Viasat, Inc. (VSAT) Earnings Call Transcript & Summary

Thank you for standing by. My name is Meg and I will be your conference operator today. At this time, I would like to welcome everyone to the Viasat Defense and Advanced Technologies Investors Teach-In. [Operator Instructions] Thank you. I would now like to turn the call over to Lisa Curran, Vice President, Investor Relations and Marketing. Please go ahead.

During the presentation, we will 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. 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'd like to hand the call over to Susan Miller, President of Viasat Government.

Thanks, Lisa, and thanks to all of you for joining us today. I have the privilege of leading Viasat's Government Group, and I'm here to tell you that we think the defense opportunity is very significant. Today, you will hear how Viasat is redefining connectivity in the defense sector, developing technologies right across the value chain. We don't just connect, we engineer and innovate, we build and integrate. What you won't hear much about today is SATCOM. Instead, we're talking about our unique value proposition in the defense and technologies sectors. We're pushing the boundaries of what's possible delivering solutions that extend far beyond traditional commercial offerings, and we can distinctively do that because defense is in our DNA. As you know, we recently announced a new segmentation standing up the Defense and Advanced Technologies, or DAT segment, to highlight the value we are creating in these businesses. DAT is a critical part of our business. But then it always has been. This shift just provides more visibility to our proven track record in the defense and technology sectors. It's a dynamic growing market where we are serious competitors, not just participants. We have a scalable competitive edge here, and we're setting new standards for performance and reliability. Our focus is on providing resilient wireless networking solutions across all domains: air, land, sea, space and cyberspace. This comprehensive approach ensures our government customers have secure reliable communications in even the most challenging environments. With our technologies and spectrum holdings, we are uniquely positioned to deliver growth. So what makes Viasat a strong investment opportunity in this space? Well, we're leading in a number of areas, allowing us to serve unmet customer needs. This gives us a defensible position in many verticals you will hear about today. How have we done this? We're the original disruptor in space. Our technology leadership has pushed the boundaries in defense for decades, and we're continuing to innovate. But we don't just innovate and invent with a laser focus on delivering for our investors. We offer the best of both worlds. We have a tech start-up culture with the financial stability and reference customers of a defense prime, and we've done all this while growing year-on-year every year, and we fully expect to continue to do that. Investing in Viasat is investing in the disruptive defense technology company. It's an opportunity to be part of a growth story driven by innovation, market expansion and a deep understanding of the defense sector's evolving needs. As we move through today's presentation, you'll see how our commitment to excellence in defense and technology translates into unique value propositions, tangible growth opportunities and long-term value creation for our investors. On this next slide, you see that Viasat Government business spans two segments: Defense Advanced Technologies, or DAT, which we're focusing on during this discussion and Communication Services. These segments leverage our cutting-edge satellite and wireless technologies to provide mission-critical solutions for defense and simple government customers worldwide. A $125 billion market that is expected to grow to $320 billion over the next 10 years for a total growth of $195 billion according to The World Economic Forum. The government business overall generated $1.8 billion in total revenue in Viasat fiscal year 2024. With the government business comprised of nearly 60% of DAT revenue and a tad more than 40% of Communication Services revenue we believe we are well positioned to take advantage of new market opportunities across all of our business lines. It's worth taking a moment to highlight a few important attributes of the DAT segment. First, our DAT businesses are less capital intensive than our satellite-based businesses and offer attractive cash flows. Additionally, a wide range of revenue stream types are featured, including licensing, equipment sales, enrolled as prime and subcontractor on a multitude of programs. A large portion of our products and software form part of key programs of record in the U.S. DoD, and similarly for allied MoDs. Importantly, approximately 2/3 of DAT expected sales in FY '24 through FY '25, our sole-source award or limited competition. As a result, they represent several different types of revenue streams throughout their 10- to 15-year life cycle ranges from development, nonrecurring engineering, or NRE, to large production contracts, aftermarket services such as support and repairs as well as multiyear hardware and software sustainment contracts. Which is a typical requirement for continuing operation of products used in defense applications. Consequently, such programs sometimes spanning years are often large and multiphase, which can result in uneven or lumpy award and revenue profiles. Therefore, it's important to keep an eye on total award values and backlog as well as related sustainment service revenue when assessing the DAT segment. Viasat has a unique position in the market and strategic advantages that include unrivaled customer intimacy in the government space, both U.S. and international, vertically integrated capabilities spanning space, air, land, sea and cyberspace domains, a multi-orbit satellite fleet offering global coverage and resilience in multiple bands, advanced encryption and cybersecurity expertise, and a proven track record of innovation, backed by over 230 patents, our innovative spirit and technological prowess in the government market continues to accelerate. We also have a special pedigree of talent who are clear to work on U.S. and international government programs. Nearly 1/4 of the workforce has the credentials to work on some of the government's most sensitive projects which allows us to communicate clearly with our customers and execute quickly when contracts are executed. Trusted by governments, nations and prime contractors worldwide Viasat consistently provides reliable and secure solutions. And last but not least, we deliver. We always deliver. Viasat is focused on several key initiatives, including expanding our global satellite network to meet increasing government demand, developing next-generation cyber technologies, and space and ground systems for enhanced resilience, advancing tactical networks for multi-domain operations and pursuing opportunities in emerging new markets like face-to-face communications and direct-to-device communications. Viasat is working revenue opportunities across our business lines valued at several billion dollars or more over the next 5 years. Space has become a critical strategic domain for nations with significant implications for national security, economic growth and technological advancement. This growing importance of space-related technologies presents numerous opportunities. We intend to tap into that growth with our expertise in crypto, tactical networking, advanced spacecraft and payloads, ground solutions and near earth space relay communications, just as a few examples. Across both segments, Viasat government has established contract vehicles with customers that allow us to offer a full range of solutions. These are currently valued at over $6 billion. That reflects the untapped value of existing contract vehicles based on their current ceilings. So above and beyond, all the exciting new opportunities with new customers in new markets, there is already substantial upside within our core customer relationships. We have long-standing relationships in defense. We have leading technologies in defense. We have a durable right to win in defense, again, because defense is in our DNA. Moving on to Slide 5. Illustrates how Viasat's DAT segment leverages its cutting-edge technologies to provide critical solutions for defense and government customers. The DAT segment is divided into four key areas: in the information security and cyber defense area, and in the tactical networking area. Viasat offers advanced encryption and cybersecurity solutions to protect sensitive information, tactical links and networking systems for secure real-time communications in challenging environments, and information assurance products and services to safeguard critical infrastructure. The U.S. and Five Eyes countries are the key buyers here. But as integration by design and interoperability with allied nations becomes more important, we see significant global opportunities to increase our traction in these areas. These capabilities position Viasat as a leader in protecting national security interests and enabling secure communications for defense and government agencies. Another key area is space and mission systems, which focuses on space payloads and full space systems development to include advanced ground segment technologies. Mission planning and execution support for space-based operations and innovative solutions for earth observation, space situational awareness, ISR and other mission-critical space applications. We have a mix of direct to government and strategic partners that support execution here. This includes government entities like NASA, AFRL, FDA and other proprietary entities, major defense contractors such as Lockheed Martin and Northrop Grumman as well as cloud service providers and LEO constellation operators. Advanced technologies focus on commercial communication satellite product development, orchestration of sovereign and multi-orbit solutions, IP licensing and emerging growth markets such as direct-to-device communications. We are well positioned with this diverse and unique portfolio of high-quality assets. Our long-term customer relationships [indiscernible] are leading positions that we've carved out with advanced technologies [indiscernible]. Moving on to the next slide. Here, we are illustrating the significant upside potential from demand in large and attractive defense markets. The global defense and civil government market is large and historically stable high spending levels spur opportunities for companies to satisfy a wide range of government customer needs. As you know, sizable, steady markets tend not to see rapid growth year-on-year, but companies can thrive if they have the expertise to solve customer problems. The trust, which is built up over years from those customers to help solve them and the technology chops to back it up. Viasat has that expertise, Viasat has that trust, and we certainly have the technology chops too. The addressable markets in our DAT segment are robust in the tens of billions of dollars. These markets are not realizing double-digit growth, but we are. And that distinction is important. We have both niche and broad appeal technologies in these areas where with targeted investments and strategic focus, we can expand our offerings across the verticals, benefiting from increased demand globally. Even a modest uplift in market share and revenue pool of this stage will yield meaningful growth for us. So where do we see the opportunities? Well, our space and mission systems business is well positioned in an exciting, dynamic and attractive market. Our ground and space-based communications system entails are poised to play a crucial role in this evolving sector of national security operations. Additionally, our strategic partnerships and investments in cutting-edge research ensure we remain at the leading edge of space and antenna technology advancements. Meanwhile, as the demand for resiliency, interoperability and multi-domain capabilities continues to grow, our prospects in the tactical networking market are expanding, which underscores the increasing importance of our solutions to this vital sector in the defense industry. Our advanced Communication Systems are designed to meet the rigorous demands of modern tactical environments, ensuring seamless and secure connectivity for mission-critical operations. Also, the cyber threat is widely recognized as one of the main potential failure modes to national security and the number of identified threats is accelerating. As a global Internet service provider, we have unique visibility and access to this threat information and understand how to protect large-scale networks. Our high assurance, quality encryption products and cyber defense solutions are addressing critical data security needs for military and civil government customers. Looking ahead, we turn our attention to the advanced technologies market. Although still in its nascent stages, we are enthusiastic about the opportunities it presents. Leveraging our spectrum partnerships and technological capabilities, we aim to develop solutions that will transform niche markets into large global opportunities. We historically have developed technologies in nascent, at the time considered niche markets, which have evolved into large global markets. But the ultimate payoff in a multibillion-dollar business has to be to develop the technology that will have broad appeal to customers who value its capabilities. The defense market isn't new to us. We're earning market share and growing fast. This is about strategic positioning with dual-use technologies in expanding markets. It's about technology innovation and lucrative government contracts in an evolving new space economy, we see a very long runway of opportunity. Now let's talk for a minute about how Viasat is driving growth to meet multiple verticals. Viasat DAT segment is diversifying our offerings to meet the next-generation requirements of defense and commercial customers. In today's rapidly evolving business landscape, secular trends are reshaping industries and creating transformative opportunities for investors. I won't read all the bullets on this slide to you, but suffice it to say, this is a good reference chart, if you want to revisit how secular trends drive sustained growth and transformative potential across multiple DAT verticals. Our investments here are focused on cutting-edge research and development to stay ahead of secular market trends. By aligning our development activities with these critical or emerging customer requirements. Viasat is well positioned to capture growth opportunities across the Defense and Advanced Technologies landscape. But I would like to be clear here, we're not playing catch up with market trends. We're not trying to work out where the market is going and then following it. It's the other way around. Market trends are starting to align with what we've been doing for years, what we're experts at. That's why we have a durable right to win. That's why we're well positioned to grow. The changing character of warfare is increasing demand for Viasat's core offerings as multi-domain operations depend on connectivity and integration from space to cyber space. Our diverse portfolio, which we'll talk about next, allows us to address evolving defense and commercial needs, driving long-term growth and value for our investors. This next slide illustrates how Viasat Defense and Advanced Technologies segment is executing targeted strategic initiatives to capitalize on growth potential reflecting the compression of cycles of innovation resulting from various attractive secular drivers across our business areas. Here, we have some examples of why we're growing faster than the market, creating new demand with disruptive technology and capitalizing on attractive market opportunities with a vertically integrated approach. Let me briefly walk you through our key focus areas, which I'll provide more detail on in select case studies that will follow. In information security and cyber defense, we're developing next-generation government-certified encryption appliances. These advanced encryptors will enhance our ability to protect critical data and systems in an increasingly complex threat landscape. For tactical networking, we're building on our successful MOJO product portfolio as an example. MOJO is a move out, jump-off gateway that is valuable in tactical marketing by providing a versatile rapidly deployable solution that enhances situational awareness, improves interoperability and enables communication across disparate networks in challenging environments. Our space and mission systems group is advancing on multiple fronts. We're focusing on orbital communications and specialized space and mission payloads positioning Viasat at the forefront of space-based capabilities. Additionally, we're building ground-based mission infrastructure for major government programs, and gateway infrastructure for low earth orbit constellations, further cementing our role in critical space initiatives. In our advanced technologies area, we're pushing the boundaries with micro geostationary orbit spacecraft development and direct-to-device communications. These innovations have the potential to transform global connectivity, open new market opportunities and establish new ecosystem partnerships. Lastly, there is potential for cross-segment synergies with our Communication Services business. Our vertically integrated approach allows us to leverage technologies and capabilities that enhance our overall value proposition. As we continue to innovate and grow these synergies, will play a crucial role in driving long-term value for investors. The bottom line is clear. Viasat is strategically positioning itself for dynamic market evolution and growth. By investing in these highly leverageable cutting-edge technologies and solutions, we're not just keeping pace with the market. We're helping to shape its future. Moving on to Slide 9. We will begin to look at a number of case studies to help you better understand our enduring value proposition. Our next-gen encryption highlights how Viasat is an industry leader in high assurance Type 1 encryption solutions with over 75 certifications to date and 100,000 products shipped by the end of this year. We are proud of our heritage for U.S. and international governments trust line set to protect classified mission data and networks, including everything from the telemetry tracking and controlling between ground stations and satellites, all the way to classify data centers and cloud service providers. Our encryption business has been a consistent growth area for Viasat with exciting new opportunities as the U.S. government is in the initial stages of a major modernization initiative that will see most fielded network encryption devices replaced over the next decade. Viasat has received over $30 million in contract awards just this year to build next-generation modernized network encryptors. Further, as cybersecurity has emerged as one of the 5 warfighting domain, we believe high assurance encryption will continue to be critical in protecting U.S. and coalition partner assets, networks and data. The modernization initiative underway will result in a substantial recapitalization investment by the U.S. government over the next decade. As just one of a handful of trusted providers of this advanced technology, Viasat is uniquely positioned to continue our history of growth in the encryption market. Viasat entered this market in the early 2000 time frame with a single appliance, serving both tactical and enterprise classified networks. Today, we have a portfolio of products and are a leader in high-speed classified cloud data center encryption fueled by AI-driven growth in cloud computing. We lead in ground-based satellite encryption solutions and are now expanding into space. Expansion in edge computing and unmanned systems is providing new growth opportunities at the tactical edge. Where Viasat is already delivering complementary tactical communications solutions across our portfolio of wireless devices. Such as our TrellisWare Mobile Ad Hoc Network, MANET, radios, tactical gateways and laser Free Space Optics. And the impact is sizable and defensible we're expecting double-digit revenue growth due to compression of government procurement cycles in areas where we possess significant competitive moats. Moving on to the next case study. Let's look at tactical edge connectivity on the move. There is a major shift happening in the DoD today, driven by the emergence of near-peer adversaries armed with hypersonics, advanced jamming and unmanned systems, along with an increased multidimensional attack surface that now includes space and cyber. The decisive advantage may go to whomever can sense, make sense and act the fastest and thus shorten the decision to action cycle. The U.S. government is recognizing this challenge and has established multiple initiatives to drive positive outcomes, including rapid contracting strategies using Other Transaction Authority or OTA, and experimentation initiatives such as the U.S. Air Force Advanced Battle Management System, or ABMS program, where they are building the digital infrastructure designed to shorten the decision to action cycles. Viasat is well positioned to succeed and substantially grow in this shift towards rapid capability that leverages commercial investments and moves away from bespoke solutions, like what we see happening today between new space and legacy launch providers and equally between swarm unmanned systems and large platforms. The challenge for the emerging digital infrastructure is connecting everything from the edge to the cloud, across the services and coalition partners, processing the data at the speed of need and delivering actionable intelligence to decision makers. And doing so while under jamming and cyber attacks. Viasat as a commercial global connectivity provider has a deep heritage in delivering secure, resilient connectivity from edge to enterprise for U.S. and international partners. Leveraging our AI-driven cybersecurity operations and large fielded base of high assurance encryptors. We have a deployed base of over 130,000 Blue Force Tracking terminals on several ground and airborne platforms for the U.S. Army and the U.S. Marine Corps, providing global coverage on our satellite network. Viasat, TrellisWare Mobile Ad Hoc Network, MANET tactical radios, are used across the Army and partners for enabling resilient wireless communications all the way to the dismounted soldier. Viasat is a technology leader in small form factor data-link gateways where we deliver the battle space common operational picture in a suitcase-size kit to mobile operators. We are excited about bringing next-generation wireless technologies through our laser Free Space Optics communications terminal. Laser communications emit no RF and are harder for our adversaries to detect and track. Our NetAgility, a software-defined networking capability bridges together disparate and stove pipe networks to provide seamless sensing and connectivity across any number of networks to mitigate the effects of interference. Viasat is uniquely positioned for this transition as we integrate our commercial and government heritage of global transport multinet connectivity across edge to cloud and cybersecurity to enable the future of the digital infrastructure at the speed of relevance. For this next case study, let's turn our attention to a key innovation in our tactical networking portfolio, TrellisWare scalable, Mobile Ad Hoc Networking solutions. TrellisWare Technologies was founded in the year 2000 by four innovators in the areas of signal processing and advanced communications. The cofounders spun off the company from Viasat to pursue terrestrial applications of technology that combines foundations in signal processing innovation with the ability to productize these ideas for the real world in the commercial sector. TrellisWare communication technologies center around two primary Mobile Ad Hoc Networking or MANET waveforms, Katana narrowband networking, and TSM wideband networking, which is the one highlighted in this case study. The challenge in tactical communications has long been the limitations of available spectrum and the need for robust, scalable mesh networks that can handle voice, data and efficient Position Location Information or, PLI distribution. Previous attempts like the Joint Tactical Radio System program, which cost the U.S. government $17 billion over 15 years, fell short in developing the necessary robust, scalable Mobile Ad Hoc Network waveforms. TrellisWare's solution addresses these challenges head-on with its unique TSM waveform. This proprietary technology is truly game changing. It's ultra scalable, supporting over 800 nodes in just 1.2 megahertz of spectrum. It provides simultaneous multichannel voice data and PLI capabilities, enabling truly mission-critical concepts of operations. What sets this solution apart is its flexibility as a true software-defined radio waveform in hardware agnostic and can be readily integrated into partner program of record radios. It's also been battle tested since early 2010 by U.S. special operations forces and is protected by high-quality patents and trade sequence. For example, the Barrage Relay networking or BRN technology is patented and eliminates the need for routing, providing unrivaled scalability using less spectrum than any other MANET technology. The impact of this technology has been significant. It's become the standard for U.S. tactical communications, helping restart the Army's Handheld, Manpack and Small Form Fit program, and establish the Army's integrated tactical network. This innovation has created a win-win-win scenario for the U.S. Army and coalition partners prime radio vendors and TrellisWare. It's also opened up a highly attractive commercial IP licensing business model complementing direct TrellisWare radio sales, and increasing the percentage of high-margin service revenue. In essence, this is another example of highly leverageable bespoke technology that exemplifies our commitment to developing solutions that not only meet current needs but anticipate and shape the future of tactical communications. Turning to the next slide. Let's talk about some specialized space payloads. As discussed, there are secular changes occurring rapidly in the defense markets. The space market is experiencing one of the most dramatic shifts in the generation. Governments worldwide are seeing the benefits of proliferated space architectures that leverage the benefit of all orbits and they are significantly increasing their presence in LEO and MEO. They are also seeking the cost and speed benefits of new space companies that leverage more commercial practices than their traditional space suppliers as the need for inter-satellite communications continues to increase with proliferated constellation architectures. Viasat is also a leader in low SWaP software-defined radio technologies and space qualified payloads to enable special communications at the tactical edge. Closing the sensor to shooter link, we talked about anytime and anywhere on the globe. So why is all of this important? It means we are capturing niche but critical pieces of the rapidly growing space market and moving up the value chain. One example we can talk about is in orbital communications. Today, Viasat is the only company that can offer global two-way based communication services from GEO with our L-Band payloads. As a result of this capability and our forthcoming Ka service, NASA awarded Viasat over $80 million under a funded Space Act Agreement to develop and deliver a commercial service to eventually replace the aging tracking and data relay satellite system or TDRSS. Today, NASA spends almost $200 million a year for the TDRSS service. Through this contract, Viasat will fly a full mission at LEO with Ka, L and direct-to-earth payloads demonstrating seamless on-orbit communication services in 2026. Ultimately, we believe our diverse and unique payload technologies put us in a great position to capitalize on critical elements of the growing commercial and government proliferated space architectures. Moving on to the next case study. We're going to talk a little bit about scalable ground segment. Viasat is an industry leader in low earth orbit or LEO ground systems to customers across the civil, defense and commercial sectors. Tracing its history back to the early NASA space programs in the 1960s and with well over 1,000 large aperture gateways delivered to customers around the world, customers depend on Viasat to deliver results on the ground. Our extensive portfolio of ground segment products and technologies enables us to continue to innovate and solve the next generation of problems for our customers. When combined with our vertically integrated engineering and manufacturing approach, we can execute this at speed and scale. This is just one example where our Antenna Systems team was selected to develop and deploy a global ground station capability to support a new LEO communication satellite constellation. Our team was selected based on our proven capabilities to meet the demanding program requirements, which include challenging technical specifications, a compressed schedule and the high reliability of our products in a variety of environmental conditions. Our extensive history and demonstrated successful past performance led our customers to entrust Viasat to make this happen. This program includes the development and delivery of nearly 100 large aperture antenna systems, a sizable contract award with the possibility of follow-on and a new family of products that can be utilized on future program opportunities within our market. Why are we showing you this? It's evidence of our customers choosing our expert teams and trusting our resilient, secure, reliable solutions and rewarding us for it. Moving to the next slide. As we look at Viasat Defense and Advanced Technologies segment, we see a compelling story of consistent growth and strategic wins. Our bar chart illustrates the steady revenue expansion we've achieved over the past several years with almost $300 million in incremental revenue over the last 2 years, and a compound annual growth rate of approximately 17% over that period. This demonstrates our ability to capture market share and deliver value in this critical sector. As an example, from 2022, the InfoSec and Cyber defense business revenue doubled and the total DAT portfolio generated revenue of over $1 billion in fiscal year 2024. This revenue growth performance highlights Viasat's strong positioning in the market and our ability to scale and deliver innovative mission-critical solutions to our government and commercial customers. As we look ahead, we're confident in our ability to develop a growth trajectory and capture emerging opportunities in the evolving defense and space sector. So you can see why we think the defense opportunity is significant. Our technology, our strategy, in fact, everything about our entire organization is unique to the SATCOM business. We go far beyond the narrower bound of that market. With our last slide, I'd like to briefly summarize some of the key messages you've heard today. We are an established provider of defense and advanced technology solutions, and we are continuing to innovate. We're pushing boundaries and winning contracts with an ever-expanding portfolio of highly leverageable and interoperable assets. We're not new to defense. We have deep expertise and a right to win in this space. The secular drivers in this market, not only aligned to the direction we're heading, but we've had a head start on them. We believe our String of Pearls strategy will continue to position us at the forefront of market trends, not just in the significant U.S. market, but internationally too, which we're even more confident about since the Inmarsat acquisition. Across the Defense and Advanced Technologies sector, many of our businesses are outpacing market growth, and we expect that to continue, especially in areas such as encryption and space and mission systems, where our unique value propositions and scalable competitive edge create opportunities to expand our market share. We have a great business here, a robust one, a growing one. And with cross-segment synergies, we can expand the scope at scale even further. Our vertical integration and extensive infrastructure provides a key competitive advantage, allowing us to offer unique and comprehensive solutions. We will continue to engineer and innovate, and we'll continue to build and integrate. And we will always deliver for defense. For investors, this means a commitment to delivering more profitable growth and stronger returns. Exposure to high-growth markets with significant expansion potential, investment in a company driving scalable technological advancements in critical defense and space sectors, and a diversified durable portfolio that capitalizes on sustained market opportunities. Thank you. Meg, you may now open the line for questions.

[Operator Instructions] Our first question will come from the line of Ryan Koontz with Needham & Company.

Can you hear me okay?

Yes, can hear you.

Yes, Ryan, we can hear you.

Question for you, didn't talk much about channel and kind of time -- sales cycles and these sorts of things. Can you kind of walk us through your sales structure, what your relationships are like with your various customers here, how you think they're sticky and differentiated, and what the typical sales cycle is like in average contract duration?

Thanks Ryan. So we've talked about a number of different businesses, and these things in terms of sales cycle, channel relationships, et cetera, do vary a little bit. But let me just make some general remarks. So in terms of channel, we very often work with defense prime contractors to reach the government customer itself. But we do have a number of instances where in the businesses we have contracts directly with the government. And so it's kind of a mix there. So through some partners and directly to the government channel. And it really varies within the businesses and depends on the size of the program we're going after and so forth. So more and more, I think the trend that we have in our business is to do more prime contracting but we like the ability to sort of be light on our feet and just kind of pick the business, the portion of the business that makes the most sense for us, that's differentiated for us. And so working through primes will continue to be one of our strategies as well. Sales cycle, again, varies quite a bit. When you look at our encryption business, in terms of the development and the production of the products and all that, that does take a fair amount of time, and we're always kind of working on the next generation there. But when it comes to the sales cycle itself from the time the business identifies a requirement or need until an order is reached, it's probably on the order of a number of months, not much longer than that. And then we are quite quick in terms of our ability to manufacture and deliver quite quick to fulfill those orders, if you will. If you think, for example, for a minute, we talk about our space and mission systems, where we're dealing with space-based hardware where we're looking at payloads that we deliver into a spacecraft development program. Those are largely direct relationships or again, through prime, but also those are a little bit longer in terms of sales cycle and just kind of following that from the moment of requirement is identified through the process that the government actually follows in terms of RFI, RFP actual proposal submission, et cetera. And that can take a good half a year or more for a sales cycle to complete. And then again, it varies a little bit more. We talked about TrellisWare where today, that sales cycle is shorter, and we'll hear more about that through other questions. And in the other areas in terms of the antenna systems, the large antenna systems sales cycle can be fairly long there as well. We do build large ground segment components or capabilities for LEO satellite operators or more proprietary restricted customers and so forth. And those things can take quite a while to pursue. So that can be on the order of the year, sometimes more depending on when the funding for those things come through in the government budget cycles as well. So I hope that answers your question.

Yes, super helpful. Just a quick follow-up here. In terms of geographies, I assume this is dominantly U.S., can you give us kind of a rough idea of the international mix within DAT?

You're right. It is largely U.S., but we definitely have a component of international in each of these business areas. I specifically don't have that number for you in terms of consolidated across segment. But yes, I would yes, I'll ask David Schmolke, who is here with us to talk a little bit about, for example, the U.S. versus foreign sales in the encryption and information security business.

Yes. So for our encryption products, what we tend to see there, and keep in mind, this is going to be one of our more restrictive portfolios. Just the nature -- high assurance nature of these products, so we're restricted on where we can sell it internationally. But within that portfolio, last year, we were operating close to around approximately 10% of the revenue in that part of the business. This year, we're seeing some robust growth there. It's in part due to now Inmarsat -- the Inmarsat acquisition being part of our sales team has seen some growth in that space.

Thanks, David. And I don't know, Metin, would you like to comment with regard to TrellisWare?

Sure. So for TrellisWare, we -- our -- a key part of our business is waveforms development and actually getting those waveforms into -- as to requirements into live services, such as U.S. army, U.S. Marine Corps. And then we try to, once we do that, then we go international and repeat the same thing such as Five Eyes and after that, NATO. So what happens is that the U.S. government, obviously, is the largest spender on defense, and that also is true for communication services. So we see our U.S. business to be usually significantly larger than international. Right now, it's probably in the neighborhood of 80:20. However, we expect that international is going to catch up over time to domestic here in the U.S. And as you probably know, defense business tends to be cyclical. So for example, U.S. Marine Corps might decide that they're going to buy lots and lots of radios in a few years, and then they will kind of dormant for a few years until they start buying radios again. And usually, that's when defense business makes it a little bit more -- international business makes a little bit more tight and so you get more of a smoothed out revenue stream.

And maybe just to finish that off, I'll make a comment, even though I don't have the overall percentage number. I will say that -- we do see, as Metin points it out, overall, the international is growing, and it's been slightly above the overall segment growth. So for example, between FY '22 through '24, we have about a 19% CAGR in terms of international business growth. So it is kind of early stages, but that's a capability and an opportunity that we expect to develop further.

Your next question comes from Edison Yu with Deutsche Bank.

Thank you very much for the very comprehensive information. I wanted to take maybe a high-level question. Can you go over the 4 segments and perhaps describe the level of competitiveness in each one, for example, market share for the main other players, just to give us a sense of the competitive dynamics?

Sure. We can do that. And I'm thinking that it might be good to just touch with each of the business leaders to actually give you the best sort of insight there. We can start with our information security and encryption business. David Schmolke, if you want to make some high-level comments about that?

Yes. Thank you, Susan. So -- yes. So what we see -- if you look at the high-assurance type encryption market, it's a rather small community of players. Clients have entered this space around the 2004 time frame with our first certified product. From that, we've grown into a product portfolio that now covers not just network encryption across land, sea and air, but also moving on to enterprise networks, space networks, both ground and space [ life ]. And so we've been able to demonstrate the ability to be able to continue to grow and penetrate new markets. And some of that has been in a very light market in terms of other players in the space. Over time, we're going to continue to pursue and grow into more areas. But that's why that has a fair amount of market share. We have large market share with our GOE encryptors, our ground space satellite encryptors. And we have large market share today in our enterprise crypto market, and we continue to grow and expand more in our HAIPE inline network encryptors as well.

Thanks, David. Mike, would you -- I'm turning over to Mike Maughan now who's also on the Q&A panel and heads up our and Space Emission Systems Group. Mike, would you like to talk about your business area similarly?

Sure, Susan. Thank you. Yes, as everyone knows, space is a pretty rapidly growing market and lots of new entrants as well as traditional entrants. So we tend to compete with and sometimes prime with the large defense primes. We also compete with new space companies that are coming into the market, depending on the specific opportunity. We even partner in and work with each of those -- both new space as well as prime. But given the kind of unique nature of Viasat's commercial experience as well as its defense heritage. We feel like we can compete on a different playing field, depending on where it is. So on the legacy front, we've got a very -- we can leverage our commercial best practices and the ability to provide commercial services, for example, orbital communications. And so we feel that's an advantage against some of the traditional primes. And then when you look at some of the new space competitors, we feel like our defense heritage, the ability to have a cleared workforce, cleared facilities and trust with certain communities that, that experience enables us kind of a competitive advantage against some of these new space entrants. So holistically, we kind of like our position in the growing space market, and we're looking forward to trying to grow that business.

Thanks, Mike. I'll turn it over to Kent Leka, who heads up our Antenna Systems Group in Duluth, Georgia. Kent, would you make some comments?

Yes. Great. Thank you, Susan. Appreciate the hand off. I would say, part -- for the Antenna Systems business, part of our strategy is to really focus on the areas where we can differentiate some of our unique capabilities. So kind of shape the market and look at it from that perspective and so from the areas where we play, we think we can participate well in probably the 30% to 40% market share. And again, I condition that with the fact that we're pretty careful about what we go after and how we actually define the market in which we participate. So as far as competition, we've got 2 or 3 competitors, really, that we see in our market space. Some of them used to work -- used to be a part of General Dynamics, the SATCOM group. They were since sold off to a private equity group. And the other used to be a part of L3Harris and they too were subsequently sold off to a private equity group. So -- and then we've got a couple -- those were both domestic and then we have a couple of internationals as well, but fairly small competitive market that we participate in. Susan?

Yes. Thanks, Kent. I appreciate that. Metin from TrellisWare, would you care to comment as well, please?

Sure. So obviously, competition exists, we're in the waveform and radio business. And everyone is always trying to show their newest waveforms, newest radios to the U.S. Army to U.S. Marine Corps, internationally as well. One unique situation that TrellisWare is in, and this goes back to the earlier question in terms of how long the sales cycles are, when the U.S. army buys -- for example, as was one of the case studies before, they buy radios in large programs of record. And these programs are worth -- the HMS program is worth probably close to $20 billion in the life of the program, and it's a 10-plus year program, right? So the sales cycle to get into a program like that is long. It took TrellisWare probably anywhere from 3 to 5 years to convince them that this was the waveform from they wanted. Then they hit to do all the testing to make sure that this waveform worked and met all their concept of operations and all that kind of stuff. So at the end of the day, they made, for example, TrellisWare, a requirement, right? So if you want to be issued at a prime such as Harris communications, common aerospace, and you want to provide and you are providing as the prime, your radios to the U.S. Army under this HMS program, you have to have TrellisWare's technology as part of it, otherwise you cannot sell your radio, right? So what that does to us though is for the winners, and in this case, TrellisWare was the winner, then even though there is a lot of competition from our side, if you're part of this large program of record and if you're a requirement, then it puts you in a rather unique position. It's similar, actually, if you look at large defense, large ministries of defense. That's how the Marine Corps in the U.S. buys. That's how special operations command in the U.S. buys. That's how the Ministry of Defense in the U.K. and Canada buys. And we have been rather successful in getting our technology to be a requirement in those programs. So as the time sell their radios, we are going to be part of that. And sometimes it's a 5-year program, sometimes it's a 15-plus year program. So in those areas, our position tends to be very, very strong. In addition to that, because we are part of these large programs of record, that, essentially, creates an ecosystem and it has huge networking effects. So for example, in the old days, they used to say, well, no one got fired for buying IBM. Well, when you're, say, in the Philippines and you're demonstrating your radios, your technology, your waveform technology to the Philippines Army, one of the things is if the U.S. Army has chosen you, right, then it has huge credibility when you can say, yes, this is what U.S. Army is using. So if you buy this technology, you're, essentially, getting the technology that the U.S. Army has. So yes, there's lots of competition. That's why we are innovating, but at the same time, we are very comfortable with our position as well, which is rather unique in the space that we are in. Thank you.

Thanks, Metin. Edison, did you have a follow-up?

Yes. That was very helpful. The follow-up is probably a bit more simple question. So I know you have that graph or table with the 17% CAGR. How does that compare to the -- how do you think that compares to the market as in how much above-market growth do you think that represents?

Yes. Thanks for that. I would say that we know that we are outpacing the market growth because, as we described, these markets are kind of large and stable markets. But in terms of exact, let me turn that over to Lisa for further comment. Lisa, do you have that data available?

Yes. I'm sorry. Edison, can you repeat what you said?

Context on that 17% CAGR, I know you're outgrowing the market, but is it -- is that, like, 15% better than market? Is that 10%? Any sense of how much above the market that you're growing?

Yes. I would just point you back to the market growth slides. I believe it was -- where we talked about the TAM. And it is a blended rate. But I would say it's comfortably above. I don't want to get ahead of myself because what's making it difficult is the lumpiness and we've had some of the licensing revenue in there. But I would say it's comfortably above.

[Operator Instructions] Your next question comes from Richard Prentiss with Raymond James.

Yes. Obviously, a lot of details in the presentation, really helps us unpack and understand the fairly complicated and diverse business, so this has been really, really helpful. I'm looking at Slide 5, which I found very useful. And one is kind of thinking back on the prior question, too. Like, If we take Slide 5 and say, who would the top competitors be for those customers that you show in each one of these 4 silos? Is there any way to kind of lay out, either company names, or more specific than you gave us with the previous answer. Just kind of helping us understand how to take that Slide 5 and go to that next step of who you're competing against primarily?