Viasat Inc. Q4 2023 Earnings Call
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Your host for today's call is Mark Dankberg, Chairman and CEO . You may proceed, Mr. Dankberg.
Okay, thanks. Good afternoon everybody. Thanks for joining us for our call today. We released our shareholder letter shortly after the market closed this afternoon and it's still available on our website. We'll be referring to it on this call. So joining me on the call today is our guru, Gharabhan, our new president.
Kevin Harkenrider, our COO, Sean Duffy, our Chief Financial Officer, Robert Blair, our General Counsel, and Paul Froehlich from Corporate Development.
And Peter Lopez from Investor Relations as well.
So before we start, Robert will provide our safe harbor guidance.
Thanks Mark. As you know, this discussion will contain forward-looking statements. This is a reminder that factors could cause actual results to differ materially. Additional information concerning these factors is contained in our SEC filing, including our most recent reports on Form 10-K and Form 10-Q . Copies are available from the SEC or from our website.
Thank you Mark.
Thanks, Howard. Okay, so to start, I'll briefly try to recap some of the business and financial highlights and also I'd like to introduce our new president, Guru Gaurav and then we'll open it up to questions.
So.
For us, the biggest highlight is that our BiSAT 3 America satellite has arrived at its orbital location and is beginning its final deployments.
With that done, we can complete in-orbit testing and we can start bringing up the network. We're aiming to be in service around mid-summer.
That's going to greatly expand our coverage and provide bandwidth to grow all of our satellite services businesses.
It's been an enormous undertaking by our whole team, and I want to thank everybody for their commitment and dedication.
We've got just a few more steps to go for this first one.
with the Europe-Middle East Africa satellite launching later this calendar year and then an Asia-Pacific satellite to get almost complete global coverage.
The Asia-Pacific satellites now in integration and test at Boeing.
We believe the combination of virtually global coverage, the amount of useful bandwidth per capital dollar invested, and the ability to dynamically move that bandwidth to the places with the greatest demand are unique to the design.
of these satellites and will prove to be especially valuable in the global and global markets.
We now anticipate closing the Inverse-I Transact transaction this month.
We've received approval of the UK and have only two more steps to go.
We believe the transaction will be accretive to adjusted EBITDA and free cash flow on a per share basis and can help both companies provide better services to our customers at lower cost.
Both BISAT and NIMHARSAT have continued to grow our global mobile businesses in the 18 months since we reached agreement.
NMRSAT just reported their most recent results and you can find them on their website.
And we also continue to expect that together we can bring more important innovations and growth to their L-BANe business as well, especially in the rapidly evolving Internet of Things and direct-to-device markets.
Early in our fourth quarter, we did close the sale of our Link 16 TDL business.
for $1.9 billion. That increased our liquidity and significantly reduced our leverage on a standalone basis as well as prospectively on a combined basis with Hit Amarsat.
Post close, we did quickly right-side the company to the new run rate, which reduces annual run rate operating costs by about $40 million. We presented our financial performance in the letter in terms of continuing operations,
That excludes the Link 16 TDL business in prior periods and also our total results of operations, including Link 16 TDL in the periods that we owned it.
Continuing operations provides context for results on a go-forward basis. We achieved new records in awards and revenue from continuing operations for fiscal year 2023 at $2.8 million and $2.6 billion, respectively. Adjusted EBITDA from continuing operations was $2.8 million.
$501 million. And with three-quarters of TDL results prior to the Q-Por sale, total adjusted EBITDA was $583 million for the year.
A few more results on the continuing cases, we're good. And survival management going into fiscal 24.
Few-fold revenue from continuing operations grew 10% year-over-year to $666 million. An adjusted EBITDA from continuing operations was $124 million, which was 21% year-over-year.
In government systems, the certification of key products
some cryptographic products cleared pent up demand that had been accruing and that grows significant year-revenue growth in the quarter.
We grew our commercial, in-flight connectivity in service week to 2,230 aircraft. We added Etihad Airways as a new airline partner, and we expanded our Delta Airlines free Wi-Fi to keep aircraft sound repeatable.
We continued market testing and analysis of new Bioshock 3 era fixed broadband plans, offering significantly higher speeds and more bandwidth per subscriber. We've been working and investing in a very capital intensive phase for several years to develop and deploy technology and business models to transform from a...
a strong masonial player into a leading global satellite services operator.
Now we can see tangible evidence of the pieces coming together and the opportunity to generate real free cash flow returns from those investments.
That includes not only our own business areas, but the very complementary people, resources, and assets from Enlarge
Given all those elements, now we need to execute and scale.
And to that end, I'd like to briefly introduce a new member of our leadership team, Guru Gaurav who joins us as President.
And we really want to thank Rick Baldrige, our vice chairman, for all he's done for us in his operating roles.
With Kudu here, Rick will continue to support special projects and will remain on our board as Vice Chairman. Thank you,ind 1905- hegemony module dehydrification module brotherhood
Guru's previous position was at Verizon Media as CEO of the former media division that includes Yahoo, AOL, Office of Post, TechCrunch and other media brands.
He's a very accomplished leader with experience in integrating large technology operations, operating scaled internet platforms, and creating powerful global partnerships.
So, Guru, would you like to introduce yourself? Thank you, Mark, and thanks to all of you joining us today on my first Learnings call for Viasat. So I'm thrilled to have joined Viasat company as you all know with...
rich history of success and innovation, our foundational technology advantage which has delivered healthy growth over time and we are poised for an incredible exciting future as we continue as a team.
Having dedicated my carrier to fostering global connectivity and interactivity across key tech consumer and B2B products, including telecommunications, I am now embarking on my biggest mission yet.
Moreover, as you know, I've joined Viasat at an inflection point with the launch of our Viasat-3 American satellite, the first step in placing more than $2 billion of assets into service. The 3-satellite constellation is expected to increase.
the scale of our network more than eight times the combined bandwidth of YSI1 and YSI2, with the flexibility to move capacity to high demand locations all while expanding our coverage globally.
And it's also important to me that space sustainability is a priority here. We intend to grow our network where our customers are, delivering the services they want and need in a globally inclusive and environmentally sustainable manner.
and all through technology innovation.
Finally, the closing of Inmarsat acquisition will be great for all our stakeholders, as it will accelerate our global expansion and our growth in mobility and government.
areas that are well suited for our products and solutions.
Inmarsat's legacy will also help us achieve our goals for global inclusive growth and space sustainability.
And as our cap-ex cycles reign, the deal is expected to double our free cash flow per share compared to stand-alone live-time.
I'm also personally very excited about the potential for growth in L-band IoT, that is, Internet of Things and directed device, as it has the potential to enormously expand the number of individual customers and B2B relationships we can achieve collectively.
And as Mark said earlier, I do want to congratulate the team, Rajiv, Tony, and the entire team at Inmarsat for a record quarter with growth across all of their businesses.
Now having been in the business of making impactful and rewarding connections for customers, I am humbled to be on this endeavor alongside this incredible team.
And throughout my career, I've always focused on five key areas. Employment culture, technology innovation and products.
customers and partners.
society, and shareholders. And I believe with hard work and relentless execution, coupled with humility and teamwork.
that we can build a bright future for all our stakeholders.
And our goal is to drive excellent financial performance while maximizing our impact on the world. And here at Viathat, I am eager to collaborate with Mark, Rick, Sean, Robert, and our entire team to do just that because the opportunities here are extraordinary. And with that, I'll hand it back over to you, Mark. Good. Thanks, Gary.
So thanks and welcome to my site. With that, we'll open it up to questions.
Thank you. Ladies and gentlemen, if you have a question, please press star 1 on your telephone keypad. If you wish to withdraw your question, simply press star 1 again.
And your first question comes from the line of Rick Prentice with Raymond James. Please go ahead. The volume has became too low.
Thanks. Good afternoon, everybody.
Good to see the finish line is getting closer for the MRSA deal. Can you update us as far as what's happening with the debt package? What are the terms? Are there any changes to that as you get closer to being able to close the transaction?
Hey Rick, this is Shawn. So, you know, I think, hey, there's a lot, there's still a lot of moving parts. I mean, things are, you know, looking really good as we get up to the, as you said, to the finish line here. I think the way we look at it is, you know, we secure that package back when we signed the transaction.
and have all the elements of that deal that reflect the market at the time. And our intentions are to execute on those economics.
So, you know, I think that's the best way to shape it up.
Okay, can you just remind us what the terms were in that package? That was obviously a different moment in time. That'd be great. Just remind us what the terms were. Okay.
And you know we didn't, those aren't public, but I think obviously they're more favorable than we are today. I can't remember it.
The following line, Guru first welcome. I should have said that first.
Help us understand, you mentioned a couple times about how you've done a lot of integration with technology items. As you look at this integration of Viasat and MR-SAT, help us understand what your top priorities are going to be there, what's the timeline like, and could there be segment reporting changes? Okay, so on the...
and what our top priorities are. One is
Weird.
As we said, really intending to grow in the global mobile markets, which are the, you know, we're really open on a broadband basis, there are markets in which we both participate, and those are government, commercial inflight, business jets.
and maritime markets are the main ones. What we really are aiming to do is to get the best of both companies in there. I think that's one of our main priorities.
is if you look at the kind of go-to-market differences between the companies, class-status tended to be primarily direct sales. That requires.
more technical support, delivers lower margins.
give us a little more control of the customer experience.
On the other hand, Inmarsat's margins are very, very good. They tend to be primarily wholesale. They have an existing global network.
And there are attributes of each company's business models and service delivery techniques that we think we want to combine. And so that's one of our most important ones. Just to be clear, we place great value on the distribution.
relationships that Inmarsa has.
we expect to continue them. We may be able to augment some of the ways in which we deliver services to our distribution partners.
cases.
By connectivity, we provide a greater range of services than some of their distribution partners do.
we provide a greater range of services than some of their distribution partners do.
That issue of kind of capture the best of both is high on our list. Another one that we really want to emphasize
is integrating the two networks. One of the real attractions
of the combination of iSAT and NIMAR-SAT is that we both operate K-band networks.
And so there's some really important synergy opportunities by being able to make over time that.
the platforms that we support work across each of the networks. So that, you know, obviously with the MRSA network, we'll be instantly global even before we get the Biosat, the next two Biosat-3 satellites, but with the Biosat-3 satellites, our depth of coverage will be...
much, much greater and I think that will allow us to extend some of the services that we've done so successfully in the U.S. to work on a global basis.
So those are I'd say those are probably the top two priorities and then the next one is to really
apply some of the technologies
that we've been developing here at Viasat into the L-band markets. Because ultimately what we see is a lot of opportunity in the L-band markets.
if we can do some of the same things that we've done in the Ka-band markets using some of those same technologies, which are to increase the speeds, increase the amount of bandwidth that we can offer, and drive down airtime prices.
We're really excited about the opportunities there. I'd say those are kind of our top three priorities.
And Mark, if I can add, and Rick, thanks for the comment earlier. What I would say on top of it, when you think about integration, we have a very good plan in place as and when the deal gets closed. And a lot of focuses, if you look at performance of individual companies, as Mark said, there are things that are working.
well and we want to make sure we don't miss a beat on those things, including these are the latest results from Inmarsat for the last quarter. So we want to make sure we maintain that and then these incremental things as Mark talked to, we at least have a good thinking and planning place to start executing on.
And finally, let me wrap up on that third opportunity, L-band. Is there opportunity for S-band as well in this directed device category? And how long does this business take to take off the directed device and what do you need to have in place besides just the spectrum? So, yeah, we'll…
The opportunity, I think, for direct devices is...
is really going to be driven by the cable. We talk to direct to device. A lot of times what people are referring to are devices that are primarily intended to operate on terrestrial networks, but that can also work directly on satellite networks. So the big opportunities are...
especially there for those frequencies that are easy to integrate into those terrestrial devices. And that includes both L and S band.
especially there for those frequencies that are easy to integrate into those terrestrial devices. And that includes both L and S band. And there are...
Different approaches to it. One of the things that we think is a big advantage of being able to do that with dedicated licensed MSS spectrum is that that spectrum won't interfere with the terrestrial frequencies and those sort of things.
devices operate on. And we think that that will allow us to address geographic locations.
many geographical locations that are within the coverage areas of terrestrial networks, but just get poor surface for a variety of reasons. You know, poor placement of cell towers, shadowing, all those kinds of things. That's to me one of the big attractions of using licensed MSS spectrum. You know, one of the things that's going to be a challenge in the rate it grows is that...
that these are new capabilities for those devices. So the market can't scale any faster than the market preserving those devices can't scale faster than those devices get the market. But on the other hand, one of the really attractive things about us and Inmarsat, and both having a
existing L band MSS businesses is that we can evolve that without having a big ramp up period. That's one of our objectives is we think that we can evolve the same techniques that will
make our services available and attractive to the terrestrial devices, we'll also expand the market for the existing NSS devices so we can provide much better services.
That's what our objective is and we see that not as a, it's not going to be an instant thing but we think it's a really attractive growth market for us.
Great. Appreciate it. We're going to stay well. Thanks, Rick. Your next question comes from the line of Simon Flannery with Morgan Stanley . Please go ahead. Great. Thank you very much. Good evening. And, Gur, good to connect with you again.
Could we talk about IFC for a minute? First, any color on the backlog sounds like you've been continuing to win there. So what's the outlook in terms of adding additional aircraft and growing volume on those aircrafts? And what are you seeing in terms of the competitive landscape, the openness of the airlines to consider some of these LEO constellations? Is that something that...
We've been installing at a high rate. We've been waiting at an even higher rate.
It's great. It's great. I think that the...
I think the reason we've been successful are the things that we've been highlighting to the airlines, which is...
Kind of the simplest way to put it is three, four years ago, if you want to impress an airline with your capabilities on in-flight connectivity, you fly an airplane around and show them a speed of 100 megabits or 200 megabits.
And they go, hey, that looks fast, isn't that good? I think what the airlines have really come to appreciate is what's really hard is serving the peak demands at the busiest airport.
especially those airports that have not only airline traffic but are on port cities and maritime traffic, there are other traffic as well. It's that geographic concentration demand that I think is...
is really going to be the most challenging issue. From our perspective, what we're hearing from the airlines is they want a good solution that offers their passengers a better life.
not only the connectivity, but connectivity is pretty closely intertwined with their entertainment options, both vibe and stored entertainment. And of course they're open to
Leo, Gio, whatever will allow them to deliver the services that their passengers want. Affordably, I think that's what they're going to be open to.
So we're going to make sure that we're competitive there. That's what's driving us. And I think this, I think this in-market transaction is going to really help us do that.
Simon, sorry, great to reconnect. The other point I would just say, what Mark said, in the end, great products win. I think what we have is a much superior experience in products. That's why the backlog and how we've been winning the customers as well. So that speaks to our core product and technology. Great. And then on the consumer broadband, you've been constrained.
I think if you define the addressable market for satellite broadband broadly to be those homes where we can, we, the satellite industry, can deliver a service that is
If you define the addressable market for satellite broadband broadly to be those homes where we can, we, the satellite industry, can deliver a service that is
you know, I'd say better, you know, than what they can get to a terrestrial option. That's how you define it. So don't think of it as generally, you know, the hurdle for doing that has continued to rise, but if you can deliver 25, 50, 100 megabits per second and you can deliver sufficient bandwidth to allow people to...
to meet their screening needs, that's going to be competitive in probably what today is roughly 10 to 15 million homes.
What we're anticipating is that, say, by five years to the end of the decade, that may go down to five to seven million homes if the infrastructure builds out. That's currently contemplating, you know, as it comes to fruition.
kind of both where we are and where we think the market's heading. And then we think that that, so our objectives are really to capture a reasonable, I'd say a reasonably modest portion of that growth for its broadband. yes that market haswon reasonably Pink
conservative moderate version share of that market.
moderate version share of that market. Thanks.
Thanks, Evan.
As a reminder, if you have a question, it is star 1 on your telephone keypad. Your next question comes from the line of Mike Crawford with B Riley. Please go ahead.
Thank you. Just to return to the first question about the debt, I thought there was some public disclosure that you had that agreement was in place through the end of May.
Is that?
But you would potentially need to renegotiate in something if it if the close extended past two weeks of no
Yeah, you know, Mike, Dushan, so I think the way I'd look at it is, you know, as I said, still lots of moving parts, but, you know, I think we've had some really good milestones and we're trying to, you know, close within our expected timeframes. But, again, I agree, there's lots of moving parts.
So there was not an end of May component.
The financing did have a timeframe to it, absolutely, so it stretched a bit beyond the original spa date, so I think it's right around that time period. It is a good time.
Okay, thank you. And then changing topics and.
The FCC's NPRM for single network feature with supplemental coverage in space and your comments
bias act arguments for a technology neutral approach that enables GSO systems and in addition to non geostationary systems to participate and you know direct to hand set connectivity and so the rules aren't proposed there that way do you care to handicap the likelihood that the FCC is gonna
include GSO by the time we get a final report in order here? Hmm. Okay. One thing is...
There's no restriction on the devices that can be used with geosynchronous networks.
So if the geosynchronous networks are capable of closing those links with the service level, the availability and the price points.
that customers want, then they're going to be completely fine. And there's already work underway, both in the U.S. and globally, to both demonstrate that and to bring those services to market.
But it is a little bit of a complicated regulatory environment. What we think, and we think this is, and we've kind of said this for both broadband markets as well as the direct-to-device markets.
is that we think that the solution is going to end up being a combination of geosynchronous and non-geosynchronous satellites. One of the biggest issues in this direct-to-device market is going to be the geographic...
concentration of demand. Because especially in the direct-to-device market, the amount of demand there will be over oceans or in unpopulated areas is not nearly as great as it will be in the population centers, especially in an environment where you can use dedicated license spectrum and conserve those populated areas.
that have all those kind of thickness black spots. So I think it's a dynamic area, but we don't see any reason that it's going to be exclusive to any particular orbit.
Okay, thank you, Mark. And then just one separate last question for me is,
Previously you were building a test beyond line-of-sight satellite that used Link 16 I think that went with the Link 16
but does Vysaut retain the capability and or desire to consider being a merchant?
satellite manufacturer? Okay, so two things. One is the contracts that we had for Link 16 in space did go with the TDL sale. We still have working relationships. We have a lot of work to do. We have a lot of work to do. We have a lot of work to do.
around Link 16 with L3 Harris. But there's also other other other other
around Link 16 with L3 Harris. But there's also other tactical............
link programs other than Link 16 in and around L-band that are interesting to us.
with terrestrial radio customers. So we are continuing to work on that. That's one of the attractions of...
of the cell band directed device market is that it does open some really unique defense opportunities outside of the Lynx 16.
that are outside the L-16 area. So, yep, we are still working those.
And just ancillary to that, just the trellis, where waveforms fit into all this? It certainly could. If that's possible.
Okay, thank you. Thanks Mike. There are no further questions at this time. I will turn the call back to Mark Dankberg. Okay, well thanks very much everybody for joining us this time and we'll look forward to speaking with you again next quarter. This concludes today's conference call. Thank you for joining.
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