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My name is Jordan, and I'll be your conference facilitator this afternoon. At this time, I'd like to welcome everyone to Viasat's Third Quarter Fiscal Year 2026 Earnings Results Conference Call. I'd now like to turn the call over to Ms. Lisa Curran, SVP of Investor Relations. Ms. Curran, you may begin the conference.
Thank you, Jordan. 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 Q3 Fiscal Year 2026 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 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.
Thank you 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'm going to cover 3 areas. First, an update on some of our recent results and accomplishments. Secondly, the impacts of those accomplishments and near-term operational objectives on our outlook; and third, an overview of macro market factors and our strategy that helps illuminate our mid- and longer-term approach to continuing to enhance shareholder value. FY '26 revenue and EBITDA performance is consistent with our expectations and plans entering the year. Cash generation has been better than planned, driven by efficient cash conversion, targeted strategic transactions and capital and operational spending efficiencies while still investing for our future.
This yielded corresponding improvements in our leverage ratio, showing substantial progress toward our target leverage ratio of below 3.0. We have 3 key focus areas to drive revenue growth in FY '27 and into FY '28: ViaSat-3, multi-orbit and what some refer to as new frontier defense technology. For ViaSat-3, Flight 2 launched in early November has completed initial deployments and is about 34 days away from being on station. Final deployments commence quickly after that, and we anticipate services commencing by May. Despite delays, we believe it still represents the state-of-the-art in space spot beam technology, which is the foundation of our broadband satellites. Flight 3 is undergoing final integration and is anticipated to launch on a Falcon Heavy shortly after Flight 2 final deployments are complete, pending a specific launch date from SpaceX with estimated service entry by late summer.
As a reminder, each of Flight 2 and Flight 3 is expected to support more bandwidth capacity than our entire existing fleet and support key growth initiatives in aviation, maritime and government SATCOM businesses. That is for all our mobility users. They also introduce important new functional capabilities, including new forms of resilience for our U.S. and international government customers as well as for commercial mobility users, particularly in and around geopolitical or other hotspots. Flight 2 and Flight 3 are also anticipated to support material improvements in our fixed services businesses. On multi-orbit, we continue to make good progress on demonstrating the customer benefits of multi-orbit broadband networks as compared to either geosynchronous or non-geosynchronous only systems through rapid growth of our maritime NexusWave service. Favorable customer perception of multi-orbit networks, including by those who are comparing them to LEO only networks, is a key competitive factor for mobile broadband customers.
We are investing in next-generation multi-orbit user terminals and additional sources of LEO bandwidth for our aero and government customers and expect those terminals to be available as new Ka-band LEO systems enter service. Most of our existing in-flight connectivity aeronautical terminals are also capable of operating with Ka-band LEOs. On the new defense technology front, there are significant changes in modern warfare trends that are behind the growth in our DAT segment and government SATCOM business. Many of those are in very early stages of development and deployment. Key themes where we have very strong competitive positions include the role of space in collecting, evaluating and distributing targeting information in real time, the role of space, cybersecurity and multimedia transmission networks for highly distributed autonomous vehicles, updates to information in cybersecurity required by AI-enabled adversaries with access to quantum computing resources, routine targeting of commercial telecom infrastructure networks on land, undersea and in space, and the consequent effects on both military and commercial traffic, and the role of dual-use space systems in augmenting sovereign systems and extending resilience to critical commercial platforms.
All those themes, combined with our assets, technology and commercial and government customer base are helping us compete very effectively in these rapidly evolving critical markets. So moving to the strategic theme, we can frame our ongoing strategic initiatives into 2 pillars that are intended to be mutually reinforcing. First, ongoing capital allocation and strategic initiatives that are aimed squarely at unlocking shareholder value, and then second, positioning ourselves to deliver clearly differentiated value to targeted segments of the fastest-growing space and defense markets with a sharp focus on capital efficiency. So I'll start with capital structure. We have consistently identified cash generation and reducing leverage as top financial objectives. This year via positive cash flow from operations plus proceeds from the Ligado transaction and smaller divestitures, we have reduced net leverage substantially.
In the very near term, additional Ligado proceeds plus another divestiture will drive further progress toward our target of under 3.0 net leverage. We are free cash flow positive for the trailing 12 months and are taking actions to continue to reduce capital spending and grow EBITDA to further improve positive free cash flow in fiscal '27. We've also committed to sustained reductions in capital intensity in the business while simultaneously enhancing our reputation for reliable cutting-edge innovation and customer value. Here, there are 2 elements to that. Defining a common small, multi-orbit and multi-band individual satellite architecture that can be adapted to either broadband, Ka-band or mobile L and S frequencies and either LEO or GEO orbits. It’s enabled by a very innovative, extremely flexible and powerful space-based phased array payload architecture with little to no mechanical deployments.
The point is to add network capacity and capability in small dollar increments and in the right places at the right time. We're also working closely with ecosystem partners as cofounders of a developing new shared space infrastructure entity that enables us to reduce capital costs for targeted business segments. The objective is to acquire our portion of that capacity at very attractive unit costs while delivering industry-leading performance at sustained or enhanced financial margins. This Equatys mobile satellite services partnership with Space42 is expected to leverage technical innovation, application of the terrestrial shared tower business model to space and emerging 3GPP interoperable non-terrestrial network standards. Importantly, the shared tower model allows us to deploy and retain our scarce licensed spectrum resources even more cost-effectively while continuing to serve vital public interest missions like maritime and aeronautical safety.
A high-power L-band network, combined with 3GPP NTN capable 5G modem chips makes literally billions of phones, wearables, IoT devices, autos and autonomous land, sea and air vehicles able to use our network whenever and wherever terrestrial 5G service is even momentarily unavailable and they can see the sky. That's the enormous attraction of updating our L-band to support those standards. Stay tuned for further updates on Equatys in the near future. We've previously referenced our Board's strategic review committee, which with the help of independent financial advisers is guiding our capital allocation and portfolio priorities. We continue to evaluate a range of strategic options up to and including separating our government and commercial businesses, intended to build shareholder value and ensure competitive positioning in attractive target markets. That includes assessing the value of our portfolio of assets and resources, key dependencies, including the entry into service of ViaSat-3 Flight 2 and 3, macro secular trends in our target markets, and the effects of achieving delevering targets and ongoing free cash flow generation.
The second pillar is to position ViaSat to compete effectively in the most attractive, fastest-growing sectors of the space economy. The recently issued 12th edition of NovaSpace's Space Economy Report shows the global space economy's significant growth trajectory, expanding from $626 billion in 2025 to $1 trillion by 2034. Recent events and transactions underscore that macro geopolitical, economic and technology forces are being driven by sovereign control of critical space and ground infrastructure assets, including communications, sensing and compute, dual commercial and national security uses, cooperative and coalition capabilities, the non-terrestrial network D2D augmentation of terrestrial networks for national security and commercial applications, vulnerabilities of terrestrial telecom infrastructure in contested geographies and resilience to space and ground cyber and physical threats.
While many companies are scrambling to vertically integrate, ViaSat is arguably one of an extremely short list of companies that has the ingredients needed to offer state-of-the-art technology, broadband and mobility applications, and resilience, along with the business model supporting national and regional sovereign interests and the security credentials needed to even have access to the products. That theme underpins much of our rapid growth in our DAT and government SATCOM businesses as well as creating new commercial growth opportunities. We also have the detailed understanding needed to help craft policy and technology solutions to warrant continued access to the spectrum and orbital resources needed for the world to participate in the rapidly evolving and emerging space economy. We note that many of the issues governing access to both orbits and spectrum are emerging as linchpins to doing so, and all of that implies for national security interests, whether economic, physical or digital security.
The pending European Space Act and European Digital Network Acts reflect rising awareness of these factors and the policy responses. The U.S. government is also investing substantially in multiple orbits to enhance resilience for critical strategic and tactical national security communications. So in summary, our financial results are evidence of our ability to execute, with cash flow and net leverage improvements as key proof points. Near-term operational targets for bringing ViaSat-3 Flight 2 and 3 into service, along with multi-orbit and new defense technology and additional cash collections from strategic transactions can help us reach our target for ongoing free cash flow and net leverage ratios. We have specific and actionable longer-term plans intended to reduce capital intensity and improve return on invested capital while simultaneously improving strategic focus and differentiated competitive positioning in very attractive growth markets that are all squarely aimed at driving shareholder returns. So with that, I'll turn it over to Gary for more information and our third quarter financial results and insight into our outlook for the fourth quarter and FY '26 as a whole.
Thank you, Mark, and good afternoon, everyone joining us on the call. As always, a special thanks to the ViaSat team for the hard work to produce the results we're about to discuss. Our financial mantra remains to build our franchises and earnings power, generate and grow free cash flow and deleverage and set a path to a value maximizing long-term capital structure. You can see the progress our team has made against these key priorities, but we have more opportunities ahead, and we need to keep executing well, especially in the coming quarters as we bring our new satellites into service. Additional and higher-performing capacity with ViaSat-3 will increase our capabilities and help us continue to grow and achieve our goals. Thus far, the year is playing out largely as we expected, and we remain focused on delivering the fourth quarter and positioning ourselves for faster growth in fiscal '27.
We're committed to delivering long-term value and confident in the strategic direction Mark just outlined. Now let's turn to the third quarter of fiscal '26. We generated revenue of $1.2 billion, adjusted EBITDA of $387 million and a 33% adjusted EBITDA margin. Cash flow from operations was $727 million or $307 million, excluding the lump sum payment from Ligado, with CapEx of $283 million, resulting in free cash flow of $444 million or $24 million, excluding the lump sum payment in the quarter. As I begin our discussion of both consolidated and segment results, I'll note that all my statements will reference the third quarter of fiscal '26 compared to the prior year period, the third quarter of fiscal '25. Awards were $1 billion, down 10%, but can be lumpy and the trailing 12 months has been solid with growth of 4%, including DAT, which is up double digits. DAT maritime and government SATCOM have been key drivers of the trailing 12-month growth.
Backlog was about $4 billion, a record for us, up about 12% or $430 million, in large part due to strong awards in the second quarter reflecting secular drivers, especially within government SATCOM and DAT, where we expect continued momentum in awards of backlog. Revenue was $1.2 billion, up approximately 3%, reflecting growth in both DAT and communication services. Net income was $25 million, an improvement of $183 million, principally due to higher interest income recognized during the quarter on the deferral of Ligado's quarterly fees, which we received as part of the lump sum payment. Adjusted EBITDA was $387 million, down 2%, primarily reflecting $10 million of incremental R&D investments related to growth initiatives as well as impact from the government shutdown. Capital expenditures rose to $283 million, up 12% as we invested in the completion of our ViaSat-3 system. During the quarter, we spent about $80 million on ViaSat-3, bringing our year-to-date total to approximately $130 million.
We generated $440 million of positive free cash flow or $24 million, excluding the lump sum Ligado payment despite incremental CapEx related to ViaSat-3 completion. Trailing 12-month free cash flow is in excess of $200 million. We're focused on growing free cash flow in the years ahead and using it to retire debt as the best way to reduce our capital base, driving returns higher. During the quarter, we entered into an agreement to divest our minority interest in Navarino, a maritime distribution partner. Navarino's results have flowed through the equity and income line item on our income statement. Transaction is expected to close in March of this year, subject to regulatory approval, and we'll provide more details upon closing. Finally, reflecting strong cash generation and Ligado payment, we ended the quarter with net debt to trailing 12-month adjusted EBITDA of 3.25x. This is a year-over-year and sequential decline and a substantial change from where we were a year ago at this time at about 3.7x levered.
Now let's turn to some segment highlights. Communication Services awards of $671 million declined 11%, reflecting lower aviation awards, effects of the government shutdown, fixed services, and other awards. Maritime awards grew 25%. Revenue was $825 million, up 1%, while solid growth in aviation and government SATCOM was moderated by declines primarily in residential fixed broadband and maritime. Aviation revenue grew 15%, led by a 9% increase in commercial aircraft in service, combined with higher average revenue per aircraft as our customer base migrates to higher value offerings. Aviation awards were less than expected during the quarter, with continued growth in our installed base, combined with updated indications from customers on their future plans, our commercial aircraft installation backlog declined sequentially. We now anticipate that approximately 1,100 additional commercial aircraft will be put into service with our IFC systems under existing customer agreements.
The aircraft we no longer expect to install on our IFC systems were to be run on legacy Inmarsat platforms. The team continues to win new business, and we have hundreds of incremental aircraft working through the contracting process and expect to see materialize in our backlog over the coming quarters. We're excited for what Flight 2 service entry will do for our Aviation business and believe its successful deployment will be a catalyst to drive new orders, accelerate contracting, and expand ARPU with existing customers through higher-value service offerings. Our government SATCOM revenue grew 4%, reflecting good growth with the U.S. and international governments. We're well positioned to take advantage of strong secular drivers in defense and expect strong growth to continue. Maritime revenue declined 3% as vessels in service were down. NexusWave orders are strong, and installations were up another 33% sequentially while continuing to be paced by vessel availability.
As of quarter end, we've received a very positive cumulative total of NexusWave orders of more than 2,600 vessels, with about 65% of those yet to be installed. We're taking actions to accelerate our install rates and still expect slight year-over-year growth in Maritime to resume by fiscal year-end with a higher NexusWave installed base driving higher ARPUs. Fixed services and other revenue was down 20% as U.S. fixed broadband subscribers continue to decline as expected. We ended the quarter with 143,000 subscribers and $112 in average revenue per user. We faced significant headwinds on fixed broadband due to bandwidth constraints in the U.S. for several years. We anticipate that ViaSat-3's Flight 2 entry into service beginning in the first quarter of fiscal '27 will allow us to improve our service offerings and increase gross additions. Communication Services adjusted EBITDA was $319 million, down 3%, primarily driven by higher investments in R&D. Turning to Defense & Advanced Technologies performance during the quarter.
Awards of $300 million declined 8% due to the impact from the government shutdown. As I mentioned earlier, the trailing 12-month period has been a strong one for data awards, up 11% year-over-year. That revenue was $332 million, up 9%, driven by strong backlog and growth in Infosec and cyber defense and tactical networking. Infosec and Cyber product revenues were up 8%, driven by high-assurance encryption products. An additional consequence of the government shutdown on the fall was a certification delay for our new space reprogrammable crypto product, a new market for us and a good example of synergy between our space and encryption businesses. Space & Mission Systems revenues were flat as we ramp up a number of programs. SMS has strong secular drivers supported by a large backlog. While quarterly growth rates can vary, we continue to expect SMS to grow nicely on a full-year basis. Tactical networking revenues were up 20% year-over-year, reflecting strong growth in Tactical Communications and TrellisWare growth in the quarter.
Defense & Advanced Technologies adjusted EBITDA was $68 million, up 7% compared to the third quarter of fiscal '25 driven by the revenue growth I just mentioned, offset by higher segment research and development investments supporting future growth in areas seeing strong secular trends where we are well positioned competitively such as Golden Dome and high-assurance communications. We estimate the government shutdown impacted third quarter EBITDA by about $10 million and expect a similar impact in the fourth quarter. Overall, third quarter results were good, and we're on track to achieve what we set out to this year. We've realized growth in both segments, invested in our future and drove cash generation. ViaSat-3 Flight 2 continues orbit raising and the launch of Flight 3 is expected next quarter shortly after Flight 2's deployment is complete. We expect the capabilities of these satellites to catalyze future unit and ARPU growth in our government and commercial franchises and begin turning the tide in our residential business.
Let's move on to our outlook. We continue to expect fiscal '26 revenue up low single digits with flat adjusted EBITDA. We're pleased with the third quarter, especially our progress on free cash flow and in terms of how we're positioning for future growth. Deployment and service entries for ViaSat-3 are an exciting catalyst for that growth. We provided additional segment-level detail in the outlook section of our shareholder letter and slides. While our leverage ratio has improved substantially, our focus on deleveraging remains as well as our intense focus on free cash flow generation. During the quarter, we spent about $80 million of CapEx related to the completion of ViaSat-3, bringing the year-to-date total of $130 million. For the full year, we expect to spend just over $200 million of this amount with another $40 million or so to spend in the first quarter of fiscal '27. The timing of these expenses is hard to pinpoint and may shift a bit between the fourth quarter and the first quarter of fiscal '27.
We will keep reporting to you on the remaining spend as we incur it. Overall, fiscal '26 CapEx is now expected to be $100 million to $200 million lower than prior guidance in the range of $1 billion to $1.1 billion, with about $350 million of that in the Inmarsat silo. We now expect positive free cash flow for fiscal '26, fiscal '27 and beyond while continuing to invest in growth in our very attractive market franchise. For clarity, our free cash flow guidance does not include free cash flow benefits from Ligado lump sum payments as they're nonrecurring. It does, however, include the benefit of ongoing quarterly payments that we expect to receive. Of the $1 billion to $1.1 billion of CapEx we project for the year, approximate breakdowns are as follows: about $200 million is capitalized interest, $450 million is maintenance, $200 million for ViaSat-3 completion, $75 million success-based, and the remaining $150 million is for growth.
We're investing in capabilities to serve next-generation defense demand, satellite programs other than ViaSat-3 capabilities, and customer equipment that will help us better serve commercial and government customers with new higher-value offerings in the future that leverage ViaSat-3 and multi-orbit capabilities. We've talked a lot about our financial mantra of building franchises, generating cash flow, and reducing debt. We want to minimize our cost of capital. But you just heard Mark describe how we're putting the bulk of our energy and investment into ensuring that our future returns exceed that cost of capital. Our focus on the growth of our franchises will drive returns higher, while cash generation will enable deleveraging that reduces our capital base, all driving our ROIC higher. Let me now speak quickly to the financial impacts of our Equatys venture. Our L-band spectrum and existing MSS franchise are valuable assets, and we're investing wisely to develop them in ways that enhance existing services while meeting new market opportunities.
We're taking a capital-efficient approach that is entirely consistent with our financial mantra, growing franchises, growing cash flow, deleveraging, and improving returns on capital. Negotiations around the formation of Equatys are ongoing, and we won't bring them into the public. But we can say our plans to develop our L-band franchise are entirely consistent with the financial objectives we keep repeating, increasing cash flow, reducing debt, and investing wisely for the future. One housekeeping note. Subsequent to quarter-end, we moved $175 million in cash from Inmarsat to Viasat. As previously discussed, we expect the total amount of funds will move over time to be $400 million to $500 million. Thus far, we've moved $350 million, including the $175 million just referenced. So in closing, in fiscal '26, we're working to deliver our commitments and position our franchises for sustained and profitable growth and free cash flow with easing capital requirements following the deployment of our ViaSat-3 satellites. Team Viasat is determined to close out the year strong and well positioned for the future. With that, I'd like to hand the call back to Mark.
Okay. Thanks, Gary. And with that, we would like to open it up for questions.
分析師問答
Your first question comes from the line of Rick Prentiss, Raymond James.
A couple of questions. First, on the all-important Flight 2, Flight 3 launches and in services. It looks like maybe a little bit of a delay on Flight 2, saying now May versus early '26. And then Flight 3 will go up, hopefully launch shortly after Flight 2 in service. How fast can Flight 3 get into service? Are there differences given the rocket you're using as far as how fast that can get in service?
The Flight 3 will likely have an orbit raise of about 2 months, compared to around 100 days for Flight 2. This is the main factor influencing the time from launch to when it becomes operational.
Great. And as we think about the strategic review you all are going through, obviously, this is not something you take lightly or that you would do without careful review. It's a long process not necessarily a quick process, obviously. But it seems like, as I read through the comments in the letter and I listened to you on the call, we want to see Flight 2 and Flight 3 successfully go in service. You want to see macro market conditions of the segment. You want to see achieving delevering and free cash flow generation. It sure looks like the tick points are starting to come along where that decision process and any external gating factors that might affect it are kind of getting knocked down. Is that the right way to think about this that kind of opens up the aperture of when you might do something?
Yes. I think you've got the factors right. Those are the things that we're looking for, and they'll all go into the mix of what we decide to do and when and how, if anything. I just want to be sure that we're evaluating, and we're going to look at online. And you got the factors just right.
Okay, that makes sense. Is the progress going well? Also, there's been a lot happening in space lately. What are your thoughts on data centers in space and AI in that context? I'm curious how you see these areas fitting into your strategy as you target fast-growing and profitable segments of space.
On the data center side, the key issue really revolves around power generation in space. The critical question is whether it is ever more cost-effective to generate power in space than on land. This remains an open question. Along the way, two major factors come into play: how efficiently power can be generated in space from solar cells and how effectively the heat from that power can be dissipated off satellites. From our viewpoint, advancements in these areas are beneficial as they enhance the productivity of communication satellites. There's also an important aspect regarding the orbital debris mitigation plan or sustainability factors related to the mass and surface area requirements for data centers, which could limit the amount of power you can generate, particularly in near-Earth orbit. We do not have any plans to enter the data center business. However, it's important to note that anyone looking to establish data centers in space will require substantial communication capabilities. We are definitely interested in that aspect and in potential partnerships with others who may want to develop compute and storage resources in space.
It is. And so when you think about fast-growing segments that you'd be interested in that would fit kind of your capital intensity and your free cash flow generation that Gary was talking about, what should we think are kind of at the top 1, 2, 3, 4, 5 segments that you think make great addressable markets for what you guys bring as far as competitive advantages?
There are two main areas to consider from a technology standpoint. First, in the broadband sector, particularly with Ka-band and higher frequencies for broadband communications, we've seen significant demand growth over the past decade, driven by decreasing unit prices, increasing speed, and greater volume per unit cost. We believe there is still ample growth potential in this market where we can effectively compete. The second area pertains to the L-band or low band, often referred to as mid-bands, which, according to various analyst estimates, could represent one of the largest markets in satellite communications. Within these two segments, especially in the broadband market, we identify several vertical markets. Mobile platforms are particularly notable, especially in government applications, which present substantial opportunities. A major trend we observe is the move toward sovereign ownership of networks, with countries taking control of operations and designs, primarily due to their reliance on these communication methods for national security.
Another aspect emerging in the mobility sector is the impact of geopolitical tensions, leading to areas becoming inaccessible for navigation and communication services. We anticipate demand for solutions that enable ship operators and airlines to navigate and communicate effectively in those regions. This creates significant opportunities that blend commercial and government interests in broadband mobility. In the contrast between the L-band mobility and broadband sectors, L-band will generally incur higher airtime costs and lower speeds due to limited spectrum availability, though it allows for the use of very compact omnidirectional antennas, similar to those in conventional mobile devices. Historically, a key barrier to growth in satellite communications has been ensuring users have compatible terminals. The emerging D2D NTN interoperable network space will connect billions of devices, and if quick and efficient handovers are achieved, along with interoperability between terrestrial and satellite systems, this could lead to a substantial market.
This development spans consumer and enterprise uses, including autonomous vehicles, though the pace of growth in these markets may vary. Ultimately, as we've seen in terrestrial systems, having compatible spectrum is essential for participation, and we believe we have positioned ourselves well as one of the few operators with access to both broadband microwave and mid-band L-band frequencies, enabling us to offer a comprehensive range of services. This encapsulates our direction with satellite services.
Norway in a nutshell, that was satellite in a nutshell. I appreciate that. And good to have a spectrum and good to have satellites about to come in service.
Your next question comes from the line of Sebastiano Petti from JPMorgan.
Mark, in response to Rick's last question, you previously mentioned a tower model related to direct to device. Can you elaborate on that? What makes you confident that we'll see a couple of D2D players emerge over time, especially without the necessary spectrum? That's my first question. I think the sovereign angle might address part of that. Additionally, regarding your comments at the end of your prepared remarks, I'm curious about Equatys in the L-band spectrum and your overall spectrum ownership. I understand the goal of increasing franchise value, but considering the current interest in satellite spectrum, what are your thoughts on controlling your own destiny and maintaining long-term option value?
For the first question, a significant portion of satellite spectrum has been designated for mobile satellite services for about 40 years. These satellites provide essential services for individuals who may not have other access and rely on the weather resilience of those frequencies compared to microwave frequencies. Ka and Ku-band offer excellent speeds of 100 megabits or more, which is a significant advantage. However, their performance can be severely impacted during storms, which poses challenges for maritime users and others. The spectrum is already allocated, with various stakeholders involved. Countries utilizing this spectrum for national security purposes, or concerned about citizens possessing devices that could circumvent their land-based infrastructure, insist that operators adhere to local telecommunications regulations. We believe there are justifiable reasons for these requirements, primarily related to national security and safety, rather than technical factors.
Therefore, we anticipate that these regulations will be necessary for operating on a larger scale in various global markets. Our interest in Inmarsat stems from its establishment as an international entity to address challenges concerning mobile satellite services. We also maintain strong relationships with numerous countries worldwide, enabling us to tackle these issues as we advance our capabilities. This context explains why we expect multiple participants in this field. The first part of your question relates to the issue of high count. It's often misunderstood that the potential to communicate with a standard terrestrial cell phone arises from increasing the power levels permitted for mobile satellite service. We're specifically referring to power levels at the earth's surface, regardless of the altitude they are generated from. A significant concern in all wireless spectrum applications is determining how much power one operator can radiate without causing interference with neighboring frequencies.
This has consistently been a challenge, particularly in the U.S., where there is considerable focus on ensuring satellite emissions do not interfere with terrestrial cellular systems. Anyone wishing to operate from satellite at these power levels will also need to coordinate with other satellite operators. This is a primary focus for us. Furthermore, the 3GPP standards, which are followed by chip designers and handset manufacturers, aim to incorporate these higher power levels necessary for broadband services, as opposed to the narrowband services currently available, in which we also participate. These fundamental issues are longstanding challenges that satellite operators have faced for decades and are not vanishing. We believe solutions exist, and we are aware of our constraints regarding interference with neighboring operators. Our network is being designed to meet the requirements of the 3GPP standards while avoiding interference with adjacent users. This is a result of our system design and an understanding of our neighboring operators. We are confident that we have the right spectrum for this purpose.
Your next question comes from the line of Ryan Koontz from Needham & Company.
Wanted to ask about the IFC and you announced this new next-gen terminal with Telesat. Maybe you could expand on what's attractive about their Lightspeed Constellation for you, Mark and how that differentiates from other opportunities out there?
What we aim to achieve with Telesat is to replicate the successful model we have in the maritime sector within a multi-orbit system. In maritime, there is ample space on ships, making it simpler to install multiple antennas. For our NexusWave service, which has seen significant market acceptance and financial growth over the past year, we have strong field results. This service utilizes a Ka-band broadband solution that incorporates our GEO satellites alongside Ku-band LEO. Currently, we have two different antennas. With our new aero services, we will introduce a single antenna capable of simultaneously operating both LEO and GEO. In this setup, we will mimic our maritime operations by using GEO satellites for most of the bandwidth while employing LEO satellites to handle latency-sensitive traffic. This approach provides the cost advantages of GEO. We are strategically concentrating on placing bandwidth where demand exists at a low cost per bit, allowing us to manage it effectively for mobile platforms.
The significant change for aero is transitioning from two antennas to one that can handle both LEO and GEO simultaneously, mainly routing latency-sensitive traffic via LEO. Most of the traffic is typically video, which is less sensitive to latency and fits well with GEO. Telesat plans to begin launching their LEO satellites by the end of next year, which will enable us to offer that service. Additionally, our current Ka-band aero terminals are capable of operating with LEO, but not concurrently with GEO.
Helpful. And then maybe kind of big picture question about once you get F2 and F3 in service here, it sounds like your third-quarter timeframe. What's the timeframe from which you really start to see a revenue inflection time for that comp services business to turn around? Are we talking about a couple of quarters? Or how should we think about that on a modeling basis?
We've experienced steady growth in nearly all areas except for residential, which has posed a challenge for us. We've noticed a slight decline in maritime, but we expect the NexusWave service to drive a return to growth this quarter. We anticipate strong continued growth in those services along with expansion in government services. Regarding residential, we won't provide specific projections at this time, but it may take several quarters to deploy terminals and observe initial results. Our goal is to reduce the rate of decline and eventually stabilize and grow that segment.
Mark has said in the past has referred to it as being paced by the demand. We have a lot of opportunities on the unit side as well as continue to upgrade some of the service offerings like you're seeing in aviation.
Your next question comes from the line of Mike Crawford from B. Riley.
Back to the evaluation you're doing on your government assets. Like could you just walk through some potential scenarios of how you would manage these key dependencies of satellite assets, if you were to separate, say, that business from the rest of Viasat?
You're addressing the right issues that we need to resolve. This process involves evaluating our capital structure, technology, and potential licensing or other cost agreements. At this stage, there are various possibilities to consider, and we are not ready to speculate. Our focus is on conducting a thorough evaluation, which may change over time. We will provide more details once we have made progress. Our priority is enhancing shareholder value, and we will not overlook opportunities that contribute to it. However, we must ensure that our final decisions support a strong competitive position in growing markets, allowing shareholders to benefit from those opportunities.
And just one final question from me. Just given this global refresh driven by quantum-resistant cryptography and your historical leadership position in information security, protecting data in movement and at rest, are you seeing your position today as competitively the same or stronger or perhaps threatened by emerging competitors?
We're seeing good growth in that business. I believe our competitive position has likely improved somewhat due to the urgency of the problem, and the market size has significantly increased for the same reason. Therefore, we are quite optimistic about that area.
Your next question comes from the line of Edison Yu from Deutsche Bank.
Wanted to actually come back to your comments about the space data centers. Let's assume that on the energy side, efficiency side and everything that kind of gets sorted out, do you think spectrum is or becomes a limitation? And I ask in the context of there was an announcement by Borge and TerraWave, and they seem to be using or wanting to use very high frequencies, Q-band, V-band and doing optical from MEO to ground. So just wondering if spectrum then becomes some type of constraint.
Yes. So I think you're already seeing a migration to higher RF bands, so from Ku to Ka to now V-band is coming more into play. E-band will probably come into play as well. So that opens up more spectrum. Ultimately, I think the number of people have talked about optical links from space to ground. One of the benefits of optical links is it is very easy for large numbers of different operators, each with large numbers of satellites without interfering with each other. At some point, if there is to be a big market for data centers in space, optical space to ground links have got to be a significant part of it.
Your next question comes from the line of quite busy but lovely me from Needham & Company.
Yes. I believe we've been performing well and competing effectively without launching new broadband satellites, even while our competitors have deployed many. We've managed to deliver competitive performance and pricing with the current bandwidth we have in space. This year, we'll be gaining additional bandwidth, which should significantly benefit our business. However, we recognize that as the market and consumption continue to grow, we'll need to pursue additional opportunities in targeted areas. Our strategy, which we'll be able to share more about throughout the year as we bring additional satellites into service, involves developing satellites that will be much cheaper than current models but with even better productivity. This approach will help us maintain and enhance our competitive edge in the satellite broadband sector. We aim to avoid making large, multi-hundred-million-dollar investments that carry substantial risk. Instead, we prefer to focus on smaller, cost-effective satellites that can deliver comparable capacity and be deployed where demand is highest. A key aspect of this strategy will be reducing capital intensity and improving returns on investment, ultimately enhancing shareholder value.
Your next question comes from the line of Justin Lang from Morgan Stanley.
Mark, maybe just quickly on the back on the strategic review, I'll try one here. A large defense prime just a few weeks ago announced a planned IPO, one of its businesses with the U.S. government as an equity investor. Curious if you see any particular merits or attractive elements in this sort of structure as you think through the optionality around that business?
That's an interesting point. I believe that part of the situation will depend on the priorities of individual governments. The U.S. government appears to be showing interest and offering some benefits to what have typically been private enterprises. If these benefits enhance competitive position and shareholder value, they are certainly worth considering. There may be more examples of this happening globally, and being able to engage in similar actions internationally would also be beneficial. These situations could be factors we consider when evaluating some of our fundamental strategic capital structures.
Great. That's great color. And maybe just quickly, Gary, and I might have missed it. I was hoping just for a little more color on the revised CapEx outlook and specifically whether the new guidance reflects more of a push out of some of the planned investment into '27 or just trying to understand if it's timing-related?
Yes. Generally not. We did note there was $40 million that we expect to continue into fiscal '27 from the ViaSat-3 spend that we've been talking about. Beyond that, the rest of it really is efficiency-driven, and we've had a big focus here on making sure that we're efficient with our capital. It has not at all been about cutting or reducing, and everybody has embraced it. I think we've done a nice job of it. So other than that $40 million I described a minute ago, it's real efficiency gain.
That concludes the question-and-answer session. I'd like to turn the call back to Mark for closing remarks.
Okay. So we appreciate everybody joining us for the past hour and all the questions and look forward to speaking again next quarter.
That concludes today's meeting. You may now disconnect.