Viasat, Inc. (NASDAQ: VSAT) has reported key financial developments that are expected to materially enhance Viasat’s cash generation profile — as a result of these developments, Viasat now expects to reach the inflection point of sustainable positive free cash flow during the first half of calendar 2025, rather than the second half, as previously announced, excluding the positive impact of satellite insurance proceeds.
Since the closing of the Inmarsat transaction in May 2023, and during the subsequent integration, Viasat has engaged in a comprehensive assessment of its operating cost structure and capital allocation strategy. This assessment has also been intertwined with the root cause analysis related to the ViaSat-3 F1 satellite, which, as previously announced, encountered a mechanical deployment issue. As this work progresses, Viasat has updated its views on operating and capital expenses, and resulting cash flow expectations as follows:
ViaSat-3 F1 Update
In connection with the ongoing root cause analysis, Viasat has determined that, while the satellite payload is functional, it expects to recover less than 10% of the planned throughput on ViaSat-3 F1. With the flexibility and agility of its integrated satellite fleet, the limited ViaSat-3 F1 capacity, the addition of the next two ViaSat-3 generation satellites, ground network mitigations, and third-party bandwidth commitments, the Company remains confident that it will meet the current and future needs of its mobility customers and is well-positioned to achieve its financial growth objectives. Viasat also confirmed that it has insurance coverage of $420 million in place for ViaSat-3 F1 and will finalize its claim before the end of the year. The Company will not require a replacement satellite for ViaSat-3 F1.
Inmarsat Acquisition Synergies Update
The integration of the Inmarsat acquisition is proceeding well and is ahead of plan. Viasat synergy estimates of approximately $80 million in annual operating expenses and approximately $110 million in annual capital expenditures are now anticipated to be fully realized in FY25, versus over an approximate three-year period as originally planned. Further, Viasat expects to identify and realize additional savings in subsequent phases of the synergy program.
Capital Expense Planning
Following Viasat’s determination that a replacement for ViaSat-3 F1 is not necessary, the majority of the capital expenditures related to the ViaSat-3 constellation have been completed. Viasat is forecasting capital expenditures in FY25 to decline from FY24 and to be in the range of $1.4 billion to $1.5 billion, including completion of the final stages of the ViaSat-3 constellation and the continued build of GX satellites. This range is inclusive of capitalized interest and funding for the replacement of the capabilities of the I6 F2 satellite. Viasat is committed to meaningfully reducing aggregate capital expenditures and expects accelerated, continued declines in capital expenditures as satellites currently under construction are completed. The Company confirms that it has insurance coverage of $348 million in place for the I6 F2 satellite and will finalize its claim before the end of the year.
Viasat expects to report more than $3 billion of liquidity as of September 30, 2023, including approximately $2.0 billion of cash, cash equivalents and short-term investments with no near-term outstanding debt maturities. These preliminary estimates are subject to the closing of the second fiscal quarter of FY2024 and finalization of financial and accounting procedures and may change.
Viasat will provide more details on its next earnings call, planned for November 2023.
