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Daily news  
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Viasat posted strong results
for fiscal year 2022 (FY2022) as revenue increased
24% year-over-year (YoY) to a record $2.8 billion,
GAAP net income* declined to a loss of $16 million,
largely on significant acquisition expenses and
amortization of acquired intangibles, and Adjusted
EBITDA increased 15% YoY to a record $611 million.
These financial results are consistent with the
expectations we previously described for FY2022,
which were intended to reflect earnings growth
potential, funding for ViaSat-3 investments, balance
sheet and leverage targets, and a continued emphasis
on growth investments. While we achieved our Q4 FY2022
outlook and FY2022 goals, Q4 FY2022 had some
challenges. ViaSat-3 ground network expansion and
delays in both NSA certification of Information
Security products and FAA approval of new Tactical
Data Links products within the U.S. were expected,
while spot supply chain issues affecting shipment of
some government products were not. In the fourth
quarter we also increased research and development
(R&D) spending on attractive growth opportunities. We believe the unexpected
challenges in the quarter are transient, and
discretionary spends are already accounted for in
our FY2023 targets. We believe we are well
positioned to achieve our prior FY2023 earnings
guidance and strategic objectives driven by the
expected continued growth in commercial in-flight
connectivity (IFC), resolution of procurement
bottlenecks in our Government Systems segment and
sustained growth in our Commercial Networks segment,
offset somewhat by bandwidth supply constraints in
fixed broadband and growing ground network expenses
as we near the ViaSat-3 (Americas) launch. We have
substantial tailwinds for FY2023 and beyond in IFC
due to passenger demand growth in North America,
rapid growth in aircraft terminal installations for
existing customers, and awards from new airline
customers – including Southwest Airlines. We now
have 20 airlines on board and intend to help each
leverage the best, most reliable in-flight Wi-Fi to
serve their needs. We are especially appreciative
that our airline partners choose to grow their
fleets with us not only because of what we can do
now, but because they resonate with our vision of
how to deliver the best connectivity in the future.
Until ViaSat-3 (Americas) enters commercial service
later this fiscal year, continued growth in domestic
IFC demand will continue to pressure our U.S. fixed
broadband business. Anticipated ViaSat-3 commercial
service activation early in Q4 FY2023, along with
new service plans and network innovations, are
expected to enable renewed growth. During FY2022 and continuing
into FY2023 our focus has been and will continue to
be on the following near-term objectives: › Deploy the ViaSat-3
constellation as quickly as we can within our target
capital structure objectives › Complete the Inmarsat
transaction › Prudently balance earnings
growth, our balance sheet, potential strategic
transactions, and investments to establish the
resources to meet the needs of target markets and
our international partners › Emphasize rapidly growing
global mobility segments including government,
aviation, maritime, and new land mobile
opportunities – along with international fixed
broadband applications › Constantly test, evaluate and
refine our core customer value propositions in
dynamic and intensely competitive markets to build
confidence in our strategic approach and financial
outlook We have chosen a bold,
aggressive, challenging and even contrarian path,
one that can deliver very attractive returns for all
of our stakeholders – customers, employees,
shareholders, and suppliers alike. The enormous
potential of the business segments we target is
attracting formidable new entrants, but we are
competitively and technologically well-positioned,
and have a history of “punching above our weight.”
Our value propositions, particularly in mobility,
continue to resonate with both new and existing
customers seeking state-of-the-art, reliable
services, especially in high-demand locations. Two
key milestones on our growth path are approaching:
1) launch and commencement of service for the first
ViaSat-3 satellite and 2) consummation of the
Inmarsat transaction. This letter provides context
for FY2022 results, affirms our FY2023 and
longer-term performance targets, and provides
updates on our core business segments, ViaSat-3
constellation progress, and the Inmarsat
transaction. We’ll discuss headwinds and tailwinds,
and cover recent early FY2023 competitive awards
that help frame both our short-term outlook and our
long-term strategic opportunities. AWARDS $ in billions Financial Highlights › Established new records in
revenue and Adjusted EBITDA, up 24% and 15% YoY,
respectively (organic growth at 14% and 8% YoY,
respectively) › Closed RigNet, Inc. (RigNet)
and Euro Broadband Infrastructure Sàrl (EBI)
acquisitions in early Q1 FY2022 › Generated $506 million in
operating cash flow for FY2022 › Total capital expenditure of
$1.1 billion, including $568 million related to our
satellite constellation investments › Net leverage increased 0.7x
YoY to 3.6x, favorable to plan, reflecting ViaSat-3
capital expenditures, including ground network
activation, international expansion and increased
R&D investment FY2022 Year in Review Business Highlights › Reached agreement to acquire
Inmarsat, an innovative, global provider of mobile
satellite services › Conducted successful ViaSat-3
ground network “alpha” testing over existing
satellites › ViaSat-3 (Americas) satellite
entered thermal vacuum chamber for final stage of
payload testing, subsequently completed in Q1 FY2023 › Received IFC awards from new
airlines including, in Q1 FY2023, Southwest Airlines › Increased U.S. fixed
broadband revenue despite reallocation of bandwidth
to mobility services to meet IFC passenger demand › Accelerated international
subscriber growth driven by residential fixed
broadband services in Brazil › Named one of Via Satellite
magazine's top 10 hottest satellite companies › Published first edition of
our Environmental, Social and Governance impact
report NET INCOME (LOSS)* NON-GAAP NET
INCOME* $ in millions › Revenue for Q4 FY2022
increased 18% YoY from growth in our Satellite
Services and Commercial Networks segments, including
the impact of the RigNet and EBI acquisitions
completed in Q1 FY2022. Organic revenue grew at 8%
YoY › A net loss of $29 million
reported for Q4 FY2022 compared to net income of $7
million in the prior year period was due primarily
to higher depreciation, non-recurring acquisition[1]related
expenses, acquired intangible amortization and
interest expense, and lower Adjusted EBITDA › Adjusted EBITDA for the
quarter declined 9% YoY primarily from higher costs
associated with the ramp-up for ViaSat-3 service
launch, increased investments in growth R&D enabled
by earnings in prior periods, certain product
shipment delays due to spot supply chain issues, and
product mix changes › Satellite Services revenue
increased substantially YoY mainly due to
approximately 40% more IFC aircraft in service
compared to the prior year period, growth in
enterprise services as a result of the RigNet and
EBI acquisitions and international fixed broadband
organic growth › Consolidated awards for the
quarter increased 10% YoY to $653 million, resulting
in a healthy consolidated backlog of $2.0 billion › Entered into $700 million
term loan facility, increasing our liquidity to $947
million as of quarter end. Net leverage increased
sequentially to 3.6x LTM Adjusted EBITDA and
favorable to year end targets due to strong earnings
and focused working capital management Government Systems AWARDS, REVENUE AND ADJ. EBITDA $ in millions Government Systems results have
been treading water largely due to direct and
indirect effects of the COVID-19 pandemic, but we
believe we are positioned to resume roughly
double-digit revenue and orders growth in FY2023 as
pandemic[1]related
bottlenecks are resolved and we make further inroads
into emerging growth markets, including government
space hardware and services, expanded cyber security
products and services, and networking solutions for
Joint All Domain Command and Control (JADC2) and
defense 5G networks. Segment Highlights › Completed spacecraft
integration on the XVI satellite, the first Link
16-capable low earth orbit (LEO) satellite, which is
expected to demonstrate space-based range extension
and interoperability beyond line-of-sight. This
program paves the way for further opportunities for
Link-16 in space › Achieved Department of
Defense Joint Interoperability Test Command
Integrated Waveform certification for our VISION
network management interface, for Ultra High
Frequency satellite communications Awards In Q4 FY2022, Government
Systems awards were $196 million, a decrease of 12%
YoY largely reflecting expected delays in NSA
certification timing and FAA approvals of new
tactical datalinks applications within the U.S., as
well as lumpiness of orders. Government Systems
ended FY2022 with a backlog of $846 million,
excluding approximately $3.7 billion of potential
unawarded Indefinite Delivery Indefinite Quantity
(IDIQ) contract value. Revenue Government Systems revenue was
$278 million in Q4 FY2022, nearly flat YoY. Service revenue was a new
quarterly record, up 6% YoY due to higher revenue
from aircraft connectivity services, Blue Force
Tracking solutions and cybersecurity, offset by
lower product revenue challenged by anticipated
delays in security device certification and
unanticipated spot supply chain (parts) issues in Q4
FY2022. Adjusted EBITDA Q4 FY2022 Government Systems
Adjusted EBITDA was $66 million, a decrease of 18%
YoY due to product sales mix and delays in product
deliveries along with higher SG&A, new business
expenses and increased R&D investments focused on
government global mobile connectivity opportunities. We are making good progress on
diversifying Satellite Services to a larger
proportion of mobility and growing international
markets. In Q4 FY2022, the proportion of revenue
other than U.S. fixed broadband reached 39%, up from
16% in the prior year period. IFC is leading this
growth. Amid intense competition we won new
agreements with Breeze Airways, Porter Airlines and
Virgin Atlantic in FY2022, and Southwest Airlines in
Q1 FY2023. We’ve also earned new orders from
existing customers attracted to our cost-efficient
space strategy which enables state-of-the-art
service reliably across the entire network,
including during peak demands at the busiest hub
airports. Our network plan resonates with airlines,
who are masters of complex logistics and scheduling
needed to ensure the right resources in the right
place at the right time. U.S. residential
competition from improving terrestrial alternatives,
including government subsidies, is increasing. But
we believe we will have growth opportunities with
new higher speed plans, offering more video
streaming, once ViaSat-3 (Americas) enters
commercial service – currently targeted for early Q4
FY2023. Segment Highlights › Record FY2022 revenue of $1.2
billion, up 37% YoY, driven by IFC services, along with the RigNet and EBI
acquisitions and fixed broadband growth. Organic revenue grew 15% YoY › Ended the quarter with 1,830
aircraft in service, up 550 tails (~40% YoY) including installs for new and
existing customers and inactive planes returning to service › New install agreements and
anticipated return to service of inactive aircraft expected to grow tails in
service to about 2,400 (up ~30%) by the end of FY2023. New activations will be
paced by new aircraft deliveries Revenue Satellite Services Q4 FY2022
revenue grew 32% YoY to $305 million from commercial IFC service revenue
growth and the RigNet and EBI acquisitions, while U.S. fixed broadband
revenue declined slightly. Higher residential ARPU largely offset a lower U.S.
fixed broadband subscriber base as we allocated more bandwidth in the U.S. to
mobility services. Sequentially, Q4 FY2022 Satellite Services revenue
declined slightly primarily due to lower U.S. fixed broadband revenue. Adjusted EBITDA Full year FY2022 Adjusted
EBITDA grew 27% and Q4 FY2022 Adjusted EBITDA grew 7% YoY. Q4 FY2022 Adjusted
EBITDA was constrained by ViaSat-3 ground network activation
expenditures, international activities, advertising
costs, and lower margin contributions from
RigNet. 1,280 1,400 1,620 1,800 1,830 1,480 1,550 1,700 1,880 1,910 Q4 FY21 Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Shareholder Letter | Q4 Fiscal
Year 2022 6 Commercial Networks AWARDS, REVENUE AND ADJ. EBITDA $ in millions AWARDS, REVENUE AND ADJ. EBITDA $ in millions $133 $85 ($26) $154 $119 ($32) Awards Revenue Adj. EBITDA Q4 FY21 Q4 FY22 $637 $321 ($106) $421 $512 ($99) Awards Revenue Adj. EBITDA FY21 FY22 Segment Highlights › Posted exceptional segment
YoY revenue growth of 40% in Q4 FY2022 and 60% for the full year, driven
by advanced ground antenna systems and commercial air IFC terminal
deliveries › Delivered over 450 IFC
terminals, weighted to the first three quarters of FY2022 based on FAA
certifications and aircraft availability › Expanded Real-Time Earth
footprint with Arctic Space Technologies partnership in Sweden › In April 2022, received
certification from the China Civil Aviation
Administration to install IFC mobility
terminals on in-country Airbus A320 series aircraft Awards Segment awards in Q4 FY2022
were $154 million, up 15% YoY driven by antenna systems and demand for
enterprise products from RigNet. Order volume for IFC mobility terminals stayed
strong in FY2022, including new orders from Breeze Airways, and has been
boosted in FY2023 by Southwest Airlines. Revenue Commercial Networks Q4 FY2022
revenue was $119 million, up 40% YoY fueled by
increased deliveries of mobility terminal shipments
to several airlines, antenna systems products, and
enterprise product contributions from RigNet. Adjusted EBITDA Q4 FY2022 segment Adjusted
EBITDA was a loss of $32 million, expanding 22% YoY. Full year Adjusted EBITDA
loss improved 6% from a loss of $106 million to a
loss of $99 million. Product mix in antenna systems
combined with investments for ViaSat-4 satellite
payload and mobility terminals affected Q4 FY2022
Adjusted EBITDA. ViaSat-3 Update The ViaSat-3 (Americas)
satellite has successfully completed all testing in
vacuum, which exposed the satellite to vacuum and
the extreme temperature ranges it will experience on
orbit. Satellite launch is anticipated to support
commercial services in early Q4 FY2023. Most of the
complexity in service launch is in the ground
network. “Alpha” testing of the ground network is
proceeding successfully, as we scale the number of
active Satellite Access Nodes needed for initial
service launch. The second ViaSat-3 payload (EMEA)
is anticipated to complete and ship to Boeing in Q1
FY2023. Operating Cash Flow Viasat generated $119 million
in operating cash flow during the quarter, a decline
of 30% YoY and 25% sequentially. The YoY comparison
primarily reflects higher working capital outflows
and, to a lesser extent, the decline in earnings.
Sequentially, the decrease relates primarily to the
decline in earnings. Capital Expenditure &
Investment Q4 FY2022 capital expenditures
were $279 million, an increase of 53% YoY, driven by
elevated expenditures related to the ViaSat-3 (EMEA)
and ViaSat-3 (APAC) programs as they continue
through the build and test phases, as well as
expenditures related to the completion of the
ViaSat-3 (Americas) satellite and accelerating
ground deployment in preparation for service launch. Debt and Leverage Net debt increased $183 million
to $2.2 billion at the end of Q4 FY2022 while net
leverage increased to 3.6x LTM Adjusted EBITDA. As
we discussed in prior quarters, we expected net
leverage to increase throughout FY2022 into FY2023
as we approach ViaSat-3 (Americas) service launch
and continue investing in the remainder of the
global ViaSat-3 constellation. Leverage at FY2022
year end was favorable to plan. During the quarter we entered
into a $700 million term loan facility which
increased our liquidity to $947 million at quarter
end, which includes $310 million in cash and cash
equivalents and the borrowing capacity under our
$700 million revolving credit facility. In FY2022,
we strengthened our balance sheet and expect that
our record of strong execution and forecasted
earnings growth will allow us flexibility in the
capital markets as we position Viasat for its next
phase of growth. Inmarsat Acquisition Update On November 8, 2021, we
announced that we entered into a definitive
agreement to acquire Inmarsat. The combination will
create a leading global communications innovator
with enhanced scale and scope to affordably,
securely and reliably connect the world. The
combined company intends to integrate the spectrum,
satellite and terrestrial assets of both companies
into a high-capacity multi-band, multi-orbit global
hybrid space and terrestrial network, capable of
delivering superior services in fast growing
commercial and government sectors. During Q4 FY2022 we achieved
important milestones related to the acquisition, including agreeing with the
U.K. government on certain economic undertakings and securing certain approvals
and clearances under foreign investment laws and antitrust and competition laws
in various countries around the world. Subsequent to FY2022 we filed a definitive
proxy statement with the U.S. Securities and Exchange Commission for a
special meeting of stockholders (scheduled for June 21, 2022) to approve the
issuance of shares for the transaction and certain related matters. We are currently targeting to
close the transaction by the end of calendar 2022, subject to satisfying closing
conditions under the purchase agreement. Until that time, Viasat and Inmarsat
continue to operate as independent companies. Financial Update Inmarsat recently posted
results for the quarter ended March 31, 2022, which included the following
highlights: › Revenue growth of 8% YoY › EBITDA growth of 10% YoY › Free cash flow increased by
44% YoY › Strong top-line growth in its
Aviation and Government businesses In April 2022, Inmarsat paid a
$299 million special dividend to its shareholders. In accordance with the terms of
the purchase agreement, the cash portion of the purchase price will be
commensurately reduced from $850 million to $551
million. Acquisition Financing In connection with the Inmarsat
transaction, we obtained committed acquisition financing for up to $1.6
billion. The terms and conditions for the financing
that we negotiated in November 2021
remain unchanged, including caps on interest rates, and due to the cash purchase
price adjustment described above we currently expect to utilize approximately $1.3
billion of the committed financing. Shareholder Letter | Q4 Fiscal
Year 2022 9 Sincerely, Rick Baldridge Mark Dankberg Coming off strong full year
financial performance in FY2022 and with the
upcoming launch of the ViaSat-3 constellation and
the expected closing of the Inmarsat transaction, we
are well positioned for strong and durable long-term
growth emphasizing global mobility. › For FY2023 on a stand-alone
basis we expect to continue generating double[1]digit
revenue and Adjusted EBITDA growth, even as we
carefully manage our available bandwidth resources
and growing market entry and network costs ahead of
the ViaSat-3 constellation entering commercial
service. › We anticipate IFC will lead
Satellite Services revenue growth from both new and
existing customer aircraft additions and a
continuing recovery in passenger volumes. We expect no
top-line growth in fixed broadband, as growth in
consumer fixed broadband in Latin America and global
enterprise fixed broadband is expected to be offset
by declines in U.S. consumer fixed broadband. We
expect margins to be constrained by increasing
expenses associated with the ramping of the ViaSat-3
ground network and higher costs internationally. We
expect segment growth to be weighted to the back
half of FY2023 due to the cumulative effects of
aircraft IFC activations and the commencement of
commercial service on ViaSat-3 (Americas) targeted
for early Q4 FY2023. › We anticipate Government
Systems revenue growth can resume in FY2023 on a YoY basis, weighted to the back half of the year as pandemic-related bottlenecks are resolved. While full year YoY revenue growth is targeted in the double digits for the segment, Adjusted EBITDA growth is expected to be somewhat lower due to
product mix, and lower margin early-stage R&D
efforts in attractive growth areas including space,
cyber, and JADC2/5G networking. Our substantial
backlog and IDIQ portfolio are expected to support
this segment. › Commercial Networks is
expected to continue growing revenue but at a more
moderate pace compared to FY2022. IFC mobility
terminal deliveries from existing orders, additional
orders from current and new IFC customers, and backlog in ground antenna
systems are anticipated to be key drivers, and also
support meaningful YoY segment Adjusted EBITDA
gains. › Net leverage is expected to
gradually increase throughout FY2023 as we continue
investing in the upcoming ViaSat-3 constellation and
associated ground network. We also reiterate our guidance
of YoY mid-teens Adjusted EBITDA CAGR relative to
FY2021. Having achieved that target for FY2022 with
15% Adjusted EBITDA growth, we are aiming for
similar growth for FY2023. We also expect to achieve
our stand-alone FY2025 target of doubling revenue
and more than doubling Adjusted EBITDA relative to
FY2020. As we near consummation of the acquisition
of Inmarsat, we are also confident in the enduring
benefits that transaction will deliver to our
customers, shareholders and employees. On behalf of everyone at
Viasat, we want to thank our shareholders,
customers, partners and employees for their
continued support.
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