My name is Sarah and I will be your conference facilitator this afternoon. At this time, I would like to welcome everyone to Viasat's Fourth Quarter Fiscal Year 2024 Earnings Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. I would now like to turn the call over to Ms. Lisa Curran, Vice President of Investor Relations. Ms. Curran, you may begin your conference.

Thanks, Sarah. 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 fourth quarter fiscal year '24 Shareholder Letter on the Investor Relations section of our website. Please note that to provide a more meaningful comparison of our results of operations year-over-year, results for the fourth quarter and fiscal year 2024 are compared against supplemental combined results for prior year periods. These supplemental combined results are based on the combination of Viasat's historical reported results from continuing operations with Inmarsat's historical reported results for periods prior to the acquisition, with adjustments to reflect purchase price accounting, the conversion of Inmarsat's results from IFRS to GAAP, and conforming changes to reflect Viasat's presentation of its results. The supplemental combined financial information was prepared to better illustrate for investors the performance of our business following our acquisition of Inmarsat. Unless otherwise noted, the presented financial measures reflect year-over-year increases or decreases relative to the supplemental combined financial data in our fourth quarter fiscal year 2024 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 subsequent report on Form 10-K. These forward-looking statements speak only as of the date they are made, and we do not assume any obligation to update any forward-looking statements. With that, I'll turn it over to Mark Dankberg, Chairman and CEO.

Good afternoon, and thanks for joining us today. With me, I have Guru Gowrappan, our President; and Shawn Duffy, our CFO. We encourage reading the Shareholder Letter that we posted on our website earlier this afternoon for more details. I'll give an overview of the main points and then Guru will cover our operational results and highlights and our growth outlook, and then we'll take questions. We achieved fiscal year 2024 revenue and adjusted EBITDA growth above the high end of our guidance, driven by mobility and government. Fiscal year 2024 was a big year for us. We closed the Inmarsat acquisition, dealt with the satellite anomalies, immediately undertook integrating the companies to eliminate redundancies, capture synergies and drive productivity. Our objective is to integrate Inmarsat's global customer base, distribution partners, global satellite coverage and leading global L-band spectrum rights and aeronautical and maritime safety services with Viasat's technology, domain expertise in aeronautical and government and systematic methodology to achieve high utilization and productivity to cost efficiently deliver reliable services to mobility customers, including in the highest demand prices and times. Within about six months of close, we made difficult, but necessary reductions and achieved operational and recurring capital synergies of approximately $200 million, ahead of the planned schedules as we aligned our organization and optimized our satellite networks. We reorganized the company to help drive efficiency and productivity by integrating engineering, operational, distribution and support functions. We've also added a number of key people to our leadership team. In fiscal year '24, we achieved another approximately $175 million reduction in CapEx, largely through investment prioritization and synergies along with some savings due to satellite system delays. We strengthened our capital structure and extended about $2 billion in debt maturities. We stayed focused on achieving our main operating financial goals…

Great. Thanks, Mark. I will cover three topics. Financial performance, near term priorities and update on our outlook. Viasat generated good financial performance during FY'24. We earned combined revenue growth of 9% year-over-year and combined adjusted EBITDA growth of 6% year-over-year, driven by mobility and government, excluding the onetime catch-up benefits of the litigation settlement in Q2 FY'24. The pressure on operating leverage reflects incremental R&D investments to deliver mobility growth, including new in-flight entertainment and connectivity functionality, next-generation encryption offerings and ramp up for the ViaSat-3 satellites entering service in FY'25. For Q4 FY'24, we grew combined revenue by 5% while combined adjusted EBITDA declined 3% year-over-year. Adjusted EBITDA in Q4 was favorable to guidance last quarter due to accelerated cost savings from synergies alongside slightly improved top line performance in government and commercial segments. The Q4 cost savings were previously slated to begin in Q1 FY'25. Some of the key highlights from the quarter include. We completed the ViaSat-3 F1 handover from Boeing, our satellite control center is now operating the spacecraft. In March, we demonstrated speeds over 200 Mbps to an aircraft and we continue to expect to place ViaSat-3 F1 into commercial service later this Q1 FY'25. Government systems had another quarter of strong demand for information assurance, high-speed network encryption products increasing just over 40% year-over-year. We also had a strong quarter in tactical SATCOM networks, driven by growth in Blue Force Tracking L-band services revenue. We were awarded a contract from Northrop Grumman to support the US Air Force Research Laboratory initiative called The Defense Experimentation using commercial space, Internet program and our ViaSat-3 satellite network will enable users to access high-bandwidth satellite internet connectivity from existing aircraft or ground vehicles. Our Satellite Services segment benefited from strong growth in aviation. Commercial IFC ended…

Okay. Thanks, Guru. Before we take additional questions, I just wanted to clarify one point. We have got some questions, which is, what is the exact adjusted EBITDA base for FY'24 that we're using as a reference for our growth into FY 2025. So that number is $1.489 billion of adjusted EBITDA in FY'24. That's the base that we're using. And that's shown on Page 3, the FY 2024 year in review of the letter, where if you look at the middle right chart, what we described as the combined base for FY 2024 was $1.575 billion. And then we had referenced that there was $86 million of onetime catch-up gain associated with the litigation settlement. So subtracting $86 million from $1,575 million is what gives that $1,489 million. And then the growth outlook of low to mid-single-digit growth for FY'25 would be off that base. So I just wanted to clarify that at the beginning, and then we can -- now we can open it up to additional questions.

Thank you [Operator Instructions] Your first question comes from the line of Simon Flannery with Morgan Stanley. Your line is open.

Thank you very much. Good evening and thanks for all the color and for the new disclosures on things like the satellite schedules. We appreciate that. If I can sort of dig into that a little bit, perhaps you could just give us a little bit more on the current status of the F2 and F3 satellites to kind of preparation and where you are in the kind of the cycles for getting them on the schedule for launch and for commercial deployment? Any updates on what's happened in the last 90 days there. And perhaps you could just update us on your thoughts on how you're going to distribute the capacity once they're launched, you've talked in the past about maybe moving some of them from EMEA or Asia-Pac over the Americas? Any updated thoughts on that as well? And also just interesting to see the NexusWave product coming out. I think you said in your comments, you might extend that to IFC. Is that something that we'll see this year, a similar product set or any more thoughts on when we'll see that integrated product? Thank you.

Simon, thank you for the question. This is Guru. I'll start it off and then I think Mark will chime in on a couple of the points. On the ViaSat-3 F3 and F2, just to point to the document or the letter as well, Page 10, actually includes the overall road map now. That's a new thing that we've added for everybody's reference. So on F3, in terms of schedule and where we are, we continue to expect to bring F3 into service in mid to late calendar year 2025, which is a little more than a year from now. And a key milestone, which is thermal vacuum testing is expected to begin this quarter on the F3 spacecraft. And then in terms of ViaSat-3 F2, we continue to anticipate bringing F2 into service in late calendar year 2025. And we expect the improved reflectors, which include the corrective actions to be delivered to Boeing in late calendar 2024. And you will notice, just to clarify, we are only giving in-service dates as these are the most critical milestone for our customers and also most relevant for you, as they best inform our growth outlook as well. I'll pass it to Mark in terms of overall coverage. And I think you had a question on NexusWave. Let me ask you to repeat that, but Mark?

Yes. On the locations of the satellite, remember, one of the things we did originally is each satellite can be used in any region. So we have flexibility there. I think one of the things that we are looking at and I think we talked about is maybe relocating them so that we would probably ultimately have Flight 2 over the US and Flight 3 will go into Asia Pacifico directly from launch. And then Flight 1 would be moved to EMEA area. That's what we think is going to optimize the use of satellites.

Your question about NexusWave. That agreement is specifically for Maritime. We expect to have additional agreements that will go into service for in-flight connectivity. The agreements are kind of optimized for each of the markets in which will be presenting.

And this is with OneWeb, is that right?

Yes, for the NexusWave. But we're working -- we actually are working with almost all of the NGSOs. And so that we'll be mixing and matching as appropriate based on the deals.

Great. And just maybe one last follow-up. Just this point on substantially lower OEM deliveries. Is that something that's changed dramatically in the last few days? I don't remember really, last few months, weeks. I don't remember you talking about that before perhaps you could just slash that out a little bit because it does seem like you've got a pretty good backlog still.

Yes. So we do have a good backlog. The main issue is following the Alaska Airlines event Boeing has reduced. It's pretty much cut its delivery of 787 -- 737, excuse me, 737s in half. And so that affects a fair number of our customers. And so that is a change to what they're receiving relative to what we believed last quarter until we are flowing those through into our outlook for FY '25. That is one of the factors for our FY '25 outlook.

Okay. Thank you.

Thanks, Simon.

Your next question comes from the line of Ric Prentiss with Raymond James. Your line is open.

Thanks. Good afternoon everybody. A couple of questions. I appreciate that -- with NexusWave, with the current quarter results, we'll get the new reporting segment. Can you give us a sneak peek into what you think we're going to see as far as those major business units under those two comm services and defense advanced technologies?

Hey, Ric. This is Shawn. I can help you out. I think what we talked about is we're going to have two segments underneath the new reporting. And the goal there is really to better reflect our strategies and mobility and our overall portfolio drivers. There's more data is going to come, but I think some high level thoughts is that the Communications Services segment, that's going to be all of our businesses that utilize the satellites. And so that means that, that's going to include the government SATCOM as a service, which is in our Government segment today. Whereas in Defense and Advanced Technologies, that's going to consist of all of our other businesses and you think of that as, for example, our encryption business. So within that, we're also going to give additional top line revenue data for most of the major revenue drivers in those segments. You can think of that as like aviation or maritime or network encryption. And we'll give more color relative to the contributions as well. So a couple of other highlights, I think just to kind of give you that as well. An example would be our IFC equipment revenues. Those are going to now flow into the Commercial Services segment alongside the recurring aviation revenue streams. And then another would be like our antenna systems product. That's now going to be reported in the Defense and Advanced Technologies segments. So that's probably some key takeaways. You'll see R&D move along those as well. For example, our R&D and commercial networks and related to bringing our networks into service, that's going to flow over, for example, in the Communication Services. Hopefully, that's helpful.

Great. Yes, it is. And I appreciate the color that you've provided to us before we go into the next earnings season to help us kind of use the quiet time to update models. So I appreciate that. When you think competitively about these segments then, so Comm Services and Defense and Advanced Technologies, who do you see as the top competitors that you're competing against in Comm Services versus Defense and Advanced Technologies?

Well, I think everybody is pretty focused on Starlink in these satellite services market, so are we. So we're positioning ourselves to compete with them.

And from the launch schedule as far as in-service, keeping kind of where we were, make up some of the delays in launch, we can get the service a little quicker. What is the Flight 1 capacity you're expecting that you'll be able to bring into service versus what we originally thought? And I think that's just a couple of months away then for F1 to come in service.

Yes. Our view of that hasn't changed from what we said in the past, which is that we think we would get up to 10%, roughly up to about 10% of the originally anticipated capacity on the satellite. So that's from a total bandwidth perspective. The big thing is that we still have really good flexibility in how we apply that bandwidth. And so it will punch above its weight relative to older satellites in those markets.

Okay. Last one for me. The directed device, 3GPP, you touched on that a little bit. But there could be something this fiscal year. Can you help us understand how do we size that opportunity? It's complicated as heck I think because the ecosystem involves so many people, chips, handsets, carriers, satellite companies. Help us understand kind of what the go-to-market strategy is there and what the opportunity is, particularly since we've got this, the next fiscal year, we don't really have capacity coming online from Flight 2 or Flight 3 then.

So for the D2D market, I think there's at least a couple of different target markets for that. One is literally the direct-to-device market, which is getting a lot of attention. And what that refers to is pretty much any smartphone being able to communicate directly to a satellite. I think there's, clearly, that's never been done before. And so there's just unknowable. So unknowns about how big that market will be. One of the things that we're aiming to do, then this is what we've talked about with the -- what's called the Release 17 3GPP standard, which is also known as the narrowband internet of things nonterrestrial network standard that, that does enable messaging or emergency communications to smartphones. And so one example, the emergency communications example is what's Apple kind of kicked this thing off with their iPhones over Globalstar. So we are working on being able to deliver those capabilities through our satellites and partner satellites during fiscal year '25 in five different continents. So that uses the Inmarsat fleet and partner fleets. And one of the things that we aim to measure with that is how many of the phones that are capable of implementing that service or signed up in some way or another for service and what types of use do they get. That's one of the ways that we'll be able to get a better handle on how that market might grow. And that's one of the things we're looking forward to reporting on. There are a number of really interesting and popular phones that will be equipped with chipsets that are capable of performing to that standard. And so we are working with the ecosystem of chip makers, device makers and mobile network operators to create service plans that should be…

Great. That helps a lot. Thanks everybody.

Thanks, Ric.

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

Hey, thank you. Thank you for taking our questions. First one on the maritime partnership. I'm wondering if you can give us a sense on the economics, the go-to-market of this type of arrangements?

Well, so what we're aiming to do with this is to provide services that are both that include things that -- there are enhancements of things that we do, but these would be crew services and operational services to maritime users integrated through a single provider. And then also, as we add the lower orbit component to it, we also can provide low latency services, which are interesting both for both of those applications for some portions of the crew used and some portions of the operational use. So we'll be integrating that into both our direct and indirect service plans. We haven't announced all the details of those, but there are a few really important concepts that are described in the press release and one of those is untapped services, which is one of the things that people are really looking for. So I think those are the main points is high-speed, uncapped, including low latency. And the idea is that those will be -- all those services will be delivered through our management of those two services. It's not just two side-by-side things. We're not just going to present two services next to each other, that they'll be integrated in a way that actually allows us to fulfill our commitments on speed, volume and latency more effectively than either one could on its own.

Understood. And just a follow-up, more generally on Maritime on the Viasat side. Have we been seeing any sort of incremental pressure from Starlink. And as in the context of, I think, some competitors out there are seeing a lot of pressure, but the Inmarsat Viasat growth has actually been pretty solid. So are we more resilient? And is this partnership going to kind of reinforce that?

So first of all, yes, so we believe that our broadband maritime service is pretty resilient. It's continued to grow. I think that's not maybe the case for all other competitors. But our Ka-band service has continued to grow. In Maritime, we offer a land. We offer both Ka-band services branded generally as Fleet Xpress. And the older L-band services, which are branded fleet broadband. The fleet broadband, which is kind of the L-band version of broadband, that's been declining for a number of years. The Fleet Xpress is still growing. And we have opportunities to refresh the fleet broadband as well. But, yes, it's a competitive environment. We see the competition just as others do. I think that it's a combination of our services and our market segments that have helped us to be resilient. And there's -- it's a big market. We believe it is segment, certainly, certain segments have been seeing more, I'd say, more competition from Starlink and others. The enterprise segments, which do depend on operational and sometimes Safety at Sea certifications. Those are the most resilient ones.

Thanks. If I could just sneak in one clarification. I think you made a comment there was about the growth CapEx over two-thirds. Did I hear that right? And is that for the full year or for the quarter?

I think the two-thirds was around maintenance CapEx versus?

Yes, I can help you with this. So the two-thirds is just to give you what the percentage of our CapEx spend that's related to essentially satellite ground networks and our success-based CapEx for a year, given a year.

Full year.

Yes.

Fiscal 2024, full year?

Yes.

Correct.

Okay. Thank you.

Thank you.

Thanks, Edison.

Your next question comes from the line of Caleb Henry with Quilty Space. Your line is open.

Hi. Thanks. Broad question just for Mark. I was curious with the Nexus program. Has your philosophy around low earth orbit changed at all? I know you've talked in past calls and years passed a lot about LEO, but this seems like a little bit of a shift from Viasat's logic from years past?

First of all, I think my philosophy matters a lot less than what customers really want. And so the first thing we're going to do, making sure we're responding to what customers want. There is a desire for low latency. We have talked about that. And so what we do see is an opportunity to combine low latency and geo to deliver a complete suite of services. The other thing that we have focused on a lot is being able to deliver service level agreements wherever customers are. And so the combination of geo can be helpful doing that. It can lower our overall fulfillment costs, if we can manage that as a single service. And so we get that in addition to the low latency. But we recognize that low latency is something that customers want. So we are integrating that. As mentioned, certainly main in a big way this year with Maritime, but we expect to do the same in all of our Global Mobile services as well.

Okay. And then on the integration there, assuming it's starting with OneWeb, they're a Ku-band system, whereas the current satellites in the Viasat fleet are Ka and L-band does that present any sort of integration challenges? And if so, how do you work through those?

Well, so that's one of the reasons we're starting with Maritime, where shipboard operators seem to be completely fine with the notion of having separate LEO and GEO antenna component. So this goes along with what a number of shipowners and operators have been open to doing. It's a little bit more complicated on other platforms where we may end up with, for instance, working with our Ka-band and as working with Ka-band LEOs.

Okay. Next question. I know Viasat hasn't given the number in a little bit, but can you share how many consumer subs the company has today? And kind of is the plan to continue with that business? Or do you see that eventually kind of closing as you focus purely on mobility and other high ARPU sectors?

So we haven't disclsed the exact subscriber numbers for a while. It's been -- one of the things that we would point out is that as we -- especially as we ship bandwidth, from that market to the mobile markets. There's been a relatively steady rate of decline in that business. That's one of the areas that is affecting our FY'25 revenue outlook. So even though our revenue outlook is relatively flat, we will be overcoming all of that in FY'25. With essentially no major new satellite additions in that year. I'd say, going beyond FY'25, one of the things that we do see is opportunistic uses in residential. We think that based on the feedback -- initial feedback that we've gotten from some of our newer residential service plans we do believe that we can -- we may be able to flatten that out or improve it depending on the amount of bandwidth that we allocate to that market in out years.

Okay. A couple more questions. On the schedule for satellites. It looks like the SWISSto12 HummingSat have incurred a two-year delay. I think last year, they were supposed to launch in 2026, now it says 2028. Can you kind of give any -- shed any light on the reason for that? And does that have any impact on the plans for shoring up L-band capacity?

No. I think there is a misunderstanding there. I think that those satellites are pretty much on the schedule in which they originally procured. Inmarsat had procured them prior to the close of the merger, we were aware of them. And that is one of the purpose that you mentioned is one of the main purpose is to provide additional coverage and resiliency for the safety services. And that schedule is consistent with that.

Okay. And then just the last question. I was curious if Viasat sees any opportunities with the Space Development Agency with PWSA? I know a lot of that seems to be focused on providers of the satellites, maybe some of the ground network infrastructure, but is there any way for Viasat to contribute to that program?

Yes. The answer to that is definitely yes. We've been involved in some of the programs in the past. But we do see we do see a number of opportunities to participate in that program on a go-forward basis through some of -- a lot of -- a lot of what they're doing is satellite technology, and that's really what the opportunity is for us is in satellite technology.

So could that look like supplying payloads or space hardware or is it something else?

No. It's really around payloads specific subsystem hardware or specific missions of those satellites. All those are kinds of the kinds of ways in which we could be involved and have in the past.

Okay. Great. Thanks, guys.

We have time for one more question. It will come from the line of Ryan Koontz with Needham. Your line is open.

Great. Thanks for squeezing me in. On the IFC side kind of your puts and takes there relative to slow shipments from Boeing to Alaska and maybe some push out and available capacity. If you exclude the Alaska impacts, would you -- how would you characterize the growth in IFC from '24 to '25? Is it demand issue? Is this a capacity issue? What kind of growth are we talking about here at a high level? You really have to quantify it, but is it in line with your goals, I guess, my question.

Yes. So I think, Ryan, I can take this. And we've had some good momentum this year with respect to new installs. And even though we're seeing some of that shifting into next year, we're going to continue to have a good install activity into the year as a whole. So I would say that as we look outward, aviation is a big part of our growth, both from services and products.

Got it. Helpful. Thanks.

Ryan, just to clarify there, just one thing because just to bring it back, I still think that we're expecting around 4,200 aircraft in service by the end of fiscal year '25.

Great. Thank you for that. With regards to the quarter that's in the books here, Q4, we saw a step down in gross margins. Is that primarily driven by pricing in these maritime and fixed markets or something else going on there on the gross margin side?

Yes. So overall in gross margins, I think there is multiple components. We saw some cost growth, for example, in our government business and the programs. We also saw a bit of if I go below the lines, we saw some R&D ventures. But I think if you're looking at the gross margin line, it's predominantly some a little bit of cost growth that we had on the program side.

Got it. All right. Thanks. This is all I had. Appreciate it.

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

Okay. Thank you. So we try to give you a good discussion about our initiatives and our approach to competing in this evolving and what we think is a rapidly growing global mobility market. We've got work to do. We know we have a lot of work to do. We know we also have a lot of opportunity to grow with those markets in a rewarding manner. So thanks, everyone, for participating in this call, and we look forward to updating on our next call.

This concludes today's call. We thank you for joining. You may now disconnect your lines.