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 (
VIASAT, INC.
(Exact name of registrant as specified in its charter)
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33-0174996 |
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(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices and telephone number)
Securities registered pursuant to Section 12(b) of the Act:
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(Title of Each Class) |
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(Trading Symbol) |
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(Name of Each Exchange on which Registered) |
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Common Stock, par value $0.0001 per share |
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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.
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, $0.0001 par value, as of July 26, 2019 was
VIASAT, INC.
TABLE OF CONTENTS
2
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
VIASAT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
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As of June 30, 2019 |
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As of March 31, 2019 |
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(In thousands) |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
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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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Operating lease right-of-use assets |
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— |
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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 and other 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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Non-current operating lease liabilities |
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— |
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Other liabilities |
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Total liabilities |
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Commitments and contingencies (Note 9) |
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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 subsidiary |
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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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June 30, 2019 |
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June 30, 2018 |
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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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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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Loss from operations |
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( |
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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 before income taxes |
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( |
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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 income (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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Basic net loss per share attributable to Viasat, Inc. common stockholders |
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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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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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Other comprehensive income (loss), net of tax: |
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Unrealized gain (loss) on hedging, net of tax |
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( |
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Foreign currency translation adjustments, net of tax |
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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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Comprehensive loss |
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Less: comprehensive income (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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See accompanying notes to the condensed consolidated financial statements.
4
VIASAT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
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Three Months Ended |
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June 30, 2019 |
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June 30, 2018 |
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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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Stock-based compensation expense |
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Loss on disposition of fixed assets |
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Other non-cash adjustments |
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( |
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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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Inventories |
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( |
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Other assets |
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( |
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Accounts payable |
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( |
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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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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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Payment related to acquisition of business, net of cash acquired |
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— |
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( |
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Net cash used in investing activities |
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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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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 stock-based compensation |
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( |
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Other financing activities |
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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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( |
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Net decrease in cash and cash equivalents |
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( |
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( |
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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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See accompanying notes to the condensed consolidated financial statements.
5
VIASAT, INC.
CONDENSED CONSOLIDATED STATEMENTS 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, 2019 |
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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 issued in settlement of certain accrued employee compensation liabilities |
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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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Net (loss) income |
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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 June 30, 2019 |
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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 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 June 30, 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 June 30, 2019, the condensed consolidated statements of operations and comprehensive income (loss) for the three months ended June 30, 2019 and 2018, the condensed consolidated statements of cash flows for the three months ended June 30, 2019 and 2018 and the condensed consolidated statements of equity for the three months ended June 30, 2019 and 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, 2019 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, 2019 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. (TrellisWare). During the third quarter of fiscal year 2019, Viasat Europe Sàrl (formerly known as Euro Broadband Retail Sàrl), 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.
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 the development and delivery of complex equipment built to customer specifications under long-term contracts.
7
VIASAT, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
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 consisting of connectivity services. 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 simultaneously receives and consumes the benefits provided. The measure of progress over time is based upon either a period of time (e.g., over the estimated contractual term) or usage (e.g., bandwidth used/bytes of data processed). The Company evaluates whether broadband equipment provided to its customer as part of the delivery of connectivity services represents a lease in accordance with ASC 842. As discussed further below under “Leases - Lessor accounting”, for broadband equipment leased to consumer broadband customers in conjunction with the delivery of connectivity services, the Company accounts for the lease and non-lease components of connectivity service arrangements as a single performance obligation as the connectivity services represent the predominant component.
The Company also derives a portion of its revenues from contracts with customers to provide products. Performance obligations to provide products are satisfied at the point in time when control is transferred to the customer. These contracts typically require payment by the customer upon passage of control and determining the point at which control is transferred may require judgment. To identify the point at which control is transferred to the customer, the Company considers indicators that include, but are not limited to, whether (1) the Company has the present right to payment for the asset, (2) the customer has legal title to the asset, (3) physical possession of the asset has been transferred to the customer, (4) the customer has the significant risks and rewards of ownership of the asset, and (5) the customer has accepted the asset. For product revenues, control generally passes to the customer upon delivery of goods to the customer.
The vast majority of the Company’s revenues from long-term contracts to develop and deliver complex equipment built to customer specifications are derived from contracts with the U.S. government (including foreign military sales contracted through the U.S. government). The Company’s contracts with the U.S. government typically are subject to the Federal Acquisition Regulation (FAR) and are priced based on estimated or actual costs of producing goods or providing services. The FAR provides guidance on the types of costs that are allowable in establishing prices for goods and services provided under U.S. government contracts. The pricing for non-U.S. government contracts is based on the specific negotiations with each customer. Under the typical payment terms of the Company’s U.S. government fixed-price contracts, the customer pays the Company either performance-based payments (PBPs) or progress payments. PBPs are interim payments based on quantifiable measures of performance or on the achievement of specified events or milestones. Progress payments are interim payments based on a percentage of the costs incurred as the work progresses. Because the customer can often retain a portion of the contract price until completion of the contract, the Company’s U.S. government fixed-price contracts generally result in revenue recognized in excess of billings which the Company presents as unbilled accounts receivable on the balance sheet. Amounts billed and due from the Company’s customers are classified as receivables on the balance sheet. The portion of the payments retained by the customer until final contract settlement is not considered a significant financing component because the intent is to protect the customer. For the Company’s U.S. government cost-type contracts, the customer generally pays the Company for its actual costs incurred within a short period of time. For non-U.S. government contracts, the Company typically receives interim payments as work progresses, although for some contracts, the Company may be entitled to receive an advance payment. The Company recognizes a liability for these advance payments in excess of revenue recognized and presents it as collections in excess of revenues and deferred revenues on the balance sheet. An advance payment is not typically considered a significant financing component because it is used to meet working capital demands that can be higher in the early stages of a contract and to protect the Company from the other party failing to adequately complete some or all of its obligations under the contract.
Performance obligations related to developing and delivering complex equipment built to customer specifications under long-term contracts are recognized over time as these performance obligations do not create assets with an alternative use to the Company and the Company has an enforceable right to payment for performance to date. To measure the transfer of control, revenue is recognized based on the extent of progress towards completion of the performance obligation. The selection of the method to measure progress towards completion requires judgment and is based on the nature of the products or services to be provided. The Company generally uses the cost-to-cost measure of progress for its contracts because that best depicts the transfer of control to the customer which occurs as the Company incurs costs on its contracts. Under the cost-to-cost measure of progress, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. When estimates of total costs to be incurred on a contract exceed total estimates of revenue to be earned, a provision for the entire loss on the contract is recognized in the period the loss is determined.
8
VIASAT, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
Contract costs on U.S. government contracts are subject to audit and review by the Defense Contracting Management Agency (DCMA), the Defense Contract Audit Agency (DCAA), and other U.S. government agencies, as well as negotiations with U.S. government representatives. The Company’s incurred cost audits by the DCAA have not been concluded for fiscal year 2019. As of June 30, 2019, the DCAA had completed its incurred cost audit for fiscal years 2004 and 2016 and approved the Company’s incurred costs for those fiscal years, as well as approved the Company’s incurred costs for fiscal years 2005 through 2015, 2017 and 2018 without further audit based on a determination of low risk. Although the Company has recorded contract revenues subsequent to fiscal year 2018 based upon an estimate of costs that the Company believes will be approved upon final audit or review, the Company does not know the outcome of any ongoing or future audits or reviews and adjustments, and if future adjustments exceed the Company’s estimates, its profitability would be adversely affected. As of June 30, 2019 and March 31, 2019, the Company had $
Evaluation of transaction price
The evaluation of transaction price, including the amounts allocated to performance obligations, may require significant judgments. Due to the nature of the work required to be performed on many of the Company’s performance obligations, the estimation of total revenue, and where applicable the cost at completion, is complex, subject to many variables and requires significant judgment. The Company’s contracts may contain award fees, incentive fees, or other provisions, including the potential for significant financing components, that can either increase or decrease the transaction price. These amounts, which are sometimes variable, can be dictated by performance metrics, program milestones or cost targets, the timing of payments, and customer discretion. The Company estimates variable consideration at the amount to which it expects to be entitled. The Company includes estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. The Company’s estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of the Company’s anticipated performance and all information (historical, current and forecasted) that is reasonably available to the Company. In the event an agreement includes embedded financing components, the Company recognizes interest expense or interest income on the embedded financing components using effective interest method. This methodology uses an implied interest rate which reflects the incremental borrowing rate which would be expected to be obtained in a separate financing transaction. The Company has elected the practical expedient not to adjust the promised amount of consideration for the effects of a significant financing component if the Company expects, at contract inception, that the period between when the Company transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less.
If a contract is separated into more than one performance obligation, the total transaction price is allocated to each performance obligation in an amount based on the estimated relative standalone selling prices of the promised goods or services underlying each performance obligation. Estimating standalone selling prices may require judgment. When available, the Company utilizes the observable price of a good or service when the Company sells that good or service separately in similar circumstances and to similar customers. If a standalone selling price is not directly observable, the Company estimates the standalone selling price by considering all information (including market conditions, specific factors, and information about the customer or class of customer) that is reasonably available.
Transaction price allocated to remaining performance obligations
The Company’s remaining performance obligations represent the transaction price of firm contracts and orders for which work has not been performed. The Company includes in its remaining performance obligations only those contracts and orders for which it has accepted purchase orders. Remaining performance obligations associated with the Company’s subscribers for fixed consumer and business broadband services in its satellite services segment exclude month-to-month service contracts in accordance with a practical expedient and are estimated using a portfolio approach in which the Company reviews all relevant promotional activities and calculates the remaining performance obligation using the average service component for the portfolio and the average time remaining under the contract. The Company’s future recurring in-flight connectivity (IFC) service contracts in its satellite services segment do not have minimum service purchase requirements and therefore are not included in the Company’s remaining performance obligations. As of June 30, 2019, the aggregate amount of the transaction price allocated to remaining performance obligations was $
9
VIASAT, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
Disaggregation of revenue
The Company operates and manages its business in
The following sets forth disaggregated reported revenue by segment and product and services for the three months ended June 30, 2019 and June 30, 2018:
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Three Months Ended June 30, 2019 |
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Satellite Services |
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Commercial Networks |
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Government Systems |
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Total Revenues |
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(In thousands) |
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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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$ |
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$ |
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$ |
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$ |
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Three Months Ended June 30, 2018 |
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Satellite Services |
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Commercial Networks |
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Government Systems |
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Total Revenues |
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(In thousands) |
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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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