Analyst downgrades Viasat
November 24, 2022
Satellite operator Viasat has suffered Covid-based delays to launches of its trio of ViaSat-3 craft with the first of the three, serving the Americas, suffering a modest slippage and not now launching until “early 2023” instead of a “by December 2022” initially planned date. SpaceX will launch the craft.
The late launch will impact Viasat’s revenue prospects. Viasat has stressed that its second and third ViaSat-3 satellites will launch next year.
“Both ViaSat-3 (EMEA) and ViaSat-3 (APAC) remain on schedule, with the launch of ViaSat-3 (EMEA) expected during the summer of 2023,” said the California-based company.
Viasat wants the trio in orbit because of the in-flight broadband contracts it has in place with the big three US majors — American Airlines, Delta Air Lines and United Airlines. Quilty Analytics reports that Viasat’s In Flight Communications (IFC) revenues grew an estimated 52 per cent in the quarter as the number of active aircraft in service increased 20 per cent y-o-y to 1,950. Despite the strong growth, aircraft installs have been anaemic YTD (60 in H1 2023 vs 220 in H1 2022) due to aircraft delivery delays for Viasat’s airline customers. Hitting management’s FY 2023 goal of 490 aircraft installs will be a challenge.
The delayed launch consequences – and impact on Viasat’s revenue stream – have led to a downgrade from Quilty following on from Viasat’s Q2 earnings call and the operator’s guidance for fiscal 2023 and its overall forward trading prospects.
Quilty says: “While investors were forgiving following Viasat’s Q1 earnings miss (stock up 7.3 per cent), two straight quarters of disappointing results was apparently too much, as the stock sold off by ~19 per cent following Viasat’s Q2 miss and lowered guidance. On a positive note, Viasat’s recent challenges appear to be primarily timing-related and not indicative of an underlying slowdown in the business. Echoing this point, management affirmed its FY20-FY25 guidance of doubling revenue and more than doubling Adjusted EBITDA.”
In summary, Viasat’s FY23 growth rates showed:
· Revenue: Lowered from double-digit to mid-single digits
· EBITDA: Lowered from mid-teens to mid-single digits
Quilty added: “Recent order strength and IFC wins provide some comfort to this guidance, but the decision by the UK’s CMA to launch a Phase 2 investigation of the proposed Inmarsat acquisition has impaired deal certainty and will inevitably raise transaction costs and delay the closing. Pending improved transaction visibility (both the Inmarsat merger and the sale of the Link-16 business), many potential investors may choose to stay on the sidelines.”
Viasat is in the process of acquiring UK-based Inmarsat and is awaiting Competition & Markets Authority (CMA) permissions for the deal to proceed.