Flight 1 flights between Hawaii and the US.
Looking ahead, we know success in fiscal 2026 is more than just getting members. It's about accelerating growth and securing our future. We've got a comprehensive plan for reducing capital intensity, generating sustainable, compelling operating and free cash flow, reinforcing our competitive position, unlocking portfolio value, and driving returns and shareholder value. As we wrap up fiscal 2025, fiscal 2026 is a year to position for growth. We know there will be challenges, but we're playing to win.
Thank you, Mark, and good afternoon, everyone, joining us on the call. Before I start, let me thank the ViaSat team for the hard work that created solid results for the year. Thank you for delivering for our customers and owners. Let me start by recapping our top financial priorities. First, build our franchise's earnings power and customer lifetime value, which leads to sustained and growing free cash flow, that's a function of profitable growth and disciplined investment in our future. Sustained free cash flow then allows us to reduce the leverage that's pressuring our debt-equity prices. Paying down debt is our top priority for capital allocation. Now, let me briefly recap the fourth quarter and fiscal 2025 results. The team delivered solid results for the quarter and the year and met our full-year plan. In the fourth quarter, we delivered revenue of $1.15 billion, GAAP net income of $246 million loss, and adjusted EBITDA of $375 million for a 32.7% adjusted EBITDA margin.
Adjusted EBITDA included a $6 million foreign exchange loss and $18 million of non-cash write-offs. Excluding these items, margins would have been about 2 points higher. The charges resulted primarily from efficiencies integrating the ViaSat and Inmarsat networks and helped reduce cap spending in the years ahead. Mark noted our push to take further advantage of such opportunities, and I'll speak to their future impacts in my remarks on the outlook. We also produced about $50 million of free cash flow, our biggest focus, with solid double-digit growth in operating cash flow and lower CapEx than our last guidance with no impact on next year's expected spend. In the last two quarters, we've reduced combined fiscal 2025 and 2026 CapEx by close to $300 million. Awards were solid at $1.2 billion, including European Space Agency's Moonlight program, expanded scope with Etihad Airways, and multiple NexusWave awards as highlights.
We took a $160 million write-down in our Communication Services segment related to the exit of certain EMEA ground network assets and related contracts, as we continued the integration of legacy networks. In Communication Services, revenue declined 4%, primarily driven by the decline in fixed services and other end-product revenue, partially offset by strength in government satcom and aviation service revenue. Our commercial aviation Asian business showed continued growth in the quarter within service aircraft of 4,030, up 10% despite slower deliveries and backlog of 1,600, up 18%. That backlog underpins our growth outlook for this business over the next few years. Business aviation and service aircraft were more than 2,000, up 12% year-over-year. Maritime revenue was down 8% as we expected to trough in the fourth quarter. We're making progress scaling NexusWave installs and ended the quarter with more than 100 ships in active service and orders for nearly 500 more.
In government satcom, we had revenue growth of 16%. Our US fixed broadband revenue continued to be challenged with capacity constraint. Fixed services and other revenue was down 19% year-over-year. Our debt business continues to enjoy great momentum with revenue up 11% for the quarter and 17% for the year, including the $95 million one-time revenue impact of last year's legal settlement. Our Info Sec and Cyber business is the largest franchise in our DAT segment. Fourth quarter product revenue was $97 million, up 8%. Awards more than doubled, driven by favorable secular trends, product cycles, and whitespace product launches. For fiscal year 2025, we delivered revenue of $4.5 billion, a GAAP net loss of $575 million, adjusted EBITDA of $1.55 billion for a 34.2% adjusted EBITDA margin. Adjusted EBITDA grew 4% over the $1.488 million prior year base referenced in the supplemental information section of our investor website.
Growth of 4% in the face of almost $200 million of revenue declines in our fixed services and other business area is a testament to the diversity and resiliency of our overall business portfolio. Turning to our fiscal 2026 outlook, we expect modest revenue growth with flattish adjusted EBITDA, which we expect will be plus or minus 1% from the $1.547 million delivered in fiscal 2025. To put more context around flattish, let me delineate some of the items we'll be overcoming this year. We'll incur about $60 million of additional third-party bandwidth expense versus the prior year to meet customer needs in the present and future. We'll face $30 million of additional operating costs, $80 million in total to ready our ViaSat-3 ground network for the service entry of Flights 2 and 3. Recall as well that fiscal 2025 benefited from very-high and lucrative royalty revenues, and we do not expect these revenues to continue at the rates we realized in fiscal 2025.
Offsetting these items are growth in our aviation, government satcom, and DAT franchises, along with about $40 million reduced operating costs from our fiscal 2025 voluntary retirement program. While we continue to expect top-line growth, double-digit cash flow growth, and free-cash flow inflection, our adjusted EBITDA guidance is slightly reduced from prior and the reason is that fiscal 2026 has begun with headwinds in our aviation business from continued OEM delivery delays and increases in aircraft out-of-service as our customers face declines in traffic levels. Our annualized exposure to current tariffs was relatively minor at $25 million, but we've already been affected by a portion of that amount. Where we fall in the guidance range will depend largely on how the remainder of the year progresses on these macro fronts. Regardless of how much or little impact we face from the macro headwinds, we expect to deliver on some critical outcomes that help our fiscal 2026 results but more importantly, position us for higher-growth levels in the years ahead.
Meaningful growth in our capacity with the launches of Flights 2 and 3 of our ViaSat-3 constellation and targeted integration of third-party capacity. Continued growth in our aviation, government satcom, and DAT franchises, a return to growth in our maritime business, and a bottoming out of our fixed services franchise with capacity ViaSat-3 Flight 2 is expected to bring. We started the year facing risk to our EBITDA outlook, but our confidence in achieving sustained free cash flow generation by the second half remains high. The business momentum we create during the year, combined with reduced capital requirements following the launch of ViaSat-3, position us for meaningful free-cash flow growth in the years beyond fiscal 2026. During fiscal 2026, we'll maintain our focus on capital efficiency in reducing the capital intensity of our business model. And we have confidence our CapEx for the year will be about $1.3 billion, inclusive of $250 million for the completion of the ViaSat-3 constellation.
Our cash focus hasn't been limited to EBITDA and CapEx. In fiscal 2025, we generated more than $900 million of operating cash flow, more than 30% growth from fiscal 2024. Our teams are sharpening their focus on key elements from our working capital, and when combined with less severance and restructuring-related charges, we expect operating cash flow growth to again be solidly in the double digits during fiscal 2026. The additional steps we're taking to streamline our organization and take better advantage of integration and other portfolio opportunities will make us more nimble and competitive, while driving growth and expanding margin. Our focus for this process will be in accessing more network synergies to better share capacity that will reduce future CapEx, better leveraging our combined scale to drive sourcing and non-labor savings, rationalizing our spend with third-party staffing contractors, and simplifying our work processes so we can operate with high velocity and take advantage of normal attrition rates to boost operating leverage.
The fiscal 2026 impact will be negligible, but we see the sum of these opportunities boosting margins by an incremental 200 basis points or more over a three-year horizon. Now let me add a little flavor on how we see our businesses developing through the year. We expect fiscal 2026 will see continued growth in both our aviation sub-segments despite the macro headwinds noted. The team has been working to deliver improving customer experiences and the integration of third-party capacity through the year to support even higher service levels as our demand continues to grow. We continue to develop Amara, our next-generation IFC multi-network solution and multi-orbit roadmap that will deliver the best customer experiences for the future. Amara will leverage the unique experiences and economics that a blend of LEO and GEO capacity can deliver, including network redundancy and guaranteed quality of experience, flexible business models, and industry-leading digital offerings.
As Mark mentioned, we signed a multi-year agreement with Telesat for LEO capacity, and we're hard at work developing a proprietary electronically steered antenna terminal, ViaSat Aera that will seamlessly integrate capacity from multiple bands and orbits to deliver superior experiences. In government satcom, we should see sustained higher levels of activity and margin expansion on a higher-margin business mix, including the use of the valuable steerable beams we have on our GX fleet. While much of our business is in backlog for fiscal 2026, recent new awards and renewals are encouraging for the future. NexusWave product performance has been strong, and the services are performing well. I'm proud of the Maritime team for their work in developing a multi-orbit solution that will meet growing customer needs for the future. We plan to increase the rate of installations and expect to drive slight sequential growth in maritime revenue in the first quarter of fiscal 2026.
Year-over-year growth is expected late in the fiscal year. In fixed broadband, Flight 2 will be pivotal to turning the tide, but we're not waiting. In advance, we're testing new offerings in targeting areas where we have available capacity, which is helping to stabilize gross adds and reduce churn. Continued subscriber pressure is expected in fiscal 2026, but with Flight 2 service entry, we expect this business to stabilize by year-end with an ability to grow beyond the year. In GAAP, we expect another year of double-digit growth in revenues driven by information security and space emissions systems. We're competing 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. During fiscal 2026, we expect growth in our Info Sec and Cyber business to meaningfully outpace overall DAT segment revenue growth.
We expect more normalized levels of royalty revenues at TrellisWare in fiscal 2026, and as a result, GAAP-adjusted EBITDA growth we expect will be less than revenue growth. Absent the TrellisWare impact, DAT margins would be improving. I'll turn now to how we're thinking about addressing our debt. Our two-step plan is to begin using available cash to redeem near-term maturities and then to leverage the momentum we built during fiscal 2026 to address our longer-term debt structure. Any potential proceeds from our strategic review or Ligado will be prioritized for debt repayment, which may accelerate our process. At quarter end, we carried available cash of $1.6 billion at the consolidated level. We've begun using that liquidity to early redeem some of our outstanding debt. Following quarter end, we redeemed the remainder of our 2025 notes for $443 million. During fiscal 2026 with confidence in sustained cash flow generation by year-end, we expect to pay down the remainder of the Inmarsat term loan B of about $300 million from available cash.
With the business momentum we expect to build in fiscal 2026, we'll be well-positioned to grow our earnings and free cash flow in the years ahead. As we exit the fiscal year, we'll begin work to address our longer-term maturities and expect to have a variety of compelling options to do so. As we get closer to the end of the fiscal year, we'll provide some additional direction as to our objectives and intent. As part of managing through this transitory period of elevated capital spending, primarily within the ViaSat silo, and as we approach sustained free cash flow, we expect upstream of approximately $400 million to $500 million of cash from our Inmarsat debt silo up to the ViaSat level. We want to be transparent about the total quantum expected, but this process should play out over time, beginning most likely in the next quarter or so. In conclusion, I hope you now understand why I'm so excited for the opportunities ahead of us in fiscal 2026.
Key outcomes for the year will be modest revenue growth, flattish adjusted EBITDA, and free cash flow inflection later in the year, but those outcomes mask a much more meaningful transformation in our business. We look to emerge from fiscal 2026 with substantially more capacity to deliver for our customers in the years ahead. We expect continued growth in key parts of our business and trends in some of the areas that have been weighing on near-term results to bottom or return to growth. The positioning of our franchises for sustained and profitable growth in combination with easing capital requirements following the launch of ViaSat-3 leads us to expect rising free cash flow in the years ahead. Against that backdrop, we'll look to begin refinancing and optimizing our debt structure for the future. I'm excited to be part of the ViaSat team as we work to realize all our opportunities in fiscal 2026. And with that, operator, I'll turn the call back to you to begin the Q&A.
Questions and answers
Hi, thank you for taking the question, and thanks for all the color there at a segment level, super helpful. I was wondering if you could update us, I don't know if you touched upon in your prepared remarks, but any update on the process, the strategic review process for the Defense and Advanced Technologies segment? I think it's something you guys have alluded to in subsequent quarters, wanted to know if any update there on how you guys are thinking about that? Is that process still ongoing? Perhaps any update on timing would be super helpful? And then I guess just in regards to the satellite launch for F2, I guess what gives you confidence in early 2026 at this point? And is part of the softer perhaps EBITDA, you did touch upon getting additional ground network costs in part of the softer EBITDA guide than previously anticipated a function of just having to wear more of those ground network costs before getting kind of any revenue benefit from there? That would be super helpful if you can comment? Thank you.
Okay. Sure. Thanks. I'll take your questions in order. On the defense and strategic review, that is still underway. The way I put it is, that business is doing really well. So we're constantly assessing what we think the value of each part of those businesses are relative to our effective expectations of their future cash flows, and I think they're evolving favorably. We're also at the same time looking at ways in which some of the things that fall out of that evaluation are things that we can do to enhance their value and their competitiveness, and we're doing those at the same time. But the review is still underway, and I think you should just look for us to make any statements if there's any material change in how we're thinking about that. The second part on Flight 2 schedule. Remember, a lot of what's been going on over the last couple of years has really been about understanding the source of the anomaly and the corrective action process.
That's where a lot of the uncertainty has been. We're reaching the conclusion of that. That entire reflector sub-assembly will be delivered to both spacecraft prime fairly soon. And then there has been a lot more straightforward and we're going through processes that we already did on Flight 1. Our spacecraft integration is still on track to deliver the satellite to the launch site this summer as we expected before. And right now, with our focus having been on delivering the satellite, we're also looking at what the activities will be post-delivery. There's a variety of activities in there, some of which are beyond our control. So we felt it was prudent just to update investors and let them know that there was some probability that it could fall into early calendar 2026. The other thing that we'd remind you of is that part of the reason that we use satellite in-service in the roadmap is that's really what defines how it's going to affect our financial outlook, and there's really no material change to our financial outlook as a result of that slip. For the third point on the EBITDA, I'll let Gary address that one.
Yes. Sebastiano, we'd actually previewed that number, I think a quarter prior. So there's no impact from the ground network costs you were referencing. That was not a driver in the guidance.
Thanks. Good afternoon, everybody. A couple of questions. Can you hear me okay?
Yes.
Okay. Great. First question, obviously, you can't talk a lot about Ligado, but is there some timeline you can at least actually kind of lay out for us of what we should be watching on the timeline of Ligado? Is there any way to put some goalposts around what the magnitude might be? And I think, Gary, you mentioned if there were proceeds, it would most likely go towards delevering? And then I've got a follow-up.
We are currently involved in litigation. We encourage investors and analysts to review the public records available in the docket to gain insight into our progress. The amount we are owed exceeds $500 million, and according to the bankruptcy plan, the entity plans to complete the transaction related to this amount. These are our objectives, but at this time, we cannot provide further details.
And anything as far as magnitude?
Well, the main thing I'd say is just that it's important to keep in mind the amount that we are owed, which is currently a matter of public record. So that's just a way to frame the problem.
Yes. Okay.
Thanks, Ric.
Thanks. Yes. And Gary, you mentioned proceeds might go to delevering. Is there kind of a target zone of where you'd like to see leverage get to over the next couple of years, given Ligado, given potential unlocking of portfolio value?
Well, yes. Let's start with lower, which is what we're working on urgently. I think we've done the research on this, and I think as is consistent with a lot of asset-intensive businesses, when you get to around 3 times, that's where two things start to happen. That's where, first of all, your cost of debt capital starts to flatten out and where equity value is maximized. So clearly, that is an initial resting point, we're working at least to get there. And I think once we get there, we'll see what we want to do next. What you see from us though is, again, we're acting today, we're not necessarily trying to be scientific about it. We're working as hard as we can to drive free cash flow, which is the best way for us to get there.
Okay. And last one for me. Obviously, airlines are looking at solutions for in-flight connectivity, particularly free Wi-Fi. We've been hearing from some of the airlines that the ViaSat solution for the narrow-body is really good. Starlink in as well, but there's some debate on the wide-body. Have you heard anything similar from the airline customers of where Starlink might have a solution that they feel is more competitive in a wide-body versus narrow-body, but just kind of update a little bit there? I know you posted something with the presentation today, but something we've just been hearing from airlines is narrow-body versus wide-body and LEO versus GEO.
Yes, that's a great question. We have been emphasizing quantitative performance metrics for our airline customers for all their flights. These metrics can differ by routes and also by considering factors like the type of aircraft, specifically the number of passengers on board, which affects the user count. We have been focusing on gathering and sorting these metrics in various ways, including by route, fleet type, and aircraft size. Currently, our data indicates that the performance for both wide-body and narrow-body planes is quite similar, though narrow-bodies tend to be slightly easier to analyze. The thresholds established by knowledgeable customers are being met for both types of aircraft. Additionally, regarding the survey results for ViaSat-3 Flight 1, a significant advantage of the ViaSat-3 architecture is that we have beams that track individual planes. This allows us to allocate enough bandwidth to serve the largest wide-body aircraft effectively. Our global customers currently utilizing ViaSat-3 on wide-bodies have reported positive outcomes. We emphasize that not all gigabits or terabits are equal; the effectiveness hinges on the gigabits that are directly over the planes being served, which is a key focus of our new satellites.
Great. That's helpful. Thanks, Mark.
Hey, thank you. First question, Mark, maybe a longer-term one. You mentioned in the prepared remarks you are playing to win. And I'm wondering what exactly does that really mean if we think about two, three, four years from now, what ViaSat looks like? Is that purely financial? Is it maybe getting back some of these market shares and ICE maritime? What does that look exactly to you winning?
The primary focus for us is growth. Winning for us means achieving that growth. The markets we are targeting still hold significant potential for expansion. We have maintained strong market shares in both commercial aviation and maritime, which are challenging areas to improve in as these markets evolve. Our emphasis is clearly on growth, and I believe we can also enhance our market share. However, it's increasingly clear that this is fundamentally an economic competition. We aim to deliver the service levels that customers expect. For instance, when we consider the Hawaii routes, as we increase our bandwidth, we will be able to offer more to our customers, especially in the mobility sectors such as government, aviation, and maritime. We intend to expand this into land mobile services as well. A critical aspect of how competition unfolds is managing bandwidth in an environment where customers enjoy unlimited free Wi-Fi.
The main concern becomes who will exhaust their bandwidth first. As long as we maintain sufficient bandwidth, customers remain satisfied. For many years, we have focused on understanding the geographic and temporal demand patterns, which will enable us to compete effectively. Additionally, by recognizing market pricing, whether it’s per boarded passenger or per ship, we can determine how to serve those price points profitably. We are dedicated to ensuring we have ample bandwidth everywhere, integrating our bandwidth with third-party sources to balance supply and demand, which is essential for competing successfully. One important distinction in our approach to providing free Wi-Fi for airlines compared to others is that we give airlines the flexibility to manage it. We offer platforms that allow them to control the customer experience. For example, in our partnership with American Airlines, they can provide incentives to their top customers, who often belong to their frequent flier program.
We equip them with the tools to oversee communication, connectivity, and entertainment, enabling them to monetize these services and achieve a favorable economic outcome while still offering passengers free Wi-Fi. This illustrates a strategy focused on delivering value beyond pricing. We apply similar strategies with our maritime and government clients. I know this is a lengthy response, but I wanted to convey our understanding of winning and our confidence in achieving that as we finalize ongoing initiatives.
Understood. I appreciate the comprehensive response. A follow-up on the L-band. Obviously, you have a lot of it. And you've articulated earlier on your desire to get more involved in an even way D2D. But I think you would probably agree that the providers or the D2D, people are trying to do D2D competitors is already pretty crowded, and many of them have much lower cost of capital, while at the same time spectrum, albeit is very scarce. So what kind of conditions would you need to see to maybe try to monetize the actual spectrum itself as opposed to trying to utilize it for service?
There's a lot to unpack here. From our standpoint, one positive aspect is our substantial existing business in L-band mobile satellite services. It's becoming increasingly clear that holding licensed satellite spectrum is extremely valuable and crucial for our public safety missions. Currently, there is significant focus on aeronautical safety, which is one of our key missions, along with growing attention to maritime safety and national security applications. All these areas benefit from having licensed satellite spectrum, and there are potential crossover advantages in D2D markets as well. I want to emphasize that due to our public service obligations, which we take seriously, it's important for us to adapt to future requirements, and we are committed to doing that. This foundation will support our expansion into other markets. When it comes to market differentiation, a critical point we've learned from discussions with mobile network operators and automotive manufacturers—key users of what will likely become a non-terrestrial network component of 5G—is that they prefer standards-based open architecture solutions to avoid being locked into a single provider.
We are striving to create a competitive landscape focused on addressing our customers’ needs for these open architecture standards. This motivation led us to help establish the Mobile Satellite Services Association, which works on standards that facilitate the operation of terrestrial networks with various satellite networks, allowing for interoperability and maintaining customer choice. Additionally, I want to highlight that a crucial element in the terrestrial landscape has been shared infrastructure. The evolution of the terrestrial market demonstrates that individual carriers don't need to bear all capital expenses on their own. This shared capital model reduces capital intensity and enhances our competitiveness. Thus, our three main strategies are: serving the public interest through aeronautical, maritime, and national security requirements; promoting an open architecture standards-based environment; and decreasing capital intensity through shared infrastructure. We are receiving very positive feedback on these initiatives, which resonate well with major users and customers in the D2D space.
Thank you very much.
Hi, this is Matt on for Ryan. Thank you for the question. Your 2026 outlook is calling for double-digit strong growth in both the Information Security and Cyber defense and the space Emission Systems businesses. Could you maybe just provide some color on what the underlying growth drivers are for those particular business segments?
Certainly. You mentioned three areas: space and mission systems, encryption, and another one that I didn't catch. I’ll address each of them. In terms of encryption, one of the major focuses is on quantum-resistant encryption, which is part of the US Department of Defense's Next Generation encryption initiative. The main challenge is transitioning a large installed base of mission-critical equipment to next-generation systems during a refresh cycle. There's been a rising awareness that the current generation of equipment has an expiration date, leading to an urgency in upgrading it due to emerging security concerns related to quantum computing. This urgency is a significant driving force for us. Another important area for us is cybersecurity in space. It’s become clear that cybersecurity can be a single point of failure that impacts entire constellations. Thus, there is a strong emphasis on cybersecurity for space operations, an area where we hold a competitive advantage.
Regarding Space and Mission Systems, there are several developments that show our success. Users are not just looking for satellite services but also for technology advancements. We’ve made progress in missions such as replacing certain NASA services for space relay, where we’ve gotten off to a good start. There have also been successful initiatives in standardizing optical intersatellite links, as well as high-bandwidth radio-frequency intersatellite links. Additionally, there are missions that require specific capabilities beyond what is available with commercial dual-use satellites, and we have excelled in those areas. On the international side, we're enthusiastic about collaborating with the European Space Agency for lunar communication projects under the Moonlight program. Moreover, there are unique opportunities arising from national security applications involving some frequency bands for dual-use applications, including L-band. These points summarize the key drivers for us.
Great. Thank you for the color. That's it from me.
Hey, thanks for the question. Maybe focusing on the introduction of new geostationary satellites. Could you just kind of walk us through how we should think about the kind of revenue addition of ViaSat-3, F2 and F3 in 2027? And maybe just walk us through kind of how you think about the moving pieces of volume versus pricing growth? And then just again walking that all back to the multi-year EBITDA margin expansion of 200 bps on margin. So it seems like if you think about like assuming a relatively flat volume versus price outcome and a little bit of EBITDA. It feels like low-single-digit is the right earnings growth number for 2027, but maybe walk us through kind of how you think about that?
I think I'm going to address the question about the 200 basis points around how we're thinking about it. Across a variety of things that we've seen, we've had the conviction that we've got more to go, we've got more opportunity to go through the integration. When you think about the magnitude of opportunities that we've got in front of us, the importance of the year, in order to maximize those opportunities, we think we really need to move towards more clarity, simplicity, and being nimble. We've had in a couple of instances, I mean, first, you saw some of the ways in which we're looking at managing integration to reduce capital needs for the future. We've also had some scrums internally on some tough problems that we've worked through. It's led us to believe that we can operate like that much more routinely. We've engaged some outsiders to help us think through what the magnitude of opportunity would be, and we're really comfortable that across that two or three-year time horizon, we'll be able to achieve numbers that would have us in that range in terms of additional margin contribution.
In terms of the ramp, it's important to highlight that both Flight 2 and Flight 3 each have more bandwidth and capacity than our entire existing fleet combined. This represents a significant increase in capacity for us. These two satellites are unique in the market, with the capability to cover about a third of the world and deliver bandwidth exactly where it’s most needed. Regarding demand growth, we are securing more platforms, particularly as the aviation market expands and the maritime sector shifts to prioritize usage over operational needs. The bandwidth demand per platform is increasing significantly. We are delivering much more service, resulting in improved customer productivity. Similar to trends in the terrestrial sector, our average revenue per platform is on the rise. The real competition lies not in who possesses the most total bandwidth, but in who can provide the most bandwidth in the best locations at the right times. While Starlink is a prominent player in these markets, their own service maps indicate that they have bandwidth available in key transportation hubs for maritime and aviation. Our focus is on increasing demand through more platforms and more bandwidth per platform while maintaining the flexibility to direct capacity to the platforms that require it when they need it. This straightforward approach sets us apart in the market.
Got it. I appreciate that clarification. I want to ensure we have a clear understanding regarding the contracted revenue. We're anticipating these to come online in 2026. Is there a reasonable way to evaluate the revenue growth from the contracted additions of F2 and F3 compared to the base numbers?
Yes, consider that we differ from traditional satellite operators who typically discuss their new satellite purchases and commitments on a transponder basis. Our business model focuses on the number of platforms we have and their usage and revenue. As we increase bandwidth availability, we are continuously expanding the number of platforms, and as we add more applications per platform, that boosts revenue for each one. It's important to track these trends. Starlink demonstrates that lowering the unit cost of bandwidth significantly expands the market, which aligns with our strategy as well. We have faced some limitations while waiting for satellite launches, but these satellites will unlock further growth for us. In the meantime, we are effectively addressing demand by incorporating third-party bandwidth, both from LEO and GEO sources. A significant portion of our capital expenditures is already behind us. The current opportunity lies in leveraging this capital expenditure while acquiring inventory, which will enhance our cash flow. That's the main focus discussed earlier by Gary.
Got it. Could you walk us through the components of free cash flow for 2027? Based on the numbers you've provided, if we consider a 30% growth in operating cash flow and the capital expenditures you've mentioned, we anticipate about $100 million to $200 million in losses for 2026. With the reduction in your estimate for ViaSat-3 to $250 million, and accounting for some level of margins and working capital, we might see around $300 million in total. Is it reasonable to expect a low-single-digit hundreds of millions of dollars in free cash flow for 2027? I’m just trying to confirm that our calculations are correct, not looking for any guidance.
Well, we're not necessarily going to validate your math or your guidance, but you clearly are educated on what some of the right building blocks are. One of the things that we have been really focused on and you've seen it in Mark's prepared remarks, is mine, is about the magnitude of opportunity and the underlying meaning of what we're setting out to accomplish in fiscal 2026 to position ourselves for a lot of growth beyond that, right? So I think you all know how to think through some of those factors in terms of what they might look like on the EBITDA line. As Mark just said, we're going to have a big lump of CapEx in ViaSat-3 behind us. One of the things you've seen, we didn't talk about it on this call was more of a focus last time. The team here has had a tremendous amount of focus on CapEx even in the here and now. We're all driving towards this goal of reducing the capital intensity of the business.
It's resulted in almost $300 million less CapEx over the course of fiscal 2025 and 2026 from where we started several quarters ago. We're going to continue with that focus, and the teams are getting trained on working capital. So, the things that you're talking about are in line with the kinds of trends that we expect to see, EBITDA growth, focus on things like net working capital, being really disciplined with our capital spending. Those are things you should expect to continue to see.
Good afternoon. Following up on the prior question. And based on what you conveyed with approximately $250 million in ViaSat-3 CapEx this year is $1 billion a good benchmark for fiscal 2027 CapEx? And would that include $200 million of capitalized interest?
Again, we're not going to give guidance on where we'll land in fiscal 2027 just yet. Factually, this year, what your numbers were, we didn't have the $250 million of CapEx around the closure of the ViaSat-3 system that we'll have next in this current fiscal year, fiscal 2026. The spending was around $1 billion in total and there was about $200 million of capitalized interest in that number. So bear in mind, the capitalized interest is something that we do think will trend down a bit. But we still have satellites under construction. So that's not something that's going to disappear from the capital line.
Right. Thanks. And secondly, what provides confidence that maritime will inflect in late fiscal 2026? Is there continued upsell from your L-band customers? And are you also taking share from like Ku-band maritime competitors?
The first thing providing us confidence is that we've completed beta trials and moved into production. We have an attractive backlog that is growing quickly, even as installation rates for our multi-band product, NexusWave, increase. Right now, we are still in the early stages, but the volume of orders, the size of our pipeline, the rate of installations, and our existing backlog all indicate that we should see stabilization and growth in net vessels. This will lead to revenue generation from those vessels. An important factor is the increased usage on ships, not just for operations but also for crew members, which is driving revenue into our maritime business, and NexusWave is our first opportunity to capitalize on this and provide integrated services. We are experiencing good revenue growth per ship, thanks to the service plans our customers are adopting. It’s clear that conventional Ku-band will struggle to compete as demand for vessels rises, and the trends regarding how those vessels cluster don't favor that technology's future.
We believe this gives us a competitive edge. Most of our growth is coming from direct sales to fleets, allowing us close customer relationships and insight into the parts of our business that go through distribution. We are also collaborating with some of our indirect distributors to establish mutual benefits and strengthen partnerships. This is another area where we’re starting to see progress and expect sustained growth. Looking ahead to the first half of Q1 and Q2, we anticipate sequential growth, and later in the year, we expect to demonstrate year-over-year revenue growth in maritime. This will serve as strong evidence of our competitive capabilities in these markets.
You did. Definitely, definitely, Mark. And one final one, do you expect to play a role in Golden Dome?
Yes, I think the key point is that the government is not going to outsource everything. There will be a significant component across a wide range of technologies, including cybersecurity, sensor fusion, and cloud communications. A lot of business will come from various disciplines, particularly in technology rather than just services, and we are well-positioned in those areas. Therefore, we are seeing opportunities there as well.
Yes. Hi, Mark and Gary. Thanks for taking the questions. I'll try to be quick here. Just one on government satcom. I think you mentioned good visibility from the backlog. The business was a nice grower in 2025. And I guess the question is, do you see that growth sort of repeating here in 2026 or should it taper a bit just given tougher comps? Just sort of curious how much would offset government satcom is to communication services this year, given some of the early aviation pressures you noted and the dynamics playing out in maritime and fixed broadband, which I think you outlined clearly? So thanks.
Yes, we anticipate that growth will slow down, but we believe it will still increase slightly and maintain much higher levels of activity. This segment of the portfolio has good margins and will make a significant contribution this year.
Okay, great. And then just a quick housekeeping, Gary, maybe I missed it, but you mentioned leverage to tick up, I think here modestly in 2026, you got flattish EBITDA and you got the second half free cash flow inflection. So I guess, how should I square that with the sort of delevering priority you laid out?
While the delevering is something that we've got to build, we do need to get through this year and achieve those outcomes that we described. We think once we get beyond this fiscal year and some of the impact of that ViaSat-3 CapEx, we'll be on a much different path in terms of the direction that we're heading. Over the course of this year, we do think that amounts to a slight uptick in that EBITDA over or net-debt over EBITDA.
Okay. Thank you so much for the question. We've covered a lot of ground, got a lot of good questions. I think I'd just like to rattle off some of the main themes that we think are really important that we're trying to communicate this quarter. One is, we're making good progress. We're steady progress. We're on the Flight 2 and Flight 3 of ViaSat-3. We've got really good data that we think demonstrates the effectiveness of that architecture, and the way that we use it on Flight 1, even though Flight 1 is certainly impaired, it demonstrates the way that we're going to use the satellites. I think it also helps demonstrate that not all gigabits or terabits are the same. You only get points for that bandwidth that is in the place that you need it when you need it. I think that on these mobility markets is a really important thing to remember. We're seeing good results from that in aviation, and we're having opportunities in government.
Maritime, we're off to a really good start on the multi-orbit NexusWave service. L-band, I think we're making progress starting in the D2D space, but really focused on these next-generation safety services in aviation, maritime, and international security components, and then being able to apply these principles that we described for an open architecture, standards-based on the value of dedicated satellite spectrum. Then bringing that to market in ways that allow us to reduce capital intensity through multi-tenant shared infrastructure, same as what's happened in the terrestrial space. We're pretty proud of things are still in flux, but for FY 2025, we had record revenue, record EBITDA, record awards. We see good opportunities for growth and operating cash flow that Gary has gone through a lot of detail on how we're going to use that to better and to improve our capital structure. Even this year, we had two quarters of positive free cash flow.
Next year, our objective is to exit the year with that sustained positive free cash flow. We've talked about a flattish FY 2026. There are some challenges in the macro-environment. Gary spoke about the impact of tariffs, also the issue about OEM deliveries in aviation. That's kind of a macro that we're dealing with, but we feel we're well-positioned for growth. We think it is becoming more clear that we can thrive and win in the markets we're targeting. Last thing I just want to say is, there's a lot of work obviously behind all things we're talking about. I want to thank all of our employees and teams for the work that they're doing. So thanks again for participating in our call. We'll speak again next quarter.
And ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.