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ViaSat (VSAT) Up 0.9% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for ViaSat (VSAT). Shares have added about 0.9% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is ViaSat due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Viasat Q4 Earnings Top Estimates, Revenues Up Y/Y

Viasat reported mixed fourth-quarter fiscal 2021 financial results, wherein the bottom line surpassed the Zacks Consensus Estimate but the top line missed the same. Accelerated investments in ViaSat-3 constellation, sustained momentum in Satellite Services segment, diligent operational execution, new contract awards and accretive subscriber base amid COVID-19 woes drove the quarterly results.

Bottom Line

On a GAAP basis, net income in the March quarter was $7.4 million or 11 cents per share compared with $1.6 million or 3 cents per share in the year-ago quarter. The improvement was primarily driven by top-line growth. Higher operating income was a contributing factor as well. The bottom line beat the Zacks Consensus Estimate by 8 cents. In fiscal 2021, net income was $3.7 million or 6 cents per share against net loss of $0.2 million or break even on a per share basis in fiscal 2020.

Non-GAAP net income came in at $25.2 million or 36 cents per share compared with $20 million or 32 cents per share in the prior-year quarter. In fiscal 2021, non-GAAP net income was $77 million or $1.15 per share compared with $72 million or $1.14 per share in fiscal 2020.

Revenues

Quarterly total revenues increased 0.7% year over year to $595.8 million. The upside was primarily driven by strong revenue growth in the Satellite Services segment backed by sustained sales backlog and new contract awards. While product revenues totaled $271.3 million, down 9.3% year over year, service revenues rose 10.8% to $324.5 million. However, the top line missed the consensus estimate of $607 million. In fiscal 2021, revenues declined 2.3% year over year to $2,256.1 million.

Segment Results

Revenues from Satellite Services jumped 8.4% year over year to a record $230.3 million. The performance was primarily driven by higher demand for premium service plans in U.S. fixed broadband business. Although current travel restrictions have affected the air traffic in fiscal 2021, accelerated vaccination initiatives, passenger traffic growth and airline fleet expansion with the rebound of Boeing 737-MAX aircraft in early fiscal 2022 are expected to give a significant push to in-flight connectivity (IFC) revenues. The segment also witnessed record average revenue per user (ARPU) for fixed consumer services. The segment’s operating profit was $14.8 million compared with $0.4 million in the year-ago quarter. Adjusted EBITDA was $93.7 million, up 33.7% driven by improved broadband business and effective management of selling, general and administrative expenses.

Commercial Networks revenues declined 8.7% to $84.7 million due to lower sales of commercial air IFC terminal and COVID-19 mayhem. However, it was partially offset by growth in antenna systems business. Markedly, the segment continues to invest in research & development to reinforce high priority long-term strategic growth opportunities. The segment’s operating loss was $45 million compared with loss of $43.3 million in the year-ago quarter. Adjusted EBITDA was a negative $26.1 million compared with negative $26.9 million in the year-ago quarter. The segment completed payload integration for ViaSat-3 (Americas) and is currently focused on construction of the payloads for ViaSat-3 (Europe, Middle East, and Africa) and ViaSat-3 (Asia-Pacific).

Revenues from Government Systems decreased 2% year over year to $280.8 million. The downside was mainly due to lower deliveries of government mobile broadband and tactical satcom network products. Notably, the segment delivered its third consecutive year of more than $1 billion in terms of awards. Ramped-up production activities followed by higher demand for government mobile broadband and tactical data links amid challenging conditions posed by the COVID-19 pandemic played major role as well. However, the segment’s operating profit was $60.6 million, up 3.2% year over year. Adjusted EBITDA was $80.6 million, up 4.5% year over year.

Other Details

Total operating income was $29.1 million compared with $14.1 million in the year-earlier quarter. Adjusted EBITDA came in at $148.1 million compared with $120.3 million a year ago, driven by diligent operational execution in U.S. fixed broadband and Commercial Networks along with a sustained demand environment.

Cash Flow & Liquidity

During fiscal 2021, Viasat generated a record high of $727 million of cash from operations compared with $437 million a year ago. The increase was mainly driven by robust operating performance, working capital optimization and disciplined expense management. The company has $700 million under a revolving credit facility, which might be used to avail additional flexibility amid coronavirus disruptions.

As of Mar 31, 2021, the satellite and wireless networking technology provider had $295.9 million in cash and cash equivalents with $119.4 million of long-term debt compared with the respective tallies of $304.3 million and $536.2 million in the year-ago period.

Moving Forward

Despite uncertainties pertaining to COVID-19 pandemic, Viasat delivered relatively healthy results in fiscal 2021 and continues to hold a leading position in the satellite and wireless communications market. With the rapid proliferation of the smartphone market and usage of mobile broadband, the user demand for coverage speed and quality has increased, which in turn is fueling demand for network tuning and optimization to maintain high data traffic. Backed by a robust vertically-integrated business model, the company remains focused on the launch of ViaSat-3 class satellite.

Revenues from IFC and enterprise markets are expected to grow, which is likely to have a positive impact on Satellite Services segment. Also, recovering air traffic volumes is anticipated to contribute to IFC growth. International market expansions in Europe and Brazil with moderate growth in the U.S. might drive Viasat’s fixed broadband business in fiscal 2022. Moreover, financial prudence in capital investments, robust pipeline of new business opportunities, market share gains and tuck-in acquisitions with an augmented geographic presence are likely to bolster the company’s business roadmap. It is to be seen whether Viasat can sustain the momentum in the coming days amid disruptions caused by the COVID-19 pandemic.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision flatlined during the past month. The consensus estimate has shifted -70.59% due to these changes.

VGM Scores

Currently, ViaSat has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

ViaSat has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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