ViaSat (VSAT) Down 21.8% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for ViaSat (VSAT). Shares have lost about 21.8% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is ViaSat due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Viasat Q3 Earnings & Revenues Beat Estimates, Up Y/Y

Viasat reported solid third-quarter fiscal 2020 results, wherein both the bottom line and the top line surpassed the respective Zacks Consensus Estimate, and increased year over year.

Net Income

On a GAAP basis, net income for the December quarter was $6.5 million or 10 cents per share against net loss of $10.4 million or loss of 17 cents per share in the year-ago quarter. The improvement was primarily driven by top-line growth. The bottom line surpassed the Zacks Consensus Estimate by 11 cents.

Non-GAAP net income came in at $24.7 million or 39 cents per share compared with $6.9 million or 12 cents per share in the prior-year quarter.

Revenues

Quarterly total revenues increased 6% year over year to $588.2 million from $554.7 million. This was driven by strong revenue growth in both Satellite Services and Government Systems segment backed by sustained backlog and new contract awards, partially offset by decline in the Commercial Networks segment. While product revenues totaled $303.1 million, up 0.4% year over year, service revenues grew 12.8% to $285.1 million. The top line surpassed the consensus estimate of $586 million.

Segment Results

Revenues from Satellite Services increased 19.1% year over year to $211.7 million, setting a record high. Markedly, the segment achieved its eighth sequential quarter of revenue growth. The performance was led by record-high average revenue per user, up 15% year over year to $89.71 primarily driven by the addition of new subscribers to premium broadband service plans.

Impressively, Viasat established robust customer relationships with the sequential growth of Community Wi-Fi internet hotspots, while residential broadband services were introduced in Mexico. Subsequent to the quarter end, the company announced that it is diversifying its third-party platform engagement program by introducing first-of-its-kind live TV streaming services, fuboTV, to the U.S. aviation market.

The segment’s operating profit was $3.6 million against loss of $10.2 million in the year-ago quarter. Adjusted EBITDA was $75.1 million, up 32.5% driven by higher mobile and fixed broadband revenues related to the ViaSat-2 satellite system.

Commercial Networks revenues were down 33.3% to $84.7 million due to the accelerated American Airlines (NASDAQ:AAL) install schedule in the prior-year quarter. The segment’s operating loss was $46.9 million compared with loss of $31.2 million in the year-ago quarter. Adjusted EBITDA was negative $30.6 million compared with negative $17 million a year ago, due to lower IFC terminal deliveries and higher R&D costs in relation to ViaSat-3 ground and space segments.

Revenues from Government Systems increased 16.7% year over year to $291.8 million, owing to augmented positions in the data links, satcom and mobile networking offerings. The segment’s operating profit was $59.1 million, up 18.4% year over year. Adjusted EBITDA was $77.8 million, up 12.8% year over year, mainly due to robust performance across government satellite communication systems, reconnaissance, tactical data links and global mobility/intelligence surveillance.

Other Details

Total operating income was $14 million compared with $6 million in the year-earlier quarter. Adjusted EBITDA witnessed a record high of $122.3 million compared with $108.7 million a year ago.

Cash Flow & Liquidity

During the first nine months of fiscal 2020, Viasat generated $293.4 million of cash from operations compared with $214.7 million in the year-ago period.

As of Dec 31, 2019, the satellite and wireless networking technology provider had $47.8 million in cash and equivalents with $289.2 million of non-current operating lease liabilities.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -56.88% due to these changes.

VGM Scores

Currently, ViaSat has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision looks promising. Notably, ViaSat has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.