Viasat’s (VSAT) fiscal first-quarter financial results appear underwhelming on the surface, but they indicate the company is poised to deliver very strong earnings in the medium-to-long term; its contract awards and backlog jumped significantly. Also noteworthy is that the firm continues to generate significant and growing amounts of cash.
Moreover, the company’s new satellites are poised to start operating soon and should enable VSAT to provide more effective internet service. The latter development, in turn, will likely enable it to convince many more firms and governments to utilize its internet services.
Finally, Viasat remains well-positioned to benefit from the proliferation of physical AI, and its valuation is still very attractive.
Given these points, the name remains appealing to all investors.
Excellent Awards and Backlog Growth, Strong Cash Flow
The firm’s awards jumped 10% versus the same period a year earlier to $1.3 billion. The standout in this category was its Defense and Advanced Technologies (DAT) unit, whose orders soared 22% year-over-year to $524 million, setting a new record. The surge was partially “driven by space and mission systems,” the company noted.
Within the latter category, VSAT in June announced that it had obtained a large contract worth up to $4 billion from the Space Force to “build, launch, and deliver the first of a proliferated fleet of small, maneuverable geosynchronous Earth orbit (GEO) satellites.”
As Viasat pointed out, in addition to tremendously boosting the company’s orders and backlog, the deal highlights the extent to which governments are interested in utilizing its satellites. Further, Washington is certainly willing to shell out large amounts of cash to do so, and America’s allies may follow in the Pentagon’s footsteps. Consequently, the deal bodes very well for VSAT’s longer-term outlook.
On the backlog front, Viasat’s total climbed by 19% year-over-year to an elevated $4.22 billion. Once again, DAT led the way, as the unit’s backlog soared 32% YOY to $1.4 billion.
Separately, Viasat’s free cash flow advanced 19% versus the same period a year earlier to $72 million. And in the year that ended on June 30, the company reported $189 million of free cash flow, “excluding non-recurring items.”
Improved Satellite-Internet Service Should Attract Many More Customers
In the near term, two new satellites are slated to enter service for Viasat. The firm’s Flight 2 spacecraft is slated to launch service by September, while its Flight 3 satellite is supposed to start being used in the Asia Pacific by late August or early September. According to VSAT, the spacecraft will boost the network’s efficiency, while enhancing geographic coverage and improving customers’ overall experience.
Given these upgrades, the new satellites should enable Viasat to gain market share in the airlines, corporate, and maritime internet markets in the medium-to-long term.
A Beneficiary of the Growth of Physical AI
“We anticipate (that the) introduction of AI-driven autonomy into land, sea, and air platforms will…be a growth catalyst” for Viasat, CEO Mark Dankberg reported.
Indeed, with autonomous vehicles beginning to proliferate on the ground and militaries starting to deploy autonomous drones and ships on a wide scale, the need for internet service that’s available everywhere looks poised to boom. That trend, in turn, should cause the demand for Viasat’s satellite-internet services to surge a great deal.
Valuation on VSAT Stock
VSAT stock is changing hands at a low trailing enterprise value-to-EBITDA ratio of just 9.4 times. That’s well below the average EV/EBITDA ratio of the S&P 500, which is 21.7 times.
Considering the company’s multiple, strong, positive catalysts, and its low valuation, it looks like an attractive name for investors.
*This article is intended to be informational only; it is not financial advice.
