Viasat Releases Q2 FY 2025 Financial Results
Revenue and Adjusted EBITDA Performance Results Were Better Than Expected
Viasat has released its Second Quarter Fiscal Year 2025 (Q2 FY25) financial results in a letter to shareholders posted on the company website.
According to the letter, the Q2 FY25 results were better than expected in terms of revenue and Adjusted EBITDA performance, reflecting continued demand for Viasat's industry leading technology solutions and strong results in Defense and Advanced Technologies (DAT).
The company also continued to take actions to strengthen our capital structure, including an upsized refinancing of nearly $2 billion of secured notes originally due 2026. New contract awards in Q2 set a new record at $1.3 billion and were led by DAT (which doubled YoY awards led by cybersecurity, space and mission systems, and tactical networking), and by aviation connectivity services. A recent investor teach-in highlighted the attractive growth potential and durable competitive advantages in key technologies such as next generation free space optical technology, mission specific phased array terminals, space based cyber security, and others. The Q2 DAT awards reinforce to management that the company is on the right track including for US government programs, international government opportunities, and certain commercial markets. One of the unifying themes among customers is access to a diverse set of orbits, spectrum, and constellations, as well as avoiding over-dependence on individual systems.
That said, the company in the letter acknowledges the intensity of competition in some of its core businesses. That makes the size, competitive positioning and growth prospects of these DAT opportunities especially exciting.
Viasat remains open minded about the best ways to capitalize on these opportunities – and are actively evaluating alternatives – while those businesses are both delivering growth and increasing their potential.
The letter cites the addition of Gary Chase as CFO. "Gary’s leadership experience in strategic, operational and financial planning will augment our focus on cash conversion, return on capital, converging to a more balanced capital structure and operating financial profile," the letter states.
In his role, Chase will provide additional experienced financial leadership on the areas we highlighted last quarter including:
Identifying, evaluating, and executing the best alternatives to realize the value embedded in our business portfolio.
Leading detailed financial reviews of our business operations designed to ensure we are at peak operational productivity levels with corresponding margin performance.
Increased rigor in capital allocation strategy to ensure we are optimizing return on capital in both the near and long term.
The main point is that Viasat is exploring additional financial and capital structure perspectives. It also continues to drive down capital intensity by augmenting our own satellites through both tactical and strategic third-party agreements. By leveraging its own satellite fleet and its diverse capabilities, existing national operator partnerships, and the coverage of additional third-party satellites and constellations, customers can be both ensured that they are getting the performance and coverage they need and more explicitly measure and drive improved returns on capital.
"Our satellite operator partners are often national space champions of key countries and geographic regions and are seeking a robust global space ecosystem to support their own national security and sovereignty. We are working with both GSO and NGSO systems," the letter states.
At the halfway point of the fiscal year, Viasat CEO Mark Dankberg says that For FY2025 the company expects mid-single-digit YoY Adjusted EBITDA growth excluding the one-time benefits from the litigation settlement of $86 million in Q2 FY2024, off a reference base of FY2024 Combined Adjusted EBITDA of $1.5 billion. The Combined Adjusted EBITDA growth is expected to be driven by strong revenue flow through from DAT licensing agreements and Communication Services.
Additionally:
Dankberg continues to expect net leverage to increase modestly by the end of FY2025 given the prior fiscal year benefit from accelerated insurance payments.
In FY2025, capital expenditures can be expected to decline to a range of $1.3 billion to $1.4 billion (which includes approximately $400 million for Inmarsat-related capital expenditures). The FY2025 range excludes the benefit from insurance recoveries and includes capitalized interest in our capex guidance, which is approximately $200 million per year (but which are expected to decline in future years, as satellites are placed into service).
Looking ahead to FY2026, Dankberg says he expects YoY revenue and Adjusted EBITDA growth – and the two-year cumulative capex number is expected to remain net neutral which indicates ultimately the same for cash through FY2026.