Viasat, Inc. — Form 10-Q summary
Business context and reporting period
Unaudited results cover the three months ended June 30, 2023, Viasat’s fiscal first quarter of fiscal 2024. Viasat provides satellite communications services and equipment through satellite services, commercial networks and government systems. The prior-year comparison is recast to exclude the Link-16 Tactical Data Links business, sold in January 2023.
Viasat completed its acquisition of Inmarsat on May 30, 2023, so current-quarter results include Inmarsat only from that date. The acquisition was funded with cash and Viasat shares, alongside new debt.
Key financial metrics
| Metric | Quarter ended June 30, 2023 | Prior-year quarter |
|---|---|---|
| Revenue | $779.8 million | $575.1 million |
| Gross profit and margin | $234.9 million; 30.1% | $157.3 million; 27.4% |
| Operating loss and margin | $(41.5) million; (5.3)% | $(56.6) million; (9.8)% |
| Net loss attributable to Viasat | $(77.0) million | $(21.6) million |
| Loss per share attributable to Viasat | $(0.83) | $(0.29) |
| Cash provided by operating activities | $103.7 million | $39.6 million |
- Revenue increased 36%, with growth in each segment. Satellite services revenue was $398.5 million, commercial networks $148.6 million, and government systems $232.7 million. Inmarsat contributed approximately $134.1 million of revenue for its one month included in the quarter.
- Operating loss narrowed by $15.1 million. Higher revenue and segment margins were partly offset by increased SG&A and acquired-intangible amortization. Net loss worsened, primarily reflecting a $50.1 million increase in interest expense and a much smaller income-tax benefit than in the prior-year quarter.
- Cash used in investing activities was $769.5 million, including $342.6 million for the acquisition, net of cash acquired, and $374.9 million of purchases of property, equipment, satellites and other assets. Financing activities provided $1.28 billion, primarily from debt borrowings.
- At June 30, cash and cash equivalents were $1.959 billion, restricted cash $34.0 million, and short-term investments $134.3 million. Management reported working capital of approximately $2.0 billion.
- Aggregate principal debt was $7.6 billion; balance-sheet debt was $7.218 billion long-term and $59.8 million current. Viasat had no borrowings on either revolving credit facility, with stated availability of $661.9 million on its facility and $700 million on Inmarsat’s. The company reported compliance with applicable debt covenants.
Material changes and operating developments
- The Inmarsat acquisition added global mobile satellite services, including maritime, aviation and government offerings. Viasat issued approximately 46.36 million shares as part of the consideration; shares issued rose from 76.9 million at March 31 to 124.1 million at June 30.
- Government systems revenue increased 55% and segment operating profit was $21.6 million, compared with a $1.1 million loss a year earlier. Satellite services operating profit was $11.4 million versus $1.3 million. Commercial networks remained loss-making, with a $46.7 million operating loss versus $49.4 million.
- U.S. fixed-broadband revenue declined as Viasat allocated more bandwidth to in-flight connectivity amid capacity constraints. In-flight services revenue increased as aircraft deployments and passenger air traffic grew.
- Firm backlog was $3.849 billion, of which $3.747 billion was funded; almost half of firm backlog was expected to be delivered in the next 12 months. Remaining performance obligations were $3.8 billion, with almost half expected to be recognized over the next 12 months. Backlog excludes certain future recurring in-flight revenues and is not necessarily indicative of future sales.
Outlook, risks and unusual items
- The filing provides no specific numerical revenue, earnings or cash-flow guidance. Management said it believes available funding, including cash, borrowing capacity and expected operating cash flow, is adequate for anticipated operating requirements over the next 12 months.
- On July 12, 2023, Viasat disclosed a reflector deployment issue on the ViaSat-3 Americas satellite that may materially affect performance. The company said it could not yet assess impairment or potential remedies. The satellite is insured for approximately $420 million, nearly half its net book value.
- Management expects elevated satellite investment and notes that launching new satellites can bring higher costs and constrained capacity before services scale. Acquisition integration, realization of expected synergies, higher debt and interest costs, and Inmarsat’s integration into public-company controls are additional risks.
- Other key risks include spectrum availability and interference, reliance on third-party suppliers and distributors, government contract audits and funding, and customer termination rights. Incurred-cost audit approval for fiscal 2021 remained pending; the company held $13.6 million in related contract reserves.
- Viasat received $97.5 million from Cisco in May 2023 under a judgment concerning Acacia. Because Acacia appealed, Viasat recorded the receipt as a long-term liability pending resolution.
- The company reported disclosure controls were effective at a reasonable assurance level as of June 30, 2023. The filing notes that Inmarsat had identified material weaknesses in its historical internal controls and that integration and remediation remain relevant considerations.
Investor verification priorities
- Track ViaSat-3 Americas reflector investigations, expected satellite performance, potential impairment, remediation and insurance recovery.
- Review Inmarsat integration progress, purchase-price-allocation changes, realized synergies, acquisition-related costs and the effect of added shares on per-share results.
- Monitor debt maturities, variable-rate exposure, interest expense, covenant headroom and the planned extension of Viasat’s revolving credit commitments.
- Assess whether satellite capacity constraints ease and whether in-flight growth offsets pressure in U.S. fixed broadband.
- Follow government contract audits, the Cisco/Acacia appeal and the timing and quality of backlog conversion into revenue and cash.