UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
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☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
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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)
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Delaware |
33-0174996 |
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(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)
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.
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Large accelerated filer |
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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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, $0.0001 par value, as of January 25, 2019 was
VIASAT, INC.
TABLE OF CONTENTS
2
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
VIASAT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
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As of December 31, 2018 |
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As of March 31, 2018 |
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(In thousands) |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable, net |
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Inventories |
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Prepaid expenses and other current assets |
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Total current assets |
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Satellites, net |
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Property and equipment, net |
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Other acquired intangible assets, net |
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Goodwill |
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Other assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued liabilities |
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Current portion of long-term debt |
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Total current liabilities |
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Senior notes |
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Other long-term debt |
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Other liabilities |
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Total liabilities |
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Commitments and contingencies (Note 8) |
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Equity: |
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Viasat, Inc. stockholders’ equity |
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Common stock |
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Paid-in capital |
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Retained earnings |
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Accumulated other comprehensive income |
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Total Viasat, Inc. stockholders’ equity |
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Noncontrolling interest in subsidiaries |
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Total equity |
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Total liabilities and equity |
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$ |
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$ |
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See accompanying notes to the condensed consolidated financial statements.
3
VIASAT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
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Three Months Ended |
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Nine Months Ended |
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December 31, 2018 |
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December 31, 2017 |
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December 31, 2018 |
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December 31, 2017 |
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(In thousands, except per share data) |
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Revenues: |
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Product revenues |
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$ |
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$ |
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$ |
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$ |
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Service revenues |
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Total revenues |
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Operating expenses: |
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Cost of product revenues |
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Cost of service revenues |
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Selling, general and administrative |
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Independent research and development |
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Amortization of acquired intangible assets |
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Income (loss) from operations |
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( |
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Other income (expense): |
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Interest income |
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Interest expense |
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( |
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— |
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Loss on extinguishment of debt |
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— |
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— |
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— |
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Loss before income taxes |
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( |
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( |
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( |
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(Provision for) benefit from income taxes |
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Equity in income of unconsolidated affiliate, net |
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Net loss |
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( |
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Less: net loss attributable to noncontrolling interests, net of tax |
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Net loss attributable to Viasat, Inc. |
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$ |
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$ |
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$ |
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$ |
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Basic net loss per share attributable to Viasat, Inc. common stockholders |
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$ |
( |
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$ |
( |
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$ |
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$ |
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Diluted net loss per share attributable to Viasat, Inc. common stockholders |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
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Shares used in computing basic net loss per share |
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Shares used in computing diluted net loss per share |
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Comprehensive income (loss): |
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Net loss |
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$ |
( |
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$ |
( |
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$ |
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$ |
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Other comprehensive income (loss), net of tax: |
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Unrealized (loss) gain on hedging, net of tax |
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Foreign currency translation adjustments, net of tax |
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Other comprehensive (loss) income, net of tax |
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Comprehensive loss |
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Less: comprehensive loss attributable to noncontrolling interests, net of tax |
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Comprehensive loss attributable to Viasat, Inc. |
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$ |
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$ |
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$ |
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$ |
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See accompanying notes to the condensed consolidated financial statements.
4
VIASAT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
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Nine Months Ended |
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December 31, 2018 |
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December 31, 2017 |
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(In thousands) |
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Cash flows from operating activities: |
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Net loss |
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$ |
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$ |
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Adjustments to reconcile net loss to net cash provided by operating activities: |
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Depreciation |
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Amortization of intangible assets |
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Deferred income taxes |
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Stock-based compensation expense |
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Loss on disposition of fixed assets |
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Loss on extinguishment of debt |
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— |
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Other non-cash adjustments |
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Increase (decrease) in cash resulting from changes in operating assets and liabilities, net of effect of acquisition: |
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Accounts receivable |
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( |
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Inventories |
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( |
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( |
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Other assets |
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( |
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Accounts payable |
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Accrued liabilities |
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Other liabilities |
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Net cash provided by operating activities |
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Cash flows from investing activities: |
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Purchase of property, equipment and satellites |
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( |
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Cash paid for patents, licenses and other assets |
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Proceeds from insurance claims on ViaSat-2 satellite |
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— |
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Proceeds from sale of real property |
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— |
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Other investing activities |
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( |
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— |
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Net cash used in investing activities |
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( |
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Cash flows from financing activities: |
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Proceeds from revolving credit facility borrowings |
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— |
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Payments of revolving credit facility borrowings |
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( |
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— |
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Payments of Ex-Im credit facility borrowings |
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( |
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— |
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Proceeds from Ex-Im credit facility borrowings, net of discount |
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— |
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Proceeds from issuance of 2025 Notes |
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— |
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Repayment of 2020 Notes |
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— |
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( |
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Payment of debt extinguishment costs |
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— |
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Payment of debt issuance costs |
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— |
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Proceeds from issuance of common stock under equity plans |
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Purchase of common stock in treasury (immediately retired) related to tax withholdings for share-based awards |
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( |
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Other financing activities |
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( |
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( |
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Net cash provided by financing activities |
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Effect of exchange rate changes on cash |
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( |
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Net (decrease) increase in cash and cash equivalents |
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Cash and cash equivalents at beginning of period |
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Cash and cash equivalents at end of period |
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$ |
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$ |
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Non-cash investing and financing activities: |
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Issuance of common stock in satisfaction of certain accrued employee compensation liabilities |
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$ |
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$ |
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Capital expenditures not paid for |
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$ |
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$ |
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Exposure fees on Ex-Im credit facility financed through Ex-Im credit facility |
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$ |
— |
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$ |
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See accompanying notes to the condensed consolidated financial statements.
5
VIASAT, INC.
CONDENSED CONSOLIDATED STATEMENT OF EQUITY
(UNAUDITED)
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Viasat, Inc. Stockholders |
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Common Stock |
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Number of Shares Issued |
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Amount |
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Paid-in Capital |
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Retained Earnings |
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Accumulated Other Comprehensive Income (Loss) |
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Noncontrolling Interest in Subsidiaries |
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Total |
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(In thousands, except share data) |
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Balance at March 31, 2018 |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Exercise of stock options |
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— |
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— |
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— |
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— |
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Issuance of stock under Employee Stock Purchase Plan |
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— |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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Shares and fully-vested RSUs issued in settlement of certain accrued employee compensation liabilities, net of shares withheld for taxes which have been retired |
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— |
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— |
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— |
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— |
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RSU awards vesting, net of shares withheld for taxes which have been retired |
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— |
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( |
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— |
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— |
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— |
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( |
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Cumulative effect adjustment upon adoption of new revenue recognition guidance (ASU 2014-09) |
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— |
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— |
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— |
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— |
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— |
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Other noncontrolling interest activity |
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— |
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— |
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— |
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— |
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( |
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( |
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Net loss |
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— |
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— |
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— |
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( |
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— |
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( |
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( |
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Other comprehensive loss, net of tax |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Balance at December 31, 2018 |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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See accompanying notes to the condensed consolidated financial statements.
6
VIASAT, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1 — Basis of Presentation
The accompanying condensed consolidated balance sheet at December 31, 2018, the condensed consolidated statements of operations and comprehensive income (loss) for the three and nine months ended December 31, 2018 and 2017, the condensed consolidated statements of cash flows for the nine months ended December 31, 2018 and 2017 and the condensed consolidated statement of equity for the nine months ended December 31, 2018 have been prepared by the management of Viasat, Inc. (also referred to hereafter as the Company or Viasat), and have not been audited. These financial statements have been prepared on the same basis as the audited consolidated financial statements for the fiscal year ended March 31, 2018 and, in the opinion of management, include all adjustments (consisting only of normal recurring adjustments) necessary for a fair statement of the Company’s results for the periods presented. These financial statements should be read in conjunction with the financial statements and notes thereto for the fiscal year ended March 31, 2018 included in the Company’s Annual Report on Form 10-K. Interim operating results are not necessarily indicative of operating results for the full year. The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America (GAAP).
The Company’s condensed consolidated financial statements include the assets, liabilities and results of operations of Viasat, its wholly owned subsidiaries and its majority-owned subsidiary, TrellisWare Technologies, Inc. During the third quarter of fiscal year 2019, Euro Broadband Retail Sàrl (Euro Broadband Retail), which was previously a majority-owned subsidiary, became a wholly owned subsidiary when the Company purchased the remaining
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and reported amounts of revenues and expenses during the reporting period. Estimates have been prepared on the basis of the most current and best available information and actual results could differ from those estimates. Significant estimates made by management include revenue recognition, stock-based compensation, self-insurance reserves, allowance for doubtful accounts, warranty accruals, valuation of goodwill and other intangible assets, patents, orbital slots and other licenses, software development, property, equipment and satellites, long-lived assets, derivatives, contingencies and income taxes including the valuation allowance on deferred tax assets.
Revenue recognition
Effective April 1, 2018, the Company adopted Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (commonly referred to as Accounting Standards Codification (ASC) 606). This update established ASC 606, Revenue from Contracts with Customers and ASC 340-40, Other Assets and Deferred Costs – Contracts with Customers.
In order to assess the impact of the new accounting standards, the Company applied the new standards to all open contracts existing as of April 1, 2018. The Company elected the practical expedient to reflect the aggregate effect of all contract modifications occurring before April 1, 2018 when identifying the satisfied and unsatisfied performance obligations, determining the transaction price and allocating the transaction price to the satisfied and unsatisfied performance obligations. The aggregated effect of applying this practical expedient did not have a significant impact on the Company’s conclusions.
7
VIASAT, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
To reflect the adoption of the new standards, the Company and its equity method investment investee elected to use the “modified retrospective method,” which resulted in the Company recording the retrospective cumulative effect to the opening balance of retained earnings.
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As of March 31, 2018 |
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Adjustments Due to ASC 606 |
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As of April 1, 2018 |
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Condensed Consolidated Balance Sheets: |
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Accounts receivable, net |
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$ |
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$ |
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Inventories |
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Prepaid expenses and other current assets |
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Other assets |
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Accrued liabilities |
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Retained earnings |
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The key impact of adoption is the deferral of commissions primarily in the Company’s satellite services segment, which were historically expensed as incurred as further described below.
The Company applied the five-step model under ASC 606 to its contracts with its customers to determine the impact of the new standard. Under this model the Company (1) identifies the contract with the customer, (2) identifies its performance obligations in the contract, (3) determines the transaction price for the contract, (4) allocates the transaction price to its performance obligations and (5) recognizes revenue when or as it satisfies its performance obligations. These performance obligations generally include the purchase of services (including broadband capacity and the leasing of broadband equipment), the purchase of products, and requirements to develop and deliver complex equipment built to customer specifications under long-term contracts.
Performance obligations
The timing of satisfaction of performance obligations may require judgment. The Company derives a substantial portion of its revenues from contracts with customers for services, primarily connectivity services including leasing of related broadband equipment. These contracts typically require advance or recurring monthly payments by the customer. The Company’s obligation to provide connectivity services is satisfied over time as the customer