Rational Investing - Cameron Stewart, CFA 对 $VIAV 的判断变化

Vat. I don't know what this company does. Never heard of it. vice set information technology company engages in the provision of broad broadband and communication products service the United States internationally. It operates in segments and communication services defense and advanced technologies. offer satellitebased broadband narrowband communication solutions, broadband services including broadband internet, voice protocol, fixed and mobile broadband. Okay, so the company also provides inflight connectivity, narrow band safety operating data and other uh complimentary services ming satellite communication company like Starling competitor.

Okay, let's uh let's see what we got. So, if it's Starling competitor, are they actually launching? Do they own the satellites up there revenues. I mean, for a growth company, just out of the gate, 5% and 7% topline revenue.

So, right out of the gate, uh, you said just launched two huge. Okay. So, so revenue growth is to come because it looks like last couple years revenue growth 5.5% 2.7% con consecutively. Um, you know, they should be going higher than that. But if they've just locked satellites, then maybe maybe they've got more growth coming.

33% margins. That seems pretty consistent. Okay. I'm assuming once the technology is up there, it R&D R&D is low. Certainly relative to Roblox, 200 million on 4.6 billion of revenue seems reasonable for a technology company.

actually marketing expenses low. You like seeing that. I think Bezos once said that if you have to advertise your product, you failed at at creating a an impressive product. So, fact these guys advertise almost nothing. It can generate this revenue. That seems nice.

They don't have any admin costs. It's buried in this other bucket, which I don't like. will have to pull up their 10K to go through it to really pull out how much they're spending in in admin.

But they're they were profitable last year for the first time in five years. They were profitable earlier and then they went negative for a while.

Okay. And I'm assuming they're issuing stock. Let's see. Weight average stock. Looks like they made a big He's focusing lower debt increasing free cash flow. Yeah. Okay. So, it looks like they've issued some stock. If they're trying to buy back debt, we'll probably see that in the cash flow statement. Issued stock buying down debt.

Uh EBITDA 1.4 billion of earnings. What? On four 4.6 billion. That's crazy. Crazy high margin. Okay. Is that Yeah, like 30% one, 1400 on what' I say 4.6. Yeah, 30%. Mental math checks out. That's very strong.

Let's see what balance sheet looks like. Give it the old smell test. Balance sheet, right, is point in time. Income statement. Cash flow is overtime. So, we're just going to look more recent period. They have 1.7 billion in cash on hand. Receivables, inventory, prepaid. This looks pretty clean. 3.1 billion property plant equipment. You want to see them if they're building satellites. It should be pretty heavy here. Intangibles. Goodwill is thin. I like seeing that. You don't I don't like seeing a lot of goodwill. That's good. Intangibles. 15 billion of total assets. 10 of which 75% is current asset and property, plant, equipment. That smells pretty clean to me.

Current working capital, current liability 1.3. Matt is is half of current assets. Ben Graham would like that. Long-term debt. Here you go. Here's your long-term debt. 6.2 billion. Capital leases, other noncurrent liabilities. That could be pensions. That could be other stuff there. It's 10 billion of liability. That's a lot.

10. Uh, so long-term. If we just focus here for a second, the bank debt, just the bank debt, 6.2 billion on EBITDA of 1462 on 14. That's 4.4 times leverage. That's pretty high.

Let's check the interest rate that they're expensing. Here's uh interest expense. It seems oddly low. They've got six billion of interest and they pay only six billion. It's only 3%. They're not paying full interest on their net. I guess they have cash.

What I'm what I'm doing is I'm looking at the interest expense and I'm comparing it to the debt they have outstanding and just dividing the two to get an interest rate. This is roughly 3%. I guess the cash that they have on the balance sheet is paying for some of the interest that they have because three, there's no way their debt is that cheap.

But on the plus side, it does look like they can at least afford this debt so they can continue to maintain the business a little bit. If income falls a little bit though, they don't have much cushion here. They're making 274 million of operating income. half more than half of that twothirds of that is going just to interest not even paying down the debt.

So I think there's if they can't grow revenue more and grow revenue quickly you could be facing additional dilution to pay down that debt.

So let's go to cash flow statement see what we get stockbased comp $81 million that's fine I like to see that the rest of that looks fine so they made they made 1.6 6 billion in in cash from operating the business.

Oh, I I was mistaken by the way. I I apologize. I forgot this this has this company has a lot of depreciation. What I said earlier is um regarding the income statement, the income statement would would turn negative. If they if operating income gets a little smaller, then income statement is going to turn negative because interest rate. However, from cash generation because they have so much depreciation, the actual cash they generate is higher, right? Because depreciation expensed on the income statement. So, the income state the operating income be a little lower. They made 1.6 billion in cash. Um, that's after paying cash interest on their debt. So, they do have a lot of cash.

They spent a billion dollars in capex. Fine. That still left 600 million in free cash flow after capex to pay down the debt. And you're right here. They paid down 800 million in debt. They borrowed only 175. So roughly 600 million of buy down happened and they pot back just a little bit of stock. So you're right, they are using their cash wisely. I think management is prudent here. I think that's the right move.

You're at 4.4. four leverage ratio. They're taking their free cash. They're buying down debt. Plus, they have enough to be able to put satellites, I guess, back in orbit at a at a billion to hopefully continue to move income higher. So, overall, very interesting, very interesting growth company.

Um, let's see what their what the valuation is. Only 12 times EBITDA. Interesting. free cash flow yield of five. That is a very interesting stock. Thank you for for the uh the note. I'll probably put that one in the cash flow club.

Satellite company that appears to be well wellrun. I don't know how they're going to compete against Starlink. I think those guys have um massive first mover advantage. and also control the method to get up there. Um kind of hard to compete if you have to pay your competitor to put your own assets in space, but um very interesting company. Thank you.

Are they have huge government contracts? Yeah, I bet. I bet they do. yeah. The question is what I mean 12 times seems pretty cheap. if they can get their um interesting look at the runup and it's still really cheap. Wow. It must have been I mean back in March at $9 a share and it's it's roughly 10xed up in a year and a half. Wow. It must have been dirt cheap. I guess it was hit negative earnings so it would have been harder to review back then. Interesting. Good for them.

Well, yeah, it's good thing that the CFO is doing his job. He's focusing on free cash flow. That's going to, you know, that's, you know, that's going to help them pay down that debt and then once they have the free cash flow, they can really start investing it hopefully and putting assets in space or doing other very interesting things.

Um I think the idea of replacing the telecom companies is from from satellite in space is a very interesting one. uh they collectively have trillions of revenue that if you can have an asset that has coverage permanently all over the planet in airplanes on boats on cruise ships wherever you go there's no dead spot I think you can gobble up that uh that old infrastructure uh which is a dividend machine for um cellular network and uh and that's worth trillions of revenue and it's not speculated we're all paying for with with cell phone plans. So, it's literally just exchanging one service for the other. Very interesting.

It's good stock. Interesting.