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Viasat (VSAT) Q1 Earnings Beat Estimates on Solid Top-Line Growth

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Viasat, Inc. VSAT reported impressive first-quarter fiscal 2022 results, wherein both the bottom line and the top line surpassed their respective Zacks Consensus Estimate. Sustained momentum in Satellite Services segment, robust demand environment, improving in-flight connectivity (IFC) revenues and accelerated investments in ViaSat-3 constellation drove the quarterly results. Shares of the Carlsbad, CA-based company jumped 8.5%, in response to the results, to close at $52.16 on Aug 5.

Bottom Line

On a GAAP basis, net income in the June quarter was $17 million or 23 cents per share against net loss of $12.4 million or loss of 20 cents per share in the year-ago quarter. The year-over-year drastic improvement was largely driven by solid top-line growth. The bottom line beat the Zacks Consensus Estimate by 20 cents.

Non-GAAP net income came in at $33.3 million or 46 cents per share compared with $4.8 million or 8 cents per share in the prior-year quarter.

Viasat Inc. Price, Consensus and EPS Surprise

Viasat Inc. Price, Consensus and EPS Surprise
Viasat Inc. Price, Consensus and EPS Surprise

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

Revenues

Quarterly total revenues soared 25.3% year over year to $664.9 million. The upside was primarily driven by higher product and service sales. Strong revenue growth in the Satellite Services segment backed by improvement in the IFC business as passengers gradually return to air travel post the COVID-19 turmoil acted as major tailwind. Sustained sales backlog, increased demand for fixed broadband and new contract awards were major growth drivers as well. While product revenues totaled $293.3 million, up 17% year over year, service revenues rose 32.8% to $371.6 million. Also, the top line surpassed the consensus mark of $623 million.

Segment Results

Revenues from Satellite Services rallied 35.7% year over year to a record $274.1 million. The performance was primarily driven by improving IFC service revenues, fueled by continued top-line growth in fixed broadband business resulting from higher bandwidth service plans in the United States and accretive subscriber base in Latin America. Strong organic growth across the segment was driven by RigNet and EBI acquisitions that closed early in the quarter. Although current travel restrictions had affected the air traffic in fiscal 2021, accelerated vaccination initiatives, passenger traffic growth, higher connectivity demand and airline fleet expansion in fiscal 2022 are expected to give a significant push to IFC revenues. The segment’s operating profit was $12.5 million against operating loss of $1.9 million in the year-ago quarter. Adjusted EBITDA was $106 million, up 48.5% driven by higher revenues.

Commercial Networks revenues increased 76.5% to $118.6 million as a result of higher IFC terminal shipments and antenna systems product deliveries. Sales of commercial air IFC terminal are expected to ramp up through the rest of fiscal 2022. The segment continues to invest in research & development to reinforce high priority long-term strategic growth opportunities, including future satellite payloads. The segment’s operating loss was $37.7 million compared with loss of $51.4 million in the year-ago quarter.

Adjusted EBITDA was a negative $18.7 million compared with negative $34.1 million in the year-ago quarter. The segment reached a major milestone by completing the payload integration and testing for ViaSat-3 (Americas). It has been shipped to the Boeing facility for final spacecraft integration and testing. Construction of the payloads for ViaSat-3 (Europe, Middle East, and Africa) and ViaSat-3 (Asia-Pacific) continues to progress per schedule.

Revenues from Government Systems improved 4.1% year over year to $272.1 million. The upside was mainly driven by growth across government mobile broadband, cybersecurity and tactical data links. However, the segment’s operating profit was $47.4 million, down 4.2% year over year. Adjusted EBITDA was $71.6 million, up 6.1% as a result of higher service revenues. The segment finished the payload and commenced spacecraft integration of the XVI satellite, the first Link 16-capable low earth orbit satellite.

Other Details

Total operating income was $16.3 million against operating loss of $5.3 million in the year-earlier quarter. Adjusted EBITDA came in at $159 million compared with $104.7 million a year ago, driven by growing investments, diligent operational execution in U.S. fixed broadband and Commercial Networks along with a sustained demand environment.

Cash Flow & Liquidity

During first-quarter fiscal 2022, Viasat generated $65 million of cash from operations compared with $157 million a year ago. The year-over-year comparison reflects higher working capital resulting from an increase in accounts receivable related to Commercial Networks and Satellite Services combined with a decline in customer advanced payments and other accrued liabilities. The company drew $320 million under a revolving credit facility, which might be used to avail additional flexibility amid coronavirus disruptions.

As of Jun 30, 2021, the satellite and wireless networking technology provider had $275.7 million in cash and cash equivalents with $427.8 million of other long-term debt.

Moving Ahead

Encouraged by a healthy momentum, Viasat delivered impressive results in first-quarter fiscal 2022 and continues to hold a leading position in the satellite and wireless communications market. With the rapid 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.

Strength in the ground antenna systems business, along with higher earth imaging and observation bandwidth demands, is expected to boost ground infrastructure products and services. Also, recovering air traffic volumes is anticipated to contribute to IFC growth. Financial prudence in capital investments related to ViaSat-3 constellation, healthy balance sheet position, robust pipeline of new business opportunities, market share gains and tuck-in acquisitions with an expanded geographic footprint are likely to bolster the company’s business roadmap. It is to be seen whether Viasat can sustain the momentum amid disruptions caused by the COVID-19 pandemic.

Zacks Rank & Stocks to Consider

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

Some better-ranked stocks in the industry are Clearfield, Inc. CLFD, Qualcomm Incorporated QCOM and Juniper Networks, Inc. JNPR. While Clearfield sports a Zacks Rank #1 (Strong Buy), Qualcomm and Juniper carry 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 49%, on average.

Qualcomm delivered a trailing four-quarter earnings surprise of 13.5%, on average.

Juniper delivered a trailing four-quarter earnings surprise of 7.5%, on average.


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