Viasat, Inc. — FY2022 Form 10-K
Business context and reporting period: Viasat provides satellite broadband and connectivity services, commercial satellite-network equipment, and government communications and cybersecurity products. This is the annual report for the fiscal year ended March 31, 2022; the filing also reports quarterly results, including the fourth quarter ended that date.
Financial performance and position
| Metric | FY2022 | FY2021 |
|---|---|---|
| Total revenue | $2.788 billion | $2.256 billion |
| Operating income | $8.3 million | $58.2 million |
| Net income (loss) attributable to Viasat | $(15.5) million | $3.7 million |
| Operating cash flow | $505.6 million | $727.2 million |
| Cash used in investing activities | $1.130 billion | $885.3 million |
- Revenue rose 24%, with service revenue up 30% and product revenue up 16%. Operating margin fell to about 0.3% from 2.6%.
- Segment revenue and operating results: Satellite Services revenue was $1.189 billion and operating profit $42.9 million; Commercial Networks revenue was $512.1 million and operating loss $180.3 million; Government Systems revenue was $1.087 billion and operating profit $174.5 million.
- At March 31, 2022, cash and cash equivalents were $310.5 million, working capital $389.1 million, and revolver availability $637.0 million. Gross debt, including finance leases, was $2.524 billion, compared with $1.855 billion a year earlier.
- Capital spending and satellite investment remained substantial: purchases of property, equipment and satellites were $938.3 million. Operating cash flow decreased $221.6 million year over year.
- Firm backlog was $2.033 billion, down from $2.306 billion; funded backlog was $1.941 billion, down from $2.120 billion.
- Fourth-quarter revenue was $701.7 million; operating loss was $20.8 million and net loss attributable to Viasat was $29.2 million, or $0.39 per diluted share.
Material changes versus prior year
- Revenue growth reflected acquisitions of RigNet and EBI, recovering in-flight connectivity activity, and higher Commercial Networks product deliveries. RigNet contributed about $154.5 million of satellite-services revenue; EBI contributed about $38.5 million.
- Despite higher revenue, operating income declined as selling, general and administrative expenses rose to $657.3 million, including increased support and acquisition-related costs, and R&D expense rose to $153.2 million.
- Government Systems operating profit fell 16%, to $174.5 million, amid higher SG&A and R&D costs. Product revenue was affected by supply issues and certification delays.
- Operating cash flow fell, chiefly due to greater cash absorbed by operating assets and liabilities, including receivables and the timing of milestone billings.
Outlook, commentary and risks
- Management expects FY2023 capital expenditures to exceed FY2022 levels as it continues satellite, earth-station and global-network investments. The filing provides no specific revenue or earnings guidance.
- Viasat anticipated commercial service on ViaSat-3 Americas in FY2023’s fourth quarter, dependent on construction deliverables, launch availability and other factors. Management warned of capacity constraints before service begins and elevated start-up and network costs.
- The proposed Inmarsat acquisition remained subject to regulatory and stockholder approvals. Consideration included approximately 46.36 million Viasat shares and cash; after an Inmarsat dividend, expected cash consideration was reduced by $299.3 million. Viasat estimated approximately $250 million in transaction costs through closing and approximately $50 million of integration costs and investments in each of the first two post-closing years. It expected to assume Inmarsat debt, adding substantial leverage.
- COVID-19 continued to weigh on aviation activity, although airline traffic and aircraft returning to service improved. Management expected some negative effects on in-flight connectivity revenue and operating cash flow into FY2023 and possibly beyond.
- A February 24, 2022 cyberattack on the KA-SAT network caused partial interruption of consumer broadband service in Europe and North Africa, affecting thousands of customers. Viasat reported no evidence of access to end-user data or compromise of the satellite or supporting ground infrastructure; financial impact was described as de minimis.
- Key risks include satellite construction, launch or performance failures; supply-chain constraints; intense competition; fixed-price contract cost overruns; reliance on U.S. Government contracts and appropriations; cybersecurity threats; regulatory and spectrum changes; acquisition execution; and high debt. The company reported effective disclosure controls and internal control over financial reporting; the auditor issued an unqualified opinion.
Investor verification checklist
- Confirm the timing, launch readiness and commercial-service start of ViaSat-3, and the cash and operating effects of capacity constraints and related investment.
- Track Inmarsat closing approvals, final consideration and financing, assumed debt, transaction costs, integration spending and expected benefits.
- Assess debt levels, covenant headroom, interest-rate exposure and liquidity after satellite spending and any acquisition financing.
- Monitor aviation recovery, aircraft installations and activation, and the conversion of firm backlog into funded orders and revenue.
- Review the effects of acquisition-related accounting, contract cost estimates, government audits, supply-chain and certification delays, and the KA-SAT cyber incident.