Viasat, Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended March 31, 2021. This is an annual report, not a standalone 2020 fourth-quarter filing. Viasat provides satellite broadband services, commercial satellite-network products and government communications and cybersecurity solutions.
Key financial results
| Metric | FY2021 | FY2020 |
|---|---|---|
| Revenue | $2.256 billion | $2.309 billion |
| Operating income | $58.2 million | $38.4 million |
| Net income (loss) attributable to Viasat | $3.7 million | $(0.2) million |
| Diluted EPS | $0.06 | $(0.00) |
| Cash provided by operating activities | $727.2 million | $436.9 million |
| Cash used in investing activities | $885.3 million | $758.8 million |
Product revenue fell 11% to $1.044 billion; service revenue increased 7% to $1.212 billion. Gross profit, calculated as revenue less product and service costs, was approximately $691.8 million, or 30.7% of revenue, versus $699.6 million, or 30.3%, in FY2020. Net income for the consolidated group was $17.1 million; $13.4 million was attributable to noncontrolling interests.
Segment results: Satellite services revenue rose 5% to $868.9 million, with operating profit of $35.9 million versus $7.0 million. Commercial networks revenue declined 7% to $320.9 million; its operating loss narrowed to $180.7 million from $186.9 million. Government systems revenue declined 6% to $1.066 billion, while operating profit fell 8% to $208.6 million. Government systems represented 47% of total revenue.
Cash, debt and liquidity
- Cash and cash equivalents were $295.9 million at year-end, down from $304.3 million. Working capital was $282.8 million, versus $441.1 million.
- Operating cash flow increased $290.3 million year over year. Purchases of property, equipment and satellites were $827.2 million; operating cash flow less those purchases was approximately negative $100.0 million, a simple calculation rather than a company-defined free-cash-flow measure.
- Outstanding debt principal was approximately $1.9 billion, including $700 million of 2025 notes, $600 million of 2027 notes, $400 million of 2028 notes, $98.3 million under the Ex-Im facility and $56.3 million of finance leases. The revolving facility had no borrowings and $673.7 million available.
- Capital expenditure and satellite investment remain substantial: satellites under construction totaled $1.338 billion on the balance sheet. Management expected FY2022 capital expenditures to exceed FY2021 levels.
Changes, outlook and risks
- Revenue decreased 2% year over year. Lower government and commercial-network product sales were partly offset by higher service revenue, including U.S. fixed broadband growth. Higher premium-plan mix supported fixed broadband revenue and margins.
- COVID-19 sharply reduced airline traffic, IFC demand and aircraft-terminal deliveries. About 200 of 1,480 aircraft with Viasat IFC systems were inactive at year-end. Management expected continued IFC revenue and operating-cash-flow pressure into FY2022 and potentially beyond, with gradual improvement as air travel recovered. It reported modest sequential improvement in the March 2021 quarter.
- Three ViaSat-3 satellites were under construction. Supply-chain and labor disruptions affected the first satellite’s payload schedule; the company continued to target an early-calendar-2022 launch for ViaSat-3 Americas. Management cited capacity constraints in U.S. fixed broadband before that satellite enters service and expected higher start-up and ground-network costs as global services expand.
- After year-end, on April 30, 2021, Viasat acquired the remaining 51% of Euro Infrastructure Co. for approximately €142.6 million, with a net cash outlay of about $50.4 million after acquired cash, and acquired RigNet in exchange for about 4.0 million shares. Purchase-accounting values were not yet available in the filing.
- Firm backlog was $2.306 billion, up from $1.871 billion; funded backlog was $2.120 billion. Slightly more than half of firm backlog was expected to be delivered within 12 months. Backlog excludes future recurring IFC service revenue and is not necessarily indicative of future sales; many contracts can be terminated or depend on future funding.
- Principal risks include satellite construction, launch or in-orbit failure; fixed-price contract cost overruns; dependence on U.S. Government business (30% of revenue); COVID-related aviation and supply-chain uncertainty; competition and spectrum regulation; and significant debt and covenant restrictions. Government cost audits for FY2019 and FY2020 remained open; the company had $10.3 million reserved for potential customer refunds related to cost adjustments.
Management said available cash, expected operating cash generation and revolver capacity were expected to cover anticipated operating requirements for at least 12 months. No specific revenue, earnings or margin guidance was provided. The company reported compliance with its credit-facility financial covenants at year-end. The auditor issued unqualified opinions on the financial statements and internal control over financial reporting; estimated costs at completion on long-term contracts were identified as a critical audit matter.
Important facts for investors to verify
- Progress, launch timing, cost and capacity of ViaSat-3, and whether COVID-related supply and labor issues persist.
- Recovery in airline traffic, the return of inactive aircraft to service and activation timing for the approximately 1,190 aircraft under existing agreements.
- Cash needs, capital spending and debt capacity after the Euro Infrastructure Co. and RigNet acquisitions; confirm final purchase accounting and integration outcomes.
- Whether backlog converts to funded orders and revenue, given termination rights and government appropriation requirements.
- Results of outstanding government contract audits and any changes to the $10.3 million contract-related reserve.