Viasat, Inc. (NASDAQ:VSAT) Q3 2023 Earnings Call Transcript

Viasat, Inc. (NASDAQ:VSAT) Q3 2023 Earnings Call Transcript February 7, 2023

Operator: Welcome to ViaSat's FY 2023 Third Quarter Earnings Conference Call. Your host for today's call is Mark Dankberg, Chairman and CEO. You may proceed, Mr. Dankberg.

Mark Dankberg: Okay, thanks. Thanks for joining us today. We released our shareholder letter shortly after market close and its available on our website and we will be referring to that on this call. Joining me today on the call are Rick Baldridge, our Vice Chairman; Kevin Harkenrider, our Chief Operating Officer; our Chief Financial Officer, Shawn Duffy, Robert Blair, our General Counsel; and Paul Froelich from Corporate Development; and Peter Lopez from Investor Relations. So, let's have Robert provide our Safe Harbor disclosure for the start.

Robert Blair: Thanks Mark. As you know, this discussion will contain forward-looking statements. This is a reminder that factors could cause actual results to differ materially. Additional information concerning these factors is contained in our SEC filings, including our most recent reports on Form 10-K and Form 10-Q. Copies are available from the SEC or from our website. Back to you, Mark.

Mark Dankberg: Okay. Thanks Robert. So, I'll start with a brief overview, and then we'll go right into questions. So, the most important point for today is that construction and test on the ViaSat-3 and America satellite has been completed. We're scheduled to launch on April 8th and which follows a pair of NASA international space station missions that have been pushed about one to two weeks later than previously planned because of the replacement mission to bring back from IFS. Bringing that satellite into service addresses our most immediately challenge, which is bandwidth constraints. In the US that have caused us to steadily downsize our residential business to support the strong growth we've had in inflight connectivity.

ViaSat-3, we'll be able to serve areas that are currently full and to introduce updated plans with higher speeds, more bandwidth, and greater value. And also supports more of our existing customers in the Americas and capacity to the good growth we've had in Brazil and Mexico and opens additional new geographic and vertical markets. We're confident it will drive growth. The satellite should reach its orbital site just a couple of weeks after launch and we expect to start initial services promptly and to start scaling during the summer. ViaSat-3, EMEA, Europe, Middle East, and Africa satellite is not far behind its planned for launch by ULA in September. That adds important coverage to our mobility businesses and capacity to a number of other markets.

Photo by Mika Baumeister on Unsplash

It's also the catalyst expected to enable us to reach positive free cash flow. The Asia-Pacific satellite is not too far behind now. Overall, new orders are up year-over-year. We're making very good progress on in-flight connectivity, especially. We think one exciting example is the recent announcement by Delta Airlines, making free Wi-Fi available on their full fleet, we've worked methodically with them to be sure, we both understand the growth in demand and how we can deliver the service quality that we expect at scale. Today, we're at about a total of around 3,000 flights a day with free Wi-Fi, now that's between Delta and JetBlue, and that's growing pretty rapidly. And of course, we also continue to serve all the other lines we support, including at those same major US cities.

We see good opportunities in working with airline partners to scale past engagement with Wi-Fi affordably and in ways that pursuit their business models and brands. We shipped about 240 in-flight terminals in the third quarter for Commercial Air and brought about 160 planes into service, which is about a 17% year-over-year growth. New orders have been very good with both new and existing customers and we still have over about 1,200 additional planes at order. Our airline customers are seeing delays in some of their new aircraft deliveries probably in the range of about 50 to 60 cumulative by the end of our fiscal 2023. So, we expect deliveries and installs will grow sequentially in the fourth quarter anyway. We've also been equipping Station Airlines in China.

The US and China are the largest domestic air travel markets. And we believe the ability to serve international pipes to and from China with our partners there seamlessly will be important to many global airlines as well as to the Chinese international airlines. The other major point for today is around the close of the sale of our TDL business just after the end of the third quarter. Within that, as we expected about $1.8 billion in cash, which greatly strengthens our balance sheet. We'll also realize again on the sale of over $1.5 billion. So, including that gain, FY 2023 will actually be a very profitable year for us. The sale will ensure we can drive our satellite services businesses since we have significantly greater growth potential.

As we mentioned last quarter, we have some rightsizing to do as a result of the sale, and that's underway. And regarding Inmarsat, the remaining gates to close the transaction are primarily the U.K. and the European community antitrust approvals. We expect to have good insight into the regulatory -- the regulators current views on the matter this quarter. So, the shareholder data of the shareholder letter also provides our financial data for our third quarter of fiscal 2023 and year-to-date. Those results are below our expectations for the year -- in the quarter with the largest factor being the significant delay in launch of the first ViaSat-3 satellite relative to the schedule we expected entering the year. We've had other challenges on supply chain affecting cost or delivery schedule of some of our products, the right airplane deliveries to our customers and encryption product certification issues that are not specific to us, but the demand for our products and services is strong, and we've had good year-over-year performance on orders.

With the TDL gain, we'll report our highest ever earnings for the fiscal year by. We expect to start fiscal year 2024 with the launch of the first ViaSat-3 and we think the outlook from there is very exciting, as described in the shareholder letter. So, with that, we'll open it up for questions.

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