ViaSat (VSAT) Earnings And Revenues Miss Estimates In Q1

ViaSat Inc. (NASDAQ:VSAT) posted yet another earnings miss in the first quarter of fiscal of 2017. The company posted adjusted earnings (including stock-based compensation adjustments) of 6 cents per share in first-quarter fiscal 2017 which missed the Zacks Consensus Estimate of 15 cents by 60%.

GAAP earnings came in at 4 cents, down 20% from 5 cents in the year-ago quarter.

The bottom-line deterioration is largely attributable to a rise in cost of service revenues and selling, general & administrative expenses.

Inside the Headlines

The company posted revenues of $363.1 million in the first quarter of fiscal 2017, led by robust growth in Satellite Services. Though revenues missed the Zacks Consensus Estimate of $366 million, it was up 5.4% year over year.

Segment-wise, Satellite Services revenues achieved a record high for the fourth consecutive quarter, up 15.1% year over year to $152.4 million. The impressive figures were driven by continued strength in residential broadband offerings and a thriving in-flight connectivity business.

However, Commercial Networks revenues continued to show weakness, edging down 1.8% on a year-over-year basis to $65.6 million. This was largely a result of lack of activities due to the completion of certain antenna systems and mobile broadband satellite communications systems programs. However, these declines were somewhat offset by a higher number of broadband terminal orders received under the NBN project.

On the other hand, Government Systems reported record revenues of $145.2 million, flat on a year-over-year basis. This was primarily fuelled by strong performance in government satellite communications systems products, offset by softness in the information assurance product line.

During the quarter, sales backlog increased 4.6% year over year to $912.9 million. Adjusted EBIDTA rose 3.5% from the comparable quarter last year to $80.2 million.

Quarterly Highlights

ViaSat’s Satellite Services average revenue per user (ARPU) in the residential internet business grew 8%, primarily fuelled by higher bandwidth, increased value plans and growth in value-added services. Also, the company’s high-speed in-flight Internet service was selected by American Airlines for its new Boeing (NYSE:BA) 737 MAX fleet. Moreover, in partnership with Eutelsat, ViaSat launched in-flight Internet service in Europe in collaboration with EL AL Israel Airlines.

Moreover, the company’s Commercial Networks business’ ViaSat-2 satellite communications platform passed critical program milestones, including completion of assembly, functional performance and first phase of environmental testing in preparation for a launch window. Also, the collaboration between ViaSat and Boeing Satellite Systems International (BSSI) on the ViaSat-3 program is progressing well as the two organizations continue to integrate ViaSat's communications payload with Boeing's upgraded platform.

Finally, the company’s Government Systems business is progressing well as ViaSat was awarded a sole-source contract to provide global in-flight connectivity service to Air Force One and other prestigious U.S. government senior leader aircraft. Also, the company continued to execute on its contract with NEXCOM (Navy Exchange Service Command), which proved conducive to Managed Wi-Fi revenues.

In addition, Royal Canadian Air Force selected ViaSat’s KOR-24A STT technology for its CP-140 Aurora aircraft and the company also managed to secure NSA certification for two of its information assurance encryption devices.

Liquidity

ViaSat exited the quarter with cash and cash equivalents of $47.2 million, compared with $42.5 million as of Jun 30, 2015.

To Conclude

ViaSat’s first-quarter fiscal 2017 results can be best described as mixed with the bottom-line performance lagging expectations but revenue growth continuing. The company’s ViaSat-1 satellite remains a star performer even after five years of launch, delivering record earnings and margins. Going forward, the company aspires to deliver more bandwidth-efficient satellites and improve its stronghold in regional and global markets by leveraging on its state-of-the art technology.

ViaSat exhibits a bullish sentiment regarding the launch of ViaSat-2 class satellites as it compounds the company’s ability to expand its foothold in residential broadband, mobile WiFi, aeronautical and maritime applications in both thriving commercial and government markets. However, heavy R&D expenses on account of ambitious developmental programs may prove to be a drag on the financial performance in the short run.

ViaSat currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same space include Sonus Networks, Inc. (NASDAQ:SONS) , Motorola Solutions, Inc. (NYSE:MSI) and Clearfield, Inc. (NASDAQ:CLFD) . All three stocks hold a Zacks Rank #2 (Buy).