ViaSat, Inc. Aktie

My name is Tina, and I will be your conference facilitator this afternoon. At this time, I would like to welcome everyone to the Viasat's First Quarter Fiscal Year 2027 Earnings Results Conference Call. [Operator Instructions]

I would now like to turn the call over to Ms. Lisa Curran, Chief Enterprise and Strategy Officer. Ms. Curran, you may begin your conference.

Thank you, Tina. We will present certain non-GAAP financial measures on today's call. Information required by the SEC relating to these non-GAAP financial measures is available on our Q1 fiscal year 27 shareholder letter on the Investor Relations section of our website.

During the presentation, we will describe certain of the more significant factors that impacted year-over-year performance. We will also make certain forward-looking statements within the meaning of the federal securities laws, including statements regarding events or developments that we expect or anticipate will or may occur in the future. These forward-looking statements are subject to a number of risks and uncertainties, and actual results might differ materially from any forward-looking statements that we will make today. Information regarding these factors that may cause actual results to differ materially from these forward-looking statements is available in our SEC filings and annual report on Form 10-K. These forward-looking statements speak only as of the 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. I'm Mark Dankberg, CEO and Chairman of Viasat. With me, along with Lisa, we have Gary Chase, our Chief Financial Officer. As always, we encourage reading the shareholder letter and referencing the slides we posted on our website earlier this afternoon for more details. I'll start with 2 areas upfront. Then Gary will review our first quarter results and outlook for fiscal year '27. Then we'll take questions. I'll cover our top level first quarter financial results, our near-term objectives and operational strategic initiatives, including ViaSat-3.

The first quarter of fiscal year 2027 showed disciplined execution, continued operational progress and milestones building our confidence in the long-term outlook. Gary will discuss the financial results in more detail, but some of the highlights include record new awards and backlog in the Defense and Advanced Technology, or DAT, segment. Most notably, we won the next phase of the Protected Tactical SATCOM-Global, or PTS-G, program.

It's important for 2 key reasons. First, it indicates the importance of a multi-orbit national security strategy, including a new approach to proliferated geosynchronous satellite. Second, it also indicates the competitive advantages of integration across space and technology and dual-use satellite services such as Viasat has. Second, we also continue to drive good cash performance with positive free cash flow of $72 million, up 19%, driven by operating cash flow of $291 million. Third, our government SATCOM services grew 10% year-over-year this quarter.

More of our solutions combine multi-orbit orchestration, close integration with specific mission systems, data analytics and dual-use infrastructure to augment and enhance the SATCOM systems. The mission systems aspect leverages our extensive experience with our diversified customer base and helps drive both technology and recurring service revenue. Leveraging dual use both significantly benefits our customers and is expected to benefit our focus on improving return on invested capital. Not only successful deployments for ViaSat-3's Flights 2 and 3 are important for ongoing communication services businesses, but also for the unique technology and functional capabilities that those satellites bring. We believe validation of the underlying technologies will contribute to near-term growth in DAT, including in new multi-orbit space systems that leverage those technologies.

On the near-term operational and strategic initiative front, we entered fiscal year '27 focused on 3 priorities: selecting and competing effectively in attractive growth markets; leveraging new technology to reduce our effective airtime costs by using greater geographic coverage flexibility to drive more resilient, efficient and effective satellite usage; and continuing to integrate AI and machine learning in multi-orbit network optimization. We're seeing both near-term and longer-term benefits from those 3 initiatives.

One overarching theme is the growing convergence of communications, cybersecurity, networking, data analytics and proliferated resilient dual-use space infrastructure. From a national security perspective, there's an emphasis on integrated mission outcomes over just stand-alone products. We believe Viasat is uniquely positioned to compete in a number of important application areas.

Another very important theme is a renewed focus on the mobile satellite services frequency bands. There's a lot of attention on direct-to-device because of the integration of 3GPP satellite non-terrestrial network capability into terrestrial mobile devices and networks. As a leading player in the existing mobile satellite services markets such as mobile voice, aeronautical and maritime safety and rapidly growing converged space and terrestrial Internet of Things applications, we also see opportunities to capture growth in those enterprise areas beyond just the consumer markets.

We anticipate introduction of AI-driven autonomy into land, sea and air platforms will also be a growth catalyst. We continue to believe that our leading role serving the critical safety services, combined with our ability to reliably and quickly evolve our user base to next-generation space resources, our globally coordinated spectrum and market access licenses and our approaches to highly efficient spectrum utilization and the application of proven shared infrastructure, technology and business models will all help us compete effectively in a broad range of mobile satellite services applications, including D2D.

Our teams delivered solid operational performance during the first quarter, maintaining financial discipline, while achieving our adjusted EBITDA objectives despite ongoing headwinds in portions of our portfolio. We maintained a strong focus on cost discipline, operational productivity and cash flow generation, while continuing to invest selectively in strategic growth initiatives. We do understand that some segments of the market are clearly going to be significantly more competitive than in the past. We believe we can continue to be a healthy competitor, leveraging new ViaSat-3 technologies, along with multiband multi-orbit integration.

Rapid evolutions in payload, system and mission technology are creating very substantial additional new technology and services market opportunities, especially for companies that integrate across commercial and national security applications and can invent and scale those new technologies. We're beginning to see evidence of the opportunities for Viasat in those areas, and we see growth in DAT awards, in particular, as leading indicators building confidence in that approach.

Turning to next generation of connectivity. We did successfully complete all deployments in the bus in-orbit test phase on ViaSat-3 Flight 2. Subsequent to quarter-end, we successfully completed reflector and boom deployment on ViaSat-3 Flight 3 and entered the in-orbit test phase ahead of expected service entry over the Asia Pacific region in late August or early September of this year.

The continued integration of multi-orbit capabilities and the development of next-generation terminals and network architectures are all designed to improve bandwidth productivity, that is more usable bandwidth per unit capital and operational spend, and increased network flexibility and resilience, while further decreasing the proportion of those costs that are associated with launch. These capabilities allow us to place capacity where and when it's needed, improve capacity utilization, improve customer experience and support attractive returns on invested capital, while remaining highly competitive in our target market.

In maritime, NexusWave continues to demonstrate customer interest and acceptance of effective multi-orbit solutions. In aviation, we remain focused on using our latest satellites to enhance customer experience and service reliability and advancing our next-generation connectivity road map. We continue to work closely with airline partners as the market more closely integrates and optimizes the entire onboard experience across connectivity and passenger entertainment and engagement.

From a longer-term perspective, we see increasing convergence of dual-use commercial and national security uses of space. Some key indicators of that include increased targeting of civil and commercial infrastructure of all types, telecom, navigation, timing, energy and computing, even in the earliest stages of geopolitical conflict. That requires increased resilience and adaptability for all forms of satellite communication.

Rapidly increasing physical occupation of space, especially LEO, is driving new resilience need for critical national security missions. And the rapid pace of new technology introduction evolve in all forms in geopolitical conflict, putting a premium not just on new technology, but the ability to integrate new technologies into operations and mission success. We believe Viasat is exceptionally well positioned to capture these opportunities through our unique combination of space and ground network technologies, resilient space and terrestrial radio and multimedia networking, link and network security and cyber defense, and mission and operational expertise.

While DAT will often be the first place growth in those areas will be manifested, we see good potential for ongoing conversions to both government and commercial recurring satellite services. These DAT contracts can include operational demonstration phases. And this quarter also highlights that we have good growth in recurring government satellite services revenue.

In summary, we're seeing evolution in our portfolio of government and commercial technologies, and recurring services businesses. Overall, we recognize the effects of greater competition in our legacy commercial services. We're seeing growth in emerging segments of dual-use, multi-orbit, multiband, driven by underlying new technologies where we can be among the few leaders. We believe the balance suggests overall good growth opportunities with DAT awards and government communication services as leading indicators and those trends becoming increasingly clear even in the balance of this fiscal year.

We're continuing to manage our business to generate cash, continue to delever and strengthen the balance sheet, while reducing capital intensity and investing prudently in underlying new technologies.

So with that, I'll turn it over to Gary for more information on the first quarter financial results and our outlook for fiscal '27.

Thank you, Mark, and thanks to all of you who are joining us. Most important of all, thank you to the Viasat team for the hard work that went into producing these results. We remain focused on the 3 pillars of our financial journey: building our franchises, generating cash and reducing our leverage. Using that lens, let's discuss our first quarter results and our outlook for the year. All my statements that follow in this section will refer to the first quarter of fiscal '27 compared to the prior year period, the first quarter of fiscal '26.

Before I start, let me call out 2 items that impact comparisons to the prior year. First, we completed the sale of our equity interest in Navarino in the fourth quarter of '26. Navarino contributed $3 million of adjusted EBITDA to Communication Services in the prior year period. Second, IP licensing revenue related to the settlement a few years ago continued to decline as the associated licensee product lines have continued to evolve. The year-over-year revenue and adjusted EBITDA impact of this decline was $19 million in the quarter and is reflected in advanced technologies and other within our Defense and Advanced Technologies segment. On a combined basis, these items impacted year-over-year EBITDA comparisons by $22 million.

Company-wide awards for the quarter were about $1.3 billion, up 10%, led by Defense and Advanced Technologies with space and mission systems, tactical networking and aviation, the drivers of growth. Backlog was $4.2 billion, up almost 19% with growth in Communication Services of 13% and in DAT of 32%. Revenue was $1.2 billion, down approximately 1%, reflecting a 4% decline in DAT and flat Communication Services. Revenue would have been flat, excluding the impacts previously noted.

Net loss was $52 million, an improvement of $5 million, principally due to lower interest expense as we continue to pay down debt. And adjusted EBITDA was $381 million, down 7%. [ But for ] the noted impact of Navarino and lower IP licensing in AT&O, EBITDA would be just about flat.

Excluding cash taxes from the gain on the sale of our interest in Navarino of about $30 million, which were paid in the first quarter of '27, we generated positive free cash flow of $72 million, up 19% and driven by operating cash flow of $291 million, which was up 13% and capital expenditures of $219 million, which were up 11%. The first quarter is typically our toughest cash quarter, given annual bonus payments. So I'm especially pleased to see strong cash generation. Our net debt relative to trailing EBITDA was approximately 3.2x, a meaningful 0.4x improvement versus the prior year period.

Now let's turn to some segment highlights. In Communication Services, awards of $774 million increased 3%, driven by aviation and maritime. Revenue was $825 million, approximately flat. Growth in aviation and government SATCOM was offset by declines in residential fixed broadband and maritime. Aviation revenue grew 11%, ending with approximately 4,530 commercial aircraft in service, a 10% increase year-over-year, combined with higher average revenue per aircraft. While we had a healthy quarter for installations, we had a number of aircraft deactivate service for previously announced transitions to a competing provider.

Within aviation, we expect revenue growth for the remainder of the year driven by ARPA expansion as more of our customer base migrates to Full, Fast, Free offerings, while units remain relatively stable to the units we ended the first quarter with. We have units flowing in and out of our aircraft backlog each quarter. This quarter's net new aircraft awards were positive, and our backlog declined due to installations during the quarter. Our IFC backlog at quarter-end was about 850 commercial aircraft.

Government SATCOM revenue growth accelerated to 10%, reflecting good growth with increased usage from U.S. and international governments. We continue to work through challenges in maritime. Revenue declined 7% as vessels in service were down. We ended the quarter with more than 1,700 NexusWave vessels in service and continue to work on improving our installation rate, while our current order book exceeds 1,400 vessels. Fixed services and other revenue was down 27% as U.S. fixed broadband subscribers continue to decline. We ended the quarter with 115,000 subscribers and $111 average revenue per user.

Communication Services adjusted EBITDA was $311 million, down 3%, primarily driven by the decline in fixed services and other and maritime, which included the sale of our interest in Navarino for a $3 million headwind in the quarter.

Turning to Defense and Advanced Technologies' performance during the quarter. Our DAT segment awards of $524 million increased 22%, driven by growth in space and mission systems and tactical networking. DAT awards are a leading indicator of future revenues. We continue to see a very strong growth environment for DAT, driven by both government and commercial opportunities for new technologies that will enhance our service businesses.

DAT revenue was $331 million, down 4%, reflecting a decline in advanced technology and other and space and mission systems, partially offset by strong growth in tactical networking. Revenue would have been up about 2% excluding the impact from lower IP licensing revenue previously noted. InfoSec and cyber defense product revenues declined 8%, reflecting lower shipments of our High Assurance encryption products. Timing of product delivery varies quarter-to-quarter, based on multiple factors, including customer schedule. Despite the Q1 reduction, we expect strong growth in InfoSec and cyber for fiscal '27.

Space and mission systems revenue declined 24%, reflecting a supplier delay in one program and a transition from development to production on another program. However, similar to InfoSec and cyber, we expect strong growth in space mission systems for the fiscal year despite the Q1 decline.

Tactical networking revenues were up 36% year-over-year, driven by strength in both our tactical communications products and TrellisWare. TrellisWare revenue growth was driven primarily by product sales to international customers as opposed to waveform royalties. TrellisWare tactical radio revenues are driven by a comprehensive portfolio of products, modules and licenses that each embody unique technology.

Advanced technologies and other revenue was down $17 million, reflecting the declining benefit from IP licensing revenue. Adjusted EBITDA was $70 million, down 20% or $17 million compared to the prior year quarter, primarily reflecting the decline in IP licensing revenue within AT&O. Excluding that IP licensing revenue, adjusted EBITDA was up slightly.

Now, let's turn to our outlook. Our financial outlook for fiscal '27 is unchanged. We expect revenue to grow mid-single digits with Communication Services growth of low-single digit and DAT growth in the mid-teens. We continue to expect our adjusted EBITDA for the fiscal year to be flat to up slightly year-over-year.

Consolidated fiscal '27 CapEx is expected to be between $950 million and $1 billion. Our consolidated CapEx is expected to break down as follows: maintenance of about $400 million; capitalized interest of greater than $150 million; ViaSat-3 spend of about $50 million, most of which was incurred in Q1; success-based of up to $150 million; and about $225 million to $250 million for growth CapEx with an emphasis on future satellites other than ViaSat-3, as well as investments in DAT segment and government SATCOM. Inmarsat CapEx is expected to be $250 million to $300 million and is contained within the consolidated numbers I just guided to. We continue to expect free cash flow of about $180 million for fiscal year '27.

Let's turn to our segments, beginning with Communication Services. Within aviation, we expect revenue growth compared to fiscal '26 as ARPA expands on unit count similar to the Q1 ending number. However, we expect the overall rate of aviation revenue growth to moderate relative to recent years. We expect maritime vessels and service to decline modestly compared to fiscal '26 but expect significant growth in the NexusWave installed base that offers customers more value and drives higher ARPA. We expect stabilization of our fixed broadband business to occur sometime after ViaSat-3's Flight 2 enters service, but expect continued declines until that time. We expect another year of growth within government SATCOM.

We've been waiting a long time for the capacity and capabilities of ViaSat-3 Flights 2 and 3. We're excited to be on the cusp of service entry for both satellites. Thanks to all the teams who have made ViaSat-3 a reality. Now our focus is ensuring that the capabilities of ViaSat-3 are mobilized to address the growing appetite our Communication Services customers have for connectivity and to position us for growth in the years ahead.

Turning to DAT. We expect a very good year ahead. Our teams are doing an awesome job of anticipating and meeting the growing needs of our customers, which is driving exciting momentum in awards that will drive revenue and earnings for years to come. We expect another year of strong revenue growth from encryption and accelerated growth from space mission systems and tactical networking. The team has continued to deliver big wins in the most important high-growth markets.

I'll also note that during the quarter, we did move an additional $100 million in cash from Inmarsat to Viasat. We've now moved a total of $450 million so far, including the $100 million just referenced. And we'll continue to evaluate opportunities to reshape our capital structure.

In conclusion, we had a good quarter as we continue to make progress on our financial journey. We're excited for a lot of hard work ahead of us. And we remain focused on improving returns on capital through franchise and earnings growth, generating positive free cash flow, repaying debt and reducing net leverage. We thank you for your continued support. Team Viasat is working to deliver our commitments for the year and beyond.

With that, let me hand the call back to Mark.

Thanks, Gary. So the combination of growth in the space market and our business and technical progress is creating more opportunity for us than ever. The ViaSat-3 deployments, along with a number of other important space and ground technology accomplishments and competitive wins, is building momentum in new markets and applications. Demand for resilient communications, secure networks, mission-critical connectivity and space-enabled capabilities is clearly growing in both commercial and defense markets globally.

Viasat has never been defined by a single technology cycle, satellite launch or market trend. Our history has been built on continued innovation, reinvention, resilience and the ability to adapt to changing customer needs. Our path forward won't be without challenges. We believe the foundation we've built and the opportunities ahead will continue to sustain our success. We enter the remainder of fiscal year 2027 with confidence in our strategy, momentum across key growth initiatives and a clear focus on creating long-term shareholder value.

Operator, you can now open the line for questions.

[Operator Instructions] Our first question comes from the line of Timothy Horan with Oppenheimer.

Good quarter. There is some concern out there that S-band spectrum holders outside the United States might lose some of the rights to that spectrum. Can you talk about your ownership rights and how much negotiating leverage you would have with governments of the United States?

And then, secondly, on your L-band spectrum, can you maybe just -- have you studied a little bit more further how much you would need of that spectrum to operate your current business versus maybe selling or leasing or partnering with someone to do direct-to-device or other services?

Okay. Well, first thing, I think I'd say just in terms of S-band, S-band tends to be less globally coordinated with [ ITU ] rights and more around national market access when used for mobile satellite services. And it's the same for our spectrum as with others. The main thing we would say is that the best way to hold on to your spectrum is to put it in use for public benefit for the nations which have granted those market access rights. So our S-band is currently in use for the purpose that it was licensed for in Europe. And I think we're working with Europe on those particular missions and new missions.

And I think that we will work with -- I think we'll work with the European Union and the individual nations to continue to evolve what we do and what they're looking for. I think we've got -- I think we have good support within Europe. But I'm not going to make any particular predictions about our success relative to others at this point. I think we have a -- as the only incumbent that's actually using the spectrum for the purpose for which it's licensed, I think that gives us a good [ legs up ], but we'll just have to see on that one.

On the L-band, I think one of the main points that we want to make is that our L-band is licensed, again, for specific mission purposes. We fulfill those purposes. They're generally really important, involving maritime and aeronautical safety as 2 of the main ones. One of the things that is a little bit unique about L-band is that in order to accomplish those missions, countries want to cooperate with each other, which is the purpose for which Inmarsat was originally formed. We still uphold those missions. And one of the main points is that the amount of bandwidth or bandwidth delivered as opposed to spectrum, separating bandwidth is basically what you get, the bits that you get through the spectrum.

The demand for bandwidth is increasing in performing those missions, both in terms of maritime safety market and especially in the aeronautical safety market. So right now, what we are aiming at is not only fulfilling the current missions, but the way that those missions are evolving. And -- but what we think is, there's a good match between the spectrum that we have and the long-term purpose of those missions, as well as new applications that are evolving such as D2D. Now we also use our spectrum for other valuable missions, which are not necessarily associated with those particular safety missions. We think the same thing will happen as we increase the network capabilities using our next generations of constellations.

Your next question comes from the line of Brent Penter with Raymond James.

First one for me, glad to see F2 and F3 both at the finish line here. Obviously, a ton of capacity coming online. How do you envision the use of capacity split in terms of serving existing customers versus the ability to bring new customers online? And can you just help us understand from the outside looking in, what are going to be the biggest drivers of revenue and EBITDA growth as those come online?

Okay. Well, first of all, the markets that we're in, primarily for monetizing our satellites now, mostly mobility markets, and that includes aeronautical, both private aviation and public -- commercial aviation, maritime, primarily vertical and maritime on large enterprise ships, and then government. So what we're aiming for -- those are the biggest uses. We also have fixed consumer use, which has obviously been declining over time, mostly because the other markets are a lot more attractive. The -- and then, the other major mobility market is government mobility. So we expect growth in basically all those markets.

Probably the one -- right now, the one that's growing -- the ones that are growing fastest are aviation and government. They're both growing from a combination of more bandwidth use per platform and more platforms. So those are really going to be kind of the keys to success. The aviation market is still relatively lightly penetrated, maybe in the range of 30-ish percent, I think, on a global basis. Some of the market segments that are lower penetrated are going to be more challenging. But I think that the addition of more satellites, more capacity is going to help address those, those being more of the international markets and also more of the low-cost carrier markets.

So in general, what you're seeing [indiscernible] kind of our transmission markets is lower unit cost of bandwidth, but overtaken by much larger growth in consumption on a per unit basis. So that's the, what we call, ARPA, average revenue per aircraft, in the aviation market. We're seeing the same effects in the maritime market where consumption is growing because of new applications. We'll also see the same in aeronautical and are certainly seeing the same in aviation.

So the simple message is similar vertical markets, more platforms, more usage per platform. I think we'll also be able to bring -- because we're getting large infusions of bandwidth, we will bring some of that bandwidth into the fixed markets as well, both consumer -- and we're seeing some opportunities for growth in fixed enterprise as well.

Okay. And then, you continue to talk about the benefits of vertical integration last quarter and this quarter, it seems, increasingly. It'd be good to get an update on the DAT strategic review and where you all are in terms of your thinking there. And as the satellites go into service, does that color how you think about whether a split makes sense or anything around timing?

Okay. Yes. When it comes to the DAT segment, I mean, right now, what we're seeing is really good growth in the -- in those parts of the business that are in the DAT part. So that's Defense and Advanced Technology. That's going to be the fastest-growing part of our business. That will be reflected in new awards. I think this was a strong quarter for new awards. Our pipeline is really attractive. And I think that we'll provide updates as we get -- as we execute contracts. Some of those contracts, you'll see possibly in defense -- in defense announcements before we can make those announcements, and keep an eye on that.

And in terms of the review, it's ongoing. The main thing that we're looking at is what those particular contracts are and what the criteria are for winning them. So think of it as we -- clearly, our DAT business is going to grow. I'll give you one example, which is, in PTS-G, part of the award there was around technology that is building low-cost, affordable proliferated satellites, but another part of it is actually operating those satellites. So it's interesting to note that among the bidders, the ones that were successful were the ones that can both -- could both provide technology and the operational capabilities. The government is looking, especially in the proliferated environment, for new mechanisms for operating satellites as well. So that -- some of that -- while the original awards will be reflected in the DAT segment, in the longer term, we expect to see communications -- government communication services revenue as well.

And if you look at our pipeline of new awards, that notion of integrated, both technology development and technology production, combined with operational capability, is a recurring theme. So the very first thing on our [ pledge ] is just to capture the awards, build the value of the DAT segment. And what we're doing is we're having an ongoing evaluation of how do we best position that, right, for the benefit of shareholders? What is the best way for shareholders to benefit? And right now, while the DAT segment is co-resident with our operating -- our services businesses, we don't have to worry about how we divide up the margins associated with that among different equity holders. So we're looking -- what we're looking at is, what is the best way to do that? It's possible that we continue to keep them together under one roof. We do that for some period of time. But the issue is that doing a separation is a little bit of a one-way door. We want to make sure that at the time we do that, if we do that, we do it in a way that most benefits shareholders.

Your next question comes from the line of Jim Ratzer with New Street Research.

I had a couple, please. Just one, just really appreciate an update on plans for Equatys, if possible, please. And then, secondly, just interested to explore if we can quantify how much new capacity is coming on with these new satellites. I mean, obviously, that's pretty exciting. There's a material growth coming on. But can you help us to kind of just think about that from a kind of quantitative perspective, what percentage increase in capacity, how many kind of gigabits or terabits per second come on with these new satellites over the next few years?

Okay. Yes. So in terms of Equatys, our intent with the next major announcement would be the funding of the initial satellite constellation. That's really the catalyst for the next round of disclosures. And that will -- that really will be the answer to the second part of your question, which is how much new capacity will come online. Let's see, the -- I'm not going to talk about the timing of that announcement, but that is -- what we're focused on is the details of a satellite constellation procurement for Equatys and then what that means for each of the users of the Equatys constellation, with us and Space42 being the 2 largest and initial users of it.

In terms of the amount of increase in capacity, that's going to be orders of magnitude. The amount of capacity on a per satellite basis is going to be hundreds or thousands of relative -- remember, capacity -- the relative capacity is a function not only of the satellites, but also of the types of terminals that are using them. When used in the types of applications that we do -- that we have now, it will be in the 1,000 to 10,000-ish amount of total capacity on a global basis for the new constellation. So, that will cover higher speeds, higher volume, higher density of usage associated with these evolved MSS applications, some of which we think will be pretty substantial growth in that, especially for things like unmanned vehicles, both land and air vehicles, that's going to have -- that's going to consume a lot of growth. And then, also -- but we expect that we'll be able to apply a lot of that capacity towards other markets, too, especially the D2D market and government markets. But that -- I think the increase in capacity is going to be in orders of magnitude. We'll be able to find that more clearly when we describe the initial constellation in more detail.

And how much [ of it ] also just comes on from the kind of the F2 and the F3, just the kind of the GEO satellites in the immediate future?

So the -- from a -- I'll say, so the F2 and F3 satellites are Ka-band. Those are broadband satellites. Those require directional antennas. The Equatys constellation will be mobile satellite services band, which is the L&S band. So we don't -- there will be -- think of it as a continuum of missions. So we'll have aeronautical uses for broadband, which will scale with different platforms. We'll also have aeronautical uses for L&S band. But what I was referring to before and with Equatys, that will be the L&S band frequencies, and F2 and F3 will cater that.

Your next question comes from the line of Sebastiano Petti with JPMorgan.

I guess, just following up on Brent's question about the strategic review. I mean, Mark, what -- has the landscape shifted that would dictate that we're closing in on 2 years of the strategic review? And it seems as though -- I mean, is the target -- is it a moving target? I understand the complexities associated with the strategic review. But can you perhaps kind of opine on whether or not there are additional complexities that have evolved over time, including the potential to monetize a portion of the spectrum via sale or via lease that has perhaps created this elongated strategic review time line? Because I think given commentary about the synergies and the merits of keeping the businesses together, it seems as though the feedback -- it seems as though that -- it seems decreasing in likelihood that we will get a separation. And that just seems to be the public -- the messaging.

And so, I just want to see if we are closing one door in terms of the strategic review in terms of a separation and is spectrum more front and center within that strategic review? Just trying to understand the different moving pieces and how we should kind of think about that and whether or not -- again, whether or not Equatys also kind of plays into that as well because I think last quarter, we talked about maybe going down a dual path. Is that still something that you would consider at this point?

Okay. Yes. The purpose of the strategic -- the purpose of the strategic review has been and remains to be delivering value to shareholders, right? That's the purpose of it. The issue is that we're in a very dynamic business environment, geopolitical environment. That's what -- the question is, do we come up with a strategy that is pertinent or relevant to what the competitive situation is and the value of our resources and assets. And so, the first thing that we had to deal with were some internal issues associated with potential separation. And that includes -- the 2 big ones that we had highlighted at the time was, one, bringing Flights 2 and 3 into service, making sure that satellites deployed directly and now we can bring them into service. We're at the tail end of those. I think we're going to retire those risks.

There were also some risks associated with the separate debt silos from the Inmarsat and Viasat, from the Inmarsat acquisition. I think those things are becoming more clear as well. But the biggest factor and one of the ones that we've also highlighted is the competitive posture of the combined company relative to the separate companies. And clearly, the multiples associated with the defense business are really attractive with the stand-alone business. That is one of the things that we've been -- that's prompted that review. But the other thing is the thing behind that is that you want a defense business that's going to grow rapidly. And so, we -- the very first thing we're trying to preserve is make sure that our defense business grows rapidly, which we believe it is.

And we also -- what we believe as well, and some of that will become more evident over the next couple of quarters as we win or lose specific contracts or -- and learn what the reasoning is behind that customer decisions. But right now, our prospects -- so we're really optimistic about our prospects, and those prospects do involve dual-use applications. And that is -- if you look on a competitive basis in the space segment, dual use does seem to be a really important theme both in the U.S. and globally. And that's because of reasons that we've talked about before, which is the cost of putting assets in space and the potential for monetizing those assets in the commercial market when they're not used for defense applications.

And then, the other one -- the other thing that's becoming really, really clear, you can certainly see that from what's going on in the Middle East as well, is that more and more commercial infrastructure is targeted. So there will be -- certainly will be benefits from having the same or related types of resilience techniques for commercial use. Things like navigation positioning, timing, communications, access to situational awareness, all those things are becoming more important for commercial assets as well. So while we're -- I'd say, while we're on a good run in the DAT business, we're probably going to make sure that we understand that because we don't want to prematurely separate the businesses. That's probably the single biggest factor on the DAT side.

On the spectrum side, what we're also seeing is a rapidly evolving environment where the competitive dynamics, especially in the D2D space, are really -- they're in turmoil because of the issue about whether, let's say, nonterrestrial networks are intended to augment terrestrial networks or compete with terrestrial networks. That has a really big impact on the competitive environment. And the choices of some nonterrestrial network operators will create opportunities for others. So we're definitely seeing the effects of that.

So again, what we -- our real near-term focus is to increase the value of our spectrum by being able to address some of these larger markets to validate not just what the transactional value of the spectrum is, but what the value of it would be when brought into use, whether it's by us or others, to make sure that we can put our spectrum to the highest purposes. And that -- I think that Equatys is going to help us frame that. So that's what we're going to continue to do. I think we're not going to make a premature decision on either spectrum or DAT separation, while the competitive environment is so dynamic.

Your next question comes from the line of Justin Lang with Morgan Stanley.

Mark, you called out AI-driven autonomy across domains as presenting a growth catalyst for you. I'm hoping maybe you could sort of expand on that a little bit. Is that sort of a nod to drones? Or is that getting at something else? Any color there around sort of opportunity sizing and time frame would be great as well.

Yes. So just in terms of the aeronautical safety requirement, drones are certainly a really big potential growth area. And for drones, one of the things to look at is, there was a notice of proposed rulemaking from the Department of Transportation about how the U.S. would handle autonomous air vehicles. And it requires some backup -- assuming that the primary -- well, the simple thing to think of is think about what's happened with autonomous ground vehicles. They get confused sometimes. They have the option of pulling over to the side of the road. You don't have that option with an air vehicle, right? So it's really, really important that air vehicles have continuous and uninterrupted transmission for command and control telemetry. So, that is one of the things that's addressed in that. That will be a special purpose application. It's very directly related to some of our existing -- to some of our existing missions in air traffic safety.

Even with commercial air traffic, there's lots of interest in, for instance, autonomous copilots, single pilot vehicles, where there's -- you can see that there's some overlap between -- or a continuum between completely unmanned ones and the manned aerial vehicles. So we -- that's a really good target area for us. For unmanned land vehicles, there's another aspect of it, which is that besides the just command and control part of it, it opens up a lot more applications for passenger use of those vehicles, a lot of which likely would be through 5G terrestrial networks, but would certainly be augmented by nonterrestrial networks. So those are 2 examples.

The other really big example is the use of autonomous drones, land, sea and air, in government applications. So that's clearly a rapidly growing area as well. So those are some of the ones that we're keeping current in terms of working with potential customers, making sure our technology is appropriate for those.

Got it. That's great color. And then, maybe just one on the PTS-G win. It looks like the contract has a $4 billion ceiling value. And Gary, maybe you could help us understand what you've booked so far and how the task orders work here. Just trying to get a sense of how the program might ramp and over what time frame and if there are any major deltas between sort of revenue recognition and cash receipts to be aware of here. I would be grateful for any color there.

Okay. So we booked what we've been awarded thus far. There's 2 components to it. There's a base order and there are some options. What's in the backlog is the order that we received, does not include the options.

I'm sorry, I'm not sure I entirely followed the remainder of that question. Maybe you could repeat it for me. Was it about revenue recognition?

Well, just over what time frame that ceiling might be exercised and how to think about potential task orders being cut from here?

More of an operational question. We're going to -- we will recognize revenue and we'll have earnings in that program based on how we're spending against the long-term program value. We'll book it as percent complete accounting, the way we do with the remainder of our contracts that are like this.

Yes. Different companies treat these delivery order contracts differently. What we do is, we only put it in backlog or count it as an order when we have a firm delivery order against the delivery order contract. Some contractors will -- some people will we'll just announce the value of that, consider that backlog. What we do is, we have a separate -- we'll separately describe the total value of delivery order contracts that we can work against, but that's not the same as backlog for us. In this particular case, I think the next increases in delivery orders against the contract would be either for more copies of the same satellite, which is -- that's one possibility. The other one would be for subsequent generations of the satellite, which we also expect that the government will go probably to some extent in both of those directions.

Your next question comes from the line of Edison Yu with Deutsche Bank.

So firstly, I have a bit of a maybe shallow question, so apologies. If I look at the last quarter shareholder letter, I think Equatys was mentioned 10 times. And if you look at the shareholder letter today, I don't think it was mentioned once. So are we just reading too much into that? Is there some type of maybe relative change in just your stance or in the timing of Equatys as it pertains to a quarter ago?

Short answer is, no. I think what we're holding up for is to have the next announcement, which really would be about the Equatys' purchase of its initial satellite constellation. So once we can announce that, that's when we will do it. And we just decided just to wait for that.

Okay. And then, just a follow-up. I know spectrum has been asked about several times, but maybe if we kind of refer to the -- I don't know if you looked at the Amazon-Globalstar proxy, but it seems there are at least 4 bidders out there for MSS spectrum. And I'm curious kind of -- I mean, in your discussions and kind of what's been going on behind the scenes, does that sound like what the market looks like to you, call it like 4 bidders out there that are really interested? Any way you can comment on that?

Well, I think that -- I mean, that was a transaction where we get more insight into it. Yes, there were 4 bidders. I think that the number of bidders is going to depend both on -- like on other spectrum -- if you think of a potential spectrum transaction, it's going to be both the unit value, or you think of it as price per megahertz-pop per market area. But that's one way that you'll see what the amount of interest is. The other one is going to be on the volume of that -- the size of that transaction, the amount of spectrum that's available. So, that was one data point. I think more recently, there's probably going to be some disclosure around an Iridium data point. And we're paying -- yes, we're paying attention to all that.

And then, as -- just on the other side, again, we think that the transactional value should be -- should grow with the development value, right? So what we're trying to make sure we understand is, what is the development value of the spectrum and what's the transaction value, and then we can decide strategically what makes the most sense for us.

And your next question comes from the line of Ryan Koontz with Needham & Company.

Maybe just first one on maritime. It seems like it's maybe not keeping up with some of your expectations with some of the installs and such. Can you maybe expand on how you see that market developing here in the short to medium term and things you're doing to counteract that?

Yes. I mean, there are several values -- several variables at play in the maritime market. One is the rate at which we can do installations. Some of that -- where we have customers that have made commitments for portions of their fleet, getting those portions installed are kind of gates to getting additional orders. But also, the market is somewhat -- let's think of it as the distribution channel to market is a little bit fragmented as well. And so, I think we're doing really well where -- with our direct relationships. Some of the indirect relationships are going to require more work because of some of the incentives that have existed in the past for some of the resellers and aggregators of satellite capacity.

I think as demand is going up that more and more -- I think that those aggregators will turn to arrangements with the few satellite operators that really have the ability to serve the most congested and densest markets. So I think we've got a couple of things that we're working through. I think the biggest thing is so far -- and we're closing in on a couple of thousand vessels connected. I think customer satisfaction is good. The ability to deliver as essentially the same as a LEO-only solution is pretty clear. So that's the thing that we're most focused on is the value proposition to the end users. I think that part is going well.

The rest -- I think we do have some logistics stuff. I don't mean to minimize that. I think we're making progress on that. And then, I think we're also working on the distribution. Those will be the factors that will drive longer-term penetration.

Really helpful, Mark. And maybe if you could just expand on your role in like the space systems business. Obviously, it's a very hot segment, and you guys have talked about growth this year. What do you see as some of the drivers there of your space systems business?

Yes. So in DAT, we have a part called mission systems. And what we're seeing are opportunities all across the board. I mean, there are -- think of it as short-term issues with existing government space assets that are expiring and they're looking for commercial versions. That's some combination of defense, civil, special mission stuff. We're seeing opportunities there. We're also seeing the government wanting to consolidate the ways that they manage and control systems, refreshes on the ground system, refreshes on the terminals.

The other really big thing that's become an issue is, think of it as what we made like tactical radios for fighter jets or ground vehicles. And often, you'll find integration is a really big issue, getting a system distributed within the platform that it's serving. So, that's creating opportunities for us as well. And then, there are some new -- just really new areas around space-to-space links. We're doing well in that. Optical, space-to-space, space-to-ground, those are opportunities. It's just a real -- I mean, that is -- space in general is really booming area for us. And I think that's what you're going to see when it comes to award opportunities for us in the next year.

And with no further questions in queue, I will now hand the call back over to Mark for closing remarks.

Okay. So thanks, everybody, for joining our call. I know that it is a really dynamic environment out there. We're excited about that. I think kind of the numbers that are most attractive to us and most exciting for us are both kind of the new order rate, especially in the DAT segment, which includes technology on both the government and commercial side. We think technology is going to be the leading indicator for awards growth. And we've got a really good pipeline. I think that will develop over just the next few quarters. We'll be able to talk about that.

And the other point that I want to reinforce is that the technology is really the leading edge of what drives our services and recurring revenue business. So I think that, that's going to help us overcome some of the increased competition in some of our older parts of our business. But basically, all the things where we're seeing growth are well within kind of the target area that we've been working for probably decades.

So thanks for joining us and look forward to speaking again next quarter.

Thank you again for joining us today. This does conclude today's conference call. You may now disconnect.

My name is Jericho, and I will be your conference facilitator this afternoon. At this time, I would like to welcome everyone to the Viasat Fourth Quarter and Fiscal Year 2026 Earnings Results Conference Call. [Operator Instructions]

I would now like to turn the call over to Ms. Lisa Curran, Chief Enterprise and Strategy Officer. Ms. Curran, you may begin the conference.

Thank you, Jericho. 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 '26 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.

Good afternoon, and thanks for joining us today. I'm Mark Dankberg, CEO and Chairman of Viasat. With me, along with Lisa, we have Gary Chase, our Chief Financial Officer. As always, we encourage reading the shareholder better and referencing the slides we posted on our website earlier this afternoon for more details.

I'll start with 3 areas upfront, then Gary will review our fiscal year '26 and fourth quarter results and our preliminary outlook for fiscal year '27. Then we'll take questions. I'll cover an update on our strategic perspective, including the cooperation agreement with Carronade Capital Management and updates on ViaSat-3 Flights 2 and 3, our top-level financial year '26 results and our near-term objectives and operational and strategic initiatives.

First, I'd like to welcome Shekar Ayyar and Jinhy Yoon to our Board of Directors. Shekar is a seasoned technology executive with deep operating experience at scale across enterprise software, cloud, networking and communications infrastructure with significant public company experience, including business strategy and M&A. His board experience includes seeing Altair through its $10-plus billion sale to Siemens.

Jinhy brings strong financial governance and capital allocation experience to the Board, advising on and structuring billions of dollars in public debt issuances and working extensively with executive teams on strategic transactions and risk management, including as a member of Intelsat's Board through the completion of its sale to SES. Both Shekar and Jinhy have been appointed to our Board's Strategic Review Committee.

Earlier this month, we also announced a cooperation agreement with Carronade. We have appreciated the constructive dialogue with Carronade over the past year and are pleased with this agreement, which we believe is in the best interest of Viasat and its shareholders.

On the ViaSat-3 front, subsequent to quarter end, we successfully completed all deployments on Flight 2, including the [ reflectors and bloom ]. Surface entry is pending authorization from the FCC. Also, subsequent to quarter end, ViaSat-3 Flight 3 [ landed ] successfully on April 29. Since then, radiator and solar array deployments have been successfully completed, and [ what we raising ] is underway. Flight 3 is expected to cover the Asia Pacific region, [ arrive on ] station in about a month and have surface entry expected in August or September of this calendar year.

Our ongoing fleet expansions support growth initiatives in aviation, maritime, fixed services and government SATCOM businesses. It also introduces important new capabilities, including new forms of resilience for our government and commercial customers. We believe that the ViaSat-3 satellites are the most advanced commercial satellites in the world in terms of adaptive beam forming for cost efficiencies, user performance improvements and resilience to interference. We also believe they set new commercial standards for solar power generation and thermal dissipation. Both those capabilities are among the foundational technology challenges for developing economical data center space.

Switching to fiscal year '26 results. Those financial results were largely consistent with our expectations and plans entering the year despite headwinds from the U.S. government shutdown during the back half of the fiscal year. Gary will go through the financial results in greater detail, but some highlights include record new contract awards and backlog, along with modest growth in revenue and adjusted EBITDA that are also both at record levels.

Our cash generation is a clear standout, as we generated nearly $600 million in free cash flow and about $180 million, excluding the lump sum Ligado payment. We've also had positive free cash flow in each of the last 5 quarters. We've achieved this while still investing for our future. And our strong cash performance has contributed to strengthening our capital structure, including very substantial progress towards our target leverage ratio of below 3.0.

So switching to near-term operational and strategic initiatives. As I shared last quarter, we have 3 key near-term focus areas to drive growth in fiscal '27 and beyond. First, our ongoing fleet expansion is expected to roughly triple bandwidth inventory, and increasing adaptive beam forming flexibility is an additional boost to the fleet's effective capacity, offering higher speeds on both forward and return links. We'll also expand our fleet-wide multi-orbit capabilities in maritime by augmenting our existing LEO and GEO resources. We are making steady progress on our [ ERA ] Ka-band multi-orbit terminal for in-flight communications, which has already entered the line-fit certification process for all Boeing commercial airliners.

Telesat is also progressing with the launch of its first [ Pathfinder ] Lightspeed LEO satellites scheduled this year and initial global service plan for late next year. While the market for broadband satellite services is very competitive, also growing rapidly, and we believe we have a good opportunity to grow with it.

Our second key area is developing and deploying shared multi-tenant, multi-orbit, L- and S-band shared infrastructure, delivering next-generation mobile satellite services, including for global air and maritime safety as well as next-generation air, ground and maritime vehicle autonomy, along with mobile direct-to-device opportunities with a focus on lowering capital intensity. While we are aiming for services in 2029, we are targeting significant revenue from our role as the technology provider for Equatys, the space infrastructure entity we are forming along with Space42.

And third, we also intend to sustain the rapid growth rate in our DAT segment for both defense and commercial markets, building on our dual-use advanced technology. The DAT segments is the first place that new [ test ] developments as we're doing for Equatys would be recognized. The Equatys initiative for next-generation L- and S-band space and ground infrastructure is anticipated to be an important contributor for broadband services, mobile L- and S-band services and [ that ]. We continue to work closely with Space42 and other potential partners as cofounders of the new shared infrastructure entity that is intended to substantially improve capital productivity for L- and S-band satellite mobility services.

Equatys infrastructure is intended to enable 3GPP standards for interoperable nonterrestrial network services through both satellite specific and terrestrial frequencies. The shared tower infrastructure model can enable greater spectrum efficiency as well as reduced infrastructure costs for all participating parties. As with terrestrial shared tower infrastructure, the spectrum rights and obligations remain with the participating licensees, which are initially Viasat and Space42, but with potential to grow for additional partners.

Viasat is expected to participate as the initial technology prime contractor for Equatys. Space-based L- and S-band beam forming technology is at the heart of the NTN direct-to-device opportunity, and our technology solution both benefit from and advances our long history of advanced L-band and Ka-band broadband space-based phased array technology. The foundational Equatys satellite and phased array technologies are also designed to support multi-orbit broadband such as Ka-band services at both GEO and LEO orbits.

The near-term market for commercial and government broadband satellite services remains both highly competitive and rapidly growing. Viasat has recently seen double-digit revenue earnings growth in aviation, offset by declines in fixed residential services and maritime. In fiscal '27, we anticipate financial results and fixed and residential services will improve, but increased competition will reduce our growth rate in aviation services. However, we're seeing accelerated growth opportunities in our DAT segment, that in combination with our Communication Services segment, creates opportunities for accelerating company-wide revenue growth ahead.

The space sector is poised to benefit from a number of exciting new defense, commercial and scientific initiatives, and we believe Viasat is well positioned to participate in a number of those. We believe our relatively unique position as both a leading space technology innovator and a leading satellite services company helps differentiate us from competitors that are, in most cases, not vertically integrated across those markets.

In the near term, many of those opportunities will first be captured in our DAT segment. I'd like to point out a few opportunities that generally involve innovations and business models as well as technology. One key opportunity was just announced last week, when subsequent to the end of in Q4, we received a follow-on award through our initial phase of the PTSG or protected tactical satellite global contract for a first delivery of a small, low-cost maneuverable dual-band geosynchronous orbit U.S. government tactical satellite. We believe PTSG is an excellent opportunity to grow our participation in government tactical space system technologies and services and an opportunity to use technology innovation to substantially increase the effectiveness and resilience of U.S. tactical broadband satellite communications while helping address potential threats to other [ Orbiten ] systems.

PTSG is closely related to the existing WGS or Wideband Global System U.S. tactical satellite network through which the U.S. has a significant range of international partnerships and coalition interoperability relationships. So there's also a meaningful international opportunity. There are also substantial follow-on opportunities in related dual-use broadband space technology and services.

Our low-cost L- and S-band multi-orbit proliferated LEO and low-cost broadband maneuverable GEO satellites share important technology foundations and are evidence of the value of our vertical integration, dual use multi-orbit multiband assets, resources and capabilities. We believe this is a key differentiator for us to provide resilient and highly valuable services to our government and commercial customers across bands and orbits.

Recently, the 3 major U.S. mobile carriers announced plans to create a joint venture around direct-to-device nonterrestrial network services. As a reminder, there are D2D opportunities using both [ Viasat ] satellite spectrum and supplemental satellite use of terrestrial spectrum each offering distinct use cases. Terrestrial spectrum used to be that space towers can extend coverage into places where no terrestrial coverage exists. Satellite spectrum can do that and can also be used via space towers as overlays to perfect service gaps in places where there already is coverage through terrestrial towers or access points.

The Equatys business model is organized to support a full service business where Viasat could compete to deliver standard interoperable directed device nonterrestrial network services using licensed satellite L- or S-band spectrum. Or a JV or the individual global network operators could simply contract per share space power infrastructure to support those mobile network operators already own terrestrial spectrum in locations where that is appropriate. Think of Equatys as a unique player offering unbundled space infrastructure, ground infrastructure and/or shared network operations as well as being a platform for satellite operators such as Viasat or Space42 or other global or regional satellite operators to offer direct-to-device services using their own [ VISIB ] spectrum.

The U.S. mobile network operator joint venture, or D2D NTN, is an example of an application that we see as a good growth opportunity for Viasat as both a service provider and of the initial Equatys technology provider in supporting mobile network operators in applying satellite to best augment their terrestrial networks. Another area driving innovation and growth in satellite technology is the potential for space data centers. While launch is certainly a key enabling technology, there are several other areas that overlap key enabling satellite communications technologies such as solar power generation, thermal dissipation, radiation hardening of tolerance for advanced digital computing, space-to-ground and space-to-space broadband communications, including both RF and optical and orchestration and coordination of congested orbital spectrum and spatial resources.

We believe we have standard the art expertise and technology to a number of these areas and have a number of avenues available for research and partnerships. It's on our target list of DAT growth opportunities, taking advantage of our multi-orbit tool use vertically integrated technology base. We have several of these significant data opportunities pending, and we'll update our fiscal year '27 outlook as those opportunities mature over the first half of this fiscal year.

So in summary, our performance over fiscal year '26 demonstrates our ability to translate strategy into attractive financial results with cash flow and net leverage improvements as key indicators and to balance near-term execution with long-term strategic positioning and also the resilience and commitment of our team to meet the challenges associated with cutting-edge space technology. We're highly focused on a critical few strategic initiatives to ensure we can participate in rapidly evolving markets, technologies and business models while maintaining top-tier competitive positions. We have optionality in our longer-term plans, building on reduced capital intensity and improving return on invested capital with key levers available to realize shareholder value.

So with that, I'll turn it over to Gary for more information on our fourth quarter financial results and our outlook for fiscal '27.

Thank you, Mark. More importantly, thank you to the Viasat team for the hard work you put into making fiscal '26 a success. We're going to need your continued dedication to ensure fiscal '27 is also a success.

Our financial journey breaks into the 3 pillars you've heard me talk about often, building our franchise, generating cash and reducing our leverage. Using this lens, I'll start with a discussion of 4Q results. I'll then recap fiscal '26, then we'll move on to the outlook for the current year. All my statements that follow in this section will reference the fourth quarter of fiscal '26 compared to the prior year period of the fourth quarter of fiscal year '25.

Awards were about $1.3 billion, up 9%, led by Communication Services with Maritime, Governments, SATCOM and Aviation the drivers of the growth in the quarter. Backlog was a record at approximately $4.1 billion, up 15% with double-digit growth in both Communication Services and DAT. Revenue was $1.2 billion, up approximately 2%, reflecting 12% growth in DAT, partially offset by a 2% decline in Communications Services. Net income was $59 million, an improvement of $305 million, principally due to a gain from the sale of our equity investment in Navarino, lower G&A expense mainly from last year's impairment charge and lower interest expense. Adjusted EBITDA was $370 million, down 1%, which primarily reflect the incremental R&D related to growth initiatives and higher-than-expected impact from the government shutdown.

Capital expenditures rose to $298 million, up 20% as we invested in the completion of our ViaSat-3 system. Importantly, we generated $24 million of positive free cash flow in the quarter despite the CapEx noted above, which was the highest CapEx quarter of the year. In March, we completed the divestiture of our interest in Navarino. Navarino's results previously flowed through the equity and income line item on our income statement and into the adjusted EBITDA we report. We received gross proceeds from the sale of $203 million in the quarter. Our net debt relative to trailing adjusted EBITDA sits at 3.1x, improved sequentially and substantially versus the prior year period.

Now let's turn to some segment highlights. In Communication Services, awards of $877 million increased 13%, driven by strength in Maritime, Government SATCOM and Aviation. Revenue was $810 million, down 2%. Growth in Aviation and Government SATCOM was more than offset by a decline in residential fixed broadband. Aviation revenue grew 11%, ending with approximately 4,450 commercial aircraft in service, a 10% increase year-over-year, combined with higher average revenue per aircraft, with units flowing in and out of our aircraft unit backlog each quarter. On a net basis, this quarter's new aircraft awards were positive, but we had a healthy number of installations. At quarter end, the net of these factors left our commercial aircraft unit backlog at 1,000. We expect these units to be put into service with our IFC systems under existing customer agreements.

Our Government SATCOM revenue grew 5%, reflecting good growth with U.S. and international governments. Government awards and backlog were up 18% year-over-year, and we drove revenue out of IDIQ contracts in place. We didn't quite hit our objective of returning Maritime revenue to growth. Revenue declined 1% as vessels and service were down. We ended the quarter with about 1,350 NexusWave vessels in service, 1,500 more in backlog. Demand for NexusWave remains strong, and we have more work to do to accelerate installations. I'll talk more about the outlook in a few minutes.

Fixed services and other revenue was down 24% as U.S. fixed broadband subs continue to decline. We ended the quarter with 130,000 subscribers and $113 average revenue per user. Communication Services adjusted EBITDA was $287 million, down 6%, primarily driven by the decline in fixed services and other, in combination with higher investments in R&D, including multi-orbit aviation terminals.

Let me turn now to Defense & Advanced Technologies performance during the quarter. Our DAT segment awards was $403 million, increased 2%, driven by growth in Infosec and cyber defense. Award growth can vary quarter-to-quarter, and we continue to see a very strong growth environment for our DAT business. DAT revenue was $361 million, up 12%, driven by strong growth in Infosec and cyber and space and mission Systems. Infosec and cyber product revenues were up 24%, driven by growth in our high assurance encryption products.

Space and mission systems revenues were up 16%, led by growth in restricted payloads. Tactical Networking revenues were up 4% year-over-year. Adjusted EBITDA was $83 million, up 20%, driven by revenue growth and positive operating leverage, partially offset by incremental R&D investments.

Let me now make a few observations about our performance across the year. My statements in this section will reference full year fiscal '26 as compared to full year fiscal '25. For fiscal '26, we delivered revenue of $4.6 billion, a GAAP net loss of $34 million and adjusted EBITDA of $1.55 billion. Cash flow from operations was $1.6 billion or $1.2 billion, excluding the lump sum payment from Ligado, with CapEx of just under $1 billion, resulting in free cash flow of $597 million or $177 million excluding the lump sum payment last quarter.

We achieved our financial guidance for the year, but for Viasat, fiscal '26 was about more than making the numbers. We needed to position ourselves for future growth. We didn't get as far as we initially hoped in some areas, but made solid progress in a number of others.

We didn't quite turn the corner on Maritime revenue as we hoped we might. We came close, but now believe it will take until later in fiscal '27 to see that inflection point sustain. More impactful, we didn't see stabilization in our fixed broadband business. But we made great progress on getting our satellites launched and successfully advancing towards service entry readiness.

Aviation and government SATCOM had another strong year, while our DAT team delivered an excellent year of revenue growth and also landed critical awards that underpin continued growth in the years ahead. From a cash flow point of view, our teams delivered in a big way. Not only did we succeed in not burning cash, we generated almost $180 million with positive free cash flow in each of the last 5 quarters.

We also delivered on the third pillar of reducing leverage, cash generation. When combined with inflows from Ligado and the sale of Navarino, allowed us to pay down $743 million of debt while growing our available cash balance, bringing net debt to $4.8 billion and our net leverage ratio down to 3.1x. We've made remarkable progress on our goal of less than 3x leverage, and I want to specifically thank the Viasat team for delivering on that mission and reducing our financial risk so profoundly.

Now let's turn to the outlook for fiscal '27. We expect revenue to grow mid-single digits with Communication Services growth of low single digits and [ that ] growth in the mid-teens. We expect our adjusted EBITDA to be flat to up slightly and backloaded within the year. Two things of note are declining impact from the intellectual property settlement of a few years ago in our Advanced Technologies and other business and the removal of Navarino EBITDA following the recent sale. In combination, these items are headwinds to fiscal '27 EBITDA with impact of about 2 percentage points versus fiscal '26.

Let me add some additional segment color, starting with Communications Services. Within Aviation, we expect revenue growth as ARPU expands with more of our customer base migrating to full fast free offerings. As Mark said, however, we expect the rate of that growth to moderate. We expect maritime vessels to decline modestly but expect significant growth in the NexusWave installed base that offers customers more value and drives higher ARPUs. We expect stabilization of our fixed broadband business to occur as ViaSat-3 enters service, but expect continued declines until that time. We expect another year of growth within government SATCOM.

Given the secular growth in defense and our position in key markets, combined with our technology leadership, we're looking for very good growth across DAT. We expect another year of strong revenue growth from encryption and accelerated growth from Space and Mission Systems and tactical networking. The teams delivered some big wins in fiscal '26, which has driven backlog up 23% year-over-year with even more wins very recently.

As Mark highlighted, just last week, we were selected as 1 of 2 IDIQ award by the U.S. Space Force Space Systems Command to deliver space vehicles in support of the Protected Tactical Satellite Global or PTSG program. This is a very exciting program and the win is indicative of our ability to compete for and earn the business of our customers in the most important high-growth markets.

We expect fiscal '27 reported CapEx of $950 million to $1 billion with a modest increase in our cash CapEx from $760 million in fiscal '26 to about $850 million. The balance will be in capitalized interest, which will decline from more than $200 million in fiscal '26 to $125 million to $150 million in fiscal '27. Please note the reduction in capitalized interest will be part of a migration of cash interest out of CapEx and into operating cash flow. This change does not affect cash flow, but it is a headwind to our cash from operations versus the prior year.

Our CapEx excluding the capitalized interest noted above for fiscal '27 breaks down as follows when compared to fiscal '26. Maintenance is flat at about $400 million. ViaSat-3 is down $150 million to about $50 million. Success base is expected to increase from $50 million to $150 million. And about $225 million to $250 million is for growth CapEx with an emphasis on future satellites other than ViaSat-3 as well as the DAT segment and government SATCOM. Inmarsat CapEx is expected to be $325 million and is embedded within the consolidated numbers I just guided to.

The year-over-year changes are driven by an approximate $100 million reduction in ViaSat-3 spend, offset by higher success-based spend that comes primarily from Maritime and NexusWave, along with higher growth spend in DAT. We've decisively turned the corner on free cash flow and expect another year of similar free cash flow or about $180 million.

In terms of leverage, while we made great progress on our goals, we have more work ahead. The delevering we've achieved this year has meaningfully improved our credit profile. We've seen a strong response in the credit markets to that improvement, and we are evaluating the possibility beginning to reshape our capital structure.

We made a lot of progress in fiscal '26. We've turned the corner on free cash flow, brought leverage down meaningfully and expect that we'll soon bring a lot of ViaSat-3 capacity and capabilities to market that will help us deliver for our customers in key growth markets. As we'll soon transition a lot more capital from unproductive to productive, we're working on driving our returns on capital higher. Returns on capital have always been at the heart of our financial journey that you keep hearing about. Franchise and earnings growth drive the numerator of that equation or returns higher. Free cash flow and asset sales reduce invested capital and improve the denominator.

We know we have a lot of hard work in front of us to get our earnings on to a higher growth trajectory. We achieved a lot in fiscal '26, and we'll continue to build on that foundation in fiscal '27. We're excited for the opportunities ahead and focused on doing right by our customers. The Viasat team is up to the challenge, and we thank you for your continued support as we work to make fiscal '27 an even better year.

With that, I'd like to hand the call back to Mark.

Thanks, Gary. So [ Kara ], I think now we'll be happy to take some time with some questions.

[Operator Instructions] Our first question comes from Edison Yu from Deutsche Bank. Please go ahead.

I wanted to ask first on Equatys. Can you remind us, how do we think about the value capture you're looking to provide? And what are you really seeking from some of the partner discussions you're having? And an example would be, are you looking for someone to provide the satellite buzz? Are you looking simply for customers? Just trying to get an idea of what the role of all the various parties here are.

Okay. Okay. So first of all, the basic idea on Equatys is shared infrastructure, which is really carried over from the terrestrial mobile networks environment where originally, for terrestrial operators, they each have their own tower networks, but they were all doing the same thing. Single tower could support spectrum from multiple operators that reduced costs, and it really didn't affect the operator's ability to differentiate since they're using the same network.

So the fundamental idea of Equatys is to share a network infrastructure. And then to -- think of it as Viasat and Space42 each as mobile satellite services operators rather than each having their own satellites, each of which only lights up a relatively small amount of spectrum. We can have common satellites that light up both of our spectrums, and then we can each perform our -- or deliver services with a lower cost basis, makes it less capital-intensive, good for investors, lower cost we can pass on to our customers, good for customers, too. So that's the basic idea.

The other thing that is interesting about it is given that what we're partnering on is a low earth orbit or LEO version of it. Remember, the satellites are roughly -- think of it as roughly evenly distributed around the world. So 1 of the opportunities to further improve cost efficiency and cost savings would be to invite other partners who may be regional operator, Viasat global Space42 is not quite global, but they cover a lot of the world, but there are also a number of regional players where if they had their own LEO system, would -- only a small portion of the satellite would be over that region. So if they share ours, it just reinforces the cost savings that we can achieve otherwise.

And the other opportunity is to coordinate spectrum in a way that allows more spectrum to be brought into use. So those are the fundamental reasons to create an entity like Equatys, which is -- I think that's part of what the name is intended to apply is that it's an unbiased shared common infrastructure, similar to what you'd see in the terrestrial business.

So that -- so the 1 set of partners. Think of it as a multisided market, 1 set of partners that we're talking to are other regional operators. They could have terrestrial spectrum or they could have satellite spectrum that would benefit from sharing in that shared infrastructure because they have other parts of the value chain themselves. So that's 1 set of partners that we're looking for.

We also are looking to make sure that the infrastructure that we're building in the space infrastructure is as cost effective as can be. So Viasat is really providing the lead network payload technology. Most of all of the networking, beam forming, those things. And we are open to partners for other parts of the infrastructure value chain. That could include launch, buses. Those are probably 2 of the primary ones. It also could include potential low-cost manufacturers or manufacturers who are associated with given geographic regions and would be preferred by certain -- by their regional spectrum holders or service providers. Those are the flavors.

We're also -- we also think that Equatys as a stand-alone company is going to be a good investment. It should have really good opportunities for growth as we add partners and the market for these services grow due to things like autonomous vehicles, whether land, sea or air, direct-to-device, as well as the traditional mobile satellite services that we provide now. Does that help?

Yes. Yes. Just 1 follow-up. I appreciate all the color. I believe in the shareholder letter, you did mention that you're aiming to deploy services in 2029. So I guess, for the bus and for the launch, when do you start needing to actually need to nail those items down, like selecting a bus provider, getting launch -- getting on the launch benefits? Because the guys out there are pretty full. So when do those decisions -- those kind of big decisions on those 2 things need to be made by?

They're being made now. And I think what Space42 has recently disclosed, and we support that, is there should be a follow-on our investor conference that we'll have that will just focus on Equatys so that we can answer these more detailed questions. But we're just waiting for -- to finalize all of the associated basic agreements before we do that, before we disclose those details.

But we do have. But obviously -- I think your point is, yes, if we're going to be in service in '29, we need to have those things in the works now, and we're aware of that, and we'll give more detail as soon as those agreements are concluded.

Next question comes from Brent Penter with Raymond James. Please go ahead.

A lot of detail in the letter and opening remarks. You talked about how you stand to benefit from vertical integration and DAT's role as a technology provider, including having a role in Equatys. Can you update us on where the strategic review of the DAT business stands and how those benefits could be maintained should you decide to go down the path of a split?

Okay. Yes. I mean, I think, first of all, we've had lots of good input and evaluation about the potential for a spinoff. I think that the -- let's say, the core element of that is that there's a good growth opportunity in defense and these advanced technologies. And the real issue is can -- is it an appreciating asset. If it's an appreciating asset, it's going to grow, it's going to have value either within the company or without. There may be a little bit of a -- certainly could be a little bit of a difference or some difference based on whether it's a stand-alone equity or part of a larger company.

But the core issue is, is it an appreciating asset. And right now, we're in an environment where dual use is really important from a commercial and military perspective, but so is the element of both having technology and the services component that goes with it. And it is interesting that both teams that won on PTSG do have the ability to both operate as well as develop the technology.

And what we see, if you look at what the long-term goals are for PTSG, it would be substantially larger fleet of much smaller agile satellites. And so there's certainly this element of both the dual use and the vertical integration between technology and services. And it's a big potential franchise. I mean, that's a -- it's a multibillion-dollar opportunity. So at least as long as we can see that we're going to be better positioned in this element of Space and Mission Systems by keeping it within the company, then I think we'll do that for some period of time. But -- so think of it as spin-off is more of a one-way door while we have it, and it's growing, it still gives us optionality.

Okay. Okay. And then another kind of strategic question. The letter in your opening remarks talked about how spectrum holders like Viasat and Space42 will maintain their spectrum licenses and obligation in Equatys. We've seen some very high valuations for spectrum recently. So I just want to make sure if the opportunity arises for some higher shareholder value use of your spectrum, what kind of flexibility does Equatys give you? And how would you approach those opportunities?

Okay. From the Viasat perspective, the core issue is the value from developing the spectrum or bringing the spectrum to market greater than or equal to the value of transacting the spectrum. So in order for us to have -- you'd have a good sense of what the alternative value is. What we're looking for is a vehicle to bring it to market. And that Equatys represents that.

It's -- and we think it's very capital efficient because Equatys doesn't solely depend on us bringing it to market. It's basically going to serve multiple different spectrum holders. I think that makes it attractive as well. And it also makes it attractive to us as a cost-effective way to be able to bring it to market.

The other thing is because the spectrum resides with us, we have the opportunity to -- think of it as it doesn't have to be binary. We don't have to sell all of it, nor do we have to bring all of it to market. We can look at either different geographies. We can look at different market segments and make sure that we're getting the best value for our shareholders through some -- think of it as some combination of transacting and developing, which could be all of either one, but doesn't have to be.

And I guess the other point I would make is it's a very dynamic market. And things are playing out. But right now, it seems -- and we can see this both from looking at transactions in the market and looking at what the demands are that we can be really well positioned to develop it. So as long as we see that, we can continue down that path instead of optionality.

Our next question comes from Sebastiano Petti with JPMorgan. Please go ahead.

Maybe going back to Equatys real quick, following up on Edison's question. So Mark, is there anything you can perhaps share about capital structure or the funding mechanism? And what Viasat may -- help us think about the contribution perhaps or the investment that Viasat might make above and beyond spectrum? Because that's kind of a little bit of a debate out there in the market as we think about the value unlocked from Equatys. Are you bringing the spectrum to market -- are you bringing the spectrum to the JV and some of the expertise from a technology perspective, but should we also consider perhaps, contribution from a capital perspective as well coming from the Viasat balance sheet?

And then thinking -- maybe shifting gears to aviation for a second. You talked about the growth slowing because of competition. Any help in terms of -- is that fully on the commercial aviation side? What are you also seeing on the BA side? And Gary, I think in your prepared remarks, you talked about -- the backlog is going to be installed from existing commercial agreements. Help us think about what's the posture of current RFPs in the market now and your expectation for jump balls, I guess, from here?

We'll cover both of those. First, on the Equatys side, we will discuss the cap structure more in detail when we conclude the agreements. And we think that, that -- Equatys will be -- ultimately, it will be financed through some combination of equity and debt. We'll talk about that, what our plans are and what we think the overall infrastructure sort of the range of budget will be when we conclude the agreements. And that shouldn't be that far away.

The other thing I would like to just clarify is, we're not going to be contributing spectrum to Equatys. We will we can play our spectrum through Equatys. We will play some of our spectrum through our existing and expanding GEO fleet as well. So think of it, Equatys -- but really, Equatys' value proposition is to investors, including us, to the extent we participate in the cap structure is its value proposition is that it's the lowest cost way for anybody that wants to play spectrum through space. It should be the lowest cost way for them to do that. And there's an opportunity to grow the initial constellation substantially to meet the demand as it materializes in these mobile satellite services and D2D markets. So we'll give more clarity on that when we do the follow-up discussion.

On the aviation side, think of it as there are several factors at play. First on commercial aviation. What we're seeing is more and more of the airlines that do have in-flight connectivity are opting for some form of free model or third-party pay model which greatly increases the take rate, right, for user penetration. And so that tends to lift the average revenue per plane.

On the other hand, what we're seeing is with increased penetration and -- increased penetration and increased usage on improved passenger basis takes a lot more bandwidth to play. So I think that you're getting the ViaSat-3 in service, certainly makes us way more competitive on that front.

The other thing that we're seeing is that in-flight connectivity is a really popular feature among passengers. It influences passenger preference for airlines. So the number of planes that are being outfitted is growing relatively tactically. So those are the 3 factors. I think that what we are anticipating is that just what we said that we'll see net good growth, but probably at a growth rate that was lower than it had been going into this year, partly through more planes. And there will be some -- we'll find out what the market price is through competition, through this combination of increased penetration, increased per capita use. That -- those are the factors.

Sebastiano, I think you also had a question on backlog. But before we get to it, just to clarify on Equatys, we're obviously still in an active discussion. We don't want to be negotiating that in the public.

What we have said is well, we also want to avoid reading too much into snippets. When -- as Mark described, when we're ready, we'll provide a full picture that will give you a good sense of it. What we have said in the interim is that the impacts will be consistent with the financial journey that we keep talking about. So that part, we can say now. You, I think, had a question on backlog?

I don't know, I was going to just talk about the general aviation part of it. On the general aviation part, I think that what we're expecting is overall, the opportunity is while the high-end segments of the general aviation market are pretty well penetrated. That would be certainly global, like global, long-haul, large jets. I think that we'll see greater penetration among lower-tier jets. But again, it's going to be a more competitive market than it has been. We think -- we still think there's growth opportunity, but there's just going to be more competitors involved. I think those are the main dynamics there.

Our next question comes from [ James Frazer ] with New Street Research.

Another question, if possible, please, on Equatys. Can you give us an update on your thinking on how much of your existing L-band spectrum you actually think you can use through Equatys for D2D services without kind of affecting your existing operating business?

So that's to be determined. There are a couple of factors that are involved. One is with -- when we augment our GEO satellites with lower Earth orbit satellites, we'll be able to achieve much higher power flex densities on the ground. These higher power levels will let us get much more bandwidth through than we can now. So we could deliver the same services with -- using only a fraction of the bandwidth we currently have.

What we are expecting is that in some cases, people -- the market will grow as a result of the ability to deliver higher speeds and more bandwidth for unit price. And so we'll just have to see how that plays out in the market. But from our perspective, these mobile satellite services, a, it's is part of our public interest obligation. So we're certainly going to prioritize them, and it's a good use of our spectrum and our assets. It's a good return for shareholders and customers. So we're likely to prioritize that.

However, the total bandwidth consumption in the D2D market could be very, very large. And so we see that as a way to bring all of our bandwidth into play. The other factors I'm sure you're probably aware of is depending on the final 3GPP specifications and the spectrum chunks that the mobile devices support, we'll end up with -- as an example, right now, people are looking at spectrum and contiguous 5 by 5 megahertz chunks. So that may turn out to be a way that we segregate the spectrum. We're -- so the amount that goes into spectrum fragments that are consistent with the device specifications goes towards D2D, and -- but all the rest of the spectrum certainly can be used for the mobile satellite services. That's another way for us to allocate it. But ultimately, it will be driven by market demand.

Got it. And actually, following up on that point and continue on spectrum, I'd love to just hear your thoughts on the announcement yesterday out of the EC with regards to the S-band. Do you -- would you like to kind of reapply for those spectrum rights beyond 2027? I think you're now going to be limited to 10 megahertz in the S-band. Would you bid for the maximum you can get there? Or do you think there's now actually kind of increased scarcity in the L-band so maybe it doesn't actually make sense to reapply in the S-band and you can maximize more value through the larger contiguous channel you've got in the L-band?

So right now, one of the things that we think is a strength for us is through the Inmarsat acquisition, we have S-band in Europe for what's called the European Aviation Network. One of the good things is that we brought that to market. That we've actually followed through, built the infrastructure, operate the service consistent with what the application was. It's on -- it's on hundreds of airplanes now. It is a good fit for the short-haul market in Europe with smaller -- with a lot of smaller planes compared to some of the higher frequency bands.

The main thing that we're seeing now is that network would benefit from being modernized, that is being able to support the same things that we described are going on in aviation in general. More passengers per plane, more bandwidth per passenger. And so that is a really good application, where the Equatys constellation could modernize that.

So we absolutely will be applying to extend it. I think the -- just to be clear, the -- currently, the spectrum is divided into 2 holders, each with 15 x 15. They described holders having 10 x 10 or 5 x 5, some combination of those chunks. So we will apply. I think we -- because we're operating the service now with European partners, I think we have a good chance of being extended. I think the guidelines suggested an increment of another 7 years. I think that certainly, there's going to be a public benefit component to their decision, and I think we're going to be a good candidate from that perspective.

Our next question comes from Justin Lang with Morgan Stanley.

Just one on DAT. I think you called out a few potentially significant opportunities that could mature in the first half of your fiscal year. Can you just talk a little bit about what those opportunities are and what we should watch for? And then I was -- just to clarify, was the suggestion earlier that Oracle data centers could represent 1 of those opportunity areas? Or is that really longer term?

Yes. Okay. So the DAT -- the DAT opportunities that we have are really relatively big opportunities across the board in the 3 main areas that we report. That would be the cryptographic security issue area, space and mission systems and tactical data networks. We're seeing opportunities across each of those.

The tactical data networks, it's -- a lot of it is international opportunities as well as opportunities to apply those ground networks to autonomous drones and autonomous vehicles. Those are 2 of the good opportunities there.

One of the things that we pointed out in the past is that there is kind of an accelerated program in the U.S. government to upgrade its cryptographic infrastructure communications, encryption infrastructure. The big issue there is whether or not we can beat the schedule, and we think we're doing well at that. Clearly, there's demand in that area.

And then the third area is Space and Mission Systems. And the big opportunities we're seeing there are dual-use applications of the commercial systems that we have and are adding to our fleet. And then also the government-specific programs that we're seeing in areas where we compete well. For instance, PTSG is a really good opportunity.

And then finally, the other area that we do put in DAT as well would be new technology development or technology sales that can cover commercial or scientific missions. And so 1 of the programs we've talked about in the past that still is -- seems to be a really good opportunity for us is the Moonlight program, which is the Lunar Relay program. Certainly, interest in the Moon is definitely increasing, both in the U.S. and in Europe.

And then another 1 would be commercial satellite programs that would use a new generation of technology. And that includes at L- and S-band as well as Ka-band. It's a target -- I describe it as a target-rich environment for us across the board of those areas.

Our next question comes from Mike Crawford with B. Riley Securities. .

I'd like to turn back to some of the technologies and areas of expertise that you say you have that can help enable data centers. I mean, solar power, thermal, radiation hardening, obviously, with your ability to do the beam forming and reuse the spectrum here, you're going to -- the last 2 orchestration in broadband terms. But I'm not aware that you have like solar power IP, like, for instance, something that could help enable getting a 200-kilowatt satellite for only $1 million is what some people think is required for compete in space. Can you just maybe flesh out some more of these capabilities you have?

Okay. Good. Yes. And just to cap off of last question because I didn't address it. We are not going to be building space data centers ourselves. The real opportunity for us is on these overlap technologies. And so I'm pretty sure that ViaSat-3 at 25 kilowatts of -- that's end of life power generation that I think is the largest commercial satellite ever. And the big -- and it's actually so far at the beginning of life, well in excess of that, specification. Some of this issue about what the peak power will be is going to depend on beginning of life, end of life and how long the life is.

But that is -- that's a big solar structure. And different parts to it. One part is just having a large structure. Another part is building space vehicles that you can stabilize and still maneuver when you have these very large structures attached to them. So that has implications, not just for the solar generation itself, but for any -- or certainly for any other deployables on the space path. And the overall -- our structural approach to the space path. So we do have good experience there.

We basically did virtually all of the thermal dissipation issues on that satellite. And that is probably -- that, again, is 1 of the most challenging aspects of it. So the opportunities for us are really to work with partners who are probably more interested in operating the data centers but are willing -- are interested and willing to develop technology that we can then deploy into space to prove these things on communication satellites. That's a big opportunity for us. So we're seeing opportunities from both government and commercial organizations that are interested in that. And 1 of the good points on put in for working with Space42 or their parent organization is G42, which is an AI company. So there's real interest in that community for some of these enabling technologies that we'll be able to advance.

This concludes the question-and-answer portion. I will now turn the call back to Mark Dankberg for closing remarks.

Okay. So I know that we've covered a lot. Thanks, everybody, for your attention, and stay tuned for a follow-up [ Bob ] as we described as if we can -- once we get all the Equatys agreements wrapped up, which we expect to be relatively near term, and we will follow through on that. We'll have a follow-on conversation just focused on Equatys. Thanks again for joining.

This concludes today's call. Thank you for attending. You may now disconnect.

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 Earning Results Conference Call. [Operator Instructions]

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 2016 (sic) [ 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.

That, and thanks for joining us today. I'm Mark Dankberg, CEO and Chairman of Viasat. With me, along with Lisa, we have Gary Chase, our Chief Financial Officer. As always, we encourage reading the shareholder letter and referencing the slides we posted on our website earlier this afternoon for more details.

I'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. And that 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 tech. 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 tech front, there's 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 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 growing 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's 2 elements to that. Defining a common small, multi-orbit and multi-band individual satellite architecture that can be adapted to either broadband, KA 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 nonterrestrial 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 that 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.

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 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 nonterrestrial 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 delever 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 impact from the government shutdown. As I mentioned earlier, 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're 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 is 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 delevering 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.

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?

Yes. Yes. The Flight 3 will probably have more like a 2-month orbit raise as opposed to more like 100 days for Flight 2. So that will get -- that's kind of the dominant factor that orbit raise in terms of time from launch to in-service.

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. Okay. Makes sense. And the progress goes along there? And then kind of the wacky question then is and there's been a lot of stuff going on in space, what are your thoughts about data centers in space and AI with space? Just trying to think -- as you think about you want to target fast-growing segments and profitable segments of space, where do those fit in your calculus?

Okay. Yes. So on the data center side, I think that the entire premise really hinges on power generation in space. That's the ultimate. That's what -- the ultimate test will be is, does it ever make sense that you can generate power more cost effectively in space than you can get it anywhere in boundaries, so I think that -- and that's an open question.

I think that along the way there, and this is what I think other people have identified as well, kind of the two of the big swingers there are going to be how efficiently can you generate power in space from solar cells and then how efficiently can you dissipate the heat from all that power off-board satellites. Those -- so from our perspective, the work in those areas is really helpful because it improves the productivity communication satellites as well.

I think there's another aspect that does get some coverage, but probably not as much as it should, which is what is the orbital debris mitigation plan or sustainability factors associated with the amount of mass that's required for those data centers and the surface area for those data centers? And does that provide a gate or does that create a gate or a limit to the amount of power you can generate at least in near earth orbit.

From our perspective, we don't have any plans to be in the data center business. Everybody does note that if you want to be in the data center business in space, you're going to need a lot of communication capability to and from that. And so those -- that part we're certainly interested in. And we're certainly interested in partnering with others that might want to actually put the compute 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?

The 2 areas I think if you look at it from a technology perspective, think of it as the broadband sector, which is kind of Ka-band and higher frequencies that are being used for broadband communications. We see that there has been, for the last 10 years, lots of demand growth as unit prices come down, get more speed, more volume per unit cost. And those markets have grown. We still think there's quite a bit of growth in there and that we can certainly compete really well in that space.

And then -- there's the whole trade-off between fixed and mobile uses. The mobile uses, certainly, we see lots of growth in those parts. And especially given what's expected to be a substantial increase in autonomous mobile platforms. The other area from a technical perspective is going to be the L-band or the low band, people refer to them as mid-bands. And that market right now, if you look at analysts -- a range of analyst estimates, that could be one of the single largest markets in the satellite communications space. Within those 2 categories, within the broadband market in the L-band market, we really see number of vertical markets in the broadband market, certainly, mobile platforms is one of the biggest and most interesting and within that market, the government applications of that is really a big opportunity.

And one of the big trends we highlighted there, we think, is going to be sovereign ownership, that is international and domestic applications. So that's going to be operating those networks, designing the network, building the networks, but a lot of them, we think, ultimately, will end up under control of individual countries as opposed to outsourced to private enterprises when those countries are so -- going to be so dependent on those -- that type of communications for national security.

There's also the other thing, we see coming in the mobility market is that just as a kind of consequence of some of the geopolitical conflict around the world, there's large parts of the earth that are just closed off to access to navigation and communication services. And we think those services that shipowners, airplane operators use, they're going to want to be able to navigate and communicate through those, not just -- not necessarily over individual hotspots, but in the surrounding areas that often are intended.

So we see big opportunities that are kind of a mix of commercial and government in that broadband mobility area. And the big difference between the L-band mobility area and the broadband areas, think about L-band will have higher unit airtime costs or lower speeds just because there's way less spectrum to work with. But the antenna that you can use for that is going to be really small, very small omnidirectional. That's like conventional cell phone, IT devices, watches.

And in the history of satellite communications one of the main barriers to growth has just been having people with terminals capable of working with your satellites. And so the big thing that's happening in this D2D NTN interoperable network space, well, there are going to be literally billions of devices that are connected, and as long as you can do the handovers quickly and well, we think as long as there's interoperability between the terrestrial and satellite domains, well, that's going to be a big market.

So those are -- and that's going to be for consumer use, enterprise use, it's going to be on autonomous vehicles. There's going to be some question about how quickly each of those markets develop. But ultimately, just like in terrestrial, having spectrum that works with those devices is going to be approved requisite to being able to participate where we feel that we've put ourselves in a good position as one of the very few operators that really has access to both the broadband, microwave frequencies and the mid-band L-band frequencies and can deliver that continuum of service. So that's -- in a nutshell, that's where we really aimed at with our 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.

I guess, Mark, related to your response there to Rick's last question, just thinking about -- in the past, you've talked about a tower model as it pertains to direct to device. I mean, can you perhaps maybe elaborate on that? I guess, what gives you confidence that we'll see 2 plus 3 D2D players that can perhaps emerge over time, particularly without the requisite spectrum that's out there, right? I guess that's kind of my first question. I think maybe the sovereign angle probably answer part of that.

And then relatedly, I guess, to your -- to the end of the prepared remarks there, just kind of thinking about Equatys in the L-band spectrum, or just your overall spectrum ownership. I guess I understand growing the value of the franchise, but we're also at a point in time now where perhaps spectrum might be a little bit -- satellite spectrum is in vogue and very hot right now. And so just the considerations there of -- is it about controlling your own destiny and maintaining option value long term?

Okay. Yes. So for the first question, one is there is a fair amount of satellite spectrum that has been allocated to mobile satellite services and has been for like 40 years. And those satellites serve real and valuable functions for people that don't have access otherwise and/or depend on the weather resilience of those frequencies compared to the microwave stuff. So Ka and Ku band is great for 100 megabit or plus higher speeds. That's a really nice feature.

But the fact that it is highly attenuated in storms is a big issue for maritime as an example, and for some other users as well. So the spectrum has been allocated. There are multiple players that have it. Often, countries who use it for national security purposes or who worry about having literally millions of people in their country with devices that can completely bypass their terrestrial infrastructure are going to and have been asserting their requirement that operators in those countries to comply with national telecommunications regulatory laws.

So we think that, that's just -- that there are good reasons for that. They're not technical reasons. They are more national security sovereignty reasons and other safety reasons. So we think that those are just going to be requirements to play in the market at a large scale in many parts of the world.

So we -- one of the reasons we're interested in Inmarsat in the first place was it was formed as an international organization to solve some of these issues around mobile satellite services and the need for that. And it still has -- and we still have really good relationships with a lot of countries around the world where we can work through these problems as we evolve the capabilities. And so that is one part of the issue about why we think there will be multiple players.

The first part of your question is related to some extent, which is the issue about high count. So I think it's not always well understood that the thing that creates the potential of communicating with an off-the-shelf terrestrial cell phone is increasing the power levels that are allowed for mobile satellite service. And this -- we're talking about power levels on the surface of the earth. That doesn't really matter what altitude you're generating them from. The big issue, one of the issues that always has been an issue and issue in basically all wireless spectrum uses is how high of a power can 1 operator reach or radiate at without interfering with neighboring frequencies.

And so that has been one of the main issues that's probably going to work more in the U.S. than others, and there, a lot of focus has been on through satellite emissions that can interfere with terrestrial cellular. Of course, anybody that wants to do it from satellite at these power levels is also going to have to coordinate with other satellite operators.

So that's one of the things that we've been really focused on. And just to be clear, the 3GPP standards, which is what the chip designers and the handset designers are working towards the infrastructure. Everybody's working to call out these higher power levels that would be required. With higher power levels required for the broadband services versus the narrowband services that are already in service and that we are participating in service for right now.

So I mean these are kind of the same fundamental issues that all satellite operators had to deal with for decades. They're not going away. I think there are solutions to them. We know what our constraints are in terms of interfering with neighboring operators, and we are designing our network in a way that it both achieves what's required in the 3GPP standards and does not interfere with neighboring users. And that is an artifact both of our system design and who our neighbors are. So that's how we're doing it. We think we have good spectrum for that purpose. And we think we understand the issue as well and are addressing it.

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?

Okay. What we're looking to do with Telesat is basically recreate what's been working in the maritime space in a multi-orbit system. And in the maritime space, there's a lot more room onboard ships and it's easy to put on multiple antennas. And so for what we -- for the NexusWave service, which has grown and has had really good market reception. And we're getting good adoption and financial results over time. And it's been in use for about a year. So we've got good field results. I mean that's -- we're using a Ka-band broadband service, which uses our GEO satellites plus Ku band LEO. And we do have 2 different antennas.

With our new aero services, we'll have a new single antenna that can operate both LEO and GEO simultaneously, effectively. So we'll do there, just what we're doing in the maritime space, we're -- essentially, we're using the GEO satellites to provide the bulk of the bandwidth and LEO satellites to manage traffic that is latency sensitive. So what you get is you get the cost benefits of GEO, which not all GEO satellites are the same. We've been really focused on putting bandwidth where there's demand at very low cost per bit and being able to move it around to follow these mobile platforms, all that stuff works well.

The big thing we're going to do in aero is instead of having 2 antennas, we have 1 antenna that can do both LEO and GEO, at the same time, we route -- primarily route the latency-sensitive traffic -- excuse me, over LEO. And the vast majority of the traffic tends to be video, which is not latency sensitive at all, very well suited for GEO. So that's the basic principle behind that.

I think that the last Telesat is that they expect to start to be launching their LEO satellites by the end of next year. And so that's when we'll be able to offer that service. The other point I'd make is even our existing Ka-band aero terminals are capable of operating with LEO. They're just not capable of doing both at the same time.

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 time frame. What's the time frame 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?

I think -- so we've had steady growth in pretty much everything except for residential has been a headwind for us. Maritime as we've seen slight downturn, but we're expecting that based primarily on the NexusWave service to be back to growth again by this quarter. So we think we'll see good continued growth in those services plus growth in the government services.

On the residential side, we're not going to give the projection right now, but it will probably take a few quarters for us to get terminals out in the field and to see that first, what we're going to be aiming for is that we slow the rate of decline, and then we think we'll level off and be able to grow that business a bit.

Mark had said in the past has referred to it as being paced by the demand. And 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?

No. I mean you're on the right track in terms of the issues that we need to resolve, right? And so that is part of what we're going through both from a capital structure perspective, from a technology perspective, prospective potential licensing or other cost agreements, that's what we're going through. And those would be the factors that it's -- we're not going to speculate.

I think at this point, there's just too many ways to go about it. We're not -- I think we're trying to make sure we do a really thorough evaluation and it may evolve over time. We'll be able to speak more about it after we've gotten through these gates. But the whole thing is -- so we are very focused on shareholder value. We're not going to dismiss things that will drive shareholder value and -- but we also -- we're going to make sure that whatever we end up with has a -- we think has a good competitive position in the growth markets, and then can get -- the shareholders can get the benefit of those things.

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 may perhaps threatened by emerging competitors?

We're seeing good growth in that business. We think we're -- how I'd put it is I think that our competitive position is probably improved a little because of the urgency of the problem and the market size has improved a lot because of the urgency of the problem. So we're pretty bullish 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 like 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, 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. And one of the benefits of optical links is it's very easy for -- to support large numbers of different operators, each with large numbers of satellites without interfering with each other that it's going to -- at some point, if there is to be a big market for data centers in space, optical space to ground links, it's got to be a significant part of it.

Okay. And separate topic. I know you're working in the pipeline on a sort of micro or mini GEO satellite. Wondering any updates on that? And is that something you think could become kind of more prevalent in the future?

Yes. Yes. I think basically, our -- one of the points I would make is we've -- I think we've been holding our own and competing pretty well without having any new broadband satellites, while competitors have launched thousands and thousands of satellites. We've really been working -- been able to deliver competitive performance and pricing without having a lot of new bandwidth in the space. We're going to get a lot of new bandwidth and space this year. I think that's going to help our business a lot.

But we know that given the market growth and the consumption growth, that we're going to want follow-ons, and we're going to want to follow on some specific areas. So the strategy that we're working on, and I think we'll be able to disclose more of this over the course of this year, once we get through getting the other satellites in service is to come up with satellites that cost a small fraction than what the current ones do, but have even better unit productivity, so that's what's going to allow us, we think, to maintain and improve our competitive position in the satellite broadband space.

And so we have -- we're not going to end up with large multi-hundred million dollar single investments that are where we have big exposure for large capital buys. What we'd like to do is to have much, much smaller satellites that are much less expensive, that have kind of sort of pretty comparable capacity and we can put wherever the hotspots are.

And then I think that's going to drive -- one of the things we keep talking about is how do we drive down capital intensity, that's a big component of it and that will drive a return on capital, which is clearly the way that we're going to deliver more 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 one. Okay. I think -- yes. Look, I think that part of that is going to be around the priorities of individual governments. And I think that right now, the U.S. government seems to be taking an interest and providing some benefits to what otherwise had been purely private enterprises. So if those -- to the extent that those are available and improved competitive position and shareholder value, that's an interesting thing to do. There are maybe more instances of that internationally. And so being able to do so internationally would also be a benefit. So I'd tell you that those are examples of things that we might look at when we consider some of these more 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.

Hello, and thank you for standing by. My name is Mark, and I will be your conference operator today. At this time, I would like to welcome everyone to the Q2 2026 Viasat Earnings Conference Call. [Operator Instructions]

Now I would like to turn the call over to Lisa Curran. Please go ahead.

Thank you, Mark. 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 Q2 fiscal year '26 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.

Thanks, Lisa. 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 second quarter fiscal year 2026 performance and the imminent launch of ViaSat-3 Flight 2 reflect the meaningful progress we're making against our highest priorities and commitment to building value for our employees, customers and shareholders. We're especially pleased with our awards growth and cash performance, as we balance investing for future growth while reducing capital intensity.

For Q2 FY '26, our net loss of $61 million improved from a net loss of $138 million in the second quarter of FY 2025, and was primarily due to favorable service revenue mix, lower depreciation and amortization and lower SG&A expenses. Revenue grew 2% year-over-year, led by a 3% growth in the Defense and Advanced Technologies segment and a 1% year-over-year increase in the Communications Services segment.

Adjusted EBITDA increased by 3% year-over-year, as better-than-expected adjusted EBITDA growth in Communication Services was partially offset by an expected year-over-year decline in the DAT segment. We were hopeful to have already had launched ViaSat-3 Flight 2 by today, but the United Launch Alliance Atlas rocket carrying the Flight 2 mission was scrubbed last night due to an issue with an Atlas booster liquid oxygen tank vent valve.

ULA is evaluating it and is now aiming to launch in a week. The launch of ViaSat-3 Flight 2 will be a very meaningful milestone for the company, An incredible amount of dedication went into preparing the satellite for launch, and I really appreciate the efforts of our entire team.

We remain focused on getting both Flight 2 and Flight 3 into service as reflected in the accompanying satellite road map. As a reminder, each of the new ViaSat-3 satellites is designed to enable more bandwidth capacity than our entire existing fleet, with the unique flexibility to aim that bandwidth exactly where needed, creating opportunities to grow in each of our franchise businesses and to accelerate growth and drive meaningful free cash flow contributions in Communication Services.

Our DAT segment outlook is promising, as backlog increased to a record of $1.2 billion, up 31% year-over-year and up 14% sequentially. The long-term growth trajectory is supported by several attractive secular growth drivers, including increased reliance on space-based assets for national security purposes, both domestically and internationally, which creates a growing set of global opportunities for the commercial space industry especially for dual-use capable systems.

Increased demand for highly resilient communications, integrating both terrestrial and satellite and multi-domain operations that require seamless interoperability as well as growing demand for digitized military infrastructure to support highly computationally intensive, autonomous, cloud-centric and AI decisions while simultaneously defending against increasingly sophisticated cyber threats. There's also the growing global recognition of the importance of sovereign control over those space systems; and finally, there's the increased integration of commercial and defense dual-use technologies together with the rise of nonterrestrial network connectivity, including direct-to-device mobile services.

Not surprisingly, we're seeing a significant uptick in interest for commercial and mobile space networks that enable direct-to-consumer device nonterrestrial network connectivities. Given some of the market transactions we're seeing in this space and our own coordination agreement with AST and Ligado, seems there's a greater appreciation of the value that we can create with our mobile satellite spectrum.

The announcement we made in September regarding our intention to form Equitus with Space 42 and potentially other operators is an example of how we believe we can continue to build on the value of our large, coordinated and highly strategic global position in mobile satellite services, while managing and reducing capital intensity and creating meaningful competitive advantages.

As I mentioned last quarter, we're continuing to opportunistically strengthen our capital structure, be it cash flow improvements, addressing debt maturities and conducting ongoing portfolio reviews.

The Strategic Review Committee of our Board of Directors continues to evaluate our capital allocation portfolio priorities, including the potential merits of separating our government commercial businesses within a competitive environment of government commercial dual-use and vertical integration opportunities.

We're focused on building shareholder value and reinforcing our competitive positions, and we see accelerating deleveraging and collapsing debt silence and thinking critically about our portfolio as important components to that.

We believe the overall strong start to our first half is an important proof point, as we compete not only for business success and outcomes but also for investor confidence and capital. Once again, we recognize there's challenges, but we're planning to win.

So with that, I'll hand it to Gary.

Thanks, Mark. Thanks, and good afternoon to everyone joining us on the call, and of course, a special thank you to the Viasat team for all the hard work that went into producing these results. I recently celebrated my 1-year anniversary here and have been reflecting back on the progress the team has made during that time.

We laid down 3 key priorities for our financial journey that by now you know well: Build our franchises and earnings power, generate and grow free cash flow and set a path to a value-maximizing long-term capital structure. I'm really proud of what the teams have accomplished in the past year and very excited for all the opportunities that lie ahead of us.

Our franchises are developing, and we've seen strong growth in aviation, government SATCOM and DAT, while we continue to win new awards that leave us with a backlog to underpin future growth in these areas. The teams have done a nice job stabilizing our maritime revenue base and creating growth opportunities with the development and market acceptance of a new multi-orbit solution that's at the same time, a great solution for our customers now and great development of a key future-facing capability.

We know we still have work in front of us on the fixed broadband business, and the capacity Flight 2 will provide supplies the bandwidth to enable progress there. Free cash flow is an even bigger highlight. On a trailing 12-month basis, we generated $147 million of it, and we've achieved positive free cash flow for 3 quarters in a row. As we get beyond the CapEx goals related to the completion of ViaSat-3, we see continued cash generation that will be the fuel we need to reduce leverage, optimize our capital structure and invest with discipline for the future.

As a result of the first 2, we're better positioned to optimize our capital structure. We'll be opportunistic given market conditions but focused on achieving a desired end state that targets a leverage ratio 3x net debt adjusted EBITDA or lower, where marginal borrowing costs tend to flatten and equity valuations are maximized.

Our desired end state will also include a collapse of our debt silos. During the second quarter, the U.S. Bankruptcy Court approved Ligado's restructuring plan, including our agreement with Ligado and AST. Following the receipt of the first $16 million quarterly payment in September and last week's $420 million lump sum payments subsequent to the end of the second quarter, we intend to take the first step soon and repay the remaining $300 million under the original Inmarsat term loan B facility.

This move will save about $23 million in cash interest payments annually. I'd like to thank the Viasat team again for delivering and making these things a reality. I'm proud to have been part of the journey thus far and excited for the great work we still got in front of us.

Now let's turn to the second quarter. We generated revenue of $1.1 billion, up 2%, adjusted EBITDA reached $385 million, up 3%; and drove a 34% adjusted EBITDA margin. Cash flow from operations was $282 million, up 18%, with CapEx of $214 million, resulting in free cash flow of $69 million in the quarter.

The first half was a good start to our fiscal year and there's still work ahead, as we focus on achieving our full year target and exiting the year well positioned for growth. We're committed to delivering long-term value and confident in our strategy, as we drive it forward.

Before we dive into more detailed results, let me clarify that all my statements in this section will reference second quarter of fiscal '26 and the prior year period comparable to the second quarter of fiscal '25. Awards were $1.5 billion, up 17%, led by Communication Services, including a large international dual-use satellite win serving Australia, New Zealand and key maritime zones.

Backlog was $3.9 billion, up about $140 million despite the sale of our energy system integration business last year, which reduced backlog by $106 million. Revenue was $1.1 billion, up approximately 2%, reflecting growth in both DAT and Communication Services. Net loss was $61 million, an improvement of $76 million, principally due to favorable service mix, lower depreciation and amortization and reduced SG&A.

Adjusted EBITDA was $385 million. The 3% increase was driven by strong operating performance in aviation, government SATCOM and InfoSec and cyber, tempered by fixed services and other and space and mission systems.

Free cash flow remains a critical focus area, and we generated $69 million of it this quarter despite heavier cash interest payments bringing our year-to-date free cash flow total almost $130 million. Operating cash flow grew 18% year-over-year. We're laser-focused on driving the sustained and growing free cash flow in the years ahead and using it to retire debt is the best way to reduce the capital base on our business, driving returns higher, reflecting strong free cash generation.

We ended the quarter at approximately 3.5x trailing 12 months adjusted EBITDA, a slight year-over-year and sequential improvement.

Now let's turn to some segment highlights. In Communication Services awards of $1.03 billion increased 35%, driven by government SATCOM, aviation and maritime. Revenue was $837 million, up 1%. Growth in aviation and government SATCOM was moderated by the sale of our energy system integration business in the prior year, along with an expected decline in fixed broadband.

Aviation revenue grew 15%, led by an 11% increase in commercial aircraft in service, combined with higher average revenue per aircraft. With continued growth in our installed base of more than 425 aircraft in the last 12 months and with 2Q, our strongest order of installs since the fourth quarter of fiscal '24, we did see our backlog decline slightly to about 1,470 aircraft.

We feel good about how we're competing. Our awards and wins were in line with our expectations, but the time to contract can vary widely from airline to airline. Aircraft are included in our backlog after they're contracted, and some of our deals take time to get to formal contracts. We have line of sight to backlog stability and/or growth ahead despite continued growth of the installed aircraft base. Our government SATCOM revenue grew 9%, reflecting strong growth with U.S. and international government.

Maritime revenue declined 3% as vessels and service were down slightly. NexusWave orders were strong and installations were up 40% sequentially paced by vessel availability. With a much larger base of yet to be installed orders, we're focused on installations and expect the installed base to grow faster over the next few quarters.

Nonsafety stand-alone L-band offerings continue to migrate to multi-band multiorbit solutions like our NexusWave offering and we expect L-band will continue to be an important component of those solutions. Our revenue base in maritime is relatively stable and will grow as our NexusWave installed base grows. We expect year-over-year growth in Maritime to resume by year end.

Fixed services and other revenue was down 16% as U.S. fixed broadband subscribers continued to decline as expected. We ended the quarter with 150,000 subscribers and an average revenue per user of $113. These revenue impacts, along with a higher mix of service revenue and good cost control drove Communication Services adjusted EBITDA to $337 million, up 6%.

Turning to Defense and Advanced Technologies, Awards of $467 million declined 9% due to a difficult comparison in space mission systems. SMS awards remained healthy, but were extraordinary in the prior year with a number of large multiyear projects awards. Excluding SMS, data awards grew year-over-year.

More importantly, the book-to-bill in DAT was 1.5x overall and greater than 1.1x for each of our DAT business lines. We continue to see exciting growth ahead across the segment. Revenue was $304 million, up 3% driven by growth in Infosec and cyber that was tempered by tactical networking.

Infosec and cyber product revenues were up 14%, driven by high assurance encryption products. We're pleased with growth prospects in this arena supported by a healthy backlog, strong secular drivers and exciting opportunities to innovate. Space and Mission Systems revenues were down 1% year-over-year due to lower development funding for certain programs. Mark talked about how SMS is a promising growth area for us with strong secular drivers. We specialize in working through complexity and building cutting-edge capabilities for our customers, and we're excited for the future opportunity in this area.

This quarter reflects some of the lumpiness from early development of innovative technology. As the market shifts to address needs for more sovereign dual-use and government purpose-built satellite communication systems, we believe SMS will generate the growing returns we've seen in other areas of our portfolio, similar to encryption and TrellisWare.

Tactical Networking revenues, including TrellisWare were down 7% and partially reflecting lower IP licensing revenue in this quarter. Defense and Advanced Technologies adjusted EBITDA was $48 million, down $9 million despite good growth from Infosec and cyber, reflecting declines in SMS as well as higher segment research and development investments supporting future growth, along with declines in tactical networking.

Overall, the quarter's results were good, and we're on track to achieve what we set out to this year. We drove growth in both of our segments, controlled costs and drove strong cash generation after making efficient investments and innovation for future growth. Our ViaSat-3 Flight 2 is imminent, and we made good progress on our Flight 3 satellite.

Let's move on now to our outlook. We continue to expect fiscal '26 revenue to be up low single digits year-over-year with flattish year-over-year adjusted EBITDA and expect continued variability quarter-to-quarter. We're pleased with the second quarter and focused on delivering not just the numbers for the year, but the business outcomes that are critical drivers of stronger performance in the years ahead. We've provided additional segment level detail in the Outlook section of our shareholder letter and slide.

Let me take a moment to talk to the government shutdown. We're watching the U.S. government work through the budget and continue to see broad support for national defense priorities. The strength of our awards and backlog reflects the growing importance of our technologies and innovations to tie nicely to key secular trends in defense, including space, communications and security.

Over time, we don't envision major impact to results. However, based on what we understand now, we estimate the shutdown in the third quarter may delay DAT awards of up to $100 million and impact DAT adjusted EBITDA by up to $20 million. We'll also need to watch the magnitude and duration of impact to flights in the U.S. system. That picture is just emerging as you see in the news today.

But based on current information, we don't see material impacts to the year. 3Q is likely to see some impact. Our focus on cash flow remains, as does our focus on increasing the capital efficiency of our business. We continue to expect cash from operations to grow double digits for the year.

We expect capital expenditures for the year to be about $1.2 billion breaking down as follows: $200 million is capitalized interest, $500 million is maintenance capital spending, about $100 million is success-based, $250 million is related to the completion of ViaSat-3 and the remainder, we're investing in new products and capabilities.

Approximately $400 million of this overall spend will occur within Inmarsat. On prior calls, I've indicated we expect to spend $250 million of CapEx on items that are both large and close in time to the launch of our ViaSat-3 satellites in fiscal '26. In the first half, we spent $50 million of this $250 million and expect to spend the remaining $200 million in the second half.

Given the much larger spend rate for those items, we expect negative free cash flow in the second half. We'll provide updates tracking our spending of the remaining $200 million in upcoming quarters. Once beyond those payments, we expect to return to free cash generation and have guided to positive free cash flow for fiscal '27.

For clarity, our free cash flow guidance does not include the anticipated free cash flow benefit from the Ligado lump sum payment, but it does include the benefit of recurring quarterly payments we expect to receive.

During the quarter, we moved $175 million in cash from Inmarsat to Viasat. As noted previously, we expect the total funds will move over time to be $400 million to $500 million, including the $175 million just referenced. Our teams are working actively on our 5-year plan as we always do at this time of year.

A critical focus of that exercise will be continuing to drive for the intersection of growth, innovation, capital efficiency and returns. We're looking at all areas of our portfolio and capital structure for value-accretive opportunities.

In closing, in the fiscal year, we're working to deliver our commitments and to position our franchises for sustained and profitable growth and free cash flow with using capital requirements following the deployment of our second and third ViaSat-3 satellites. We're determined to close out the year strong and well positioned for the future.

With that, I'll turn it back to Mark.

Thanks, Gary. So we think there's a lot to be excited about, including the forthcoming launch of ViaSat-3 Flight 2 and the progress to launch on Flight 3. We're building momentum with multi-orbit solutions across businesses that are very attractive for our customers, and we're being disciplined with costs and CapEx, which is building the foundation for strong cash generation. We believe there is tremendous value in our franchises as a leader in satellite infrastructure and connectivity, in-flight connectivity and critical military and government communication and defense solutions.

So with that, let's open it up for questions, please.

[Operator Instructions] Our first question comes from the line of Brent Penter with Raymond James.

I appreciate the comments on the split and some interesting comments there regarding government commercial dual-use and vertical integration opportunities as well as the debt silos. So can you just update us what inning are we in, in terms of evaluating that possibility? And maybe you could just elaborate on those comments regarding vertical integration and the debt side of things.

Okay. I'm not sure I'm going to give an inning, but we are working and we're always evaluating these options, I'd say, continuously. It's not like there's going to be an end date to that.

And then just in terms of the vertical -- when we talk about vertical integration and dual-use, you can see examples of that, both domestically and internationally in space systems, increasing reliance on space systems. But the issue is those systems are expensive, and it's hard for a lot of countries to just carve that much money completely out of their economy.

So I mean one clear example of this might be, for instance, what Europe is doing with IRIS², where clearly, national security system needs to also be able to carry its weight commercially and economically. So we see that as a really good opportunity for us. We're benefiting from that. And we're just weighing the benefits of that compared to any potential benefits of a spin-off and they're not mutually exclusive. There may be ways in which we connect the two to preserve the competitive advantages while also creating what potentially might be more attractive investment vehicles. That's the trade-off that we're doing with respect to the spin.

Okay. Okay. That's helpful. And then spectrum value, you all talked about it and it's clearly getting a lot of attention right now given some of the activity in the industry. Just focusing on your international spectrum, can you all remind us what exactly you own in terms of megahertz and priority rights. And given some of the existing businesses on that spectrum as well as now the JV with Space 42. How open are you all to alternative ways to monetize that spectrum and maximize the NPV there?

Okay. In terms of what we have in spectrum, in our ITU positions are public and pretty well defined. The big attraction we think in our spectrum position is that it's global, and the amount of spectrum that we have is substantially higher on a global basis than pretty much any other company. I think that the spectrum is put to very good use now, I think, in critical services both maritime and aviation as well as land mobile.

I think that those services are going to -- they're important to almost every nation on earth, and so we do have really well-coordinated access to virtually everywhere in the world, which is also a unique situation. What we're looking at is a combination of evolving those services to fulfill the demands of the aviation industry and the maritime industry, while also being able to support the network standards that enable this large potential direct-to-device market.

What we do think is a lot of the applications that are going to drive these uses, which include things like vehicular autonomy, aeronautical autonomy, maritime autonomy, more edge-based AI applications that all those things are going to leverage both terrestrial mobility where available as well as space. So what we're doing is we're just constantly evaluating the two main forms of how the company can drive value from it. One is by continuing to operate and invest in the infrastructure required to use those assets versus what the current value might be to others who might be able to use those assets as well where we may be able to either work with them or coordinate with them in a way that also builds value. So those are the trade-offs that we do.

I think we've been responsible steward of it. We just completed one transaction that we thought was in the best interest and that actually had been in the works for quite a long time. So I think we're going to be open-minded and even-handed, but always mindful of the public interest obligations that come along with that spectrum and making sure that we fulfill those obligations, and we're continuing to use the spectrum in the best way for both us and our public interest obligations.

Okay. I appreciate all the detail there. And then final question for me on the topic of Equitus. Can you all just talk a little bit more about that project? And who you view as the ideal customer that this is going to be most appealing to? And I realize it's early, but any conversations you've had with other potential partners or customers? And then I would also appreciate any details you can give in terms of economics, CapEx and how we should think about that?

Okay. The main purposes of Equitus are really to help bring modern infrastructure to the spectrum allocations that are either satellite specific or could also be used for the supplemental satellite spectrum allocations as well. The thing that's really influencing these direct to device that is being able to make connections to cell phones at the power levels and the gains in the space segment that enabled closing those links.

And so those are generally done by global constellations, but there are a number of operators that are otherwise only regional. And so the notion of having shared infrastructure is a very natural way to be able to extend, to make that infrastructure available to regional players who otherwise would only be able to make use of that infrastructure a small fraction of its time.

So there are multiple benefits that Equitus can deliver. One is that operators would only essentially pay for the services that they can use in their region and they wouldn't be paying for dead time over other places that by having a cooperative there, those infrastructure costs are shared. There's additional benefits that can be gained for operators who choose to coordinate their spectrum with others in a way that aggregate that spectrum and just takes advantage of information, theoretic, Shannon capacity terms that would that mean that adding -- treating the spectrum as an aggregated block is the most cost-effective way to increase capacity and reduce airtime costs.

So some of the -- so we are in discussions with a number of regional operators in addition to Space42, which is to have a very large region, 2/3 of the world, but there are other regional operators who are really interested in having sovereignty in their area at an economical cost. One of the partners that we're working with already that we've discussed in the past is Europe. We were working with the European Space Agency to help them have a sovereign component to a global constellation that is -- that would be far more economical than what they might otherwise do on a stand-alone basis. I think that's a good example. There are others, but we're not going to name those now.

Okay. And anything you can help us out with in terms of sizing CapEx there?

No. I think we're going to -- we'll do that as we get more definition on the program. There are still a lot of variables in the way it's structured and how we work with partners. So at this point, it would be premature to give detail on that.

Just to punctuate to Mark's point, we keep talking about capital efficiency. Remember the -- at least as I look at the world, the concept of shared infrastructure is a big idea on that front.

Your next question comes from the line of Sebastiano Petti with JPMorgan.

Just to maybe follow up on one of the questions there. Mark, as we think about your global portfolio, I think in the Space42 announcement, it said that you'd be able to -- capable of supporting well over 100 megahertz of harmonized MSS spectrum. Is that accurate as it pertains to Viasat global harmonized spectrum?

I think the 100 megahertz refers to the combination of what Viasat and Space42 have together that was underpinning.

Okay. Got it. Helpful. And then staying on the Equitus Space42, as you go down that path, I think -- and you kind of prepare yourself for service launch, right, targeted within 3 years, I mean when should we -- you kind of alluded to it in an earlier question here, when should we begin to hear more about partners with -- partnerships with MVNOs, perhaps additional investors kind of coming on board, maybe some of the milestones that we should be anticipating prospectively over the next couple of quarters and months -- years here?

Well, I think the thing you said at the end is right. It's going to be over the next couple of quarters and years. We still have work to do with Space42, but we're making good progress on that to provide the definition and the transactions that either additional customers or investors would make with Equitus, but are necessary to form that. But we're seeing a lot of interest. And I think now you're starting to see others start to talk about the benefits of shared infrastructure as well that -- I think that, that -- it's pretty evident that, that makes a lot of sense.

The devil is really in the details and that's what we've been working on for quite a while, so that we can provide really all of the details needed for real transactions, both by other users of the system -- let's say, other operators who would participate in the system, investors who would invest in the system and then MVNOs or others who would be users of the system to make it clear what this means in detail to each of those constituents. And I think we're making good progress there, but that will be the next step is to get out of the definitization of each of those points.

That's helpful. And then I guess one last one. I guess, Gary, notwithstanding the government shutdown and what that might all mean from an awards perspective and revenue and EBITDA impact. But just as we think about the business overall, right, I think one of the things that, in particular, I think some folks struggle with is just the backlog growth, right, and the awards quarter-on-quarter pretty impressive and continue to be -- continue to grow at a very healthy rate, I mean, I think you called it -- I may have missed the data awards, but CS awards up 35% quarter-on-quarter.

Any kind of help thinking about how that backlog -- as that grows over time, maybe the cadence of backlog recognition. I know we kind of talked book-to-bill, but is there any other kind of metrics above and beyond the book-to-bill ratios that we have historically focused on in the business as we kind of think about your ability to monetize that?

I'm trying to think of the right way to address that. I think we highlight the metrics that we think are relevant for how we're seeding the future. I think what you're going to see is -- and I should also go back and reference some of the things that we set out to accomplish this year. If you remember, we said this wasn't really about the numbers, it was about some of the outcomes that we set out to achieve, that was continued growth in Aviation, Government SATCOM. We wanted to see a stabilization and a return to growth of our Maritime business. And then the other one was to make sure that we had access to the capacity of Flight 2, so we could address some of the declines that we've been seeing pretty consistently in our fixed broadband business. And as I look at the year, when I say we're making good progress, it's largely on those fronts. We're not tracking the specific numbers.

So I'm feeling good about our ability to turn the efforts that we've made this year and to growth for the future. And we certainly have the backlog to underpin it, and the capacity is coming we -- the capacity that we need in some arenas is coming very shortly with Flight 2.

Your next question comes from the line of Mike Crawford with B. Riley Securities.

First, on HaloNet, that seems to be the commercial environment as something you talked about and advocated for quite some time. But is that something that's going to take a year or 2 you get off the ground because say, Leo sensor and low earth orbit would have to have in that center pointing it up to GEO and then it would signal get bounced back down to a gateway into the edge via your growth segment?

I'm sorry, Mike, I missed the very first part, which system are you referring to?

HaloNet.

Okay. Yes. So the HaloNet we're aiming at several different markets. One of them -- one of the early ones that we're getting into is launch telemetry as an example, where we can -- really, what we're looking to do is deal with the space relay as a whole. So that includes things like launch telemetry, it also -- one of the options that we talked about originally was think of it as sensor -- say, sensor data or other data that would be relayed from LEO to GEO and back to ground stations really to help reduce latency for earth-sensing, earth observation. And we've also been dealing with that a little bit through shared sensor infrastructure.

Another one that we got with Inmarsat is less relaying the sensor data itself and more relaying the tasking and command and control for those satellites, which is also important in terms of getting timely data. There are other components that we're also looking to get to, which are other forms of kind of space vehicles that are relayed through government assets now that one of those government assets are either bottlenecked or going -- or actually going away.

So it's kind of each of those markets, and they have somewhat different communications paths depending on what the application is. Did that address what your question was?

Yes. I mean you've also talked about offering to say earth observation companies and the ability to not have to wait to pass over -- yes, and instead you could get data out to the edge much more quickly. So I have another question, Mark. You have this great cryptographic and encryption franchise, how does the advent of quantum computing affect those?

So the very first application is in what people are calling quantum-resistant cryptography. One of the main applications of quantum computing is factoring numbers, which would be used to attack existing cryptographic systems. So one of the highest priority objectives in any secured infrastructure is making them quantum-resistant. So that's driving a big refresh in secure systems especially in the U.S., but globally as well. The -- I think the other thing is going to be -- the other thing that's really driving the growth in our crypto business is basically the use of data centers, right? The things that are so computationally intensive that they can't be done anywhere else.

So that's driving -- I mean think of AI as being one of those. There's other big data applications. And when you think of quantum computing, that's another form of dealing with very computationally intensive algorithms that will be done in data centers. All this stuff is driving demand for data center cryptos. And also on the user side, it's driving demand for cryptos that have kind of the networking flexibility to get to the right data centers, that have either the computational resources and/or the raw data to work with as well as the speeds that are needed as well as the -- basically the quantum resistance as well as other cybersecurity threats that are also evolving along with the quantum threat.

So it's just -- it's driving -- I mean, think of there's a bunch of drivers that are causing both modernization of the cryptos, increased speed. And then the other thing that becomes really important data center, of course, is getting low power, low footprint within the data centers just because of the really rapid increase in aggregate speeds that are going into those data centers. I'd say those are the main drivers.

And then just one last quick one for me is how are you accounting for the $420 million cash received on Halloween and the $100 million of additional cash you're going to get on March 31?

Do you want to take it, Shawn?

I can take this for you. This is Shawn. I think Gary kind of summarized up the -- how we see the cash coming in. I think if you look at the earnings, we don't expect it to be a large impact to EBITDA. So most of the lump sum proceeds are going to go to deferred revenue, and they're going to get recognized over the life of the contract. The interest portion will come in, and that will come into interest income, which obviously is EBITDA neutral.

We're still finalizing the details. You should see a chunk of that as well in operating cash flow when you see the next set of financial statements.

Yes. And we'll give you guys more details on that in Q3.

Okay. So you're going to recognize $520 million of deferred revenue over 80 years?

There's a good portion will go to deferred revenue, but we'll also have a portion that will go to interest income.

Your next question comes from the line of Ryan Koontz with Needham & Company.

I wanted to ask about the communication services backlog there, and obviously, Flight 2 going up and the capacity. How should we think about pent-up demand and timing? I know it's about 6 months from launch to service. But what percentage of that backlog in comp services would you say is dependent on F2?

Actually, you're not going to see that necessarily come out of backlog. I mean for instance, growth in consumer, right, that wouldn't be -- that's not a backlog item for us. We have pretty good ways of estimating what that growth will be as a functional service plans and pricing.

Likewise, for instance, one of the things that we're seeing in aviation is more bandwidth consumption through greater penetration or additional service plans. Again, that would just show up as air time. It will be recurring revenue, but it's not going to come out of backlog either. Same thing in Maritime, as we're seeing increased use there.

So it's really going to be reflected in ARPA or plane counts. You will see is things like ships and airplanes being converted, but that's not going to directly relate to all of the revenue growth that's driven from it.

[indiscernible]

[indiscernible] availability itself is continued growth of the franchises that we keep talking about, aircraft, vessels, residential subscribers, et cetera.

Sure. So you've got the relationships in place. It will show up as more usage, but you haven't per say booked committed revenue in backlog for that capacity to come on, you just believe that it is there.

Yes. But what we do have, as an example, would be think of when airlines work with the safe ideas of what those service plans will be, we can infer from that what the penetration rates would be, what airtime consumption would be, what airtime pricing models would make sense. And then also, when we do monetizations, there is -- as an example, that will -- those types of subscriber statistics might drive advertising and promotional revenue, but it's all kind of -- it's sort of baked into what the service relationships are with those customers.

Makes sense. And another if I could just sneak it in. Just in terms of the aviation environment there. I mean, any updated thoughts on how you see that evolving? Obviously, it seems like changes happen every quarter. So I would love your thoughts on that, Mark.

Yes. I think so the main trends you can see is greater penetration of the airlines, including different types of airlines. A greater emphasis on being able to go fee-free to support streaming, driving higher penetration. But some of the consequences -- I can tell you some of the consequences that we've been anticipating, and I think are going to be -- are going to play out is as you get all those effects, this issue about what happens in high-demand locations is going to be more and more evident. That is the effects that we've been seeing for quite a while in major hub airports, combinations of airports and seaports, you'll see that.

The other thing, I think, is going to be really interesting, one of the reasons that we've been working on the business models that we are is that the free WiFi in an aero environment is sort of a mixed blessing. On the one hand, passengers like it. But if every airline has the same free service, then they all have extra costs and nobody has a competitive advantage.

So one of the things that we've been really working with the airlines on is how do you get competitive advantage as well -- and differentiation as well as just free WiFi. And I think those are going to become important. And that's -- the various monetization techniques that we're using and developing, I think, will be increasingly important in an environment where every airline kind of is recognizing the need to connect virtually all the passengers with really high-quality WiFi.

Your next question comes from the line of Colin Canfield with Cantor.

As we think about the building blocks on Viasat shares, we just sort of run the following concept by you in terms of kind of like headlines that are out there, right, you have $50 of share value in the DAT unlock and then we have the organic SATCOM business, which just according to kind of the most recent investors are getting for free.

So as we think about the precedent transaction of SpaceX EchoStar, and the roughly $20 billion of value for, we'll call it, 75 megahertz of S-band. How do we think about ViaSat's 75 megahertz of S-band in that concept, right? And then within that, is it fair to characterize that deal is comparable, a; b, does the company have a preference of cash versus equity and c, kind of how does the management team think about the arbitrage opportunity of carrying something like that on the balance sheet? So a complex question, but basically, how do you think about spectrum and what's your preference on terms?

Right. I think if you look at what's happened in the terrestrial market, you have these same issues about how do you value spectrum? And I think the main ways are do we have the -- can we bring it to market in the most modern and useful ways complying with our public interest obligations and then develop value from that? That's one.

Another one would be, can somebody else do that better and is there a way in which we can reach coordination agreements or some other way to do that because somebody else can do it better than we can? And then the other way you look at spectrum is what are your options, for instance, in the terrestrial world, one of the ways people can look at alternatives to spectrum in terms of service economics or performance is through node splitting.

In the space, there's equivalence to the node splitting, right, as well based on sort of how you do beam-forming and how big your satellites are. Those are the factors that go into it. I think that we're really focused on the fundamentals of how does it deliver value to the end users? And how do you do that in a way that is consistent with the interest of the regulators that allocate the spectrum? We have to deal with all of those issues.

And I -- we just -- it's just hard to break it down into purely transactional methods just say, well, hey, can we -- how would we structure a transaction that might be dissimilar to some other transactions when the environments around them are may be so different that you just can't do it that way. So I think we're not going to speculate on different transactions so much is focused on.

How do we -- the one thing that we can really focus on is how can we use the spectrum that we've been allocated in ways that are comport with the license obligations and deliver value to customers and shareholders. That's the way we're most looking at it. And then if there's other opportunities that present themselves that are more -- that are better for shareholders, we'll certainly consider those.

Got it. Got it. And then maybe turning over to defense bookings. As we think about the environment, appreciate the healthy performance on probably the U.S. side. But as you think of like the continent in Europe, how are you kind of seeing the demand signals to materialize? Because I think what are the kind of pieces that the market's kind of working through now is whether or not the IRIS timetable matches up to national security risks. And you can argue that some of the awards you've seen today suggest there's probably an accelerated interest for kind of new constellation build or new capabilities. So maybe -- just maybe parse out the incremental government demand that you're seeing beyond just the U.S. side and how you expect that to unfold over a multiyear period?

Okay. Yes, I think -- if I were to talk about sort of national security in general, I think that the things that we're really seeing, there's kind of two of them, one of them by definitely really high -- it's high priority and you're seeing this in IRIS² is sovereignty is that countries don't want to depend on individual or other foreign corporations or foreign countries for essential national security. So I think then what that's driving them to is, okay, I don't necessarily need to have my own LEO or whatever it is.

What I need to do is get the effects that those deliver in a way that I have sovereign over it and the effects that they generally need are things like I might need small terminals, I might need terminals that can be deployed rapidly, that don't become targets rapidly, that resist jamming or other countermeasures, that are cyber-secure.

I think there's this list of requirements that you're seeing that are playing out, let's say, with Ukraine being kind of the example of what people might expect from a countermeasure perspective and what they need in order to defend themselves in a modern tactical environment.

Then the question becomes, okay, how do I get those things and still have sovereignty? And some of that may come through infrastructure sharing in certain ways and others that may come from -- you can certainly achieve pretty much any of the effects I described with the right GEO systems as well. And you could achieve them to different extents even with existing systems.

So that -- those are the conversations that we're having now. It's really how do I get the effects? And then how do I have control over those? Those are, I'd say, the two biggest issues.

Your next question comes from the line of Edison Yu with Deutsche Bank.

Happy Friday! I wanted to come back to the spectrum. I believe you have quite a bit of spend in Europe. And I'm wondering if you can clarify the future intention with that? And if I'm not mistaken, some of it or all that comes up for renewal in 2027 and so curious on what you plan to do about that? Do you think you'll get all back and how you see that situation?

Okay. So yes, the S-band spectrum in Europe, the history is that it derives from a particular program. We are one of the holders of spectrum grant through the Inmarsat acquisition. There is an ongoing process in the European union to determine how to allocate that spectrum post 2027. We've submitted applications -- an application to do that.

They're going through a process. We think that we, as an operator, have both build the commitments that Inmarsat made -- we, through our acquisition of Inmarsat made when it was first allocated. And in our application, I think we're making a strong case for why we can still -- we would still be a good steward of that spectrum, both in terms of what we would do with ground systems, what we do in space and what we would do with user terminals. And I think that's where it currently stands and the European Union will allocate not only our portion of the spectrum, but the additional portions of the spectrum sometime in the next year or two.

Understood. I appreciate that. I wanted to come back on F2 and F3. Is there any way to dimension, let's say, you're fully up in service, how much of a growth bump or sales bump, whatever, that you'll get once those two are fully operational?

Well, so -- I mean one of the ways to think about it, just this is at a very top level, it roughly -- those two satellites together would kind of triple the amount of bandwidth that we would have. And -- if -- how you monetize that depends on what the mix of services are, where those services are. And the other thing that we're really sensitive to because we've been one of the leaders in providing service level agreements is where are those services, where the demands are for those services?

I think we've been doing a good job of fulfilling the service commitments that we make. And so you have to look at where the bottlenecks might be. But we have a lot of runway to grow given those 2 satellites. And then we also have -- because we're still -- we're going to buy F2 in the Americas, F3 in Asia Pacific, we have 3 additional Inmarsat satellites GX789 that we are going to deploy in the EMEA region that will give us the capacity we need in the high-demand areas there.

We also have bandwidth coming that we've already contracted for from third parties as well as from LEO systems as well. And then the counter -- the sort of the counterweight that everyone that provides the types of services we have to do -- that we do has to account for is the per capita growth in bandwidth demand for each of our customers.

All I can tell you is that those are the forces that are at play. When we provide guidance, we try to bake those into what our outlook is, and we try to provide some visibility into the growth of each of the different areas. But that's -- I mean those are the forces that will determine how we turn all that bandwidth into revenue. Right now, we see a lot of opportunity in those regions among especially the mobility services.

And those are the ones I think where we compete the best, where we're adding the most value and then we're using things like fixed services as kind of buffer to make sure that we're using all the bandwidth. But over time, we're gradually migrating it to these higher-value services.

There is no further questions at this time. I will now turn the call back over to Mark Dankberg for closing remarks. Mark?

So just want to remind people that we remain very committed to building a solid foundation for accelerated and sustained growth, capital efficiency and cash generation. Our future growth outlook is underpinned by large installed base in a number of our markets, strong secular drivers across our different vertical applications and a diversified portfolio.

We operate across one of the largest blocks of mobile satellite spectrum in the world. We've been a very responsible user of that spectrum since Inmarsat's inception over 45 years ago. We're dedicated to providing and evolving the vital services that our commercial and government customers need around the world.

And we believe this drives meaningful upside value, including to associated with our spectrum position, and we've got a comprehensive plan to reinforce our competitive positions, drive returns and enhance shareholder value.

So thanks, everybody, for your participation in this call, and we look forward to talking again next quarter.

That concludes today's call. You may now disconnect.