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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2019.

OR

 

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from              to             .

Commission File Number (000-21767)

 

VIASAT, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

33-0174996

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

6155 El Camino Real

Carlsbad, California 92009

(760) 476-2200

(Address of principal executive offices and telephone number)

Securities registered pursuant to Section 12(b) of the Act:

 

(Title of Each Class)

 

(Trading Symbol)

 

(Name of Each Exchange on which Registered)

Common Stock, par value $0.0001 per share

 

VSAT

 

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

The number of shares outstanding of the registrant’s common stock, $0.0001 par value, as of October 25, 2019 was 61,352,560.

 

 

 


VIASAT, INC.

TABLE OF CONTENTS

 

 

 

Page

PART I. FINANCIAL INFORMATION

 

 

Item 1. Financial Statements (Unaudited)

 

3

Condensed Consolidated Balance Sheets

 

3

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

 

4

Condensed Consolidated Statements of Cash Flows

 

5

Condensed Consolidated Statements of Equity

 

6

Notes to the Condensed Consolidated Financial Statements

 

8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

34

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

55

Item 4. Controls and Procedures

 

56

PART II. OTHER INFORMATION

 

 

Item 1. Legal Proceedings

 

56

Item 1A. Risk Factors

 

56

Item 6. Exhibits

 

57

Signatures

 

58

 

2


PART I — FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

VIASAT, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

 

 

 

As of

September 30, 2019

 

 

As of

March 31, 2019

 

 

 

(In thousands)

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

87,045

 

 

$

261,701

 

Accounts receivable, net

 

 

294,067

 

 

 

300,307

 

Inventories

 

 

269,517

 

 

 

234,518

 

Prepaid expenses and other current assets

 

 

105,004

 

 

 

90,646

 

Total current assets

 

 

755,633

 

 

 

887,172

 

 

 

 

 

 

 

 

 

 

Property, equipment and satellites, net

 

 

2,363,916

 

 

 

2,125,290

 

Operating lease right-of-use assets

 

 

319,698

 

 

 

 

Other acquired intangible assets, net

 

 

17,967

 

 

 

22,301

 

Goodwill

 

 

121,223

 

 

 

121,719

 

Other assets

 

 

788,614

 

 

 

758,805

 

Total assets

 

$

4,367,051

 

 

$

3,915,287

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

141,746

 

 

$

157,275

 

Accrued and other liabilities

 

 

330,011

 

 

 

308,268

 

Current portion of long-term debt

 

 

29,962

 

 

 

19,937

 

Total current liabilities

 

 

501,719

 

 

 

485,480

 

 

 

 

 

 

 

 

 

 

Senior notes

 

 

1,284,329

 

 

 

1,282,898

 

Other long-term debt

 

 

159,636

 

 

 

110,005

 

Non-current operating lease liabilities

 

 

296,707

 

 

 

 

Other liabilities

 

 

118,824

 

 

 

120,826

 

Total liabilities

 

 

2,361,215

 

 

 

1,999,209

 

Commitments and contingencies (Note 9)

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

 

Viasat, Inc. stockholders’ equity

 

 

 

 

 

 

 

 

Common stock

 

 

6

 

 

 

6

 

Paid-in capital

 

 

1,751,924

 

 

 

1,656,819

 

Retained earnings

 

 

237,311

 

 

 

245,585

 

Accumulated other comprehensive income

 

 

1,666

 

 

 

5,338

 

Total Viasat, Inc. stockholders’ equity

 

 

1,990,907

 

 

 

1,907,748

 

Noncontrolling interest in subsidiary

 

 

14,929

 

 

 

8,330

 

Total equity

 

 

2,005,836

 

 

 

1,916,078

 

Total liabilities and equity

 

$

4,367,051

 

 

$

3,915,287

 

 

See accompanying notes to the condensed consolidated financial statements.

 

3


VIASAT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

September 30, 2019

 

 

September 30, 2018

 

 

September 30, 2019

 

 

September 30, 2018

 

 

 

(In thousands, except per share data)

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product revenues

 

$

306,830

 

 

$

280,435

 

 

$

570,445

 

 

$

498,564

 

Service revenues

 

 

285,426

 

 

 

237,039

 

 

 

558,848

 

 

 

457,779

 

Total revenues

 

 

592,256

 

 

 

517,474

 

 

 

1,129,293

 

 

 

956,343

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of product revenues

 

 

223,075

 

 

 

216,900

 

 

 

420,015

 

 

 

390,348

 

Cost of service revenues

 

 

187,024

 

 

 

175,230

 

 

 

374,543

 

 

 

346,662

 

Selling, general and administrative

 

 

127,391

 

 

 

113,120

 

 

 

252,523

 

 

 

225,762

 

Independent research and development

 

 

34,314

 

 

 

31,360

 

 

 

67,788

 

 

 

64,733

 

Amortization of acquired intangible assets

 

 

2,027

 

 

 

2,435

 

 

 

4,064

 

 

 

4,888

 

Income (loss) from operations

 

 

18,425

 

 

 

(21,571

)

 

 

10,360

 

 

 

(76,050

)

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

413

 

 

 

29

 

 

 

1,338

 

 

 

65

 

Interest expense

 

 

(9,540

)

 

 

(14,074

)

 

 

(20,714

)

 

 

(25,398

)

Income (loss) before income taxes

 

 

9,298

 

 

 

(35,616

)

 

 

(9,016

)

 

 

(101,383

)

(Provision for) benefit from income taxes

 

 

(2,390

)

 

 

9,704

 

 

 

4,820

 

 

 

38,909

 

Equity in income of unconsolidated affiliate, net

 

 

1,154

 

 

 

314

 

 

 

2,521

 

 

 

1,379

 

Net income (loss)

 

 

8,062

 

 

 

(25,598

)

 

 

(1,675

)

 

 

(61,095

)

Less: net income (loss) attributable to

   noncontrolling interests, net of tax

 

 

4,868

 

 

 

126

 

 

 

6,599

 

 

 

(1,361

)

Net income (loss) attributable to Viasat, Inc.

 

$

3,194

 

 

$

(25,724

)

 

$

(8,274

)

 

$

(59,734

)

Basic net income (loss) per share attributable to

   Viasat, Inc. common stockholders

 

$

0.05

 

 

$

(0.43

)

 

$

(0.14

)

 

$

(1.00

)

Diluted net income (loss) per share attributable

   to Viasat, Inc. common stockholders

 

$

0.05

 

 

$

(0.43

)

 

$

(0.14

)

 

$

(1.00

)

Shares used in computing basic net income

   (loss) per share

 

 

61,480

 

 

 

59,734

 

 

 

61,200

 

 

 

59,470

 

Shares used in computing diluted net income

   (loss) per share

 

 

62,761

 

 

 

59,734

 

 

 

61,200

 

 

 

59,470

 

Comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

8,062

 

 

$

(25,598

)

 

$

(1,675

)

 

$

(61,095

)

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain (loss) on hedging, net of tax

 

 

3

 

 

 

38

 

 

 

48

 

 

 

(288

)

Foreign currency translation adjustments, net

   of tax

 

 

(1,436

)

 

 

(7,104

)

 

 

(3,720

)

 

 

(6,901

)

Other comprehensive loss, net of tax

 

 

(1,433

)

 

 

(7,066

)

 

 

(3,672

)

 

 

(7,189

)

Comprehensive income (loss)

 

 

6,629

 

 

 

(32,664

)

 

 

(5,347

)

 

 

(68,284

)

Less: comprehensive income (loss) attributable

   to noncontrolling interests, net of tax

 

 

4,868

 

 

 

126

 

 

 

6,599

 

 

 

(1,361

)

Comprehensive income (loss) attributable to

   Viasat, Inc.

 

$

1,761

 

 

$

(32,790

)

 

$

(11,946

)

 

$

(66,923

)

 

See accompanying notes to the condensed consolidated financial statements.

4


VIASAT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

 

 

Six Months Ended

 

 

 

September 30, 2019

 

 

September 30, 2018

 

 

 

(In thousands)

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(1,675

)

 

$

(61,095

)

Adjustments to reconcile net loss to net cash provided by operating

   activities:

 

 

 

 

 

 

 

 

Depreciation

 

 

135,144

 

 

 

128,990

 

Amortization of intangible assets

 

 

31,206

 

 

 

28,281

 

Stock-based compensation expense

 

 

42,328

 

 

 

38,503

 

Loss on disposition of fixed assets

 

 

23,566

 

 

 

26,025

 

Other non-cash adjustments

 

 

(4,023

)

 

 

(32,753

)

Increase (decrease) in cash resulting from changes in operating assets

   and liabilities, net of effect of acquisition:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

893

 

 

 

(10,595

)

Inventories

 

 

(34,091

)

 

 

(34,173

)

Other assets

 

 

(6,403

)

 

 

(9,771

)

Accounts payable

 

 

5,582

 

 

 

19,908

 

Accrued liabilities

 

 

(2,292

)

 

 

10,396

 

Other liabilities

 

 

(6,943

)

 

 

7,576

 

Net cash provided by operating activities

 

 

183,292

 

 

 

111,292

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchase of property, equipment and satellites

 

 

(329,558

)

 

 

(333,466

)

Cash paid for patents, licenses and other assets

 

 

(35,445

)

 

 

(21,692

)

Proceeds from insurance claims on ViaSat-2 satellite

 

 

2,277

 

 

 

44,394

 

Proceeds from sale of real property

 

 

 

 

 

14,034

 

Payments related to acquisition of business, net of cash acquired

 

 

 

 

 

(2,339

)

Net cash used in investing activities

 

 

(362,726

)

 

 

(299,069

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from debt borrowings

 

 

 

 

 

355,000

 

Payments of debt borrowings

 

 

(14,821

)

 

 

(186,386

)

Payment of debt issuance costs

 

 

(2,479

)

 

 

 

Proceeds from issuance of common stock under equity plans

 

 

27,016

 

 

 

11,087

 

Purchase of common stock in treasury (immediately retired) related

   to tax withholdings for stock-based compensation

 

 

(3,128

)

 

 

(6,551

)

Other financing activities

 

 

(1,368

)

 

 

(3,886

)

Net cash provided by financing activities

 

 

5,220

 

 

 

169,264

 

Effect of exchange rate changes on cash

 

 

(442

)

 

 

(1,306

)

Net decrease in cash and cash equivalents

 

 

(174,656

)

 

 

(19,819

)

Cash and cash equivalents at beginning of period

 

 

261,701

 

 

 

71,446

 

Cash and cash equivalents at end of period

 

$

87,045

 

 

$

51,627

 

Non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Issuance of common stock in satisfaction of certain accrued employee

   compensation liabilities

 

$

22,829

 

 

$

32,129

 

Capital expenditures not paid for

 

$

4,023

 

 

$

6,724

 

 

See accompanying notes to the condensed consolidated financial statements.

 

5


 

VIASAT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(UNAUDITED)

 

 

 

Viasat, Inc. Stockholders

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of

Shares

Issued

 

 

Amount

 

 

Paid-in

Capital

 

 

Retained

Earnings

 

 

Accumulated

Other

Comprehensive

Income (Loss)

 

 

Noncontrolling

Interest in

Subsidiaries

 

 

Total

 

 

 

(In thousands, except share data)

 

For the Three Months Ended September 30, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at June 30, 2019

 

 

61,276,933

 

 

$

6

 

 

$

1,726,009

 

 

$

234,117

 

 

$

3,099

 

 

$

10,061

 

 

$

1,973,292

 

Exercise of stock options

 

 

42,606

 

 

 

 

 

 

2,639

 

 

 

 

 

 

 

 

 

 

 

 

2,639

 

Stock-based compensation

 

 

 

 

 

 

 

 

24,076

 

 

 

 

 

 

 

 

 

 

 

 

24,076

 

RSU awards vesting, net of

   shares withheld for taxes

   which have been retired

 

 

33,021

 

 

 

 

 

 

(800

)

 

 

 

 

 

 

 

 

 

 

 

(800

)

Net income

 

 

 

 

 

 

 

 

 

 

 

3,194

 

 

 

 

 

 

4,868

 

 

 

8,062

 

Other comprehensive loss, net

   of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,433

)

 

 

 

 

 

(1,433

)

Balance at September 30, 2019

 

 

61,352,560

 

 

$

6

 

 

$

1,751,924

 

 

$

237,311

 

 

$

1,666

 

 

$

14,929

 

 

$

2,005,836

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended September 30, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at June 30, 2018

 

 

59,527,520

 

 

$

6

 

 

$

1,589,167

 

 

$

277,831

 

 

$

15,442

 

 

$

9,501

 

 

$

1,891,947

 

Exercise of stock options

 

 

93,900

 

 

 

 

 

 

3,432

 

 

 

 

 

 

 

 

 

 

 

 

3,432

 

Stock-based compensation

 

 

 

 

 

 

 

 

22,207

 

 

 

 

 

 

 

 

 

 

 

 

22,207

 

RSU awards vesting, net of shares

   withheld for taxes which have

   been retired

 

 

28,809

 

 

 

 

 

 

(582

)

 

 

 

 

 

 

 

 

 

 

 

(582

)

Other noncontrolling interest activity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3

)

 

 

(3

)

Net (loss) income

 

 

 

 

 

 

 

 

 

 

 

(25,724

)

 

 

 

 

 

126

 

 

 

(25,598

)

Other comprehensive loss, net

   of tax