Business Context and Reporting Period
Company: VIASAT, INC.
Filing Type: Form 10-K (Annual Report)
Fiscal Year Ended: April 3, 2009 (53-week year)
Business Overview: ViaSat is a leading producer of satellite and wireless communications and networking systems for government and commercial customers. The company operates through three segments: Government Systems, Commercial Networks, and Satellite Services. A significant portion of revenue is derived from U.S. government contracts (36% in FY2009).
Key Financial Metrics
| Metric | FY 2009 | FY 2008 | FY 2007 |
|---|---|---|---|
| Revenues | $628.2 million | $574.7 million | $516.6 million |
| Net Income | $38.3 million | $33.5 million | $30.2 million |
| Diluted EPS | $1.20 | $1.04 | $0.98 |
| Operating Income | $44.3 million | $42.9 million | $35.4 million |
| Operating Margin | 7.1% | 7.5% | 6.9% |
| Cash & Equivalents | $63.5 million | $125.2 million | $103.4 million |
| Working Capital | $203.4 million | $248.3 million | $187.4 million |
| Debt | $0 (No borrowings under credit facility) | $0 | $0 |
| Backlog (Firm) | $474.6 million | $374.4 million | N/A |
Material Changes vs. Prior Period
- Revenue Growth: Total revenue increased 9.3% to $628.2 million, driven by record new contract awards of $728.4 million (up from $560.0 million in FY2008).
- Segment Performance:
- Government Systems: Revenue increased 21.6% to $388.7 million, primarily due to higher sales in information assurance and military satellite communication systems.
- Commercial Networks: Revenue decreased 7.0% to $230.8 million, largely due to a $34.0 million reduction in consumer broadband product sales, partially offset by growth in mobile satellite systems.
- Satellite Services: Revenue increased 27.6% to $8.7 million, though the segment continued to operate at a loss ($4.0 million).
- Profitability: Net income rose 14.4% to $38.3 million. The effective tax rate dropped significantly to 15.0% (from 28.1% in FY2008) due to increased federal research tax credits.
- Cash Flow: Operating cash flow improved to $61.9 million (from $48.3 million). However, investing cash outflows surged to $126.1 million, primarily due to $93.4 million in construction costs for the ViaSat-1 satellite.
Guidance, Outlook, and Risks
- ViaSat-1 Satellite Project: The company is constructing a high-capacity Ka-band satellite (ViaSat-1) with a projected total project cost of approximately $400 million. Launch is targeted for early 2011, with service introduction later that year. The company believes current cash, operating cash flow, and credit facility availability are sufficient to fund the project.
- Backlog: Firm backlog increased to $474.6 million, with approximately $323.6 million expected to be delivered in FY2010. However, a majority of contracts can be terminated at the convenience of the customer.
- Risk Factors:
- Government Dependence: 62% of revenue comes from government systems; contracts are subject to termination, funding delays, and audit adjustments.
- Fixed-Price Contracts: Approximately 86% of revenue is from fixed-price contracts, exposing the company to cost overrun risks.
- Satellite Risks: Significant risks exist regarding the construction, launch, and in-orbit performance of ViaSat-1, including potential cost overruns and launch failures.
- Concentration: The five largest contracts generated 35% of FY2009 revenue.
Investor Verification Checklist
- ViaSat-1 Funding: Verify the company's ability to fund the remaining ~$400 million satellite project without dilutive equity issuance or debt covenant breaches.
- Commercial Segment Turnaround: Monitor the Commercial Networks segment for signs of recovery in consumer broadband sales and margin improvement.
- Government Contract Stability: Assess the risk of contract terminations or funding delays given the high concentration of revenue in U.S. government contracts.
- Fixed-Price Exposure: Review future contract mix to ensure fixed-price contracts do not lead to unexpected cost overruns impacting margins.
- Launch Timeline: Track the progress of the ViaSat-1 satellite construction and launch schedule against the 2011 target.