Viasat Probe Into Ailing $700M Satellite Casts Shadow Over Q1 Results

Satellite operator Viasat says problems with its first ViaSat-3 deployment have created unanticipated biz challenges that may disrupt commercial prospects in the short term.

The company's ViaSat-3 Americas satellite was launched earlier this year, but Viasat disclosed last month there had been an issue during deployment of the giant reflector for its antenna that might affect the satellite's performance.

Analysts have estimated its "all-in costs," including build and launch money, at $700 million. The satellite was intended to play a key part in delivering faster broadband across a broader area.

Viasat CEO Mark Dankberg said during the company's earnings call for Q1 of its fiscal 2024 ended June 30, that he doesn't expect 2024 financial results to be significantly affected, but FY2025 would be impacted by "Flight 1 performance" and "the timing of the corrective actions on Flight 2."

He anticipates that Viasat can continue to grow, just not to the same extent as it would have without the anomaly.

Flight 1 refers to the ViaSat-3 Americas satellite, launched to provide coverage in the Americas, which should mean that Flight 2 is the ViaSat-3 EMEA unit and Flight 3 would be the remaining ViaSat-3 unit intended to cover the Asia-Pacific region.

The Flight 2 satellite was understood to be scheduled for launch in September, but this has now been postponed, and the company said it will have more information on a rescheduled launch next quarter.

Dankberg revealed that Flight 2 uses the same antenna "from a major aerospace supplier" as the first satellite, but that "Flight 3 uses a completely different design from a different manufacturer," and that satellite is expected to be unaffected by the Flight 1 anomaly.

He added in a letter to shareholders that "We understand the risks involved in space systems, and have insurance."

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Viasat is currently working with the antenna manufacturer and its satellite supplier to determine the root cause of the reflector anomaly and appropriate corrective actions for Flight 2, Dankberg said. The company expects to have more to report on the fault in the next three months.

He indicated that Viasat is still assessing the performance of the first satellite, including the effects of the anomaly and potential operational mitigations that can be employed. This might include some way of improving the antenna deployment.

The satellite itself and the supporting ground infrastructure are operating as expected or better, he claimed.

When asked whether Viasat might procure a "Flight 4" satellite to cover the region intended to be served by Flight 1, Dankberg said it does have plans which cover that eventuality, but added "what we'll do for a replacement satellite depends a lot on what the performance of this one is."

In response to another question, he also hinted the second satellite, intended for EMEA, might as a last resort be used to cover the Americas until another satellite could be put in place.

"We will move satellites in a way that gives us the best shot at serving our customers, all of our customers' demands. So we have the flexibility to do that," but he added: "it would be premature to jump to an operational scenario that assumes that the [first] satellite has no utility."

The company previously indicated it would be able to redeploy other satellites in its fleet in order to cover for ViaSat-3 Americas.

Viasat's revenue for Q1 FY2024 was $780 million, up 36 percent compared with the $575 million reported for the same quarter last year. However, Viasat also reported a net loss of $77 million versus a net loss of $38.5 million a year earlier, which it claimed was driven by higher interest rates and non-recurring acquisition-related expenses.

These results include one month's worth of contribution from Inmarsat amounting to $134 million of revenue, following the completion of its acquisition by Viasat at the end of May.

Inmarsat's stand-alone performance for the full quarter ended June 30 saw revenue growth of 10 percent year-on-year to approximately $400 million, Viasat said.

CFO Shawn Duffy said that Inmarsat's revenue mix for the previous year was 36 percent from government customers, 34 percent in maritime, 22 percent commercial aviation and 8 percent enterprise and other. "That's a high-quality diverse revenue base, which fits well with Viasat business and our growth objectives in the mobility and government markets," he commented.

Viasat President Guru Gowrappan said the company expects revenue growth in the "high single-digit percentages" for the full FY2024, and continued growth into FY2025, but added: "We do anticipate that FY 2025 growth rate will be affected by the ViaSat-3 Flight 1 anomaly, especially by the fixed broadband business, where growth will be delayed."

That sector is currently only about 13 percent of Viasat's revenue, Gowrappan said "and we anticipate growth in rest of the business as it is not directly affected, and that is 87 percent of our business." ®