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Viasat (VSAT) Misses on Q2 Earnings Despite Record Revenues

Viasat, Inc. VSAT reported mixed second-quarter fiscal 2022 results, wherein the bottom line missed the Zacks Consensus Estimate but the top line beat the same.

The stock plummeted 16.9% on Nov 8, closing the session at $55.65.

The Carlsbad, CA-based company is making progress on the payload module for the second ViaSat-3 (EMEA) in its own facilities. The payload for the first satellite in the ViaSat-3 constellation, ViaSat-3 (Americas), is at Boeing BA Satellite Systems for final integration and environmental testing ahead of its planned launch.

Bottom Line

On a GAAP basis, net income in the quarter was $3.3 million or 4 cents per share compared with $2 million or 3 cents per share in the prior-year quarter. Despite a decline in operating income, net income improved on the back of lower interest expense and higher income tax benefit. The bottom line, however, missed the Zacks Consensus Estimate by 7 cents.

Non-GAAP net income was $25.4 million or 34 cents per share compared with $20.5 million or 31 cents per share in the year-ago quarter.

Viasat Inc. Price, Consensus and EPS Surprise

Viasat Inc. price-consensus-eps-surprise-chart | Viasat Inc. Quote

Revenues

Quarterly total revenues grew 26.5% year over year to a record $701.4 million. The rise was driven by the company’s recent acquisitions, strong product sales, and service revenue growth across all segments. While product revenues totaled $308.7 million, up 20.6% year over year, service revenues rose 31.6% to $392.7 million. The top line surpassed the consensus estimate of $682 million.

Segment Results

Revenues from Satellite Services rallied 39% year over year to a record $300.1 million. The performance was driven by an improvement in in-flight connectivity (IFC) service revenues as more passengers return to air travel, the two acquisitions (RigNet and EBI) that closed last quarter, as well as stability in the U.S. fixed broadband business. The segment’s operating profit was $17 million compared with $11.5 million in the year-ago quarter. Adjusted EBITDA was $110.4 million, up 30.5%.

Commercial Networks revenues increased 70.8% to $134.8 million. The main growth drivers were mobile IFC terminal deliveries and strong performance of the ground antenna systems business. Operating loss was $45.3 million compared with a loss of $45.4 million in the year-ago quarter. Adjusted EBITDA was a negative $24.5 million compared with a negative $26.6 million a year ago.

Revenues from Government Systems improved 2.7% year over year to $266.4 million. This reflects growth across the diversified service offerings in mobile broadband, government satcom, space, cybersecurity, and tactical satcom radio services. Operating profit was $44 million, down 8.1% year over year. Adjusted EBITDA was $69.1 million, down 4.4% due to higher R&D, sales and marketing expenses, and bid and proposal activities.

Other Details

Total operating income was $8.3 million compared with $12.7 million in the prior-year quarter. Adjusted EBITDA grew to $155.1 million from $130.3 million a year ago despite higher expenses for ViaSat-3 deployment preparation, new market entry, and R&D.

Notable Development

Viasat has inked a deal with Inmarsat, a London-based global mobile satellite communications services provider, under which the former will acquire the latter for $7.3 billion. The amount comprises $850 million in cash, around 46.36 million of Viasat shares valued at $3.1 billion based on the closing price on Nov 5, and $3.4 billion of debt.

The combination will create a leading communications innovator with a greater scale to securely connect the world. The complementary assets of the organization will enable the availability of advanced services in mobile and fixed segments. The new entity aims to integrate the spectrum, satellite, and terrestrial assets of both companies into a global high-capacity hybrid space and terrestrial network.

The deal is expected to be completed in the second half of the calendar year 2022, subject to the approval of Viasat shareholders and the satisfaction of customary closing conditions.

Cash Flow & Liquidity

During the fiscal second quarter, Viasat generated $163 million of cash from operating activities compared with $177 million in the prior-year quarter. As of Sep 30, 2021, the company had $217.7 million in cash and cash equivalents with $1,684.7 million of senior notes.

Zacks Rank & Stocks to Consider

Viasat currently carries a Zacks Rank #3 (Hold).

A couple of better-ranked stocks in the industry are Clearfield, Inc. CLFD, sporting a Zacks Rank #1 (Strong Buy), and Motorola Solutions, Inc. MSI, carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Clearfield delivered a trailing four-quarter earnings surprise of 50.8%, on average.

Motorola pulled off a trailing four-quarter earnings surprise of 9.5%, on average.


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