Viasat, Inc. — FY2023 Form 10-K
Reporting period: Fiscal year ended March 31, 2023. This is an annual report, not a calendar fourth-quarter filing. Unless noted, operating results below are for continuing operations and exclude the Link-16 business, which was reported as discontinued operations.
Business context and transactions
Viasat provides satellite broadband services, commercial satellite-network products, and communications and cybersecurity solutions for government customers. It reports three continuing segments: satellite services, commercial networks, and government systems.
- Viasat completed the sale of its Link-16 Tactical Data Links business to L3Harris on January 3, 2023, for approximately $1.96 billion in cash, subject to adjustments.
- The Inmarsat acquisition remained pending at the filing date. Consideration was approximately $850 million in cash, subject to adjustments, plus about 46.36 million Viasat shares. Inmarsat’s April 2022 dividend reduced the cash consideration by $299.3 million. Closing required regulatory approvals and other conditions.
- ViaSat-3 Americas launched on April 30, 2023, after fiscal year-end; commercial service was expected in summer 2023. Viasat expected the EMEA satellite to launch later in calendar 2023 and the APAC satellite thereafter.
Financial performance and liquidity
| Metric | FY2023 | FY2022 | Change / context |
|---|---|---|---|
| Revenue, continuing operations | $2.556 billion | $2.417 billion | Up 6% |
| Product / service revenue | $954.1 million / $1.602 billion | $860.7 million / $1.556 billion | Product revenue up 11%; service revenue up 3% |
| Gross profit / margin | Approximately $721 million / 28.2% | Approximately $706 million / 29.2% | Margin declined as service costs rose faster than revenue |
| Operating loss, continuing operations | $156.0 million | $113.1 million | Loss widened; operating margin about (6.1)% versus (4.7)% |
| Net loss from continuing operations | $211.6 million | $101.7 million | Loss widened |
| Net income attributable to Viasat | $1.085 billion | Net loss of $15.5 million | FY2023 includes the Link-16 disposal gain |
| Operating cash flow | $367.9 million | $505.6 million | Down $137.8 million; cash-flow statements include discontinued operations |
| Capital expenditures | $1.2 billion | Not clearly stated as an exact value in the cited comparison | FY2023 spending was 18% higher; management expected FY2024 capex to be flat year over year |
| Cash and restricted cash | $1.379 billion | $310.5 million | Includes $30.5 million restricted cash |
| Working capital | $1.3 billion | $389.1 million | Improved, primarily reflecting sale proceeds |
| Debt principal outstanding | $2.490 billion | $2.524 billion | Includes $36.4 million finance lease obligations |
FY2023 continuing-operations revenue growth included a $55.8 million product-revenue benefit from the Cisco settlement and $6.4 million of related interest income. The Link-16 sale generated a reported $1.662 billion gain before tax and costs to sell; discontinued operations contributed $1.302 billion of after-tax income. Consequently, reported FY2023 net income does not represent recurring operating profitability.
Segment revenue and operating results: satellite services revenue was $1.211 billion, with a $41.0 million operating loss (versus $31.6 million profit in FY2022); commercial networks revenue was $612.6 million, with a $145.3 million operating loss (versus a $209.1 million loss); government systems revenue was $732.8 million, with $60.2 million operating profit (versus $93.1 million).
Cash provided by investing activities was $768.0 million, including $1.932 billion of Link-16 sale proceeds and $1.077 billion of property, equipment and satellite purchases. Financing activities used $66.1 million. Operating cash flow less capital expenditures was approximately negative $0.8 billion; cash-flow figures include discontinued operations, so this is not a continuing-operations measure.
At March 31, 2023, Viasat had $657.4 million available under its revolving credit facility and no revolving borrowings. Term Loan Facility borrowings carried a 9.95% effective rate. The $700 million 2025 Notes mature in 2025; the revolving facility was scheduled to mature in January 2024. Viasat reported compliance with its debt financial covenants at fiscal year-end.
Material changes, outlook and risks
- Satellite services: Revenue grew 2%, but the segment swung to an operating loss. Viasat attributed weaker U.S. fixed-broadband revenue and margins to fewer residential subscribers as it managed limited bandwidth in favor of mobility services ahead of ViaSat-3 Americas. It expected margins to improve as the new satellite entered service and utilization scaled, but cautioned that this outcome was not assured.
- Commercial networks: Revenue increased 20%, including $55.8 million from the Cisco settlement. The operating loss narrowed, supported by higher revenue and lower independent R&D spending.
- Government systems: Revenue increased 2%, while operating profit declined 35%, principally due to higher SG&A. The filing cited ongoing certification delays and component shortages; segment awards remained strong.
- Forward outlook: Management expected FY2024 capital expenditures to remain approximately flat with FY2023 and IR&D investment to continue. It anticipated ongoing effects from the pandemic on in-flight connectivity revenue and operating cash flow in FY2024 and potentially beyond, with impacts expected to lessen as air traffic and aircraft activity recovered. Startup costs, ground-network investment and international expansion could weigh on results as ViaSat-3 service ramps.
- Inmarsat financing and execution: Viasat had commitments for $1.6 billion of new debt facilities and planned to assume $2.1 billion of Inmarsat bonds and borrowings under its $2.4 billion secured credit facilities. Integration costs, financing needs, regulatory conditions, delays, and failure to realize expected synergies could affect liquidity and returns. Termination under specified circumstances could require a fee of up to $200 million or expense reimbursement of up to $40 million.
- Other risks and unusual items: The filing cited satellite construction, launch and in-orbit performance risks; heavy capital requirements; competition from terrestrial and other satellite providers; supply-chain constraints, inflation and fixed-price contract cost overruns; U.S. Government funding and audit risks; spectrum and regulatory uncertainty; and significant debt. A cyberattack on the KA-SAT network in late FY2022 partially interrupted consumer broadband services in Europe and North Africa; Viasat reported no evidence that end-user data or the satellite and supporting ground infrastructure were compromised. FY2023 also included about $40 million of expenses for cost-reduction measures and a $19.1 million impairment of operating lease right-of-use assets.
Most important facts for investors to verify
- Whether and when the Inmarsat acquisition closed, its final funding mix and consideration, and actual integration costs and realized synergies.
- ViaSat-3 Americas’ commercial-service timing, capacity and performance, and launch and deployment progress for the EMEA and APAC satellites.
- Underlying continuing-operations profitability and cash generation excluding the Link-16 disposal gain and Cisco settlement, alongside ongoing satellite capex and debt-service requirements.
- Progress in restoring satellite-services margins and residential broadband performance while supporting mobility growth.
- Current debt maturities, refinancing arrangements, covenant headroom and liquidity after the Link-16 sale and any Inmarsat-related borrowing.
- Outcomes of material government contract audits, tax matters and the appeal or further resolution of the Cisco judgment; the filing states that the ultimate resolution of the later judgment was unknown.