ViaSat(VSAT) - 2023 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The first quarter results were consistent with the outlook described in the previous fiscal year-end call, with slight sequential decline in adjusted EBITDA due to various factors including seasonality and supply chain issues [7] - Consolidated service revenue and Satellite Services segment revenue achieved new records in the quarter, partially offset by product revenue impacts [8] - The company expects first quarter EBITDA to be the low point of the fiscal year, with anticipated sequential growth driven by in-flight connectivity installations and strong government orders [8] Business Line Data and Key Metrics Changes - The government business is composed of three main segments: Tactical Data Links (approximately one-third), information security and cybersecurity (less than one-third), and satellite-oriented services [16][17] - The fastest-growing segment is satellite services, which has significant synergy with the overall satellite services business [17] Market Data and Key Metrics Changes - The company aims to grow its fleet of active in-flight aircraft by about 500 over the remainder of the fiscal year, including both new and retrofit aircraft [8] - The company has been successful in the U.S. market and is looking to expand its international presence as it prepares for the launch of ViaSat-3 [33] Company Strategy and Development Direction - The company focuses on synergy across its various business segments, particularly in defense and satellite services, to drive growth [19] - The encryption portion of the business is viewed as a critical component of the overall cybersecurity strategy, with expectations of spillover into commercial markets [20] - The company is pursuing a multi-orbit strategy, recognizing the importance of both GEO and non-GEO solutions to meet customer needs [41][42] Management's Comments on Operating Environment and Future Outlook - Management believes the current quarter represents the low point in financial performance, with expectations for solid sequential organic growth throughout the year [93] - The company is making good progress on the Inmarsat integration and anticipates the ViaSat-3 Americas launch shortly after the next earnings call, which are seen as catalysts for continued growth [94] Other Important Information - The company collected a $62 million payment from Acacia Communications for the use of its intellectual property, which will help offset pre-launch ground infrastructure expenses [10][11] - The company is actively involved in ongoing litigation with Acacia, with two pending lawsuits related to technology use beyond 2018 [79] Q&A Session Summary Question: Update on the government side of the business and potential strategic drop-ins - Management does not comment on speculation but provided insights into the composition and relative size of the government business segments [16] Question: Timeline for closing the Inmarsat acquisition - Management remains optimistic about closing the acquisition within the expected timeframe, although regulatory reviews are ongoing [22][24] Question: Visibility on adding 500 aircraft and targeting international airlines - The 500 aircraft target includes both new and retrofit planes, with a focus on expanding international presence as ViaSat-3 comes online [31][33] Question: Thoughts on the FCC's review of the space industry - Management views the FCC's efforts as a proactive approach to address potential regulatory bottlenecks in the evolving space sector [54] Question: Legal settlement impact on EBITDA - The $62 million payment is expected to contribute approximately $50 million to EBITDA after accounting for associated costs [48][50] Question: Synergies in Tactical Link 16 and opportunities - Management highlighted the potential for synergies in defense communications and the integration of terrestrial and satellite networks [56][57] Question: Industry consolidation and its implications - Management believes the shift from broadcast to data transmission is driving consolidation, with a focus on creating growth opportunities rather than merely seeking cost synergies [58][59]