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 June 30, 2021.December 31, 2021.

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)(000-21767)

img241860665_0.jpg 

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, California92009

(760) (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, a 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 July 23, 2021January 21, 2022 was 73,325,854.74,393,040.


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

78

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

3336

Item 3. Quantitative and Qualitative Disclosures About Market Risk

5059

Item 4. Controls and Procedures

5160

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

5160

Item 1A. Risk Factors

5160

Item 6. Exhibits

5261

Signatures

5362


2


PART I — FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

VIASAT, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

 

As of

June 30, 2021

 

 

As of

March 31, 2021

 

 

As of
 December 31, 2021

 

 

As of
 March 31, 2021

 

 

(In thousands)

 

 

(In thousands)

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

275,688

 

 

$

295,949

 

 

$

166,032

 

 

$

295,949

 

Accounts receivable, net

 

 

364,494

 

 

 

238,652

 

 

 

363,013

 

 

 

238,652

 

Inventories

 

 

349,687

 

 

 

336,672

 

 

 

353,993

 

 

 

336,672

 

Prepaid expenses and other current assets

 

 

143,159

 

 

 

119,960

 

 

 

144,833

 

 

 

119,960

 

Total current assets

 

 

1,133,028

 

 

 

991,233

 

 

 

1,027,871

 

 

 

991,233

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property, equipment and satellites, net

 

 

3,389,443

 

 

 

3,050,483

 

 

 

3,603,181

 

 

 

3,050,483

 

Operating lease right-of-use assets

 

 

344,656

 

 

 

340,456

 

 

 

344,499

 

 

 

340,456

 

Other acquired intangible assets, net

 

 

261,941

 

 

 

9,568

 

 

 

237,850

 

 

 

9,568

 

Goodwill

 

 

181,737

 

 

 

122,300

 

 

 

190,907

 

 

 

122,300

 

Other assets

 

 

683,728

 

 

 

835,427

 

 

 

682,486

 

 

 

835,427

 

Total assets

 

$

5,994,533

 

 

$

5,349,467

 

 

$

6,086,794

 

 

$

5,349,467

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

204,198

 

 

$

145,134

 

 

$

251,335

 

 

$

145,134

 

Accrued and other liabilities

 

 

510,029

 

 

 

532,831

 

 

 

505,702

 

 

 

532,831

 

Current portion of long-term debt

 

 

30,328

 

 

 

30,472

 

 

 

29,590

 

 

 

30,472

 

Total current liabilities

 

 

744,555

 

 

 

708,437

 

 

 

786,627

 

 

 

708,437

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior notes

 

 

1,684,004

 

 

 

1,683,264

 

 

 

1,685,484

 

 

 

1,683,264

 

Other long-term debt

 

 

427,843

 

 

 

119,420

 

 

 

463,908

 

 

 

119,420

 

Non-current operating lease liabilities

 

 

316,094

 

 

 

313,762

 

 

 

317,941

 

 

 

313,762

 

Other liabilities

 

 

165,027

 

 

 

137,350

 

 

 

157,104

 

 

 

137,350

 

Total liabilities

 

 

3,337,523

 

 

 

2,962,233

 

 

 

3,411,064

 

 

 

2,962,233

 

Commitments and contingencies (Note 8)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Viasat, Inc. stockholders’ equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock

 

 

7

 

 

 

7

 

 

 

7

 

 

 

7

 

Paid-in capital

 

 

2,360,023

 

 

 

2,092,595

 

 

 

2,397,903

 

 

 

2,092,595

 

Retained earnings

 

 

266,032

 

 

 

249,064

 

 

 

262,710

 

 

 

249,064

 

Accumulated other comprehensive (loss) income

 

 

(5,939

)

 

 

9,803

 

 

 

(26,170

)

 

 

9,803

 

Total Viasat, Inc. stockholders’ equity

 

 

2,620,123

 

 

 

2,351,469

 

 

 

2,634,450

 

 

 

2,351,469

 

Noncontrolling interest in subsidiary

 

 

36,887

 

 

 

35,765

 

 

 

41,280

 

 

 

35,765

 

Total equity

 

 

2,657,010

 

 

 

2,387,234

 

 

 

2,675,730

 

 

 

2,387,234

 

Total liabilities and equity

 

$

5,994,533

 

 

$

5,349,467

 

 

$

6,086,794

 

 

$

5,349,467

 

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

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

June 30, 2021

 

 

June 30, 2020

 

 

December 31, 2021

 

 

December 31, 2020

 

 

December 31, 2021

 

 

December 31, 2020

 

 

(In thousands, except per share data)

 

 

(In thousands, except per share data)

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product revenues

 

$

293,264

 

 

$

250,634

 

 

$

316,143

 

$

266,514

 

$

918,073

 

$

773,128

 

Service revenues

 

 

371,596

 

 

 

279,854

 

 

 

403,574

 

 

 

309,045

 

 

 

1,167,858

 

 

 

887,197

 

Total revenues

 

 

664,860

 

 

 

530,488

 

 

719,717

 

575,559

 

2,085,931

 

1,660,325

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of product revenues

 

 

219,347

 

 

 

187,892

 

 

237,481

 

196,895

 

691,549

 

576,677

 

Cost of service revenues

 

 

234,629

 

 

 

197,677

 

 

262,640

 

194,394

 

750,991

 

587,494

 

Selling, general and administrative

 

 

154,200

 

 

 

121,039

 

 

170,222

 

132,394

 

481,106

 

378,884

 

Independent research and development

 

 

34,463

 

 

 

27,636

 

 

37,316

 

28,803

 

112,309

 

83,970

 

Amortization of acquired intangible assets

 

 

5,929

 

 

 

1,558

 

 

 

7,531

 

 

 

1,313

 

 

 

20,859

 

 

 

4,171

 

Income (loss) from operations

 

 

16,292

 

 

 

(5,314

)

Income from operations

 

4,527

 

21,760

 

29,117

 

29,129

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

63

 

 

 

232

 

 

386

 

114

 

520

 

474

 

Interest expense

 

 

(6,292

)

 

 

(9,524

)

 

(5,411

)

 

(7,880

)

 

(17,796

)

 

(27,194

)

Other income, net

 

 

4,118

 

 

 

 

 

 

 

 

 

 

 

 

4,118

 

 

 

 

Income (loss) before income taxes

 

 

14,181

 

 

��

(14,606

)

Benefit from income taxes

 

 

4,087

 

 

 

5,748

 

Equity in (loss) income of unconsolidated affiliate, net

 

 

(256

)

 

 

331

 

Net income (loss)

 

 

18,012

 

 

 

(8,527

)

(Loss) income before income taxes

 

(498

)

 

13,994

 

15,959

 

2,409

 

(Provision for) benefit from income taxes

 

(3,492

)

 

(7,008

)

 

3,469

 

(573

)

Equity in income (loss) of unconsolidated affiliate, net

 

 

 

 

 

774

 

 

 

(256

)

 

 

788

 

Net (loss) income

 

(3,990

)

 

7,760

 

19,172

 

2,624

 

Less: net income attributable to

noncontrolling interest, net of tax

 

 

1,044

 

 

 

3,862

 

 

 

2,623

 

 

 

1,000

 

 

 

5,526

 

 

 

6,290

 

Net income (loss) attributable to Viasat, Inc.

 

$

16,968

 

 

$

(12,389

)

Basic net income (loss) per share attributable

to Viasat, Inc. common stockholders

 

$

0.24

 

 

$

(0.20

)

Diluted net income (loss) per share attributable

to Viasat, Inc. common stockholders

 

$

0.23

 

 

$

(0.20

)

Shares used in computing basic net income

(loss) per share

 

 

71,543

 

 

 

62,511

 

Shares used in computing diluted net income

(loss) per share

 

 

72,818

 

 

 

62,511

 

Net (loss) income attributable to Viasat, Inc.

 

$

(6,613

)

 

$

6,760

 

 

$

13,646

 

 

$

(3,666

)

Basic net (loss) income per share attributable
to Viasat, Inc. common stockholders

 

$

(0.09

)

 

$

0.10

 

$

0.19

 

$

(0.06

)

Diluted net (loss) income per share attributable
to Viasat, Inc. common stockholders

 

$

(0.09

)

 

$

0.10

 

$

0.18

 

$

(0.06

)

Shares used in computing basic net
(loss) income per share

 

73,917

 

67,995

 

73,004

 

65,704

 

Shares used in computing diluted net
(loss) income per share

 

73,917

 

68,668

 

74,348

 

65,704

 

Comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

18,012

 

 

$

(8,527

)

Net (loss) income

 

$

(3,990

)

 

$

7,760

 

$

19,172

 

$

2,624

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments, net

of tax

 

 

(15,742

)

 

 

(803

)

 

 

(9,297

)

 

 

9,047

 

 

 

(35,973

)

 

 

12,662

 

Other comprehensive loss, net of tax

 

 

(15,742

)

 

 

(803

)

Comprehensive income (loss)

 

 

2,270

 

 

 

(9,330

)

Other comprehensive (loss) income, net of tax

 

 

(9,297

)

 

 

9,047

 

 

 

(35,973

)

 

 

12,662

 

Comprehensive (loss) income

 

(13,287

)

 

16,807

 

(16,801

)

 

15,286

 

Less: comprehensive income attributable

to noncontrolling interest, net of tax

 

 

1,044

 

 

 

3,862

 

 

 

2,623

 

 

 

1,000

 

 

 

5,526

 

 

 

6,290

 

Comprehensive income (loss) attributable to

Viasat, Inc.

 

$

1,226

 

 

$

(13,192

)

Comprehensive (loss) income attributable to
Viasat, Inc.

 

$

(15,910

)

 

$

15,807

 

 

$

(22,327

)

 

$

8,996

 

 

See accompanying notes to the condensed consolidated financial statements.

4


VIASAT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

Three Months Ended

 

 

Nine Months Ended

 

 

June 30, 2021

 

 

June 30, 2020

 

 

December 31, 2021

 

 

December 31, 2020

 

 

(In thousands)

 

 

(In thousands)

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

18,012

 

 

$

(8,527

)

Adjustments to reconcile net income (loss) to net cash provided by

operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

19,172

 

 

$

2,624

 

Adjustments to reconcile net income to net cash provided by
operating activities:

 

 

 

 

 

 

Depreciation

 

 

94,149

 

 

 

77,760

 

 

 

304,145

 

 

 

241,935

 

Amortization of intangible assets

 

 

20,603

 

 

 

14,842

 

 

 

65,343

 

 

 

50,181

 

Stock-based compensation expense

 

 

22,218

 

 

 

20,942

 

 

 

64,676

 

 

 

64,967

 

Loss on disposition of fixed assets

 

 

8,713

 

 

 

6,689

 

 

 

32,383

 

 

 

29,841

 

Other non-cash adjustments

 

 

(5,395

)

 

 

(4,428

)

 

 

(932

)

 

 

3,611

 

Increase (decrease) in cash resulting from changes in operating

assets and liabilities, net of effect of acquisitions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(47,885

)

 

 

55,440

 

 

 

(58,166

)

 

 

123,374

 

Inventories

 

 

(10,483

)

 

 

(18,118

)

 

 

(14,717

)

 

 

(39,988

)

Other assets

 

 

4,398

 

 

 

17,946

 

 

 

25,141

 

 

 

24,017

 

Accounts payable

 

 

26,625

 

 

 

(10,037

)

 

 

49,718

 

 

 

(39,004

)

Accrued liabilities

 

 

(55,027

)

 

 

(4,903

)

 

 

(59,135

)

 

 

102,603

 

Other liabilities

 

 

(10,799

)

 

 

9,301

 

 

 

(41,250

)

 

 

(6,787

)

Net cash provided by operating activities

 

 

65,129

 

 

 

156,907

 

 

 

386,378

 

 

 

557,374

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase of property, equipment and satellites

 

 

(246,164

)

 

 

(208,722

)

 

 

(671,207

)

 

 

(655,672

)

Cash paid for patents, licenses and other assets

 

 

(14,743

)

 

 

(20,540

)

 

 

(41,041

)

 

 

(47,164

)

Payments related to acquisition of businesses, net of cash acquired

 

 

(138,668

)

 

 

 

 

 

(138,668

)

 

 

 

Net cash used in investing activities

 

 

(399,575

)

 

 

(229,262

)

 

 

(850,916

)

 

 

(702,836

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from debt borrowings

 

 

320,000

 

 

 

400,000

 

 

 

440,000

 

 

 

400,000

 

Payments of debt borrowings

 

 

(12,346

)

 

 

(402,697

)

 

 

(97,784

)

 

 

(414,604

)

Payment of debt issuance costs

 

 

 

 

 

(3,790

)

 

 

 

 

 

(5,060

)

Proceeds from issuance of common stock under equity plans

 

 

8,717

 

 

 

9,206

 

 

 

20,549

 

 

 

19,101

 

Purchase of common stock in treasury (immediately retired) related

to tax withholdings for stock-based compensation

 

 

(458

)

 

 

(401

)

 

 

(22,165

)

 

 

(13,013

)

Proceeds from common stock issued in private placement, net
of issuance costs

 

 

 

 

 

174,749

 

Other financing activities

 

 

(691

)

 

 

(2,178

)

 

 

(2,340

)

 

 

(4,280

)

Net cash provided by financing activities

 

 

315,222

 

 

 

140

 

 

 

338,260

 

 

 

156,893

 

Effect of exchange rate changes on cash

 

 

(1,037

)

 

 

324

 

 

 

(3,639

)

 

 

1,604

 

Net decrease in cash and cash equivalents

 

 

(20,261

)

 

 

(71,891

)

Net (decrease) increase in cash and cash equivalents

 

 

(129,917

)

 

 

13,035

 

Cash and cash equivalents at beginning of period

 

 

295,949

 

 

 

304,309

 

 

 

295,949

 

 

 

304,309

 

Cash and cash equivalents at end of period

 

$

275,688

 

 

$

232,418

 

 

$

166,032

 

 

$

317,344

 

Non-cash investing and financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures not paid for

 

$

73,705

 

 

$

22,224

 

Right-of-use assets obtained in exchange for operating lease liabilities

 

$

8,918

 

 

$

7,870

 

 

$

36,422

 

 

$

55,717

 

Issuance of common stock in connection with acquisition

 

$

207,169

 

 

$

 

 

$

207,169

 

 

$

 

 

See accompanying notes to the condensed consolidated financial statements.

5



VIASAT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(UNAUDITED)

 

Viasat, Inc. Stockholders

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Viasat, Inc. Stockholders

 

 

 

 

 

 

 

 

Number of

Shares

Issued

 

 

Amount

 

 

Paid-in

Capital

 

 

Retained

Earnings

 

 

Accumulated

Other

Comprehensive

Income (Loss)

 

 

Noncontrolling

Interest in

Subsidiary

 

 

Total

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In thousands, except share data)

 

 

Number of
Shares
Issued

 

 

Amount

 

 

Paid-in
Capital

 

 

Retained
Earnings

 

 

Accumulated
Other
Comprehensive
Income (Loss)

 

 

Noncontrolling
Interest in
Subsidiary

 

 

Total

 

For the Three Months Ended June 30, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 31, 2021

 

 

68,529,133

 

 

$

7

 

 

$

2,092,595

 

 

$

249,064

 

 

$

9,803

 

 

$

35,765

 

 

$

2,387,234

 

 

(In thousands, except share data)

 

For the Three Months Ended December 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at September 30, 2021

 

 

73,398,078

 

 

$

7

 

 

$

2,382,356

 

 

$

269,323

 

 

$

(16,873

)

 

$

38,657

 

 

$

2,673,470

 

Exercise of stock options

 

 

363

 

 

 

 

 

 

11

 

 

 

 

 

 

 

 

 

 

 

 

11

 

 

 

24,850

 

 

 

 

 

 

1,456

 

 

 

 

 

 

 

 

 

 

 

 

1,456

 

Issuance of stock under Employee Stock Purchase

Plan

 

 

313,700

 

 

 

 

 

 

8,706

 

 

 

 

 

 

 

 

 

 

 

 

8,706

 

 

 

272,503

 

 

 

 

 

 

10,317

 

 

 

 

 

 

 

 

 

 

 

 

10,317

 

Stock-based compensation

 

 

 

 

 

 

 

 

27,512

 

 

 

 

 

 

 

 

 

 

 

 

27,512

 

 

 

 

 

 

 

 

 

24,197

 

 

 

 

 

 

 

 

 

 

 

 

24,197

 

Shares issued in settlement of certain accrued

employee compensation liabilities

 

 

457,130

 

 

 

 

 

 

24,488

 

 

 

 

 

 

 

 

 

 

 

 

24,488

 

RSU awards vesting, net of shares withheld for taxes

which have been retired

 

 

20,339

 

 

 

 

 

 

(458

)

 

 

 

 

 

 

 

 

 

 

 

(458

)

Shares issued in connection with acquisition of

business

 

 

4,000,189

 

 

 

 

 

 

207,169

 

 

 

 

 

 

 

 

 

 

 

 

207,169

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

78

 

 

 

78

 

Net income

 

 

 

 

 

 

 

 

 

 

 

16,968

 

 

 

 

 

 

1,044

 

 

 

18,012

 

Other comprehensive loss, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(15,742

)

 

 

 

 

 

(15,742

)

Balance at June 30, 2021

 

 

73,320,854

 

 

$

7

 

 

$

2,360,023

 

 

$

266,032

 

 

$

(5,939

)

 

$

36,887

 

 

$

2,657,010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended June 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 31, 2020

 

 

62,147,140

 

 

$

6

 

 

$

1,788,456

 

 

$

245,373

 

 

$

(6,048

)

 

$

22,355

 

 

$

2,050,142

 

Issuance of stock under Employee Stock Purchase

Plan

 

 

282,269

 

 

 

 

 

 

9,206

 

 

 

 

 

 

 

 

 

 

 

 

9,206

 

Stock-based compensation

 

 

 

 

 

 

 

24,160

 

 

 

 

 

 

 

 

 

 

 

 

24,160

 

Shares issued in settlement of certain accrued

employee compensation liabilities

 

 

580,846

 

 

 

 

 

 

25,406

 

 

 

 

 

 

 

 

 

 

 

 

25,406

 

RSU awards vesting, net of shares withheld for taxes

which have been retired

 

 

15,746

 

 

 

 

 

 

(401

)

 

 

 

 

 

 

 

 

 

 

 

(401

)

 

 

697,472

 

 

 

 

 

 

(20,423

)

 

 

 

 

 

 

 

 

 

 

 

(20,423

)

Net (loss) income

 

 

 

 

 

 

 

 

 

(12,389

)

 

 

 

 

 

3,862

 

 

 

(8,527

)

 

 

 

 

 

 

 

 

 

 

 

(6,613

)

 

 

 

 

 

2,623

 

 

 

(3,990

)

Other comprehensive loss, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

(803

)

 

 

 

 

 

(803

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,297

)

 

 

 

 

 

(9,297

)

Balance at June 30, 2020

 

 

63,026,001

 

 

$

6

 

 

$

1,846,827

 

 

$

232,984

 

 

$

(6,851

)

 

$

26,217

 

 

$

2,099,183

 

Balance at December 31, 2021

 

 

74,392,903

 

 

$

7

 

 

$

2,397,903

 

 

$

262,710

 

 

$

(26,170

)

 

$

41,280

 

 

$

2,675,730

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended December 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at September 30, 2020

 

 

67,532,869

 

 

$

7

 

 

$

2,047,525

 

 

$

234,947

 

 

$

(2,433

)

 

$

27,645

 

 

$

2,307,691

 

Issuance of stock under Employee Stock Purchase
Plan

 

 

356,523

 

 

 

 

 

 

9,895

 

 

 

 

 

 

 

 

 

 

 

 

9,895

 

Stock-based compensation

 

 

 

 

 

 

 

 

25,199

 

 

 

 

 

 

 

 

 

 

 

 

25,199

 

RSU awards vesting, net of shares withheld for taxes
which have been retired

 

 

614,936

 

 

 

 

 

 

(12,266

)

 

 

 

 

 

 

 

 

 

 

 

(12,266

)

Net income

 

 

 

 

 

 

 

 

 

 

 

6,760

 

 

 

 

 

 

1,000

 

 

 

7,760

 

Other comprehensive income, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9,047

 

 

 

 

 

 

9,047

 

Balance at December 31, 2020

 

 

68,504,328

 

 

$

7

 

 

$

2,070,353

 

 

$

241,707

 

 

$

6,614

 

 

$

28,645

 

 

$

2,347,326

 

See accompanying notes to the condensed consolidated financial statements.

6



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
Subsidiary

 

 

Total

 

 

 

(In thousands, except share data)

 

For the Nine Months Ended December 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 31, 2021

 

 

68,529,133

 

 

$

7

 

 

$

2,092,595

 

 

$

249,064

 

 

$

9,803

 

 

$

35,765

 

 

$

2,387,234

 

Exercise of stock options

 

 

27,107

 

 

 

 

 

 

1,526

 

 

 

 

 

 

 

 

 

 

 

 

1,526

 

Issuance of stock under Employee Stock Purchase
   Plan

 

 

586,203

 

 

 

 

 

 

19,023

 

 

 

 

 

 

 

 

 

 

 

 

19,023

 

Stock-based compensation

 

 

 

 

 

 

 

 

75,267

 

 

 

 

 

 

 

 

 

 

 

 

75,267

 

Shares issued in settlement of certain accrued
   employee compensation liabilities

 

 

457,130

 

 

 

 

 

 

24,488

 

 

 

 

 

 

 

 

 

 

 

 

24,488

 

RSU awards vesting, net of shares withheld for taxes
   which have been retired

 

 

793,141

 

 

 

 

 

 

(22,165

)

 

 

 

 

 

 

 

 

 

 

 

(22,165

)

Shares issued in connection with acquisition of business

 

 

4,000,189

 

 

 

 

 

 

207,169

 

 

 

 

 

 

 

 

 

 

 

 

207,169

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(11

)

 

 

(11

)

Net income

 

 

 

 

 

 

 

 

 

 

 

13,646

 

 

 

 

 

 

5,526

 

 

 

19,172

 

Other comprehensive loss, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(35,973

)

 

 

 

 

 

(35,973

)

Balance at December 31, 2021

 

 

74,392,903

 

 

$

7

 

 

$

2,397,903

 

 

$

262,710

 

 

$

(26,170

)

 

$

41,280

 

 

$

2,675,730

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Nine Months Ended December 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 31, 2020

 

 

62,147,140

 

 

$

6

 

 

$

1,788,456

 

 

$

245,373

 

 

$

(6,048

)

 

$

22,355

 

 

$

2,050,142

 

Issuance of stock under Employee Stock Purchase
   Plan

 

 

638,792

 

 

 

 

 

19,101

 

 

 

 

 

 

 

 

 

 

19,101

 

Common stock issued in private placement, net of
   issuance costs

 

 

4,474,559

 

 

 

1

 

 

 

174,748

 

 

 

 

 

 

 

 

 

 

174,749

 

Stock-based compensation

 

 

 

 

 

 

 

75,655

 

 

 

 

 

 

 

 

 

 

75,655

 

Shares issued in settlement of certain accrued
   employee compensation liabilities

 

 

580,846

 

 

 

 

 

25,406

 

 

 

 

 

 

 

 

 

 

25,406

 

RSU awards vesting, net of shares withheld for taxes
   which have been retired

 

 

662,991

 

 

 

 

 

(13,013

)

 

 

 

 

 

 

 

 

 

(13,013

)

Net (loss) income

 

 

 

 

 

 

 

 

 

 

(3,666

)

 

 

 

 

 

6,290

 

 

 

2,624

 

Other comprehensive income, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

12,662

 

 

 

 

 

 

12,662

 

Balance at December 31, 2020

 

 

68,504,328

 

 

$

7

 

 

$

2,070,353

 

 

$

241,707

 

 

$

6,614

 

 

$

28,645

 

 

$

2,347,326

 

See accompanying notes to the condensed consolidated financial statements.

7


VIASAT, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 1 — Basis of Presentation

The accompanying condensed consolidated balance sheet at June 30,December 31, 2021, the condensed consolidated statements of operations and comprehensive income (loss) for the three and nine months ended June 30,December 31, 2021 and 2020, the condensed consolidated statements of cash flows for the threenine months ended June 30,December 31, 2021 and 2020 and the condensed consolidated statements of equity for the three and nine months ended June 30,December 31, 2021 and 2020 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, 2021 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, 2021 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 first quarter of fiscal year 2022, the Company completed the acquisitions of the remaining 51% interest in Euro Broadband Infrastructure Sàrl (Euro Infrastructure Co.)(EBI) and RigNet, Inc. (RigNet) (see Note 12 – Acquisitions for more information). The acquisitions were accounted for as purchases and accordingly, the condensed consolidated financial statements include the operating results of Euro Infrastructure Co.EBI and RigNet from the dates of acquisition.

All significant intercompany amounts have been eliminated. Investments in entities in which the Company can exercise significant influence, but does not own a majority equity interest or otherwise control, are accounted for using the equity method and are included as investment in unconsolidated affiliate in other assets (long-term) on the condensed consolidated balance sheets.

On November 8, 2021, the Company entered into a Share Purchase Agreement to combine with Connect Topco Limited, a private company limited by shares and incorporated in Guernsey (Inmarsat), with the shareholders of Inmarsat and certain management and employees who hold options and shares of a subsidiary of Inmarsat whose options and shares will be exchanged for shares of Inmarsat prior to closing (collectively, the Sellers). Pursuant to the Share Purchase Agreement, the Company will purchase all of the issued and outstanding shares of Inmarsat from the Sellers upon the terms and subject to the conditions set forth therein (the Inmarsat Transaction) (see Note 12 – Acquisitions for more information).

During the second quarter of fiscal year 2021, the Company issued and sold an aggregate of 4,474,559 shares of the Company’s common stock at a purchase price of $39.11 per share to certain accredited investors in a private placement transaction exempt from registration under the Securities Act of 1933, as amended, resulting in net proceeds of approximately $174.7 million after deducting offering expenses.

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, allowance for doubtful accounts, valuation of goodwill and other intangible assets, patents, orbital slots and other licenses, software development, property, equipment and satellites, long-lived assets, contingencies and income taxes including the valuation allowance on deferred tax assets.

Revenue recognition

The Company applies the five-step model under Accounting Standards Codification (ASC) 606 to its contracts with its customers. 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

8


VIASAT, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

broadband equipment), the purchase of products, and the development and delivery of 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 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 customers as part of the delivery of connectivity services represents a lease in accordance with ASC 842. As

7


VIASAT, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

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

9


VIASAT, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

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. Estimating the total costs at completion of a performance obligation requires management to make estimates related to items such as subcontractor performance, material costs and availability, labor costs and productivity and the costs of overhead. 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.

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 years 2019, 2020 or 2021. As of June 30,December 31, 2021, the DCAA had completed its incurred cost audit for

8


VIASAT, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

fiscal years 2004, 2016 and 20162019 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 the determination of low risk. Although the Company has recorded contract revenues subsequent to fiscal year 20182019 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,December 31, 2021 and March 31, 2021, the Company had $10.912.1 million and $10.3 million, respectively, in contract-related reserves for its estimate of potential refunds to customers for potential cost adjustments on several multi-year U.S. Government cost reimbursable contracts (see Note 8 — Commitments and Contingencies for more information).

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 the 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

10


VIASAT, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

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 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,December 31, 2021, the aggregate amount of the transaction price allocated to remaining performance obligations was $2.2$2.1 billion, of which the Company expects to recognize a little over half over the next 12 months, with the balance recognized thereafter.thereafter.

9


VIASAT, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Disaggregation of revenue

The Company operates and manages its business in 3 reportable segments: satellite services, commercial networks and government systems. Revenue is disaggregated by products and services, customer type, contract type, and geographic area, respectively, as the Company believes this approach best depicts how the nature, amount, timing and uncertainty of its revenue and cash flows are affected by economic factors.

The following sets forth disaggregated reported revenue by segment and product and services for the three and nine months ended June 30,December 31, 2021 and 2020:

 

Three Months Ended June 30, 2021

 

 

Three Months Ended December 31, 2021

 

 

Satellite

Services

 

 

Commercial

Networks

 

 

Government

Systems

 

 

Total

Revenues

 

 

Satellite
Services

 

 

Commercial
Networks

 

 

Government
Systems

 

 

Total
Revenues

 

 

(In thousands)

 

 

(In thousands)

 

Product revenues

 

$

 

 

$

101,531

 

 

$

191,733

 

 

$

293,264

 

 

$

 

 

$

123,059

 

 

$

193,084

 

 

$

316,143

 

Service revenues

 

 

274,117

 

 

 

17,065

 

 

 

80,414

 

 

 

371,596

 

 

 

309,711

 

 

 

16,618

 

 

 

77,245

 

 

 

403,574

 

Total revenues

 

$

274,117

 

 

$

118,596

 

 

$

272,147

 

 

$

664,860

 

 

$

309,711

 

 

$

139,677

 

 

$

270,329

 

 

$

719,717

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30, 2020

 

 

Nine Months Ended December 31, 2021

 

 

Satellite

Services

 

 

Commercial

Networks

 

 

Government

Systems

 

 

Total

Revenues

 

 

Satellite
Services

 

 

Commercial
Networks

 

 

Government
Systems

 

 

Total
Revenues

 

 

(In thousands)

 

 

(In thousands)

 

Product revenues

 

$

 

 

$

55,119

 

 

$

195,515

 

 

$

250,634

 

 

$

 

 

$

343,525

 

 

$

574,548

 

 

$

918,073

 

Service revenues

 

 

201,984

 

 

 

12,043

 

 

 

65,827

 

 

 

279,854

 

 

 

883,938

 

 

 

49,554

 

 

 

234,366

 

 

 

1,167,858

 

Total revenues

 

$

201,984

 

 

$

67,162

 

 

$

261,342

 

 

$

530,488

 

 

$

883,938

 

 

$

393,079

 

 

$

808,914

 

 

$

2,085,931

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended December 31, 2020

 

 

Satellite
Services

 

 

Commercial
Networks

 

 

Government
Systems

 

 

Total
Revenues

 

 

(In thousands)

 

Product revenues

 

$

 

 

$

75,690

 

 

$

190,824

 

 

$

266,514

 

Service revenues

 

 

220,789

 

 

 

14,409

 

 

 

73,847

 

 

 

309,045

 

Total revenues

 

$

220,789

 

 

$

90,099

 

 

$

264,671

 

 

$

575,559

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended December 31, 2020

 

 

Satellite
Services

 

 

Commercial
Networks

 

 

Government
Systems

 

 

Total
Revenues

 

 

(In thousands)

 

Product revenues

 

$

 

 

$

197,560

 

 

$

575,568

 

 

$

773,128

 

Service revenues

 

 

638,660

 

 

 

38,561

 

 

 

209,976

 

 

 

887,197

 

Total revenues

 

$

638,660

 

 

$

236,121

 

 

$

785,544

 

 

$

1,660,325

 

Revenues from the U.S. Government as an individual customer comprised approximately 28%24% and 31%26% of total revenues for the three and nine months ended June 30,December 31, 2021, respectively, and approximately 28% and 30% of total revenues for the three and nine months ended December 31, 2020, respectively, mainly reported within the government systems segment. Revenues from the Company’s other customers, mainly reported within the commercial networks and satellite services segments, comprised approximately 72%76% and 69%74% of total revenues for the three and nine months

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VIASAT, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

ended December 31, 2021, respectively, and approximately 72% and 70% of total revenues for the three and nine months ended June 30, 2021 andDecember 31, 2020, respectively.

The Company’s satellite services segment revenues are primarily derived from the Company’s fixed broadband services, in-flight services and in-flight services.advanced software and communication infrastructure services (acquired through the RigNet acquisition).

Revenues in the Company’s commercial networks and government systems segments are primarily derived from three types of contracts: fixed-price, cost-reimbursement and time-and-materials contracts. Fixed-price contracts (which require the Company to provide products and services under a contract at a specified price) comprised approximately 89%91% and 85%90% of the Company’s total revenues for these segments for the three and nine months ended June 30,December 31, 2021, respectively, and approximately 91% and 88% of the Company’s total revenues for these segments for the three and nine months ended December 31, 2020, respectively. The remainder of the Company’s revenues in these segments for such periods was derived primarily from cost-reimbursement contracts (under which the Company is reimbursed for all actual costs incurred in performing the contract to the extent such costs are within the contract ceiling and allowable under the terms of the contract, plus a fee or profit) and from time-and-materials contracts (under which the Company is reimbursed for the number of labor hours expended at an established hourly rate negotiated in the contract, plus the cost of materials utilized in providing such products or services).

Historically, a significant portion of the Company’s revenues in its commercial networks and government systems segments has been derived from customer contracts that include the development of products. The development efforts are conducted in direct response to the customer’s specific requirements and, accordingly, expenditures related to such efforts are included in cost of sales when incurred and the related funding (which includes a profit component) is included in revenues. Revenues for the Company’s funded development from its customer contracts were approximately 23%24% and 27%23% of its total revenues for the three and nine months ended June 30,December 31, 2021, respectively, and approximately 20% and 23% of its total revenues for the three and nine months ended December 31, 2020, respectively.

 

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VIASAT, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Contract balances

Contract balances consist of contract assets and contract liabilities. A contract asset, or with respect to the Company, an unbilled accounts receivable, is recorded when revenue is recognized in advance of the Company’s right to bill and receive consideration, typically resulting from sales under long-term contracts. Unbilled accounts receivable are generally expected to be billed and collected within one year. The unbilled accounts receivable will decrease as provided services or delivered products are billed. The Company receives payments from customers based on a billing schedule established in the Company’s contracts.

When consideration is received in advance of the delivery of goods or services, a contract liability, or with respect to the Company, collections in excess of revenues or deferred revenues, is recorded. Reductions in the collections in excess of revenues or deferred revenues will be recorded as the Company satisfies the performance obligations.

The following table presents contract assets and liabilities as of June 30,December 31, 2021 and March 31, 2021:

 

As of

June 30, 2021

 

 

As of

March 31, 2021

 

 

As of
 December 31, 2021

 

 

As of
 March 31, 2021

 

 

(In thousands)

 

 

(In thousands)

 

Unbilled accounts receivable

 

$

105,366

 

 

$

70,785

 

 

$

102,110

 

$

70,785

 

Collections in excess of revenues and deferred revenues

 

 

201,706

 

 

 

216,594

 

 

 

180,854

 

216,594

 

Deferred revenues, long-term portion

 

 

90,352

 

 

 

84,654

 

 

 

89,083

 

84,654

 

Unbilled accounts receivable increased $34.6$31.3 million during the threenine months ended June 30,December 31, 2021, primarily driven by revenue recognized in the Company’s commercial networks and satellite services segmentssegment in excess of billings. The acquisition of RigNet contributed to $20.6$17.5 million of the increase in unbilled accounts receivable.

Collections in excess of revenues and deferred revenues decreased $14.9$35.7 million during the threenine months ended June 30,December 31, 2021, primarily driven by revenue recognized in excess of advances on goods or services received in the Company’s commercial networks and government systems segments.segment.

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VIASAT, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

During the three and nine months ended June 30,December 31, 2021, the Company recognized revenue of $78.2$47.7 million and $169.7 million, respectively, that was previously included in the Company’s collections in excess of revenues and deferred revenues at March 31, 2021. During the three and nine months ended June 30,December 31, 2020, the Company recognized revenue of $57.6$7.6 million and $82.2 million, respectively, that was previously included in the Company’s collections in excess of revenues and deferred revenues at March 31, 2020.

Property, equipment and satellites

Satellites and other property and equipment, including internally developed software, are recorded at cost or, in the case of certain satellites and other property acquired, the fair value at the date of acquisition, net of accumulated depreciation. Capitalized satellite costs consist primarily of the costs of satellite construction and launch, including launch insurance and insurance during the period of in-orbit testing, the net present value of performance incentives expected to be payable to satellite manufacturers (dependent on the continued satisfactory performance of the satellites), costs directly associated with the monitoring and support of satellite construction, and interest costs incurred during the period of satellite construction. The Company also constructs earth stations, network operations systems and other assets to support its satellites, and those construction costs, including interest, are capitalized as incurred. At the time satellites are placed in service, the Company estimates the useful life of its satellites for depreciation purposes based upon an analysis of each satellite’s performance against the original manufacturer’s orbital design life, estimated fuel levels and related consumption rates, as well as historical satellite operating trends. The Company periodically reviews the remaining estimated useful life of its satellites to determine if revisions to estimated useful lives are necessary. Costs incurred for additions to property, equipment and satellites, together with major renewals and betterments, are capitalized and depreciated over the remaining life of the underlying asset. Costs incurred for maintenance, repairs and minor renewals and betterments are charged to expense as incurred. When assets are sold or otherwise disposed of, the cost and related accumulated depreciation or amortization are removed from the accounts and any resulting gain or loss is recognized in operations, which for the periods presented, primarily related to losses incurred for unreturned customer premise equipment (CPE). The Company computes depreciation using the straight-line method over the estimated useful lives of the assets ranging from two to 17 years.38 years. Leasehold improvements are capitalized and amortized using the straight-line method over the shorter of the lease term or the life of the improvement.

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VIASAT, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Costs related to internally developed software for internal uses are capitalized after the preliminary project stage is complete and are amortized over the estimated useful lives of the assets, which are approximately three to seven years.years. Capitalized costs for internal-use software are included in property,property, equipment and satellites, net in the Company’s condensed consolidated balance sheets.

Interest expense is capitalized on the carrying value of assets under construction, in accordance with the authoritative guidance for the capitalization of interest (ASC 835-20). With respect to the ViaSat-3 classconstruction of satellites, gateway and networking equipment and other assets under construction, the Company capitalized $23.6$25.8 million and $15.9$74.2 million of interest expense for the three and nine months ended June 30,December 31, 2021, respectively, and $21.8 million and $57.7 million for the three and nine months ended December 31, 2020, respectively.

The Company owns three satellites in service over North America (ViaSat-2, ViaSat-1 and WildBlue-1) and, after acquiring the remaining interest in Euro Infrastructure Co.EBI during the first quarter of fiscal year 2022, the Company also owns the KA-SAT satellite over Europe, Middle East, and Africa (EMEA). In addition, the Company has lifetime leases of Ka-band capacity on two satellites. The Company also has a global constellation of three third-generation ViaSat-3 class satellites under construction. In addition, the Company owns related earth stations and networking equipment for all of its satellites. The Company procures indoor and outdoor CPE units leased to subscribers under a retail leasing program as part of the Company’s satellite services segment, which are reflected in investing activities and property, equipment and satellites, net in the accompanying condensed consolidated financial statements. The Company depreciates the satellites, earth stations and networking equipment, CPE units and related installation costs over their estimated useful lives. The total cost and accumulated depreciation of CPE units included in property, equipment and satellites, net,, as of June 30,December 31, 2021 were $409.8$397.4 million and $198.9$203.8 million, respectively. The total cost and accumulated depreciation of CPE units included in property, equipment and satellites, net,, as of March 31, 2021 were $409.9$409.9 million and $193.7$193.7 million, respectively.

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VIASAT, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Occasionally, the Company may enter into finance lease arrangements for various machinery, equipment, computer-related equipment, software, furniture, fixtures, or satellites. The Company records amortization of assets leased under finance lease arrangements within depreciation expense (see Note 1 — Basis of Presentation – Leases for more information).The Company’s finance leases consist primarily of satellite lifetime Ka-band capacity leases and have remaining terms from less than one year to five years.years. The Company reports assets obtained under finance leases in property, equipment and satellites, net and the current and non-current portions of its finance lease liabilities in current portion of long-term debt and other long-term debt, respectively.

Leases

Leases

Lessee accounting

For contracts entered into on or after April 1, 2019, the Company assesses at contract inception whether the contract is, or contains, a lease. Generally, the Company determines that a lease exists when (1) the contract involves the use of a distinct identified asset, (2) the Company obtains the right to substantially all economic benefits from use of the asset, and (3) the Company has the right to direct the use of the asset. A lease is classified as a finance lease when one or more of the following criteria are met: (1) the lease transfers ownership of the asset by the end of the lease term, (2) the lease contains an option to purchase the asset that is reasonably certain to be exercised, (3) the lease term is for a major part of the remaining useful life of the asset, (4) the present value of the lease payments equals or exceeds substantially all of the fair value of the asset or (5) the asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term. A lease is classified as an operating lease if it does not meet any of these criteria.

At the lease commencement date, the Company recognizes a right-of-use asset and a lease liability for all leases, except short-term leases with an original term of 12 months or less. The right-of-use asset represents the right to use the leased asset for the lease term. The lease liability represents the present value of the lease payments under the lease. The right-of-use asset is initially measured at cost, which primarily comprises the initial amount of the lease liability, less any lease incentives received. All right-of-use assets are periodically reviewed for impairment in accordance with standards that apply to long-lived assets. The lease liability is initially measured at the present value of the lease payments, discounted using an estimate of the Company’s incremental borrowing rate for a collateralized loan with the same term as the underlying leases.

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VIASAT, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Lease payments included in the measurement of lease liabilities consist of (1) fixed lease payments for the noncancelable lease term, (2) fixed lease payments for optional renewal periods where it is reasonably certain the renewal option will be exercised, and (3) variable lease payments that depend on an underlying index or rate, based on the index or rate in effect at lease commencement. Certain of the Company’s real estate lease agreements require variable lease payments that do not depend on an underlying index or rate established at lease commencement. Such payments and changes in payments based on a rate or index are recognized in operating expenses when incurred.

Lease expense for operating leases consists of the fixed lease payments recognized on a straight-line basis over the lease term plus variable lease payments as incurred. Lease expense for finance leases consists of the depreciation of assets obtained under finance leases on a straight-line basis over the lease term and interest expense on the lease liability based on the discount rate at lease commencement. For both operating and finance leases, lease payments are allocated between a reduction of the lease liability and interest expense.

The Company’s operating leases consist primarily of leases for office space, data centers and satellite ground facilities and have remaining terms from less than one year to 1211 years, some of which include renewal options, and some of which include options to terminate the leases within one year. Certain earth station leases have renewal terms that have been deemed to be reasonably certain to be exercised and as such have been recognized as part of the Company’s right-of-use assets and lease liabilities. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. The Company recognized right-of-use assets and lease liabilities for such leases in connection with its adoption of ASC 842 as of April 1, 2019. The Company reports operating lease right-of-use assets in operating lease right-of-use assets and the current and non-current portions of its operating lease liabilities in accrued and other liabilities and non-current operating lease liabilities, respectively.

Lessor accounting

For broadband equipment leased to fixed broadband customers in conjunction with the delivery of connectivity services, the Company has made an accounting policy election not to separate the broadband equipment from the related

14


VIASAT, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

connectivity services. The connectivity services are the predominant component of these arrangements. The connectivity services are accounted for in accordance with ASC 606. The Company is also a lessor for certain insignificant communications equipment. These leases meet the criteria for operating lease classification. Lease income associated with these leases is not material.

Patents, orbital slots and other licenses

The Company capitalizes the costs of obtaining or acquiring patents, orbital slots and other licenses. Amortization of intangible assets that have finite lives is provided for by the straight-line method over the shorter of the legal or estimated economic life. Total capitalized costs of $3.5$3.5 million related to patents were included in other assets as of both June 30,December 31, 2021 and March 31, 2021. The Company capitalized costs of $60.3$64.1 million and $53.8$53.8 million related to acquiring and obtaining orbital slots and other licenses included in other assets as of June 30,December 31, 2021 and March 31, 2021, respectively. Accumulated amortization related to these assets was $4.5$5.0 million and $4.4$4.4 million as of June 30,December 31, 2021 and March 31, 2021, respectively. Amortization expense related to these assets was an insignificant amount for the three and nine months ended June 30,December 31, 2021 and 2020. If a patent, orbital slot or other license is rejected, abandoned or otherwise invalidated, the unamortized cost is expensed in that period. During the three and nine months ended June 30,December 31, 2021 and 2020, the Company did not write off any significant costs due to abandonment or impairment.

Debt issuance costs

Debt issuance costs are amortized and recognized as interest expense using the effective interest rate method, or, when the results are not materially different, on a straight-line basis over the expected term of the related debt. During the threenine months ended June 30,December 31, 2021 and 2020,00 debt issuance costs and $5.1$5.1 million of debt issuance costs were capitalized, respectively. Unamortized debt issuance costs related to extinguished debt are expensed at the time the debt is extinguished and recorded in loss on extinguishment of debt in the condensed consolidated statements of operations and comprehensive income (loss). Debt issuance costs related to the Company’s revolving credit facility (the Revolving Credit Facility) are recorded in prepaid expenses and other current assets and in other long-term assets in the condensed consolidated balance sheets in accordance with the authoritative guidance for imputation of interest (ASC 835-30). Debt issuance costs related to the Company’s 5.625% Senior Notes due 2025 (the 2025 Notes), the Company’s 5.625% Senior Secured Notes due 2027 (the 2027 Notes), the Company’s 6.500% Senior Notes due 2028 (the 2028 Notes and, together with the 2025 Notes and the 2027 Notes, the Notes) and the Ex-Im Credit Facility are recorded as a direct deduction from

13


VIASAT, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

the carrying amount of the related debt, consistent with debt discounts, in accordance with the authoritative guidance for imputation of interest (ASC 835-30).

Software development

Costs of developing software for sale are charged to independent research and development expense when incurred, until technological feasibility has been established. Software development costs incurred from the time technological feasibility is reached until the product is available for general release to customers are capitalized and reported at the lower of unamortized cost or net realizable value. Once the product is available for general release, the software development costs are amortized based on the ratio of current to future revenue for each product with an annual minimum equal to straight-line amortization over the remaining estimated economic life of the product, generally within five years.years. Capitalized costs, net, of $232.5$223.1 million and $237.1$237.1 million related to software developed for resale were included in other assets as of June 30,December 31, 2021 and March 31, 2021, respectively. The Company capitalized $9.9$8.7 million and $14.3$29.6 million of costs related to software developed for resale for the three and nine months ended June 30,December 31, 2021, respectively. The Company capitalized $13.0 million and $41.5 million of costs related to software developed for resale for the three and nine months ended December 31, 2020, respectively. Amortization expense for capitalized software development costs was $14.5$14.5 million and $13.1$43.6 million for the three and nine months ended June 30,December 31, 2021, respectively, and $17.1 million and $45.1 million for the three and nine months ended December 31, 2020, respectively.

15


VIASAT, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Self-insurance liabilities

The Company has self-insurance plans to retain a portion of the exposure for losses related to employee medical benefits and workers’ compensation. The self-insurance plans include policies which provide for both specific and aggregate stop-loss limits. The Company utilizes internal actuarial methods as well as other historical information for the purpose of estimating ultimate costs for a particular plan year. Based on these actuarial methods, along with currently available information and insurance industry statistics, the Company has recorded self-insurance liability for its plans of $6.9$6.9 million in accrued and other liabilities in the condensed consolidated balance sheets as of both June 30,December 31, 2021 and March 31, 2021. The Company’s estimate, which is subject to inherent variability, is based on average claims experience in the Company’s industry and its own experience in terms of frequency and severity of claims, including asserted and unasserted claims incurred but not reported, with no explicit provision for adverse fluctuation from year to year. This variability may lead to ultimate payments being either greater or less than the amounts presented above. Self-insurance liabilities have been classified as a current liability in accrued and other liabilities in accordance with the estimated timing of the projected payments.

Indemnification provisions

In the ordinary course of business, the Company includes indemnification provisions in certain of its contracts, generally relating to parties with which the Company has commercial relations. Pursuant to these agreements, the Company will indemnify, hold harmless and agree to reimburse the indemnified party for losses suffered or incurred by the indemnified party, including but not limited to losses relating to third-party intellectual property claims. To date, there have not been any material costs incurred in connection with such indemnification clauses. The Company’s insurance policies do not necessarily cover the cost of defending indemnification claims or providing indemnification, so if a claim was filed against the Company by any party that the Company has agreed to indemnify, the Company could incur substantial legal costs and damages. A claim would be accrued when a loss is considered probable and the amount can be reasonably estimated. At June 30,December 31, 2021 and March 31, 2021, 0 such amounts were accrued related to the aforementioned provisions.

Noncontrolling interests

A noncontrolling interest represents the equity interest in a subsidiary that is not attributable, either directly or indirectly, to the Company and is reported as equity of the Company, separately from the Company’s controlling interest. Revenues, expenses, gains, losses, net income (loss) and other comprehensive income (loss) are reported in the condensed consolidated financial statements at the consolidated amounts, which include the amounts attributable to both the controlling and noncontrolling interest.

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VIASAT, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Investments in unconsolidated affiliate — equity method

Investments in entities in which the Company can exercise significant influence, but does not own a majority equity interest or otherwise control, are accounted for using the equity method and are included as investment in unconsolidated affiliate in other assets (long-term) on the condensed consolidated balance sheets. The Company records its share of the results of such entities within equity in income (loss) of unconsolidated affiliate, net on the condensed consolidated statements of operations and comprehensive income (loss). The Company monitors such investments for other-than-temporary impairment by considering factors including the current economic and market conditions and the operating performance of the entities and records reductions in carrying values when necessary. The fair value of privately held investments is estimated using the best available information as of the valuation date, including current earnings trends, undiscounted cash flows, quoted stock prices of comparable public companies, and other company specific information, including recent financing rounds.

Common stock held in treasury

As of June 30,December 31, 2021 and March 31, 2021, the Company had 0 shares of common stock held in treasury.

During the three months ended June 30,December 31, 2021 and 2020, the Company issued 29,0601,091,363 and 24,294963,565 shares of common stock, respectively, based on the vesting terms of certain restricted stock unit agreements. During the nine months ended December 31, 2021 and 2020, the Company issued 1,220,370 and 1,028,535 shares of common stock, respectively, based on the vesting terms of certain restricted stock unit agreements. In order for employees to satisfy minimum statutory employee tax withholding requirements related to the issuance of common stock underlying these restricted stock unit agreements, during the three months ended June 30,December 31, 2021 and 2020, the Company

16


VIASAT, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

repurchased 8,721393,891 and 8,548348,629 shares of common stock, respectively, at cost and with a total value of an insignificant amount in both periods.$20.4 million and $12.3 million, respectively. During the nine months ended December 31, 2021 and 2020, the Company repurchased 427,229 and 365,544 shares of common stock, respectively, at cost and with a total value of $22.2 million and $13.0 million, respectively. Although shares withheld for employee withholding taxes are technically not issued, they are treated as common stock repurchases for accounting purposes (with such shares deemed to be repurchased and then immediately retired), as they reduce the number of shares that otherwise would have been issued upon vesting of the restricted stock units. These retired shares remain as authorized stock and are considered to be unissued. The retirement of treasury stock had no impact on the Company’s total consolidated stockholders’ equity.

Stock-based compensation

In accordance with the authoritative guidance for share-based payments (ASC 718), the Company measures stock-based compensation cost at the grant date, based on the estimated fair value of the award. Expense for restricted stock units and stock options is recognized on a straight-line basis over the employee’s requisite service period. Expense for total shareholder return (TSR) performance stock options that vest is recognized regardless of the actual TSR outcome achieved and is recognized on a graded-vesting basis. The Company accounts for forfeitures as they occur.The Company recognized $22.2$21.4 million and $20.9$64.7 million of stock-based compensation expense for the three and nine months ended June 30,December 31, 2021, respectively. The Company recognized $21.7 million and $65.0 million of stock-based compensation expense for the three and nine months ended December 31, 2020, respectively. The Company recognizes excess tax benefits or deficiencies on vesting or settlement of awards as discrete items within income tax benefit or provision within net income (loss) and the related cash flows are classified within operating activities.

Income taxes

Accruals for uncertain tax positions are provided for in accordance with the authoritative guidance for accounting for uncertainty in income taxes (ASC 740). The Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The authoritative guidance for accounting for uncertainty in income taxes also provides guidance on derecognition of income tax assets and liabilities, classification of deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, and income tax disclosures. The Company’s policy is to recognize interest expense and penalties related to income tax matters as a component of income tax expense.

Ordinarily, the Company calculates its provision for income taxes at the end of each interim reporting period on the basis of an estimated annual effective tax rate adjusted for tax items that are discrete to each period. However, when a reliable estimate cannot be made, the Company computes its provision for income taxes using the actual effective tax rate (discrete method) for the year-to-date period. The Company’s effective tax rate is highly influenced by the amount of its research and development (R&D) tax credits. A small change in estimated annual pretax income (loss) can produce a significant variance in the annual effective tax rate given the Company’s expected amount of R&D tax credits. This variability provides an unreliable estimate of the annual effective tax rate. As a result, and in accordance with the

15


VIASAT, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

authoritative guidance for accounting for income taxes in interim periods, the Company has computed its provision for income taxes for the three and nine months ended June 30,December 31, 2021 and 2020 by applying the actual effective tax rate to the pretax income (loss) for the three-month and nine-month periods.

A deferred income tax asset or liability is established for the expected future tax consequences resulting from differences in the financial reporting and tax bases of assets and liabilities and for the expected future tax benefit to be derived from tax credit and loss carryforwards. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Recent authoritative guidance

In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2019-12, Income Taxes (ASC 740): Simplifying the Accounting for Income Taxes, which is intended to simplify various areas related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in ASC 740 and also clarifies and amends existing guidance to improve consistent application. The Company adopted the new guidance in the first quarter of fiscal year 2022 on a prospective basis and as a result upon purchase of the remaining 51%51% interest in Euro Infrastructure Co.EBI from Eutelsat (see Note 12 — Acquisitions for more information), and assertion to permanently

17


VIASAT, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

reinvest future earnings, the deferred tax liability recorded for Euro Infrastructure Co.’sEBI’s outside basis difference of $8.1$8.1 million was reversed and recorded in the first quarter of fiscal year 2022 as an income tax benefit in the condensed consolidated statements of operations and comprehensive income (loss).

In January 2020, the FASB issued ASU 2020-01, Investments – Equity Securities (ASC 321), Investments – Equity Method and Joint Ventures (ASC 323) and Derivatives and Hedging (ASC 815). ASU 2020-01 clarifies the interaction of the accounting for equity securities under ASC 321 and investments accounted for under the equity method of accounting under ASC 323, and the accounting for certain forward contracts and purchased options accounted for under ASC 815. The Company adopted the new guidance in the first quarter of fiscal year 2022 on a prospective basis and the guidance did not have a material impact on the Company’s consolidated financial statements and disclosures.

In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (ASC 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40). ASU 2020-06 simplifies the accounting for convertible instruments by removing the beneficial conversion and cash conversion accounting models for convertible instruments and removes certain settlement conditions that are required for contracts to qualify for equity classification. This new standard also simplifies the diluted earnings per share calculations by requiring that an entity use the if-converted method for convertible instruments and requires that the effect of potential share settlement be included in diluted earnings per share calculations when an instrument may be settled in cash or shares. The new standard requires entities to provide expanded disclosures about the terms and features of convertible instruments, how the instruments have been reported in the entity’s financial statements, and information about events, conditions, and circumstances that can affect how to assess the amount or timing of an entity’s future cash flows related to those instruments. The new standard will become effective for the Company beginning in fiscal year 2023, with early adoption permitted. The Company is currently evaluating the impact of this standard on its consolidated financial statements and disclosures.

In October 2020, the FASB issued ASU 2020-08, Codification Improvements to Subtopic 310-20, Receivables – Nonrefundable Fees and Other Costs. ASU 2020-08 clarifies that a company should reevaluate whether a callable debt security is within the scope of ASC paragraph 310-20-35-33 for each reporting period. The Company adopted the new guidance in the first quarter of fiscal year 2022 on a prospective basis and the guidance did not have a material impact on the Company’s consolidated financial statements and disclosures.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (ASC 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. ASU 2021-08 requires contract assets and contract liabilities acquired in a business combination to be recognized in accordance with ASC 606 as if the acquirer had originated the contracts. The new standard will become effective for the Company beginning in fiscal year 2024, with early adoption permitted. The Company is currently evaluating the impact of this standard on its consolidated financial statements and disclosures.

16

In November 2021, the FASB issued ASU 2021-10, Government Assistance (ASC 832): Disclosures by Business Entities about Government Assistance. ASU 2021-10 requires annual disclosures when an entity accounts for a transaction with a government by applying a grant or contribution accounting model by analogy to other accounting guidance. The new standard will become effective for the Company beginning in fiscal year 2023, with early adoption permitted. The Company is currently evaluating the impact of this standard on its consolidated financial statements and disclosures.

18


VIASAT, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Note 2 — Composition of Certain Balance Sheet Captions

 

 

As of
 December 31, 2021

 

 

As of
 March 31, 2021

 

 

 

(In thousands)

 

Accounts receivable, net:

 

 

 

 

 

 

Billed

 

$

268,013

 

 

$

172,559

 

Unbilled

 

 

102,110

 

 

 

70,785

 

Allowance for doubtful accounts

 

 

(7,110

)

 

 

(4,692

)

 

 

$

363,013

 

 

$

238,652

 

Inventories:

 

 

 

 

 

 

Raw materials

 

$

103,845

 

 

$

98,338

 

Work in process

 

 

76,184

 

 

 

71,875

 

Finished goods

 

 

173,964

 

 

 

166,459

 

 

 

$

353,993

 

 

$

336,672

 

Prepaid expenses and other current assets:

 

 

 

 

 

 

Prepaid expenses

 

$

102,826

 

 

$

94,405

 

Other

 

 

42,007

 

 

 

25,555

 

 

 

$

144,833

 

 

$

119,960

 

Property, equipment and satellites, net:

 

 

 

 

 

 

Equipment and software (estimated useful life of 3-7 years)

 

$

1,671,024

 

 

$

1,505,697

 

CPE leased equipment (estimated useful life of 4-5 years)

 

 

397,416

 

 

 

409,942

 

Furniture and fixtures (estimated useful life of 7 years)

 

 

60,076

 

 

 

57,433

 

Leasehold improvements (estimated useful life of 2-17 years)

 

 

155,603

 

 

 

149,324

 

Buildings (estimated useful life of 12-38 years)

 

 

12,405

 

 

 

8,923

 

Land

 

 

3,978

 

 

 

2,291

 

Construction in progress

 

 

335,174

 

 

 

219,482

 

Satellites (estimated useful life of 7-17 years)

 

 

1,060,656

 

 

 

969,952

 

Satellite Ka-band capacity obtained under finance leases (estimated useful life of 7-11 years)

 

 

173,480

 

 

 

173,467

 

Satellites under construction

 

 

1,708,565

 

 

 

1,338,408

 

 

 

 

5,578,377

 

 

 

4,834,919

 

Less: accumulated depreciation and amortization

 

 

(1,975,196

)

 

 

(1,784,436

)

 

 

$

3,603,181

 

 

$

3,050,483

 

Other acquired intangible assets, net:

 

 

 

 

 

 

Technology (weighted average useful life of 7 years)

 

$

150,559

 

 

$

78,185

 

Contracts and customer relationships (weighted average useful life of 10 years)

 

 

167,294

 

 

 

55,161

 

Satellite co-location rights (weighted average useful life of 9 years)

 

 

8,600

 

 

 

8,600

 

Trade name (weighted average useful life of 7 years)

 

 

32,042

 

 

 

5,940

 

Other (weighted average useful life of 11 years)

 

 

22,388

 

 

 

3,663

 

 

 

 

380,883

 

 

 

151,549

 

Less: accumulated amortization

 

 

(143,033

)

 

 

(141,981

)

 

 

$

237,850

 

 

$

9,568

 

Other assets:

 

 

 

 

 

 

Investment in unconsolidated affiliate

 

$

 

 

$

176,938

 

Deferred income taxes

 

 

289,181

 

 

 

273,288

 

Capitalized software costs, net

 

 

223,142

 

 

 

237,100

 

Patents, orbital slots and other licenses, net

 

 

62,553

 

 

 

52,889

 

Other

 

 

107,610

 

 

 

95,212

 

 

 

$

682,486

 

 

$

835,427

 

Accrued and other liabilities:

 

 

 

 

 

 

Collections in excess of revenues and deferred revenues

 

$

180,854

 

 

$

216,594

 

Accrued employee compensation

 

 

83,017

 

 

 

87,153

 

Accrued vacation

 

 

49,134

 

 

 

59,509

 

Warranty reserve, current portion

 

 

5,009

 

 

 

6,693

 

Operating lease liabilities

 

 

50,049

 

 

 

48,896

 

Other

 

 

137,639

 

 

 

113,986

 

 

 

$

505,702

 

 

$

532,831

 

Other liabilities:

 

 

 

 

 

 

Deferred revenues, long-term portion

 

$

89,083

 

 

$

84,654

 

Warranty reserve, long-term portion

 

 

5,699

 

 

 

5,193

 

Satellite performance incentive obligations, long-term portion

 

 

19,568

 

 

 

22,191

 

Deferred income taxes

 

 

15,160

 

 

 

 

Other

 

 

27,594

 

 

 

25,312

 

 

 

$

157,104

 

 

$

137,350

 

 

 

As of

June 30, 2021

 

 

As of

March 31, 2021

 

 

 

(In thousands)

 

Accounts receivable, net:

 

 

 

 

 

 

 

 

Billed

 

$

262,591

 

 

$

172,559

 

Unbilled

 

 

105,366

 

 

 

70,785

 

Allowance for doubtful accounts

 

 

(3,463

)

 

 

(4,692

)

 

 

$

364,494

 

 

$

238,652

 

Inventories:

 

 

 

 

 

 

 

 

Raw materials

 

$

94,937

 

 

$

98,338

 

Work in process

 

 

77,400

 

 

 

71,875

 

Finished goods

 

 

177,350

 

 

 

166,459

 

 

 

$

349,687

 

 

$

336,672

 

Prepaid expenses and other current assets:

 

 

 

 

 

 

 

 

Prepaid expenses

 

$

101,189

 

 

$

94,405

 

Other

 

 

41,970

 

 

 

25,555

 

 

 

$

143,159

 

 

$

119,960

 

Property, equipment and satellites, net:

 

 

 

 

 

 

 

 

Equipment and software (estimated useful life of 3-7 years)

 

$

1,587,674

 

 

$

1,505,697

 

CPE leased equipment (estimated useful life of 4-5 years)

 

 

409,849

 

 

 

409,942

 

Furniture and fixtures (estimated useful life of 7 years)

 

 

59,719

 

 

 

57,433

 

Leasehold improvements (estimated useful life of 2-17 years)

 

 

154,006

 

 

 

149,324

 

Building (estimated useful life of 12 years)

 

 

12,512

 

 

 

8,923

 

Land

 

 

4,008

 

 

 

2,291

 

Construction in progress

 

 

236,704

 

 

 

219,482

 

Satellites (estimated useful life of 7-17 years)

 

 

1,065,559

 

 

 

969,952

 

Satellite Ka-band capacity obtained under finance leases (estimated useful life of 7-11 years)

 

 

173,480

 

 

 

173,467

 

Satellites under construction

 

 

1,497,175

 

 

 

1,338,408

 

 

 

 

5,200,686

 

 

 

4,834,919

 

Less: accumulated depreciation and amortization

 

 

(1,811,243

)

 

 

(1,784,436

)

 

 

$

3,389,443

 

 

$

3,050,483

 

Other acquired intangible assets, net:

 

 

 

 

 

 

 

 

Technology (weighted average useful life of 7 years)

 

$

154,246

 

 

$

78,185

 

Contracts and customer relationships (weighted average useful life of 10 years)

 

 

177,224

 

 

 

55,161

 

Satellite co-location rights (weighted average useful life of 9 years)

 

 

8,600

 

 

 

8,600

 

Trade name (weighted average useful life of 7 years)

 

 

32,318

 

 

 

5,940

 

Other (weighted average useful life of 9 years)

 

 

18,792

 

 

 

3,663

 

 

 

 

391,180

 

 

 

151,549

 

Less: accumulated amortization

 

 

(129,239

)

 

 

(141,981

)

 

 

$

261,941

 

 

$

9,568

 

Other assets:

 

 

 

 

 

 

 

 

Investment in unconsolidated affiliate

 

$

 

 

$

176,938

 

Deferred income taxes

 

 

286,556

 

 

 

273,288

 

Capitalized software costs, net

 

 

232,493

 

 

 

237,100

 

Patents, orbital slots and other licenses, net

 

 

59,307

 

 

 

52,889

 

Other

 

 

105,372

 

 

 

95,212

 

 

 

$

683,728

 

 

$

835,427

 

Accrued and other liabilities:

 

 

 

 

 

 

 

 

Collections in excess of revenues and deferred revenues

 

$

201,706

 

 

$

216,594

 

Accrued employee compensation

 

 

42,075

 

 

 

87,153

 

Accrued vacation

 

 

58,606

 

 

 

59,509

 

Warranty reserve, current portion

 

 

7,039

 

 

 

6,693

 

Operating lease liabilities

 

 

50,955

 

 

 

48,896

 

Other

 

 

149,648

 

 

 

113,986

 

 

 

$

510,029

 

 

$

532,831

 

Other liabilities:

 

 

 

 

 

 

 

 

Deferred revenues, long-term portion

 

$

90,352

 

 

$

84,654

 

Warranty reserve, long-term portion

 

 

5,491

 

 

 

5,193

 

Satellite performance incentive obligations, long-term portion

 

 

21,347

 

 

 

22,191

 

Other

 

 

47,837

 

 

 

25,312

 

 

 

$

165,027

 

 

$

137,350

 

1719


VIASAT, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Note 3 — Fair Value Measurements

In accordance with the authoritative guidance for financial assets and liabilities measured at fair value on a recurring basis (ASC 820), the Company determines fair value based on the exchange price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants, and prioritizes the inputs used to measure fair value from market-based assumptions to entity specific assumptions:

• Level 1 — Inputs based on quoted market prices for identical assets or liabilities in active markets at the measurement date.

• Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

• Level 3 — Inputs which reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. The inputs are unobservable in the market and significant to the instrument’s valuation.

Level 1 — Inputs based on quoted market prices for identical assets or liabilities in active markets at the measurement date.

Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3 — Inputs which reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. The inputs are unobservable in the market and significant to the instrument’s valuation.

The Company had $5.0$5.0 million in cash equivalents (Level 1) and 0 liabilities measured at fair value on a recurring basis as of both June 30,December 31, 2021 and March 31, 2021.

The following section describes the valuation methodologies the Company uses to measure financial instruments at fair value:

Cash equivalents — The Company’s cash equivalents consist of money market funds. Money market funds are valued using quoted prices for identical assets in an active market with sufficient volume and frequency of transactions (Level 1).

Contingencies— In connection with the acquisition of the remaining 51%51% interest in Euro Infrastructure Co.EBI on April 30, 2021 (see Note 12 — Acquisitions for more information), part of the purchase price consideration will not be determined until two years after the closing date, when the Company may pay or receive up to €20.020.0 million, or approximately $24.2$22.6 million, in cash. The consideration to be paid in the future is contingent based on certain outcomes as defined in the acquisition agreement. Each reporting period, the Company estimates the fair value of the contingent consideration based on unobservable inputs and probability weightings using standard valuation techniques (Level 3). The fair value amount is currently recorded in other assets on the condensed consolidated balance sheets and any change to fair value is recorded in the Company’s condensed consolidated statements of operations each reporting period. As of and for the three-month periodand nine-month periods ended June 30,December 31, 2021, the Company’s fair value estimate, and change in fair value of the contingent consideration since the acquisition date, waswere immaterial.

In connection with the RigNet acquisition on April 30, 2021 (see Note 12 — Acquisitions for more information), the Company assumed a contingent liability associated with a RigNet predecessor subsidiary of approximately $13.8 million. As of June 30, 2021, after a partial payment, the fair value of $9.5 million was estimated and recorded in accrued and other liabilities, as the maximum amount payable under the terms of the agreement has been achieved. The amount is payable in September 2021 in cash or stock at the Company’s discretion (with the intent to pay in cash). Due to the proximity of the payable date, the fair value approximates the actual payment amount (Level 1).

Foreign currency forward contracts — The Company uses derivative financial instruments to manage foreign currency risk relating to foreign exchange rates. The Company does not use these instruments for speculative or trading purposes. The Company’s objective is to reduce the risk to earnings and cash flows associated with changes in foreign currency exchange rates. Derivative instruments are recognized as either assets or liabilities in the accompanying condensed consolidated financial statements and are measured at fair value. Gains and losses resulting from changes in the fair values of those derivative instruments are recorded to earnings or other comprehensive income (loss) depending on the use of the derivative instrument and whether it qualifies for hedge accounting. The Company’s foreign currency forward contracts are valued using standard calculations/models that are primarily based on observable inputs, such as foreign currency exchange rates, or can be corroborated by observable market data (Level 2).

18


VIASAT, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Long-term debt — The Company’s long-term debt consists of borrowings under its Revolving Credit Facility and Ex-Im Credit Facility (collectively, the Credit Facilities), $700.0$700.0 million in aggregate principal amount of 2025 Notes, $600.0$600.0 million in aggregate principal amount of 2027 Notes, $400.0$400.0 million in aggregate principal amount of 2028 Notes and finance lease obligations reported at the present value of future minimum lease payments with current accrued interest. Long-term debt related to the Revolving Credit Facility is reported at the outstanding principal amount of borrowings, while long-term debt related to the Ex-Im Credit Facility, the 2025 Notes, the 2027 Notes and the 2028 Notes is reported at amortized cost. However, for disclosure purposes, the Company is required to measure the fair value of outstanding debt on a recurring basis. The fair value of the Company’s long-term debt related to the Revolving Credit Facility approximates its carrying amount due to its variable interest rate, which approximates a market interest rate. As of June 30,December 31, 2021 and March 31, 2021, the fair value of the Company’s long-term debt related to the Ex-Im Credit Facility was determined based on a discounted cash flow analysis using observable market interest rates for instruments with similar terms (Level 2) and was approximately $89.578.9 million and $100.1 million, respectively. As of June 30,December 31, 2021 and March 31, 2021, the estimated fair value of the Company’s outstanding long-term debt related to each series of Notes was determined based on actual or estimated bids and offers for such series of Notes in an over-the-counter market (Level 2) and was $714.0703.5 million and $709.6 million, respectively, for the 2025 Notes, $626.3616.2 million and $629.2 million, respectively, for the 2027 Notes, and $426.6402.5 million and $420.5$420.5 million, respectively, for the 2028 Notes.

Satellite performance incentive obligations— The Company’s contracts with the manufacturers of the ViaSat-1 and ViaSat-2 satellites require the Company to make monthly in-orbit satellite performance incentive payments, including interest, through fiscal year 2027 and fiscal year 2028, respectively, subject to the continued satisfactory performance of the applicable satellites. The Company records the net present value of these expected future payments as a liability and

20


VIASAT, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

as a component of the cost of the satellites. However, for disclosure purposes, the Company is required to measure the fair value of outstanding satellite performance incentive obligations on a recurring basis. The fair value of the Company’s outstanding satellite performance incentive obligations is estimated to approximate their carrying value based on current rates (Level 2). As of June 30,December 31, 2021 and March 31, 2021, the Company’s estimated satellite performance incentive obligations relating to the ViaSat-1 and ViaSat-2 satellites, including accrued interest, were $26.4$24.8 million and $27.1$27.1 million, respectively.

19


VIASAT, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Note 4 — Shares Used In Computing Diluted Net Income (Loss) Per Share

 

 

Three Months Ended

 

 

 

June 30, 2021

 

 

June 30, 2020

 

 

 

(In thousands)

 

Weighted average:

 

 

 

 

 

 

 

 

Common shares outstanding used in

   calculating basic net income (loss)

   per share attributable to Viasat, Inc.

   common stockholders

 

 

71,543

 

 

 

62,511

 

Options to purchase common stock as

   determined by application of the

   treasury stock method

 

 

6

 

 

 

 

TSR performance stock options to

   purchase common stock as

   determined by application of the

   treasury stock method

 

 

84

 

 

 

 

Restricted stock units to acquire

   common stock as determined by

   application of the treasury stock

   method

 

 

678

 

 

 

 

Potentially issuable shares in

   connection with certain terms

   of the Viasat 401(k) Profit

   Sharing Plan and Employee Stock

   Purchase Plan

 

 

507

 

 

 

 

Shares used in computing diluted net

   income (loss) per share attributable

   to Viasat, Inc. common stockholders

 

 

72,818

 

 

 

62,511

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

December 31, 2021

 

 

December 31, 2020

 

 

December 31, 2021

 

 

December 31, 2020

 

 

 

(In thousands)

 

Weighted average:

 

 

 

 

 

 

 

 

 

 

 

 

Common shares outstanding used in
   calculating basic net (loss) income
   per share attributable to Viasat, Inc.
   common stockholders

 

 

73,917

 

 

 

67,995

 

 

 

73,004

 

 

 

65,704

 

Options to purchase common stock as
   determined by application of the
   treasury stock method

 

 

 

 

 

 

 

 

8

 

 

 

 

TSR performance stock options to
   purchase common stock as
   determined by application of the
   treasury stock method

 

 

 

 

 

 

 

 

34

 

 

 

 

Restricted stock units to acquire
   common stock as determined by
   application of the treasury stock
   method

 

 

 

 

 

108

 

 

 

869

 

 

 

 

Potentially issuable shares in
   connection with certain terms
   of the Viasat 401(k) Profit
   Sharing Plan and Employee Stock
   Purchase Plan

 

 

 

 

 

565

 

 

 

433

 

 

 

 

Shares used in computing diluted net
   (loss) income per share attributable
   to Viasat, Inc. common stockholders

 

 

73,917

 

 

 

68,668

 

 

 

74,348

 

 

 

65,704

 

Antidilutive shares excluded from the calculation for the three months ended June 30, 2021December 31, 2020 consisted of 960,0801,082,081 shares related to stock options (other than TSR performance stock options), 0 shares related to TSR performance stock options and 1,390,2512,928,601 shares related to restricted stock units. Antidilutive shares excluded from the calculation for the nine months ended December 31, 2021 consisted of 918,054 shares related to stock options (other than TSR performance stock options), 0 shares related to TSR performance stock options and 1,084,275 shares related to restricted stock units.

The weighted average number of shares used to calculate basic and diluted net loss per share attributable to Viasat, Inc. common stockholders is the same for the three months ended June 30,December 31, 2021 and for the nine months ended December 31, 2020, as the Company incurred a net loss attributable to Viasat, Inc. common stockholders for the periodsuch periods and inclusion of potentially dilutive weighted average shares of common stock would be antidilutive. Potentially dilutive weighted average shares excluded from the calculation for the three months ended June 30, 2020December 31, 2021 consisted of 1,225,233820,948 shares related to stock options (other than TSR performance stock options), 083,961 shares related to TSR performance stock options, 2,575,3741,842,847 shares related to restricted stock units and 529,909463,354 shares related to certain terms of the Viasat 401(k) Profit Sharing Plan and Employee Stock Purchase Plan. Potentially dilutive weighted average shares excluded from the calculation for the nine months ended December 31, 2020 consisted of 1,176,106 shares related to stock options (other than TSR performance stock options), 0 shares related to TSR performance stock options, 2,514,857 shares related to restricted stock units and 496,869 shares related to certain terms of the Viasat 401(k) Profit Sharing Plan and Employee Stock Purchase Plan.

21


VIASAT, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Note 5 — Goodwill and Acquired Intangible Assets

During the threenine months ended June 30,December 31, 2021, the increase in the Company’s goodwill primarily related to the acquisitions of the remaining 51% interest in Euro Infrastructure Co.EBI and of RigNet on April 30, 2021 (see Note 12 – Acquisitions for more information) and an insignificant effect ofa foreign currency translation effect recorded within all three of the Company’s segments. During the threenine months ended June 30,December 31, 2020, the insignificant increase in the Company’s goodwill related to the effects of foreign currency translation recorded within all three of the Company’s segments.

Other acquired intangible assets are amortized using the straight-line method over their estimated useful lives of two to 1220 years (which approximates the economic pattern of benefit). Amortization expense related to other acquired intangible assets was $5.9$7.5 million and $1.6$1.3 million for the three months ended June 30,December 31, 2021 and 2020, respectively, and $20.9 million and $4.2 million for the nine months ended December 31, 2021 and 2020, respectively.

20


VIASAT, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

The expected amortization expense of amortizable acquired intangible assets may change due to the effects of foreign currency fluctuations as a result of international businesses acquired. CurrentThe current and expected amortization expense for acquired intangible assets for each of the following periods is as follows:

 

Amortization

 

 

(In thousands)

 

 

Amortization

 

For the three months ended June 30, 2021

 

$

5,929

 

 

(In thousands)

 

For the nine months ended December 31, 2021

 

$

20,859

 

 

 

 

 

 

 

 

Expected for the remainder of fiscal year 2022

 

$

23,756

 

 

$

7,532

 

Expected for fiscal year 2023

 

 

31,673

 

 

 

30,128

 

Expected for fiscal year 2024

 

 

30,123

 

 

 

28,678

 

Expected for fiscal year 2025

 

 

27,848

 

 

 

26,540

 

Expected for fiscal year 2026

 

 

27,696

 

 

 

26,388

 

Thereafter

 

 

120,845

 

 

 

118,584

 

 

$

261,941

 

 

$

237,850

 

In the first quarter of fiscal year 2022, the gross amount and accumulated amortization for acquired identifiable intangible assets were reduced by the retirement of fully amortized assets that were no longer in use.

Note 6 — Senior Notes and Other Long-Term Debt

Total long-term debt consisted of the following as of June 30,December 31, 2021 and March 31, 2021:

 

As of

June 30, 2021

 

 

As of

March 31, 2021

 

 

As of
 December 31, 2021

 

 

As of
 March 31, 2021

 

 

(In thousands)

 

 

(In thousands)

 

2028 Notes

 

$

400,000

 

 

$

400,000

 

 

$

400,000

 

$

400,000

 

2027 Notes

 

 

600,000

 

 

 

600,000

 

 

600,000

 

600,000

 

2025 Notes

 

 

700,000

 

 

 

700,000

 

 

700,000

 

700,000

 

Revolving Credit Facility

 

 

320,000

 

 

 

 

 

370,000

 

 

Ex-Im Credit Facility

 

 

88,435

 

 

 

98,261

 

 

78,609

 

98,261

 

Finance lease obligations (see Note 1)

 

 

53,974

 

 

 

56,336

 

 

 

48,227

 

 

 

56,336

 

Total debt

 

 

2,162,409

 

 

 

1,854,597

 

 

2,196,836

 

1,854,597

 

Unamortized discount and debt issuance costs

 

 

(20,234

)

 

 

(21,441

)

 

(17,854

)

 

(21,441

)

Less: current portion of long-term debt

 

 

30,328

 

 

 

30,472

 

 

 

29,590

 

 

 

30,472

 

Total long-term debt

 

$

2,111,847

 

 

$

1,802,684

 

 

$

2,149,392

 

 

$

1,802,684

 

22


VIASAT, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Revolving Credit Facility

As of June 30,December 31, 2021, the Revolving Credit Facility provided a $700.0$700.0 million revolving line of credit (including up to $150.0$150.0 million of letters of credit), with a maturity date of January 18, 2024.2024. At June 30,December 31, 2021, the Company had $320.0$370.0 million in principal amount of outstanding borrowings under the Revolving Credit Facility and $59.7$58.9 million outstanding under standby letters of credit, leaving borrowing availability under the Revolving Credit Facility as of June 30,December 31, 2021 of $320.3$271.1 million.

Borrowings under the Revolving Credit Facility bear interest, at the Company’s option, at either (1) the highest of the Federal Funds rate plus 0.50%, the Eurodollar rate plus 1.00%, or the administrative agent’s prime rate as announced from time to time, or (2) the Eurodollar rate, plus, in the case of each of (1) and (2), an applicable margin that is based on the Company’s total leverage ratio. As of June 30,December 31, 2021, the weighted average effective interest rate on the Company’s outstanding borrowings under the Revolving Credit Facility was 1.59%1.86%. The Company has capitalized certain amounts of interest expense on the Revolving Credit Facility in connection with the construction of various assets during the construction period. The Revolving Credit Facility is required to be guaranteed by certain significant domestic subsidiaries of the Company (as defined in the Revolving Credit Facility) and secured by substantially all of the Company’s and any such subsidiaries’ assets. As of June 30,December 31, 2021, none of the Company’s subsidiaries guaranteed the Revolving Credit Facility.

21


VIASAT, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

The Revolving Credit Facility contains financial covenants regarding a maximum total leverage ratio and a minimum interest coverage ratio. In addition, the Revolving Credit Facility contains covenants that restrict, among other things, the Company’s ability to sell assets, make investments and acquisitions, make capital expenditures, grant liens, pay dividends and make certain other restricted payments. The Company was in compliance with its financial covenants under the Revolving Credit Facility as of June 30,December 31, 2021.

On November 23, 2021, the Company amended the Revolving Credit Facility to, among other matters, permit the consummation of the Inmarsat Transaction and provide additional covenant flexibility following the completion of the Inmarsat Transaction. These amendments will become effective at and are conditional upon the closing of the Inmarsat Transaction.

Ex-Im Credit Facility

The Ex-Im Credit Facility originally provided a $362.4$362.4 million senior secured direct loan facility, which was fully drawn. Of the $362.4$362.4 million in principal amount of borrowings made under the Ex-Im Credit Facility, $321.2$321.2 million was used to finance up to 85%85% of the costs of construction, launch and insurance of the ViaSat-2 satellite and related goods and services (including costs incurred on or after September 18, 2012), with the remaining $41.2$41.2 million used to finance the total exposure fees incurred under the Ex-Im Credit Facility (which included all previously accrued completion exposure fees). As of June 30,December 31, 2021, the Company had $88.4$78.6 million in principal amount of outstanding borrowings under the Ex-Im Credit Facility.

Borrowings under the Ex-Im Credit Facility bear interest at a fixed rate of 2.38%2.38%, payable semi-annually in arrears. The effective interest rate on the Company’s outstanding borrowings under the Ex-Im Credit Facility, which takes into account timing and amount of borrowings and payments, exposure fees, debt issuance costs and other fees, is 4.54%4.54%. Borrowings under the Ex-Im Credit Facility are required to be repaid in 16 semi-annual principal installments, which commenced on April 15, 2018, with a maturity date of October 15, 2025.2025. Pursuant to the terms of the Ex-Im Credit Facility, certain insurance proceeds related to the ViaSat-2 satellite must be used to pay down outstanding borrowings under the Ex-Im Credit Facility upon receipt. The Ex-Im Credit Facility is guaranteed by Viasat and is secured by first-priority liens on the ViaSat-2 satellite and related assets, as well as a pledge of the capital stock of the borrower under the facility.

The Ex-Im Credit Facility contains financial covenants regarding Viasat’s maximum total leverage ratio and minimum interest coverage ratio. In addition, the Ex-Im Credit Facility contains covenants that restrict, among other things, the Company’s ability to sell assets, make investments and acquisitions, make capital expenditures, grant liens, pay dividends and make certain other restricted payments. The Company was in compliance with its financial covenants under the Ex-Im Credit Facility as of June 30,December 31, 2021.

Borrowings under the Ex-Im Credit Facility are recorded as current portion of long-term debt and as other long-term debt, net of unamortized discount and debt issuance costs, in the Company’s condensed consolidated financial statements. The discount of $42.3$42.3 million (consisting of the initial $6.0$6.0 million pre-exposure fee, $35.3$35.3 million of

23


VIASAT, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

completion exposure fees, and other customary fees) and deferred financing cost associated with the issuance of the borrowings under the Ex-Im Credit Facility are amortized to interest expense on an effective interest rate basis over the weighted average term of the Ex-Im Credit Facility and in accordance with the related payment obligations.

Senior Notes

Senior Notes due 2028

In June 2020, the Company issued $400.0$400.0 million in principal amount of 2028 Notes in a private placement to institutional buyers. The 2028 Notes were issued at face value and are recorded as long-term debt, net of debt issuance costs, in the Company’s condensed consolidated financial statements. The 2028 Notes bear interest at the rate of 6.500%6.500% per year, payable semi-annually in cash in arrears, which interest payments commenced in January 2021. Debt issuance costs associated with the issuance of the 2028 Notes are amortized to interest expense on a straight-line basis over the term of the 2028 Notes, the results of which are not materially different from the effective interest rate basis.

The 2028 Notes are required to be guaranteed on an unsecured senior basis by each of the Company’s existing and future subsidiaries that guarantees the Revolving Credit Facility. As of June 30,December 31, 2021, none of the Company’s subsidiaries guaranteed the 2028 Notes. The 2028 Notes are the Company’s general senior unsecured obligations and rank equally in right of payment with all of the Company’s existing and future unsecured unsubordinated debt. The 2028 Notes are effectively junior in right of payment to the Company’s existing and future secured debt, including under the Credit Facilities and the 2027 Notes (to the extent of the value of the assets securing such debt), are structurally subordinated to all existing and future liabilities (including trade payables) of the Company’s subsidiaries that do not guarantee the 2028 Notes, and are senior in right of payment to all of the Company’s existing and future subordinated indebtedness.

22


VIASAT, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

The indenture governing the 2028 Notes limits, among other things, the Company’s and its restricted subsidiaries’ ability to: incur, assume or guarantee additional debt; issue redeemable stock and preferred stock; pay dividends, make distributions or redeem or repurchase capital stock; prepay, redeem or repurchase subordinated debt; make loans and investments; grant or incur liens; restrict dividends, loans or asset transfers from restricted subsidiaries; sell or otherwise dispose of assets; enter into transactions with affiliates; reduce the Company’s satellite insurance; and consolidate or merge with, or sell substantially all of their assets to, another person.

Prior to July 15, 2023, the Company may redeem up to 40% of the 2028 Notes at a redemption price of 106.500%106.500% of the principal amount thereof, plus accrued and unpaid interest, if any, thereon to the redemption date, from the net cash proceeds of specified equity offerings. The Company may also redeem the 2028 Notes prior to July 15, 2023, in whole or in part, at a redemption price equal to 100%100% of the principal amount thereof plus the applicable premium and any accrued and unpaid interest, if any, thereon to the redemption date. The applicable premium is calculated as the greater of: (i) 1.0% of the principal amount of such 2028 Notes and (ii) the excess, if any, of (a) the present value at such date of redemption of (1) the redemption price of such 2028 Notes on July 15, 2023 plus (2) all required interest payments due on such 2028 Notes through July 15, 2023 (excluding accrued but unpaid interest to the date of redemption), computed using a discount rate equal to the treasury rate (as defined under the indenture governing the 2028 Notes) plus 50 basis points, over (b) the then-outstanding principal amount of such 2028 Notes. The 2028 Notes may be redeemed, in whole or in part, at any time during the 12 months beginning on July 15, 2023 at a redemption price of 103.250%103.250%, during the 12 months beginning on July 15, 2024 at a redemption price of 101.625%101.625%, and at any time on or after July 15, 2025 at a redemption price of 100%100%, in each case plus accrued and unpaid interest, if any, thereon to the redemption date.

In the event a change of control triggering event occurs (as defined in the indenture governing the 2028 Notes), each holder will have the right to require the Company to repurchase all or any part of such holder’s 2028 Notes at a purchase price in cash equal to 101%101% of the aggregate principal amount of the 2028 Notes repurchased, plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date).

Senior Secured Notes due 2027

In March 2019, the Company issued $600.0$600.0 million in principal amount of 2027 Notes in a private placement to institutional buyers. The 2027 Notes were issued at face value and are recorded as long-term debt, net of debt issuance costs, in the Company’s condensed consolidated financial statements. The 2027 Notes bear interest at the rate of 5.625%5.625% per year, payable semi-annually in cash in arrears, which interest payments commenced in October 2019. Debt issuance

24


VIASAT, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

costs associated with the issuance of the 2027 Notes are amortized to interest expense on a straight-line basis over the term of the 2027 Notes, the results of which are not materially different from the effective interest rate basis.

The 2027 Notes are required to be guaranteed on a senior secured basis by each of the Company’s existing and future subsidiaries that guarantees the Revolving Credit Facility. As of June 30,December 31, 2021, none of the Company’s subsidiaries guaranteed the 2027 Notes. The 2027 Notes are secured, equally and ratably with the Revolving Credit Facility and any future parity lien debt, by liens on substantially all of the Company’s assets.

The 2027 Notes are the Company’s general senior secured obligations and rank equally in right of payment with all of its existing and future unsubordinated debt. The 2027 Notes are effectively senior to all of the Company’s existing and future unsecured debt (including the 2025 Notes and the 2028 Notes) as well as to all of any permitted junior lien debt that may be incurred in the future, in each case to the extent of the value of the assets securing the 2027 Notes. The 2027 Notes are effectively subordinated to any obligations that are secured by liens on assets that do not constitute a part of the collateral securing the 2027 Notes, are structurally subordinated to all existing and future liabilities (including trade payables) of the Company’s subsidiaries that do not guarantee the 2027 Notes (including obligations of the borrower under the Ex-Im Credit Facility), and are senior in right of payment to all of the Company’s existing and future subordinated indebtedness.

The indenture governing the 2027 Notes limits, among other things, the Company’s and its restricted subsidiaries’ ability to: incur, assume or guarantee additional debt; issue redeemable stock and preferred stock; pay dividends, make distributions or redeem or repurchase capital stock; prepay, redeem or repurchase subordinated debt; make loans and investments; grant or incur liens; restrict dividends, loans or asset transfers from restricted subsidiaries; sell or otherwise dispose of assets; enter into transactions with affiliates; reduce the Company’s satellite insurance; and consolidate or merge with, or sell substantially all of their assets to, another person.

23


VIASAT, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Prior to April 15, 2022, the Company may redeem up to 40% of the 2027 Notes at a redemption price of 105.625%105.625% of the principal amount thereof, plus accrued and unpaid interest, if any, thereon to the redemption date, from the net cash proceeds of specified equity offerings.The Company may also redeem the 2027 Notes prior to April 15, 2022, in whole or in part, at a redemption price equal to 100%100% of the principal amount thereof plus the applicable premium and any accrued and unpaid interest, if any, thereon to the redemption date. The applicable premium is calculated as the greater of: (i) 1.0% of the principal amount of such 2027 Notes and (ii) the excess, if any, of (a) the present value at such date of redemption of (1) the redemption price of such 2027 Notes on April 15, 2022 plus (2) all required interest payments due on such 2027 Notes through April 15, 2022 (excluding accrued but unpaid interest to the date of redemption), computed using a discount rate equal to the treasury rate (as defined under the indenture governing the 2027 Notes) plus 50 basis points, over (b) the then-outstanding principal amount of such 2027 Notes. The 2027 Notes may be redeemed, in whole or in part, at any time during the 12 months beginning on April 15, 2022 at a redemption price of 102.813%102.813%, during the 12 months beginning on April 15, 2023 at a redemption price of 101.406%101.406%, and at any time on or after April 15, 2024 at a redemption price of 100%100%, in each case plus accrued and unpaid interest, if any, thereon to the redemption date.

In the event a change of control triggering event occurs (as defined in the indenture governing the 2027 Notes), each holder will have the right to require the Company to repurchase all or any part of such holder’s 2027 Notes at a purchase price in cash equal to 101%101% of the aggregate principal amount of the 2027 Notes repurchased, plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date).

Senior Notes due 2025

In September 2017, the Company issued $700.0$700.0 million in principal amount of 2025 Notes in a private placement to institutional buyers. The 2025 Notes were issued at face value and are recorded as long-term debt, net of debt issuance costs, in the Company’s condensed consolidated financial statements. The 2025 Notes bear interest at the rate of 5.625%5.625% per year, payable semi-annually in cash in arrears, which interest payments commenced in March 2018. Debt issuance costs associated with the issuance of the 2025 Notes are amortized to interest expense on a straight-line basis over the term of the 2025 Notes, the results of which are not materially different from the effective interest rate basis.

The 2025 Notes are required to be guaranteed on an unsecured senior basis by each of the Company’s existing and future subsidiaries that guarantees the Revolving Credit Facility. As of June 30,December 31, 2021, none of the Company’s subsidiaries guaranteed the 2025 Notes. The 2025 Notes are the Company’s general senior unsecured obligations and rank equally in right of payment with all of the Company’s existing and future unsecured unsubordinated debt. The 2025

25


VIASAT, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Notes are effectively junior in right of payment to the Company’s existing and future secured debt, including under the Credit Facilities and the 2027 Notes (to the extent of the value of the assets securing such debt), are structurally subordinated to all existing and future liabilities (including trade payables) of the Company’s subsidiaries that do not guarantee the 2025 Notes, and are senior in right of payment to all of the Company’s existing and future subordinated indebtedness.

The indenture governing the 2025 Notes limits, among other things, the Company’s and its restricted subsidiaries’ ability to: incur, assume or guarantee additional debt; issue redeemable stock and preferred stock; pay dividends, make distributions or redeem or repurchase capital stock; prepay, redeem or repurchase subordinated debt; make loans and investments; grant or incur liens; restrict dividends, loans or asset transfers from restricted subsidiaries; sell or otherwise dispose of assets; enter into transactions with affiliates; reduce the Company’s satellite insurance; and consolidate or merge with, or sell substantially all of their assets to, another person.

The 2025 Notes may be redeemed, in whole or in part, at any time during the 12 months beginning on September 15, 2020 at a redemption price of 102.813%, during the 12 months beginning on September 15, 2021 at a redemption price of 101.406%, and at any time on or afterprior to September 15, 2022 at a redemption price of 100%101.406%, and at any time thereafter at a redemption price of 100%, in each case plus accrued and unpaid interest, if any, thereon to the redemption date.

In the event a change of control triggering event occurs (as defined in the indenture governing the 2025 Notes), each holder will have the right to require the Company to repurchase all or any part of such holder’s 2025 Notes at a purchase price in cash equal to 101%101% of the aggregate principal amount of the 2025 Notes repurchased, plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date).

24


VIASAT, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Note 7 — Product Warranty

The Company provides limited warranties on its products for periods of up to five years.years. The Company records a liability for its warranty obligations when products are shipped or they are included in long-term construction contracts based upon an estimate of expected warranty costs. Amounts expected to be incurred within 12 months are classified as accrued liabilities and amounts expected to be incurred beyond 12 months are classified as other liabilities in the condensed consolidated financial statements. For mature products, the warranty cost estimates are based on historical experience with the particular product. For newer products that do not have a history of warranty costs, the Company bases its estimates on its experience with the technology involved and the types of failures that may occur. It is possible that the Company’s underlying assumptions will not reflect the actual experience and, in that case, future adjustments will be made to the recorded warranty obligation.The following table reflects the change in the Company’s warranty accrual during the threenine months ended June 30,December 31, 2021 and 2020:

 

 

Three Months Ended

 

 

 

June 30,

2021

 

 

June 30,

2020

 

 

 

(In thousands)

 

Balance, beginning of period

 

$

11,886

 

 

$

11,643

 

Change in liability for warranties issued in period

 

 

4,064

 

 

 

1,202

 

Settlements made (in cash or in kind) during the

   period

 

 

(3,420

)

 

 

(1,123

)

Balance, end of period

 

$

12,530

 

 

$

11,722

 

 

 

Nine Months Ended

 

 

 

December 31,
2021

 

 

December 31,
2020

 

 

 

(In thousands)

 

Balance, beginning of period

 

$

11,886

 

 

$

11,643

 

Change in liability for warranties
   issued in period

 

 

4,064

 

 

 

4,120

 

Settlements made (in cash or in kind)
   during the period

 

 

(5,242

)

 

 

(3,882

)

Balance, end of period

 

$

10,708

 

 

$

11,881

 

Note 8 — Commitments and Contingencies

The Company has entered into satellite construction agreements with The Boeing Company (Boeing) for the construction and purchase of three ViaSat-3 class satellites and the integration of Viasat’s payload and technologies into the satellites. See Note 12 – Commitments to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended March 31, 2021 for information regarding the Company’s future minimum payments under its satellite construction contracts and other satellite-related purchase commitments.

From time to time, the Company is involved in a variety of claims, suits, investigations and proceedings arising in the ordinary course of business, including government investigations and claims, and other claims and proceedings with respect to intellectual property, breach of contract, labor and employment, tax and other matters. Such matters could

26


VIASAT, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

result in fines; penalties, compensatory, treble or other damages; or non-monetary relief. A violation of government contract laws and regulations could also result in the termination of its government contracts or debarment from bidding on future government contracts. Although claims, suits, investigations and proceedings are inherently uncertain and their results cannot be predicted with certainty, the Company believes that the resolution of its current pending matters will not have a material adverse effect on its business, financial condition, results of operations or liquidity.

The Company has contracts with various U.S. Government agencies. Accordingly, the Company is routinely subject to audit and review by the DCMA, the DCAA and other U.S. Government agencies of its performance on government contracts, indirect rates and pricing practices, accounting and management internal control business systems, and compliance with applicable contracting and procurement laws, regulations and standards. An adverse outcome to a review or audit or other failure to comply with applicable contracting and procurement laws, regulations and standards could result in material civil and criminal penalties and administrative sanctions being imposed on the Company, which may include termination of contracts, forfeiture of profits, triggering of price reduction clauses, suspension of payments, significant customer refunds, fines and suspension, or a prohibition on doing business with U.S. Government agencies. In addition, if the Company fails to obtain an “adequate” determination of its various accounting and management internal control business systems from applicable U.S. Government agencies or if allegations of impropriety are made against it, the Company could suffer serious harm to its business or its reputation, including its ability to bid on new contracts or receive contract renewals and its competitive position in the bidding process. The Company’s incurred cost audits by the DCAA have not been concluded for fiscal years 2019, 2020 or 2021. As of June 30,December 31, 2021, the DCAA had completed its incurred cost audit for fiscal years 2004, 2016 and 20162019 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 the determination of low risk. Although the Company has recorded contract revenues subsequent to fiscal year 20182019 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,December 31, 2021 and March 31, 2021, the Company had $10.9$12.1 million and $10.3$10.3 million, respectively, in contract-related reserves for its estimate of potential refunds to customers for potential cost adjustments on several multi-year U.S. Government cost reimbursable contracts. This reserve is classified as either an element of accrued liabilities or as a reduction of unbilled accounts receivable based on the status of the related contracts.

25


VIASAT, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Note 9 — Income Taxes

Ordinarily, the Company calculates its provision for income taxes at the end of each interim reporting period on the basis of an estimated annual effective tax rate adjusted for tax items that are discrete to each period. However, when a reliable estimate cannot be made, the Company computes its provision for income taxes using the actual effective tax rate (discrete method) for the year-to-date period. The Company’s effective tax rate is highly influenced by the amount of its R&D tax credits. A small change in estimated annual pretax income (loss) can produce a significant variance in the annual effective tax rate given the Company’s expected amount of R&D tax credits. This variability provides an unreliable estimate of the annual effective tax rate. As a result, and in accordance with the authoritative guidance for accounting for income taxes in interim periods, the Company has computed its provision for income taxes for the three and nine months ended June 30,December 31, 2021 and 2020 by applying the actual effective tax rate to the income (loss) for the three-month and nine-month periods.

For the three and nine months ended June 30,December 31, 2021, the Company recorded an income tax provision of $3.5 million and an income tax benefit of $4.1$3.5 million, respectively, resulting in an effective tax benefit raterates of 29%.negative 701% and negative 22%, respectively. The effective tax benefit raterates for the periodsuch periods differed from the U.S. statutory rate primarily due to the benefit of federal and state R&D tax credits, partially offset by the expense for tax deficiencies upon settlement of stock-based compensation during the periods and, in the nine months ended December 31, 2021, a reversal of a deferred tax liability recorded for Euro Infrastructure Co.’sEBI’s outside basis difference upon the assertion made during the first quarter of fiscal year 2022 to indefinitely reinvest future earnings.

For the three and nine months ended June 30,December 31, 2020, the Company recorded an income tax benefitprovision of $5.7$7.0 million and an insignificant amount, respectively, resulting in an effective tax benefit raterates of 39%.50% and 24%, respectively. The effective tax benefit raterates for the periodperiods differed from the U.S. statutory rate primarily due primarily to the expense for tax deficiencies upon settlement of stock-based compensation during the periods, partially offset by the benefit of federal and state R&D tax credits.

27


VIASAT, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Future realization of existing deferred tax assets ultimately depends on future profitability and the existence of sufficient taxable income of appropriate character (for example, ordinary income versus capital gains) within the carryforward period available under tax law. In the event that the Company’s estimate of taxable income is less than that required to utilize the full amount of any deferred tax asset, a valuation allowance is established, which would cause a decrease to income in the period such determination is made.

For the three and nine months ended June 30,December 31, 2021, the Company’s gross unrecognized tax benefits increased by $1.6$6.7 million and $13.1 million, respectively, including interest and penalties of an insignificant amount, which were included as a component of the provision for income taxes. In the next 12 months it is reasonably possible that the amount of unrecognized tax benefits will not change significantly.

Note 10 — Equity Method Investments and Related-Party Transactions

Euro Broadband Infrastructure Sàrl

In March 2017, the Company acquired a 49%49% interest in Euro Infrastructure Co.EBI for $139.5$139.5 million as part of the consummation of the Company’s strategic partnering arrangement with Eutelsat. On April 30, 2021, Euro Infrastructure Co.EBI became a consolidated subsidiary when the Company purchased the remaining 51%51% interest in Euro Infrastructure Co.EBI from Eutelsat (see Note 12 — Acquisitions — Euro Infrastructure Co.EBI for more information).

Prior to the purchase of the remaining 51%51% interest on April 30, 2021, the Company'sCompany’s investment in Euro Infrastructure Co.EBI was accounted for under the equity method and the total investment including basis difference allocated to tangible assets, identifiable intangible assets, deferred income taxes and goodwill, was classified as a single line item, as an investment in unconsolidated affiliate, in the Company'sCompany’s condensed consolidated balance sheets. Because the underlying net assets in Euro Infrastructure Co.EBI and the related excess carrying value of investment over the proportionate share of net assets was denominated in Euros, foreign currency translation gains or losses impacted the recorded value of the Company’s investment. Prior to the purchase, the Company’s investment in Euro Infrastructure Co.EBI was presented at cost of investment plus its accumulated proportional share of income or loss, including amortization of the difference in the historical basis of the Company’s contribution, less any distributions it has received.

26


VIASAT, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

The difference between the Company’s carrying value of its investment in Euro Infrastructure Co.EBI and its proportionate share of the net assets of Euro Infrastructure Co.EBI as of March 31, 2021 is summarized as follows:

 

As of

March 31, 2021

 

 

 

 

As of
 March 31, 2021

 

Carrying value of investment in Euro Infrastructure Co.

 

$

176,938

 

 

 

Carrying value of investment in EBI

 

$

176,938

 

Less: proportionate share of net assets of Euro

Infrastructure Co.

 

 

159,394

 

 

 

159,394

 

Excess carrying value of investment over

proportionate share of net assets

 

$

17,544

 

 

$

17,544

 

The excess carrying value has been primarily

assigned to:

 

 

 

 

 

 

 

Goodwill

 

$

23,978

 

 

$

23,978

 

Identifiable intangible assets

 

 

8,332

 

 

8,332

 

Tangible assets

 

 

(15,781

)

 

(15,781

)

Deferred income taxes

 

 

1,015

 

 

 

1,015

 

 

$

17,544

 

 

$

17,544

 

As of March 31, 2021, the identifiable intangible assets had useful lives of up to 11 years and a weighted average useful life of approximately ten years, and tangible assets had useful lives of up to 11 years and a weighted average useful life of approximately 11 years. Goodwill is not deductible for tax purposes.

The Company’s share of earnings on its investment in Euro Infrastructure Co.EBI was0ne and an insignificant amount through the purchase date for the three and nine months ended June 30,December 31, 2021, respectively, and an insignificant amount for both the three and nine months ended June 30,December 31, 2020, consisting of the Company’s share of equity in Euro Infrastructure Co.’sEBI’s income (loss), including amortization of the difference in the historical basis of the Company’s contribution.Prior to the purchase of the remaining 51%51% interest on April 30, 2021, the Company recorded its proportionate share of the results of Euro Infrastructure Co.,EBI, and any related basis difference amortization expense, within equity in income of unconsolidated affiliate, net, one quarter in arrears. Subsequent to April

28


VIASAT, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

30, 2021, the results of Euro Infrastructure Co.EBI have been included within the consolidated results of the Company and will no longer be recorded in arrears with no material impact.

Since acquiringits initial interest in Euro Infrastructure Co.EBI through the purchase date, the Company recorded $10.4$10.4 million in retained earnings of undistributed cumulative earnings in equity interests, net of tax, as of April 30, 2021.

Related-party transactions

Transactions with the equity method investee are considered related-party transactions. In the first quarter of fiscal year 2022, the Company acquired the remaining 51%51% interest in its former equity method investee, Euro Infrastructure Co.EBI. Refer to Note 12 — Acquisitions — Euro Infrastructure Co.EBI for further information. The following tables set forth the material related-party transactions entered into between Euro Infrastructure Co.EBI and its subsidiaries, on the one hand, and the Company and its subsidiaries, on the other hand, in the ordinary course of business for the time periods presented:

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

December 31, 2020

 

 

December 31, 2020

 

 

 

(In thousands)

 

Revenue – EBI

 

$

8,319

 

 

$

9,743

 

Expense – EBI

 

 

4,163

 

 

 

12,331

 

Cash received – EBI

 

 

1,773

 

 

 

9,995

 

Cash paid – EBI

 

 

7,867

 

 

 

20,947

 

 

 

As of
 March 31, 2021

 

 

 

 

Collections in excess of revenues and deferred
   revenues – EBI

 

$

6,013

 

* Amount was insignificant.

 

 

Three Months Ended

 

 

 

June 30, 2020

 

 

 

(In thousands)

 

Expense – Euro Infrastructure Co.

 

$

4,164

 

Cash received – Euro Infrastructure Co.

 

 

3,402

 

Cash paid – Euro Infrastructure Co.

 

 

8,194

 

 

 

As of

March 31, 2021

 

 

 

 

Collections in excess of revenues and deferred

   revenues – Euro Infrastructure Co.

 

$

6,013

 

27


VIASAT, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Note 11 — Segment Information

The Company’s reporting segments, comprised of the satellite services, commercial networks and government systems segments, are primarily distinguished by the type of customer and the related contractual requirements. The Company’s satellite services segment provides satellite-based broadband and related services to residential customers, Community Internet hotspot users, enterprises, commercial airlines and other mobile broadband customers. The Company’s commercial networks segment develops and offers advanced satellite and wireless broadband platforms, ground networking equipment, radio frequency and advanced microwave solutions, Application-Specific Integrated Circuit chip design, satellite payload development and space-to-earth connectivity systems, some of which are ultimately used by the Company’s satellite services segment. The Company’s government systems segment provides global mobile broadband services to military and government users and develops and offers network-centric, internet protocol-based fixed and mobile secure communications products and solutions. The more regulated government environment is subject to unique contractual requirements and possesses economic characteristics which differ from the satellite services and commercial networks segments. The Company’s segments are determined consistent with the way management currently organizes and evaluates financial information internally for making operating decisions and assessing performance.

29


VIASAT, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Segment revenues and operating profits (losses) for the three and nine months ended June 30,December 31, 2021 and 2020 were as follows:

 

 

Three Months Ended

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

June 30, 2021

 

 

June 30, 2020

 

 

December 31, 2021

 

 

December 31, 2020

 

 

December 31, 2021

 

 

December 31, 2020

 

 

(In thousands)

 

 

(In thousands)

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Satellite services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product

 

$

 

 

$

 

 

$

 

$

 

$

 

$

 

Service

 

 

274,117

 

 

 

201,984

 

 

 

309,711

 

 

 

220,789

 

 

 

883,938

 

 

 

638,660

 

Total

 

 

274,117

 

 

 

201,984

 

 

309,711

 

220,789

 

883,938

 

638,660

 

Commercial networks

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product

 

 

101,531

 

 

 

55,119

 

 

123,059

 

75,690

 

343,525

 

197,560

 

Service

 

 

17,065

 

 

 

12,043

 

 

 

16,618

 

 

 

14,409

 

 

 

49,554

 

 

 

38,561

 

Total

 

 

118,596

 

 

 

67,162

 

 

139,677

 

90,099

 

393,079

 

236,121

 

Government systems

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product

 

 

191,733

 

 

 

195,515

 

 

193,084

 

190,824

 

574,548

 

575,568

 

Service

 

 

80,414

 

 

 

65,827

 

 

 

77,245

 

 

 

73,847

 

 

 

234,366

 

 

 

209,976

 

Total

 

 

272,147

 

 

 

261,342

 

 

270,329

 

264,671

 

808,914

 

785,544

 

Elimination of intersegment revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

664,860

 

 

$

530,488

 

 

$

719,717

 

 

$

575,559

 

 

$

2,085,931

 

 

$

1,660,325

 

 

 

 

 

 

 

 

 

 

 

 

Operating profits (losses):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Satellite services

 

$

12,513

 

 

$

(1,857

)

 

$

14,152

 

$

11,457

 

$

43,711

 

$

21,083

 

Commercial networks

 

 

(37,708

)

 

 

(51,394

)

 

(44,572

)

 

(39,028

)

 

(127,601

)

 

(135,785

)

Government systems

 

 

47,416

 

 

 

49,495

 

 

42,478

 

50,644

 

133,866

 

148,002

 

Elimination of intersegment operating

profits

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment operating profit (loss) before

corporate and amortization of acquired

intangible assets

 

 

22,221

 

 

 

(3,756

)

Segment operating profit before corporate
and amortization of acquired intangible
assets

 

12,058

 

23,073

 

49,976

 

33,300

 

Corporate

 

 

 

 

 

 

 

 

 

 

 

Amortization of acquired intangible

assets

 

 

(5,929

)

 

 

(1,558

)

 

 

(7,531

)

 

 

(1,313

)

 

 

(20,859

)

 

 

(4,171

)

Income (loss) from operations

 

$

16,292

 

 

$

(5,314

)

Income from operations

 

$

4,527

 

 

$

21,760

 

 

$

29,117

 

 

$

29,129

 

28


VIASAT, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Assets identifiable to segments include: accounts receivable, unbilled accounts receivable, inventory, acquired intangible assets and goodwill. The Company’s property and equipment, including its satellites, earth stations and other networking equipment, are assigned to corporate assets as they are available for use by the various segments throughout their estimated useful lives. Segment assets as of June 30,December 31, 2021 and March 31, 2021 were as follows:

 

 

As of
 December 31, 2021

 

 

As of
 March 31, 2021

 

 

 

(In thousands)

 

Segment assets:

 

 

 

 

 

 

Satellite services

 

$

437,337

 

 

$

64,048

 

Commercial networks

 

 

228,416

 

 

 

168,334

 

Government systems

 

 

477,909

 

 

 

470,389

 

Total segment assets

 

 

1,143,662

 

 

 

702,771

 

Corporate assets

 

 

4,943,132

 

 

 

4,646,696

 

Total assets

 

$

6,086,794

 

 

$

5,349,467

 

30


VIASAT, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

 

 

As of

June 30, 2021

 

 

As of

March 31, 2021

 

 

 

(In thousands)

 

Segment assets:

 

 

 

 

 

 

 

 

Satellite services

 

$

449,976

 

 

$

64,048

 

Commercial networks

 

 

235,575

 

 

 

168,334

 

Government systems

 

 

471,442

 

 

 

470,389

 

Total segment assets

 

 

1,156,993

 

 

 

702,771

 

Corporate assets

 

 

4,837,540

 

 

 

4,646,696

 

Total assets

 

$

5,994,533

 

 

$

5,349,467

 

Other acquired intangible assets, net and goodwill included in segment assets as of June 30,December 31, 2021 and March 31, 2021 were as follows:

 

 

Other Acquired Intangible

Assets, Net

 

 

Goodwill

 

 

Other Acquired Intangible
Assets, Net

 

 

Goodwill

 

 

As of

June 30, 2021

 

 

As of

March 31, 2021

 

 

As of

June 30, 2021

 

 

As of

March 31, 2021

 

 

As of
 December 31, 2021

 

 

As of
 March 31, 2021

 

 

As of
 December 31, 2021

 

 

As of
 March 31, 2021

 

 

(In thousands)

 

 

(In thousands)

 

Satellite services

 

$

258,713

 

 

$

5,738

 

 

$

73,155

 

 

$

13,814

 

 

$

235,240

 

$

5,738

 

$

82,567

 

$

13,814

 

Commercial networks

 

 

 

 

 

 

 

 

44,083

 

 

 

44,044

 

 

 

 

44,083

 

44,044

 

Government systems

 

 

3,228

 

 

 

3,830

 

 

 

64,499

 

 

 

64,442

 

 

 

2,610

 

 

 

3,830

 

 

 

64,257

 

 

 

64,442

 

Total

 

$

261,941

 

 

$

9,568

 

 

$

181,737

 

 

$

122,300

 

 

$

237,850

 

 

$

9,568

 

 

$

190,907

 

 

$

122,300

 

Amortization of acquired intangible assets by segment for the three and nine months ended June 30,December 31, 2021 and 2020 was as follows:

 

 

Three Months Ended

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

June 30, 2021

 

 

June 30, 2020

 

 

December 31, 2021

 

 

December 31, 2020

 

 

December 31, 2021

 

 

December 31, 2020

 

 

(In thousands)

 

 

(In thousands)

 

Satellite services

 

$

5,322

 

 

$

509

 

 

$

7,231

 

$

557

 

$

19,650

 

$

1,612

 

Commercial networks

 

 

 

 

 

257

 

 

 

 

 

257

 

Government systems

 

 

607

 

 

 

792

 

 

 

300

 

 

 

756

 

 

 

1,209

 

 

 

2,302

 

Total amortization of acquired

intangible assets

 

$

5,929

 

 

$

1,558

 

 

$

7,531

 

 

$

1,313

 

 

$

20,859

 

 

$

4,171

 

Revenue informationRevenues by geographic area for the three and nine months ended June 30,December 31, 2021 and 2020 were as follows:

 

Three Months Ended

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

June 30, 2021

 

 

June 30, 2020

 

 

December 31, 2021

 

 

December 31, 2021

 

 

(In thousands)

 

 

(In thousands)

 

U.S. customers

 

$

567,486

 

 

$

498,515

 

 

$

616,682

 

$

1,782,459

 

Non-U.S. customers (each country

individually insignificant)

 

 

97,374

 

 

 

31,973

 

 

 

103,035

 

 

 

303,472

 

Total revenues

 

$

664,860

 

 

$

530,488

 

 

$

719,717

 

 

$

2,085,931

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

December 31, 2020

 

 

December 31, 2020

 

 

(In thousands)

 

U.S. customers

 

$

512,439

 

$

1,523,969

 

Non-U.S. customers (each country individually insignificant)

 

 

63,120

 

 

 

136,356

 

Total revenues

 

$

575,559

 

 

$

1,660,325

 

The Company distinguishes revenues from external customers by geographic area based on customer location.

Note 12 — Acquisitions

29Inmarsat Transaction

On November 8, 2021, the Company entered into a Share Purchase Agreement with the Sellers to combine Viasat with Inmarsat. Pursuant to the Share Purchase Agreement, the Company will purchase all of the issued and outstanding shares of Inmarsat from the Sellers upon the terms and subject to the conditions set forth therein. The total consideration payable by the Company under the Share Purchase Agreement consists of $850.0 million in cash, subject to adjustments, and approximately 46.36 million unregistered shares of the Company’s common stock.

The closing of the Inmarsat Transaction is subject to customary closing conditions, including receipt of regulatory approvals and clearances, and approval by the stockholders of the Company of the issuance of shares in the transaction and an amendment to the Company’s certificate of incorporation to increase the number of shares of common stock authorized for issuance. The Share Purchase Agreement contains certain termination rights for both the Company and certain of the Sellers and further provides that, upon termination of the Share Purchase Agreement under certain

31


VIASAT, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Note 12 — Acquisitions

(UNAUDITED)

circumstances, the Company may be obligated to pay a termination fee of up to $200.0 million or to reimburse certain out-of-pocket expenses of certain Sellers up to $40.0 million.

The Company has obtained financing commitments for $2.3 billion of new debt facilities in connection with the Inmarsat Transaction (which may be secured and/or unsecured), a portion of which is to be raised between the signing and closing of the Inmarsat Transaction to fund the Company’s standalone growth expenditures. The Company also plans to assume $2.1 billion in principal amount of Inmarsat senior secured bonds and the outstanding indebtedness under Inmarsat’s $2.4 billion senior secured credit facilities. The Company had also obtained commitments of $3.2 billion to backstop certain amendments required under the Credit Facilities and Inmarsat’s $2.4 billion senior secured credit facilities, which amendments have been obtained under the Revolving Credit Facility and Inmarsat’s $2.4 billion senior secured credit facilities.

Euro Broadband Infrastructure Co.Sàrl

On April 30, 2021, the Company acquired the remaining 51%51% interest in Euro Infrastructure Co.,EBI, a broadband services provider, from Eutelsat. By completing the acquisition, the Company gained 100%100% ownership and control of Euro Infrastructure Co.EBI and the KA-SAT satellite over EMEA and related ground infrastructure, which is expected to facilitate the diversification of the Company’s business portfolio in Europe, while establishing operations, distribution and sales of satellite-based broadband services, ahead of the anticipated ViaSat-3 (EMEA) satellite launch. The benefits and additional opportunities of the acquisition were among the factors that contributed to a purchase price resulting in the recognition of preliminary estimated goodwill, which was recorded within the Company’s satellite services segment. The goodwill recognized is not deductible for U.S. and foreign income tax purposes.

Prior to the acquisition date, the Company owned a 49%49% interest in Euro Infrastructure Co.EBI and accounted for the investment using the equity method of accounting (see Note 10 – Equity Method Investments and Related-Party Transactions for more information). The acquisition of the remaining equity interest in Euro Infrastructure Co.EBI was accounted for as a step acquisition in accordance with the authoritative guidance for business combinations (ASC 805). Accordingly, the Company allocated the purchase price of the acquired company to the net tangible assets and intangible assets acquired based upon their preliminary estimated fair values. The Company remeasured the previously held equity method investment to its fair value based upon a valuation of the acquired business, as of the date of acquisition.The Company considered multiple factors in determining the fair value of the previously held equity method investment, including, (i) the price negotiated with the selling shareholder for the remaining 51%51% interest in Euro Infrastructure Co.EBI and (ii) an income valuation model (discounted cash flow). As a result of the equity method investment remeasurement, recognition of previously unrecognized foreign currency gain and settlement of insignificant preexisting relationships, the Company recognized an insignificant total net gain included in other income, net, in the condensed consolidated statements of operations and comprehensive income (loss) in the first quarter of fiscal year 2022.

The purchase price of $327.4$327.4 million was primarily comprised of $167.0$167.0 million of cash, net of what is currently estimated to be an immaterial amount of estimated purchase price consideration to be settled among the parties over the next 24 months (up(up to plus or minus €20.020.0 million, or approximately $24.2$22.6 million, see Note 3 — Fair Value Measurements for more information) from the closing date (which after consideration of approximately $121.7$121.7 million of Euro Infrastructure Co.’sEBI’s cash on hand, resulted in a net cash outlay of approximately $51.0$51.0 million) and the fair value of previously held equity method investment of approximately $160.4$160.4 million.

32


VIASAT, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

The purchase price allocation is preliminary primarily due to the finalization of the Company’s valuation analysis and review of various tax attributes. The preliminary purchase price allocation of the acquired assets and assumed liabilities based on the estimated fair values as of April 30, 2021, slightly adjusted since the close of the acquisition, primarily between goodwill, identifiable intangible assets and property, equipment and satellites, is as follows:

 

 

(In thousands)

 

Current assets

 

$

154,479

 

Property, equipment and satellites

 

 

109,433

 

Identifiable intangible assets

 

 

35,029

 

Goodwill

 

 

29,930

 

Other assets

 

 

3,775

 

Total assets acquired

 

$

332,646

 

Total liabilities assumed

 

$

(5,296

)

Total consideration transferred

 

$

327,350

 

 

 

(In thousands)

 

Current assets

 

$

154,479

 

Property, equipment and satellites

 

 

108,696

 

Identifiable intangible assets

 

 

26,574

 

Goodwill

 

 

42,488

 

Other assets

 

 

1,028

 

Total assets acquired

 

$

333,265

 

Total liabilities assumed

 

$

(5,914

)

Total consideration transferred

 

$

327,351

 

Amounts assigned to identifiable intangible assets are preliminary and are being amortized on a straight-line basis over their estimated useful lives (which approximates the economic pattern of benefit) and are as follows as of April 30, 2021:

 

 

Preliminary

 

 

Estimated Weighted

 

 

 

Fair Value

 

 

Average Useful Life

 

 

 

(In thousands)

 

 

(In years)

 

Customer relationships

 

$

17,877

 

 

 

8

 

Other

 

 

7,851

 

 

 

7

 

Trade name

 

 

846

 

 

 

2

 

Total identifiable intangible assets

 

$

26,574

 

 

 

8

 

30


VIASAT, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

 

 

Preliminary

 

 

Estimated Weighted

 

 

Fair Value

 

 

Average Useful Life

 

 

(In thousands)

 

 

(In years)

Customer relationships

 

$

26,332

 

 

8

Other

 

 

7,851

 

 

7

Trade name

 

 

846

 

 

2

Total identifiable intangible assets

 

$

35,029

 

 

8

At the closing of the acquisition, Euro Infrastructure Co.EBI became a wholly owned subsidiary of the Company and Euro Infrastructure Co.’sEBI’s operations have been included in the Company’s condensed consolidated financial statements in the Company’s satellite services segment commencing on the acquisition date.

As Euro Infrastructure Co.’sEBI’s results of operations are not material to the Company’s consolidated results of operations, pro forma results of operations for this acquisition have not been presented.

33


VIASAT, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

RigNet, Inc.

On April 30, 2021, the Company completed the acquisition of all outstanding shares of RigNet, a publicly held leading provider of ultra-secure, intelligent networking solutions and specialized applications. The acquisition of RigNet is beneficial to the Company as it enables the Company to expand into new and adjacent industries, including renewable energy, transportation, maritime, mining and other enterprise markets. These benefits and additional opportunities were among the factors that contributed to a purchase price resulting in the recognition of preliminary estimated goodwill, which was recorded within the Company’s satellite services segment. The goodwill recognized is not deductible for U.S. and foreign income tax purposes.

The consideration transferred of approximately $317.9$317.9 million was primarily comprised of $207.2$207.2 million of the fair value of approximately 4.0 million shares of the Company’s common stock issued at the closing date, $107.3$107.3 million related to the pay down of outstanding borrowings of RigNet’s revolving credit facility, a de minimis amount in cash consideration in respect of fractional shares to the former shareholders of RigNet and an insignificant amount of other consideration. In connection with the RigNet acquisition, the Company recorded merger-related transaction costs of an insignificant amount and approximately $6.8$7.2 million, inrespectively, for the first quarter of fiscal year 2022three and nine months ended December 31, 2021, included in selling, general and administrative expenses.

The purchase price allocation is preliminary primarily due to the finalization of the Company’s valuation analysis and review of various tax attributes. The preliminary purchase price allocation of the acquired assets and assumed liabilities based on the estimated fair values as of April 30, 2021 is as follows:

 

 

(In thousands)

 

Current assets

 

$

88,166

 

Property, equipment and satellites

 

 

63,191

 

Identifiable intangible assets

 

 

221,540

 

Goodwill

 

 

29,132

 

Other assets

 

 

13,350

 

Total assets acquired

 

$

415,379

 

Current liabilities

 

 

(66,006

)

Other long-term liabilities

 

 

(31,433

)

Total liabilities assumed

 

$

(97,439

)

Total consideration transferred

 

$

317,940

 

Amounts assigned to identifiable intangible assets are preliminary and are being amortized on a straight-line basis over their estimated useful lives (which approximates the economic pattern of benefit) and are as follows as of April 30, 2021:

31


VIASAT, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

 

 

Preliminary

 

 

Estimated Weighted

 

 

 

Fair Value

 

 

Average Useful Life

 

 

 

(In thousands)

 

 

(In years)

 

Technology

 

$

85,440

 

 

 

8

 

Customer relationships

 

 

101,920

 

 

 

12

 

Trade name

 

 

25,540

 

 

 

8

 

Other

 

 

8,640

 

 

 

12

 

Total identifiable intangible assets

 

$

221,540

 

 

 

10

 

In connection with the acquisition, the Company assumed a contingent liability associated with a RigNet predecessor subsidiary. The consideration issubsidiary of approximately $13.8 million, which represented the maximum amount payable in cash or stock atunder the Company’s discretion (with the intent to pay in cash) and due in September 2021. At June 30, 2021, the fair valueterms of the agreement. As of December 31, 2021, 0 amount remains payable as the maximum remaining earn-out considerationamount payable was $9.5 million (which representspaid during the achieved maximum pay-out amount due in September 2021)first and was recorded in accrued and other liabilities.second quarters of fiscal year 2022.

34


VIASAT, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

The condensed consolidated financial statements include the operating results of RigNet from the date of acquisition. Since the acquisition date, the Company recorded approximately $34.0$52.2 million and $131.4 million in revenue for the three and $6.3nine months ended December 31, 2021, respectively, and $7.0 million and $23.2 million of net losses for the three and nine months ended December 31, 2021, respectively, with respect to the RigNet business primarily in the Company’s satellite services segment (with a portion included in ourits commercial networks segment) in the condensed consolidated statements of operations.

Unaudited Pro Forma Financial Information

The unaudited financial information in the table below summarizes the combined results of operations for the Company and RigNet on a pro forma basis, as though the companies had been combined as of the beginning of the prior fiscal year, April 1, 2020. The pro forma information is presented for informational purposes only and may not be indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of the related fiscal periods. The pro forma financial information for the three-month and nine-month periods ended June 30,December 31, 2021, and June 30,December 31, 2020 include the business combination accounting effects primarily related to the amortization and depreciation changes from acquired intangible and tangible assets, acquisition-related transaction costs and related tax effects.

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

December 31, 2021

 

 

December 31, 2020

 

 

December 31, 2021

 

 

December 31, 2020

 

 

 

(In thousands)

 

Total revenues

 

$

719,717

 

 

$

622,606

 

 

$

2,097,548

 

 

$

1,809,485

 

Net (loss) income attributable
   to Viasat, Inc.

 

$

(6,613

)

 

$

(4,308

)

 

$

9,222

 

 

$

(47,628

)

35

 

 

Three Months Ended

 

 

 

June 30, 2021

 

 

June 30, 2020

 

 

 

(In thousands)

 

Total revenues

 

$

676,477

 

 

$

583,879

 

Net income (loss) attributable to Viasat, Inc.

 

$

12,544

 

 

$

(35,774

)



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

Forward-Looking Statements

This Quarterly Report on Form 10-Q, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements regarding future events and our future results that are subject to the safe harbors created under the Securities Act of 1933 and the Securities Exchange Act of 1934. These statements are based on current expectations, estimates, forecasts and projections about the industries in which we operate and the beliefs and assumptions of our management. We use words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “goal,” “intend,” “may,” “plan,” “project,” “seek,” “should,” “target,” “will,” “would,” variations of such words and similar expressions to identify forward-looking statements. In addition, statements that refer to the proposed Inmarsat Transaction (as defined below) and any statements regarding the expected timing, benefits, synergies, growth opportunities and other financial and operating benefits thereof, the closing of the Inmarsat Transaction and timing or satisfaction of regulatory and other closing conditions, or the anticipated operations, financial position, liquidity, performance, prospects or growth and scale opportunities of the combined company; the impact of the novel coronavirus (COVID-19) pandemic on our business; our expectations regarding an end to the pandemic and a lessening of its effects on our business, including expectations for increased airline passenger traffic and in-flight connectivity (IFC) growth; projections of earnings, revenue, costs or other financial items; anticipated growth and trends in our business or key markets; future economic conditions and performance; the anticipated benefits of our acquisitions of RigNet, Inc. (RigNet) and Euro Broadband Infrastructure Sàrl (Euro Infrastructure Co.)(EBI); the development, customer acceptance and anticipated performance of technologies, products or services; satellite construction and launch activities; the performance and anticipated benefits of our ViaSat-2 and ViaSat-3 class satellites and any future satellite we may construct or acquire; the expected completion, capacity, service, coverage, service speeds and other features of our satellites, and the timing, cost, economics and other benefits associated therewith; anticipated subscriber growth; plans, objectives and strategies for future operations; international growth opportunities; the number of additional aircraft under existing contracts with commercial airlines anticipated to be put into service with our IFC systems; and other characterizations of future events or circumstances, are forward-looking statements. Readers are cautioned that these forward-looking statements are only predictions and are subject to risks, uncertainties and assumptions that are difficult to predict. Factors that could cause actual results to differ materially include: risks and uncertainties related to the Inmarsat Transaction, including the failure to obtain, or delays in obtaining, required regulatory approvals or clearances; the risk that any such approval may result in the imposition of conditions that could adversely affect Viasat, the combined company or the expected benefits of the Inmarsat Transaction; the failure to satisfy any of the closing conditions to the Inmarsat Transaction on a timely basis or at all; any adverse impact on the business of Viasat or Inmarsat as a result of uncertainty surrounding the Inmarsat Transaction; the nature, cost and outcome of any legal proceedings related to the Inmarsat Transaction; the occurrence of any event, change or other circumstances that could give rise to the termination of the definitive agreement for the Inmarsat Transaction, including in circumstances requiring Viasat to pay a termination fee; the risk that Viasat’s stock price may decline significantly if the Inmarsat Transaction is not consummated; the failure to obtain the necessary debt financing arrangements set forth in the commitment letters received in connection with the Inmarsat Transaction; risks that the Inmarsat Transaction disrupts current plans and operations or diverts management’s attention from its ongoing business; the effect of the announcement of the Inmarsat Transaction on the ability of Viasat to retain and hire key personnel and maintain relationships with its customers, suppliers and others with whom it does business; the ability of Viasat to successfully integrate Inmarsat operations, technologies and employees; the ability to realize anticipated benefits and synergies of the Inmarsat Transaction, including the expectation of enhancements to Viasat’s products and services, greater revenue or growth opportunities, operating efficiencies and cost savings; the ability to ensure continued performance and market growth of the combined company’s business; our ability to realize the anticipated benefits of the ViaSat-2 and ViaSat-3 class satellites and any future satellite we may construct or acquire; unexpected expenses related to our satellite projects; our ability to successfully implement our business plan for our broadband services on our anticipated timeline or at all; capacity constraints in our business in the lead-up to the launch of services on our ViaSat-3 satellites; risks associated with the construction, launch and operation of satellites, including the effect of any anomaly, operational failure or degradation in satellite performance; the impact of the COVID-19 pandemic on our business, suppliers, consumers, customers, and employees or the overall economy; our ability to realize the anticipated benefits of our acquisitions or strategic partnering arrangements, including the RigNet and Euro Infrastructure Co.EBI acquisitions; our ability to successfully develop, introduce and sell new technologies, products and services; audits by the U.S. Government; changes in the global business environment and economic conditions; delays in approving U.S. Government budgets and cuts in government defense expenditures; our reliance on U.S. Government contracts, and on a small number of contracts which account for a significant percentage of our revenues; reduced demand for products and services as a result of continued constraints on capital spending by customers; changes in relationships with, or the financial condition of, key customers or suppliers; our reliance on a limited number of third parties to manufacture and supply our products; increased competition; introduction of new technologies and other factors affecting the communications and defense industries generally; the effect of adverse regulatory changes (including changes affecting spectrum availability or permitted uses) on our ability to

36


sell or deploy our products and services; changes in the way others use spectrum; our inability to access additional spectrum, use spectrum for additional purposes, and/or operate satellites at additional orbital locations; competing uses of the same spectrum or orbital locations that we utilize or seek to utilize; the effect of recent changes to U.S. tax laws; our level of indebtedness and ability to comply with applicable debt covenants; our involvement in litigation, including intellectual property claims and litigation to protect our proprietary technology; our dependence on a limited number of key employees; and other factors identified under the heading “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended March 31, 2021, under the heading “Risk Factors” in Part II, Item 1A of this report, elsewhere in this report and our other filings with the Securities and Exchange Commission (the SEC). Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. We undertake no obligation to revise or update any forward-looking statements for any reason.

Company Overview

We are an innovator in communications technologies and services, focused on making connectivity accessible, available and secure for all. Our end-to-end platform of high-capacity Ka-band satellites, ground infrastructure and user terminals enables us to provide cost-effective, high-speed, high-quality broadband solutions to enterprises, consumers, military and government users around the globe, whether on the ground, in the air or at sea. In addition, our government business includes a market-leading portfolio of military tactical data link systems, satellite communication products and services, and cybersecurity and information assurance products and services. We believe that our diversification strategy—anchored in a broad portfolio of products and services—our vertical integration approach and our ability to effectively cross-deploy technologies between government and commercial applications and segments as well as across


different geographic markets, provide us with a strong foundation to sustain and enhance our leadership in advanced communications and networking technologies. Viasat, Inc. was incorporated in California in 1986, and reincorporated as a Delaware corporation in 1996.

We conduct our business through three segments: satellite services, commercial networks and government systems.

AcquisitionsInmarsat Acquisition

On November 8, 2021, we entered into a Share Purchase Agreement to combine with Connect Topco Limited, a private company limited by shares and incorporated in Guernsey (Inmarsat), with the shareholders of Inmarsat and certain management and employees who hold options and shares of a subsidiary of Inmarsat whose options and shares will be exchanged for shares of Inmarsat prior to closing (collectively, the Sellers). Pursuant to the Share Purchase Agreement, we will purchase all of the issued and outstanding shares of Inmarsat from the Sellers upon the terms and subject to the conditions set forth therein (the Inmarsat Transaction). Our board of directors has unanimously approved the Share Purchase Agreement and the proposed Inmarsat Transaction.

The total consideration payable by us under the Share Purchase Agreement consists of $850.0 million in cash, subject to adjustments, and approximately 46.36 million unregistered shares of our common stock.

The closing of the Inmarsat Transaction is subject to customary closing conditions, including receipt of regulatory approvals and clearances, and approval by our stockholders of the issuance of shares in the Inmarsat Transaction and an amendment to our certificate of incorporation to increase the number of shares of common stock authorized for issuance. The Share Purchase Agreement contains certain termination rights for both us and certain of the Sellers and further provides that, upon termination of the Share Purchase Agreement under certain circumstances, we may be obligated to pay a termination fee of up to $200.0 million or to reimburse certain out-of-pocket expenses of certain Sellers up to $40.0 million.

We have obtained financing commitments for $2.3 billion of new debt facilities in connection with the Inmarsat Transaction (which may be secured and/or unsecured), a portion of which is to be raised between the signing and closing of the Inmarsat Transaction to fund our standalone growth expenditures. We also plan to assume $2.1 billion in principal amount of Inmarsat senior secured bonds and the outstanding indebtedness under Inmarsat’s $2.4 billion senior secured credit facilities. We had also obtained commitments of $3.2 billion to backstop certain amendments required under the Revolving Credit Facility and Ex-Im Credit Facility and Inmarsat’s $2.4 billion senior secured credit facilities, which amendments had been obtained under the Revolving Credit Facility and Inmarsat’s $2.4 billion senior secured credit facilities as of the date of this report.

For more detail about the Inmarsat Transaction, please see our Current Report on Form 8-K filed with the SEC on November 8, 2021.

37


Other Acquisitions

On April 30, 2021, we completed our acquisition of the remaining 51% interest in Euro Infrastructure Co.,EBI, a leading KA-SAT satellite broadband internet service provider in Europe, Middle East and Africa (EMEA), from Eutelsat. The acquisition is expected to facilitate the diversification of our business portfolio in Europe, while establishing operations, distribution and sales of satellite-based broadband services, ahead of the anticipated ViaSat-3 (EMEA) satellite launch. We paid approximately $167.0 million in cash, net of what is currently estimated to be an immaterial amount of estimated purchase price consideration (resulting in a cash outlay of approximately $51.0 million, net of approximately $121.7 million of Euro Infrastructure Co.’sEBI’s cash on hand) and the fair value of previously held equity method investment of approximately $160.4 million. In connection with the acquisition, we remeasured the previously held equity method investment to its fair value as of the date of the acquisition, recognized previously unrecognized foreign currency gain and settlement of insignificant preexisting relationships, and as a result recorded an insignificant total net gain included in other income, net in the condensed consolidated statements of operations and comprehensive income (loss).

On April 30, 2021, we completed our acquisition of RigNet, a leading provider of ultra-secure, intelligent networking solutions and specialized applications. In connection with the acquisition, we issued approximately 4.0 million shares of our common stock to RigNet former shareholders, paid down $107.3 million of outstanding borrowings of RigNet’s revolving credit facility, paid a de minimis amount of cash in respect of fractional shares and paid an insignificant amount of other consideration. We retained approximately $20.6 million of RigNet’s cash on hand.

COVID-19

In March 2020, the global outbreak of COVID-19 was declared a pandemic by the World Health Organization and a national emergency by the U.S. Government. The COVID-19 pandemic and attempts to contain it, such as mandatory closures, “shelter-in-place” orders and travel restrictions, have caused significant disruptions and adverse effects on U.S. and global economies, including impacts to supply chains, customer demand and financial markets. We have taken measures to protect the health and safety of our employees and to work with our customers, employees, suppliers, subcontractors, distributors, resellers and communities to address the disruptions from the pandemic. Although our financial results for the three and nine months ended June 30,December 31, 2021 were impacted by the pandemic, the impact was not material to our financial position, results of operations or cash flows in such period,periods, with continued negative impacts particularly in our commercial aviation business offset by strong demand in our fixed broadband services business and other parts of our business. We continue to expect our diversified businesses to provide resiliency for the remainder of fiscal year 2022.

Our government systems segment, which represented 41%38% and 39% of our total revenues during the three and nine months ended June 30,December 31, 2021, respectively, continued to perform in line with our expectations. Demand for products and services in our government systems segment remained strong despite the evolving COVID-19 pandemic, although our government business continued to experience some administrative delays on certain contractual vehicles as government customers continue to adjust toreflecting the challenges inherent in the remote work environment resulting from the COVID-19 pandemic.

SinceDuring the onset of pandemic, lockdowns in March 2020, we have experienced increased demand for our premium high-speed plans in our fixed broadband services business, reflecting customers’ increased bandwidth needs in a remote working/distance schooling environment. However, the pandemic also caused a severe decline in global air traffic, which reduced demand for our in-flight services and IFC systems in our satellite services and commercial networks segments, respectively. While currentdomestic airline traffic increased during calendar year 2021 (with increased planes in service and higher passenger volumes), global airline traffic is still a fraction of pre-pandemic activity, domestic airline traffic continues to show signs of improvement. As a result, our in-flight services business showed modest improvement in the quarter ended June 30, 2021 compared to the quarter ended March 31, 2021, with increased planes in service and passenger volumes.activity. We expect to continue to see negative impacts on revenues and operating cash flows from our IFC businesses in the remainder of fiscal year 2022 and potentially beyond, but for the effects to continue to lessen over time with increases in passenger air traffic and the return to service of additional currently inactive aircraft. In fiscal year 2020, prior to the pandemic, less than 10% of our total revenues were generated by services and products provided to commercial airlines reported in our satellite services and commercial networks segments.

The extent of the impact of the COVID-19 pandemic on our business in the remainder of fiscal year 2022 and potentially beyond will depend on many factors, including the duration and scope of the public health emergency, the extent, duration and


effectiveness of containment actions taken, the efficacy and extent of vaccination programs, the extent of disruption to important global, regional and local supply chains and economic markets, and the impact of the pandemic on overall supply and demand, global air travel, consumer confidence, discretionary spending levels and levels of economic activity.

38


Satellite Services

Our satellite services segment uses our proprietary technology platform to provide satellite-based high-speed broadband services around the globe for use in commercial applications. Our proprietary Ka-band satellites are at the core of our technology platform, and we also have access to a number of Ka-band and Ku-band satellites in service globally. We own three Ka-band satellites in service over North America:America, including our second-generation ViaSat-2 satellite (launched in 2017), our first-generation ViaSat-1 satellite (launched in 2011) and the WildBlue-1 satellite (launched in 2007), and after acquiring the remaining interest in Euro Infrastructure Co. in the first quarter of fiscal year 2022, we also own the KA-SAT satellite over EMEA. In addition, we have lifetime leases of Ka-band capacity on two satellites—one over North America and a second one over EMEA. We also have a global constellation of three third-generation ViaSat-3 class satellites under construction. We expect our ViaSat-3 constellation, once in service, to enable us to deliver affordable connectivity across most of the world.

The primary services offered by our satellite services segment are comprised of:

Fixed broadband services, which provide consumers and businesses with high-speed, high-quality broadband internet access and Voice over Internet Protocol (VoIP) services, primarily in the United States as well as in various countries in Europe and Latin America.
In-flight services, which provide industry-leading IFC, wireless in-flight entertainment and aviation software services. As of December 31, 2021, we had our IFC systems installed and in service on approximately 1,880 commercial aircraft, of which, due to impacts of the COVID-19 pandemic approximately 80 were inactive at quarter end. We anticipate that approximately 860 additional commercial aircraft under existing customer agreements with commercial airlines will be put into service with our IFC systems. However, the timing of installation and entry into service for additional aircraft under existing customer agreements may be delayed due to COVID-19 impacts. Additionally, due to the nature of commercial airline contracts, there can be no assurance that anticipated IFC services will be activated on all such additional commercial aircraft. See the section entitled “COVID-19” above for a discussion of the impact of the COVID-19 pandemic on our in-flight services business.
Community Internet services,which offer innovative, affordable, satellite-based connectivity in communities that have little, or no, access to the internet. The services help foster digital inclusion by enabling millions of people to connect to affordable high-quality internet services via a centralized community hotspot connected to the internet via satellite. Since launch, our Community Internet services have reached approximately 2 million people living and working in thousands of rural, suburban and urban communities in Mexico. We are trialing services in advance of full commercial launch in other countries, including Brazil, Guatemala and Nigeria.
Other mobile broadband services, which include high-speed, satellite-based internet services to seagoing vessels (such as energy offshore vessels, cruise ships, consumer ferries and yachts), as well as L-band managed services enabling real-time machine-to-machine (M2M) position tracking, management of remote assets and operations, and visibility into critical areas of the supply chain.
Advanced software and communication infrastructure services, which include ultra-secure solutions spanning global IP connectivity, bandwidth-optimized over-the-top applications, industrial Internet-of-Things big data enablement and industry-leading machine learning analytics. These services support the evolution of digital enablement, and primarily result from our acquisition of RigNet in the first quarter of fiscal year 2022.

Fixed broadband services, which provide consumers and businesses with high-speed, high-quality broadband internet access and Voice over Internet Protocol (VoIP) services, primarily in the United States as well as in various countries in Europe and Latin America.

In-flight services, which provide industry-leading IFC, wireless in-flight entertainment and aviation software services. As of June 30, 2021, we had our IFC systems installed and in service on approximately 1,550 commercial aircraft, of which, due to impacts of the COVID-19 pandemic approximately 150 were inactive at quarter end. We anticipate that approximately 1,160 additional commercial aircraft under existing customer agreements with commercial airlines will be put into service with our IFC systems. However, the timing of installation and entry into service for additional aircraft under existing customer agreements may be delayed due to COVID-19 impacts. Additionally, due to the nature of commercial airline contracts, there can be no assurance that anticipated IFC services will be activated on all such additional commercial aircraft. See the section entitled “COVID-19” above for a discussion of the impact of the COVID-19 pandemic on our in-flight services business.  

Community Internet services,which offer innovative, affordable, satellite-based connectivity in communities with that have little, or no, access to the internet. The services help foster digital inclusion by enabling millions of people to connect to affordable high-quality internet services via a centralized community hotspot connected to the internet via satellite. Since launch, our Community Internet services have reached approximately 2 million people living and working in thousands of rural, suburban and urban communities in Mexico. We are trialing services in advance of full commercial launch in other countries, including Brazil, Guatemala and Nigeria.

Other mobile broadband services, which include high-speed, satellite-based internet services to seagoing vessels (such as energy offshore vessels, cruise ships, consumer ferries and yachts), as well as L-band managed services enabling real-time machine-to-machine (M2M) position tracking, management of remote assets and operations, and visibility into critical areas of the supply chain.

Advanced software and communication infrastructure services, which include ultra-secure solutions spanning global IP connectivity, bandwidth-optimized over-the-top applications, industrial Internet-of-Things big data enablement and industry-leading machine learning analytics. These services support the evolution of digital enablement, and primarily result from our acquisition of RigNet in the first quarter of fiscal year 2022.

The assets and results of operations of our recent acquisitions, Euro Infrastructure Co.EBI and RigNet, are primarily included in our satellite services segment (with insignificant amounts included in our commercial networks segment).


Commercial Networks

Our commercial networks segment develops and sells a wide array of advanced satellite and wireless products, antenna systems and terminal solutions that support or enable the provision of high-speed fixed and mobile broadband services. We design, develop and produce space system solutions for multiple orbital regimes, including geostationary (GEO), medium earth orbit (MEO) and low earth orbit (LEO). The primary products, systems, solutions and services offered by our commercial networks segment are comprised of:

Mobile broadband satellite communication systems, designed for use in aircraft, seagoing vessels and land-mobile systems.
Fixed broadband satellite communication systems, including next-generation satellite network infrastructure and ground terminals.

39


Antenna systems, including state-of-the-art ground and airborne terminals, antennas and gateways for terrestrial and satellite customer applications, mobile satellite communication, Ka-band earth stations and other multi-band antennas.
Satellite networking development, including specialized design and technology services covering all aspects of satellite communication system architecture and technology.
Space systems, including the design and development of high-capacity Ka-band satellites and associated payload technologies for our own satellite fleet as well as for third parties.

Mobile broadband satellite communication systems, designed for use in aircraft, seagoing vessels and land-mobile systems.

Fixed broadband satellite communication systems, including next-generation satellite network infrastructure and ground terminals.

Antenna systems, including state-of-the-art ground and airborne terminals, antennas and gateways for terrestrial and satellite customer applications, mobile satellite communication, Ka-band earth stations and other multi-band antennas.

Satellite networking development, including specialized design and technology services covering all aspects of satellite communication system architecture and technology.

Space systems, including the design and development of high-capacity Ka-band satellites and associated payload technologies for our own satellite fleet as well as for third parties.

Government Systems

Our government systems segment offers a broad array of products and services designed to enable the collection and transmission of secure real-time digital information and communications between fixed and mobile command centers, intelligence and defense platforms and individuals in the field. The primary products and services of our government systems segment include:

Government mobile broadband products and services, which provide military and government users with high-speed, real-time, broadband and multimedia connectivity in key regions of the world, as well as line-of-sight and beyond-line-of-sight Intelligence Surveillance and Reconnaissance missions.
Government satellite communication systems, which offer an array of portable, mobile and fixed broadband modems, terminals, network access control systems and antenna systems, and include products designed for manpacks, aircraft, unmanned aerial vehicles, seagoing vessels, ground-mobile vehicles and fixed applications.
Secure networking, cybersecurity and information assurance products and services, which provide advanced, high-speed IP-based “Type 1” and High Assurance Internet Protocol Encryption (HAIPE®)-compliant encryption solutions that enable military and government users to communicate information securely over networks, and that protect the integrity of data stored on computers and storage devices.
Tactical data links, including our Battlefield Awareness and Targeting System — Dismounted (BATS-D) handheld Link 16 radios, our Small Tactical Terminal (STT) 2-channel radios for manned and unmanned applications, “disposable” defense data links, and our Multifunctional Information Distribution System (MIDS) and MIDS Joint Tactical Radio Systems (MIDS-JTRS) terminals for military fighter jets.

Government mobile broadband products and services, which provide military and government users with high-speed, real-time, broadband and multimedia connectivity in key regions of the world, as well as line-of-sight and beyond-line-of-sight Intelligence Surveillance and Reconnaissance missions.

Government satellite communication systems, which offer an array of portable, mobile and fixed broadband modems, terminals, network access control systems and antenna systems, and include products designed for manpacks, aircraft, unmanned aerial vehicles, seagoing vessels, ground-mobile vehicles and fixed applications.

Secure networking, cybersecurity and information assurance products and services, which provide advanced, high-speed IP-based “Type 1” and High Assurance Internet Protocol Encryption (HAIPE®)-compliant encryption solutions that enable military and government users to communicate information securely over networks, and that protect the integrity of data stored on computers and storage devices.

Tactical data links, including our Battlefield Awareness and Targeting System — Dismounted (BATS-D) handheld Link 16 radios, our Small Tactical Terminal (STT) 2-channel radios for manned and unmanned applications, “disposable” defense data links, and our Multifunctional Information Distribution System (MIDS) and MIDS Joint Tactical Radio Systems (MIDS-JTRS) terminals for military fighter jets.

Sources of Revenues

Our satellite services segment revenues are primarily derived from our fixed broadband services, in-flight services and in-flight services.advanced software and communication infrastructure services (acquired through the RigNet acquisition).

Revenues in our commercial networks and government systems segments are primarily derived from three types of contracts: fixed-price, cost-reimbursement and time-and-materials contracts. Fixed-price contracts (which require us to provide products and services under a contract at a specified price) comprised approximately 89%91% of our total revenues for these segments for both the three months ended December 31, 2021 and 85%2020, and approximately 90% and 88% of our total revenues for these segments for the threenine months ended June 30,December 31, 2021 and 2020, respectively. The remainder of our revenues in these segments for such periods was derived primarily from cost-reimbursement contracts (under which we are reimbursed for all actual costs incurred in performing the contract to the extent such costs are within the contract ceiling and allowable under the terms of the contract, plus a fee or profit) and from time-and-materials contracts (which reimburse us for the number of labor hours expended at an established hourly rate negotiated in the contract, plus the cost of materials utilized in providing such products or services).


Our ability to grow and maintain our revenues in our commercial networks and government systems segments has to date depended on our ability to identify and target markets where the customer places a high priority on the technology solution, and our ability to obtain additional sizable contract awards. Due to the nature of this process, it is difficult to predict the probability and timing of obtaining awards in these markets.

Historically, a significant portion of our revenues in our commercial networks and government systems segments has been derived from customer contracts that include the development of products. The development efforts are conducted in direct response to the customer’s specific requirements and, accordingly, expenditures related to such efforts are included in cost of sales when incurred and the related funding (which includes a profit component) is included in revenues. Revenues for our funded development from our customer contracts were approximately 23%24% and 27%20% of our

40


total revenues for the three months ended June 30,December 31, 2021 and 2020, respectively.respectively, and approximately 23% of our total revenues for both the nine months ended December 31, 2021 and 2020.

We also incur independent research and development (IR&D) expenses, which are not directly funded by a third party. IR&D expenses consist primarily of salaries and other personnel-related expenses, supplies, prototype materials, testing and certification related to research and development (R&D) projects. IR&D expenses were approximately 5% of total revenues during both the three months ended June 30,December 31, 2021 and 2020, and approximately 5% of total revenues during both the nine months ended December 31, 2021 and 2020. As a government contractor, we are able to recover a portion of our IR&D expenses pursuant to our government contracts.

Critical Accounting Policies and Estimates

Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We consider the policies discussed below to be critical to an understanding of our financial statements because their application places the most significant demands on management’s judgment, with financial reporting results relying on estimation about the effect of matters that are inherently uncertain. We describe the specific risks for these critical accounting policies in the following paragraphs. For all of these policies, we caution that future events rarely develop exactly as forecast, and even the best estimates routinely require adjustment.

Revenue recognition

We apply the five-step revenue recognition model under Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (commonly referred to as Accounting Standards Codification (ASC) 606) to our contracts with our customers. Under this model, we (1) identify the contract with the customer, (2) identify our performance obligations in the contract, (3) determine the transaction price for the contract, (4) allocate the transaction price to our performance obligations and (5) recognize revenue when or as we satisfy our 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.

The timing of satisfaction of performance obligations may require judgment. We derive a substantial portion of our revenues from contracts with customers for services, primarily consisting of connectivity services. These contracts typically require advance or recurring monthly payments by the customer. Our 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). We evaluate whether broadband equipment provided to our customer as part of the delivery of connectivity services represents a lease in accordance with ASC 842. As discussed in Note 1 – Basis of Presentation – Leases to our condensed consolidated financial statements, for broadband equipment leased to fixed broadband customers in conjunction with the delivery of connectivity services, we account for the lease and non-lease components of connectivity services arrangement as a single performance obligation as the connectivity services represent the predominant component.

We also derive a portion of our 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, we consider indicators that include, but are not limited to, whether (1) we have 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 our 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). Our 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

41


each customer. Under the typical payment terms of our U.S. Government fixed-price contracts, the customer pays us 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, our U.S. Government fixed-price contracts generally result in revenue recognized in excess of billings which we present as unbilled accounts receivable on the balance sheet. Amounts billed and due from our 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 our U.S. Government cost-type contracts, the customer generally pays us for our actual costs incurred within a short period of time. For non-U.S. Government contracts, we typically receive interim payments as work progresses, although for some contracts, we may be entitled to receive an advance payment. We recognize a liability for these advance payments in excess of revenue recognized and present 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 us 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 us and we have 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. We generally use the cost-to-cost measure of progress for our contracts because that best depicts the transfer of control to the customer which occurs as we incur costs on our 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. Estimating the total costs at completion of a performance obligation requires management to make estimates related to items such as subcontractor performance, material costs and availability, labor costs and productivity and the costs of overhead. 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. A one percent variance in our future cost estimates on open fixed-price contracts as of June 30,December 31, 2021 would change our income (loss) before income taxes by an insignificant amount.

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 our performance obligations, the estimation of total revenue, and where applicable the cost at completion, is complex, subject to many variables and requires significant judgment. Our 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. We estimate variable consideration at the amount to which we expect to be entitled. We include 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. Our estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of our anticipated performance and all information (historical, current and forecasted) that is reasonably available to us. In the event an agreement includes embedded financing components, we recognize interest expense or interest income on the embedded financing components using the 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. We have elected the practical expedient not to adjust the promised amount of consideration for the effects of a significant financing component if we expect, at contract inception, that the period between when we transfer 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, we utilize the observable price of a good or service when we sell that good or service separately in similar circumstances and to similar customers. If a standalone selling price is not directly observable, we estimate 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.

42


Warranty reserves

We provide limited warranties on our products for periods of up to five years. We record a liability for our warranty obligations when we ship the products or they are included in long-term construction contracts based upon an estimate of expected warranty costs. Amounts expected to be incurred within 12 months are classified as accrued liabilities and amounts expected to be incurred beyond 12 months are classified as other liabilities in the condensed consolidated financial statements. For mature products, we estimate the warranty costs based on historical experience with the particular product. For newer products that do not have a history of warranty costs, we base our estimates on our experience with the technology involved and the types of failures that may occur. It is possible that our underlying assumptions will not reflect the actual experience, and, in that case, we will make future adjustments to the recorded warranty obligation.

Property, equipment and satellites

Satellites and other property and equipment are recorded at cost or in the case of certain satellites and other property acquired, the fair value at the date of acquisition, net of accumulated depreciation. Capitalized satellite costs consist primarily of the costs of satellite construction and launch, including launch insurance and insurance during the period of in-orbit testing, the net present value of performance incentive payments expected to be payable to the satellite manufacturers (dependent on the continued satisfactory performance of the satellites), costs directly associated with the monitoring and support of satellite construction, and interest costs incurred during the period of satellite construction. We also construct earth stations, network operations systems and other assets to support our satellites, and those construction costs, including interest, are capitalized as incurred. At the time satellites are placed in service, we estimate the useful life of our satellites for depreciation purposes based upon an analysis of each satellite’s performance against the original manufacturer’s orbital design life, estimated fuel levels and related consumption rates, as well as historical satellite operating trends. We periodically review the remaining estimated useful life of our satellites to determine if revisions to the estimated useful lives are necessary.

We own three satellites in service over North America (ViaSat-2, ViaSat-1 and WildBlue-1) and, after acquiring the remaining interest in Euro Infrastructure Co.EBI in the first quarter of fiscal year 2022, we also own the KA-SAT satellite over EMEA. In addition, we have lifetime leases of Ka-band capacity on two satellites. We also have a global constellation of three third-generation ViaSat-3 class satellites under construction. In addition, we own related earth stations and networking equipment for all of our satellites. Property, equipment and satellites, net also includes the customer premise equipment units leased to subscribers under a retail leasing program as part of our satellite services segment.

Leases

For contracts entered into on or after April 1, 2019, we assess at contract inception whether the contract is, or contains, a lease. Generally, we determine that a lease exists when (1) the contract involves the use of a distinct identified asset, (2) we obtain the right to substantially all economic benefits from use of the asset, and (3) we have the right to direct the use of the asset. A lease is classified as a finance lease when one or more of the following criteria are met: (1) the lease transfers ownership of the asset by the end of the lease term, (2) the lease contains an option to purchase the asset that is reasonably certain to be exercised, (3) the lease term is for a major part of the remaining useful life of the asset, (4) the present value of the lease payments equals or exceeds substantially all of the fair value of the asset or (5) the asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term. A lease is classified as an operating lease if it does not meet any of these criteria.

At the lease commencement date, we recognize a right-of-use asset and a lease liability for all leases, except short-term leases with an original term of 12 months or less. The right-of-use asset represents the right to use the leased asset for the lease term. The lease liability represents the present value of the lease payments under the lease. The right-of-use asset is initially measured at cost, which primarily comprises the initial amount of the lease liability, less any lease incentives received. All right-of-use assets are periodically reviewed for impairment in accordance with standards that apply to long-lived assets. The lease liability is initially measured at the present value of the lease payments, discounted using an estimate of our incremental borrowing rate for a collateralized loan with the same term as the underlying leases.


Lease payments included in the measurement of lease liabilities consist of (1) fixed lease payments for the noncancelable lease term, (2) fixed lease payments for optional renewal periods where it is reasonably certain the renewal option will be exercised, and (3) variable lease payments that depend on an underlying index or rate, based on the index or rate in effect at lease commencement. Certain of our real estate lease agreements require variable lease payments that do not depend on an underlying index or rate established at lease commencement. Such payments and changes in payments based on a rate or index are recognized in operating expenses when incurred.

43


Lease expense for operating leases consists of the fixed lease payments recognized on a straight-line basis over the lease term plus variable lease payments as incurred. Lease expense for finance leases consists of the depreciation of assets obtained under finance leases on a straight-line basis over the lease term and interest expense on the lease liability based on the discount rate at lease commencement. For both operating and finance leases, lease payments are allocated between a reduction of the lease liability and interest expense.

For broadband equipment leased to fixed broadband customers in conjunction with the delivery of connectivity services, we have made an accounting policy election not to separate the broadband equipment from the related connectivity services. The connectivity services are the predominant component of these arrangements. The connectivity services are accounted for in accordance ASC 606. We are also a lessor for certain insignificant communications equipment. These leases meet the criteria for operating lease classification. Lease income associated with these leases is not material.

Impairment of long-lived and other long-term assets (property, equipment and satellites, and other assets, including goodwill)

In accordance with the authoritative guidance for impairment or disposal of long-lived assets (ASC 360), we assess potential impairments to our long-lived assets, including property, equipment and satellites and other assets, when there is evidence that events or changes in circumstances indicate that the carrying value may not be recoverable. We recognize an impairment loss when the undiscounted cash flows expected to be generated by an asset (or group of assets) are less than the asset’s carrying value. Any required impairment loss would be measured as the amount by which the asset’s carrying value exceeds its fair value, and would be recorded as a reduction in the carrying value of the related asset and charged to results of operations. No material impairments were recorded by us for the three and nine months ended June 30,December 31, 2021 and 2020.

We account for our goodwill under the authoritative guidance for goodwill and other intangible assets (ASC 350) and the provisions of ASU 2017-04, Simplifying the Test for Goodwill Impairment, which we early adopted in fiscal year 2020. Current authoritative guidance allows us to first assess qualitative factors to determine whether it is necessary to perform the quantitative goodwill impairment test. If, after completing the qualitative assessment, we determine that it is more likely than not that the estimated fair value is greater than the carrying value, we conclude that no impairment exists. Alternatively, if we determine in the qualitative assessment that it is more likely than not that the fair value is less than its carrying value, then we perform a quantitative goodwill impairment test to identify both the existence of an impairment and the amount of impairment loss, by comparing the fair value of the reporting unit with its carrying amount, including goodwill. If the estimated fair value of the reporting unit is less than the carrying value, then a goodwill impairment charge will be recognized in the amount by which the carrying amount exceeds the fair value, limited to the total amount of goodwill allocated to that reporting unit. We test goodwill for impairment during the fourth quarter every fiscal year and when an event occurs or circumstances change such that it is reasonably possible that an impairment may exist.

In accordance with ASC 350, we assess qualitative factors to determine whether goodwill is impaired. The qualitative analysis includes assessing the impact of changes in certain factors including: (1) changes in forecasted operating results and comparing actual results to projections, (2) changes in the industry or our competitive environment since the acquisition date, (3) changes in the overall economy, our market share and market interest rates since the acquisition date, (4) trends in the stock price and related market capitalization and enterprise values, (5) trends in peer companies’ total enterprise value metrics, and (6) additional factors such as management turnover, changes in regulation and changes in litigation matters.

Based on our qualitative assessment performed during the fourth quarter of fiscal year 2021, we concluded that it was more likely than not that the estimated fair value of our reporting units exceeded their carrying value as of March 31, 2021, and therefore, determined it was not necessary to perform a quantitative goodwill impairment test.

44


Income taxes and valuation allowance on deferred tax assets

Management evaluates the realizability of our deferred tax assets and assesses the need for a valuation allowance on a quarterly basis to determine if the weight of available evidence suggests that an additional valuation allowance is


needed. In accordance with the authoritative guidance for income taxes (ASC 740), net deferred tax assets are reduced by a valuation allowance if, based on all the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. In the event that our estimate of taxable income is less than that required to utilize the full amount of any deferred tax asset, a valuation allowance is established, which would cause a decrease to income in the period such determination is made. Our valuation allowance against deferred tax assets increased $23.5 million from $47.1 million at March 31, 2021 to $70.6$74.5 million at June 30,December 31, 2021. The valuation allowance relates to state and foreign net operating loss carryforwards, state R&D tax credit carryforwards and foreign tax credit carryforwards.

Our analysis of the need for a valuation allowance on deferred tax assets considered historical as well as forecasted future operating results. In addition, our evaluation considered other factors, including our contractual backlog, our history of positive earnings, current earnings trends assuming our satellite services segment continues to grow, taxable income adjusted for certain items, and forecasted income by jurisdiction. We also considered the period over which these net deferred tax assets can be realized and our history of not having federal tax loss carryforwards expire unused.

Accruals for uncertain tax positions are provided for in accordance with the authoritative guidance for accounting for uncertainty in income taxes (ASC 740). Under the authoritative guidance, we may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The authoritative guidance addresses the derecognition of income tax assets and liabilities, classification of deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, and income tax disclosures.

We are subject to income taxes in the United States and numerous foreign jurisdictions. In the ordinary course of business, there are calculations and transactions where the ultimate tax determination is uncertain. In addition, changes in tax laws and regulations as well as adverse judicial rulings could adversely affect the income tax provision. We believe we have adequately provided for income tax issues not yet resolved with federal, state and foreign tax authorities. However, if these provided amounts prove to be more than what is necessary, the reversal of the reserves would result in tax benefits being recognized in the period in which we determine that provision for the liabilities is no longer necessary. If an ultimate tax assessment exceeds our estimate of tax liabilities, an additional charge to expense would result.

Results of Operations

The following table presents, as a percentage of total revenues, income statement data for the periods indicated:

 

Three Months Ended

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

June 30,

2021

 

 

June 30,

2020

 

 

December 31,
2021

 

 

December 31,
2020

 

 

December 31,
2021

 

 

December 31,
2020

 

Revenues:

 

 

100

%

 

 

100

%

 

100

%

 

100

%

 

100

%

 

100

%

Product revenues

 

 

44

 

 

 

47

 

 

44

 

46

 

44

 

47

 

Service revenues

 

 

56

 

 

 

53

 

 

56

 

54

 

56

 

53

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of product revenues

 

 

33

 

 

 

35

 

 

33

 

34

 

33

 

35

 

Cost of service revenues

 

 

35

 

 

 

37

 

 

36

 

34

 

36

 

35

 

Selling, general and administrative

 

 

23

 

 

 

23

 

 

24

 

23

 

23

 

23

 

Independent research and development

 

 

5

 

 

 

5

 

 

5

 

5

 

5

 

5

 

Amortization of acquired intangible assets

 

 

1

 

 

 

 

 

 

1

 

 

 

 

 

 

1

 

 

 

 

Income (loss) from operations

 

 

2

 

 

 

(1

)

Income from operations

 

1

 

4

 

1

 

2

 

Interest expense, net

 

 

(1

)

 

 

(2

)

 

 

(1

)

 

 

(1

)

 

 

(1

)

 

 

(2

)

Income (loss) before income taxes

 

 

2

 

 

 

(3

)

Benefit from income taxes

 

 

1

 

 

 

1

 

Net income (loss)

 

 

3

 

 

 

(2

)

Net income (loss) attributable to Viasat, Inc.

 

 

3

 

 

 

(2

)

(Loss) income before income taxes

 

 

2

 

1

 

 

(Provision for) benefit from income taxes

 

 

(1

)

 

 

 

Net (loss) income

 

(1

)

 

1

 

1

 

 

Net (loss) income attributable to Viasat, Inc.

 

(1

)

 

1

 

1

 

 


45


Three Months Ended June 30,December 31, 2021 vs. Three Months Ended June 30,December 31, 2020

Revenues

 

Three Months Ended

 

 

Dollar

 

 

Percentage

 

 

Three Months Ended

 

 

Dollar

 

 

Percentage

 

(In millions, except percentages)

 

June 30,

2021

 

 

June 30,

2020

 

 

Increase

(Decrease)

 

 

Increase

(Decrease)

 

 

December 31,
2021

 

 

December 31,
2020

 

 

Increase
(Decrease)

 

 

Increase
(Decrease)

 

Product revenues

 

$

293.3

 

 

$

250.6

 

 

$

42.6

 

 

 

17

%

 

$

316.1

 

$

266.5

 

$

49.6

 

19

%

Service revenues

 

 

371.6

 

 

 

279.9

 

 

 

91.7

 

 

 

33

%

 

 

403.6

 

 

 

309.0

 

 

 

94.5

 

 

31

%

Total revenues

 

$

664.9

 

 

$

530.5

 

 

$

134.4

 

 

 

25

%

 

$

719.7

 

$

575.6

 

$

144.2

 

25

%

Our total revenues grewincreased by $134.4$144.2 million as a result of a $91.7$94.5 million increase in service revenues and a $42.6$49.6 million increase in product revenues. The service revenue increase was due todriven by increases of $72.1$88.9 million in our satellite services segment, $14.6$3.4 million in our government systems segment and $5.0$2.2 million in our commercial networks segment. The product revenue increase was driven primarily by ana $47.4 million increase of $46.4 million in our commercial networks segment partially offset byand a $3.8$2.3 million decreaseincrease in our government systems segment.

Cost of revenues

 

Three Months Ended

 

 

Dollar

 

 

Percentage

 

 

Three Months Ended

 

 

Dollar

 

 

Percentage

 

(In millions, except percentages)

 

June 30,

2021

 

 

June 30,

2020

 

 

Increase

(Decrease)

 

 

Increase

(Decrease)

 

 

December 31,
2021

 

 

December 31,
2020

 

 

Increase
(Decrease)

 

 

Increase
(Decrease)

 

Cost of product revenues

 

$

219.3

 

 

$

187.9

 

 

$

31.5

 

 

 

17

%

 

$

237.5

 

 

$

196.9

 

 

$

40.6

 

21

%

Cost of service revenues

 

 

234.6

 

 

 

197.7

 

 

 

37.0

 

 

 

19

%

 

 

262.6

 

 

 

194.4

 

 

 

68.2

 

 

35

%

Total cost of revenues

 

$

454.0

 

 

$

385.6

 

 

$

68.4

 

 

 

18

%

 

$

500.1

 

 

$

391.3

 

 

$

108.8

 

28

%

Cost of revenues increased $68.4$108.8 million due to increases of $37.0$68.2 million in cost of service revenues and $31.5$40.6 million in cost of product revenues. The cost of service revenue increase was primarily due to increased service revenues, mainly from our satellite services segment, causing a $64.8$59.5 million increase in cost of service revenues on a constant margin basis. The increase in cost of service revenues was partially offsetalso driven by improvedlower margins, primarily driven by our IFCin fixed broadband services in our satellite services segment. The increase in cost of product revenue increase primarily related torevenues was mostly driven by increased product revenues, causing a $32.0$36.7 million increase in cost of product revenues on a constant margin basis, mainly in our mobile broadband satellite communication systems products in our commercial networks segment.

Selling, general and administrative expenses

 

Three Months Ended

 

 

Dollar

 

 

Percentage

 

 

Three Months Ended

 

 

Dollar

 

 

Percentage

 

(In millions, except percentages)

 

June 30,

2021

 

 

June 30,

2020

 

 

Increase

(Decrease)

 

 

Increase

(Decrease)

 

 

December 31,
2021

 

 

December 31,
2020

 

 

Increase
(Decrease)

 

 

Increase
(Decrease)

 

Selling, general and administrative

 

$

154.2

 

 

$

121.0

 

 

$

33.2

 

 

 

27

%

 

$

170.2

 

$

132.4

 

$

37.8

 

29

%

The $33.2$37.8 million increase in selling, general and administrative (SG&A) expenses reflected an increase in support costs of $25.6$26.3 million, driven primarily by acquisition-related expenses of approximately $11.8 million related to the Inmarsat Transaction as well as support costs related to RigNet, which was reflected in all three segments, withacquired during the highest increase in our satellite services segment.first quarter of fiscal year 2022. The increase in SG&A expenses was also driven by $7.6$10.7 million of higher selling costs, reflected primarily in our satellite services and government systems segments. SG&A expenses consisted primarily of personnel costs and expenses for business development, marketing and sales, bid and proposal, facilities, finance, contract administration and general management.

Independent research and development

 

Three Months Ended

 

 

Dollar

 

 

Percentage

 

 

Three Months Ended

 

 

Dollar

 

 

Percentage

 

(In millions, except percentages)

 

June 30,

2021

 

 

June 30,

2020

 

 

Increase

(Decrease)

 

 

Increase

(Decrease)

 

 

December 31,
2021

 

 

December 31,
2020

 

 

Increase
(Decrease)

 

 

Increase
(Decrease)

 

Independent research and development

 

$

34.5

 

 

$

27.6

 

 

$

6.8

 

 

 

25

%

 

$

37.3

 

$

28.8

 

$

8.5

 

30

%

The $6.8$8.5 million increase in IR&D expenses was primarily the result of increasesa $5.9 million increase in our commercial networks and government systems segments primarily related to an increase in IR&D expensessegment (primarily related to next-generation satellite platformspayload technologies and payload technologies.commercial aeronautical broadband programs) and a $2.6 million increase in our government systems segment (primarily related to the development of next-generation dual band mobility solutions and the advancement of integrated government satellite communications platforms).


46


Amortization of acquired intangible assets

We amortize our acquired intangible assets from prior acquisitions over their estimated useful lives, which range from two to 1220 years. The $4.4$6.2 million increase in amortization of acquired intangible assets in the firstthird quarter of fiscal year 2022 compared to the prior year period was primarily related to the amortization of new intangibles acquired as a result of the acquisition of RigNet and of the remaining 51% interest in Euro Infrastructure Co. and of RigNetEBI in April 2021. CurrentThe current and expected amortization expense for acquired intangible assets for each of the following periods is as follows:

 

Amortization

 

 

(In thousands)

 

 

Amortization

 

For the three months ended June 30, 2021

 

$

5,929

 

 

(In thousands)

 

For the nine months ended December 31, 2021

 

$

20,859

 

 

 

 

 

 

 

 

Expected for the remainder of fiscal year 2022

 

$

23,756

 

 

$

7,532

 

Expected for fiscal year 2023

 

 

31,673

 

 

 

30,128

 

Expected for fiscal year 2024

 

 

30,123

 

 

 

28,678

 

Expected for fiscal year 2025

 

 

27,848

 

 

 

26,540

 

Expected for fiscal year 2026

 

 

27,696

 

 

 

26,388

 

Thereafter

 

 

120,845

 

 

 

118,584

 

 

$

261,941

 

 

$

237,850

 

Interest income

The decrease in interestInterest income for the three months ended June 30,December 31, 2021 was relatively flat compared to the prior year period was mainly the result of lower average invested cash balances during the first quarter of fiscal year 2022 compared to the prior year period.

Interest expense

The $3.2$2.5 million decrease in interest expense for the three months ended June 30,December 31, 2021 compared to the prior year period was primarily the result of an increase in the amount of interest capitalized during the third quarter of fiscal year 2022 compared to the periodprior year period, partially offset by an increase in interest expense attributable to higher borrowings under our 6.500% Senior Notes due 2028 (the 2028 Notes), which were issued in late June 2020.Revolving Credit Facility compared to the prior year period.

Income taxes

For the three months ended June 30,December 31, 2021, we recorded an income tax benefitprovision of $4.1$3.5 million, resulting in an effective tax benefit rate of 29%negative 701%. For the three months ended June 30,December 31, 2020, we recorded an income tax benefitprovision of $5.7$7.0 million, resulting in an effective tax benefit rate of 39%50%. The effective tax benefit rates for thesuch periods differed from the U.S. statutory rate primarily due to the benefit of federal and state R&D tax credits.In addition,credits and the effectiveexpense for tax rate fordeficiencies upon settlement of stock-based compensation during the three months ended June 30, 2021 included a tax benefit for the reversal of a deferred tax liability recorded for Euro Infrastructure Co.’s outside basis difference upon assertion to indefinitely reinvest future earnings.periods.

Ordinarily, the effective tax rate at the end of an interim period is calculated using an estimate of the annual effective tax rate expected to be applicable for the full fiscal year. However, when a reliable estimate cannot be made, we compute our provision for income taxes using the actual effective tax rate (discrete method) for the year-to-date period. Our effective tax rate is highly influenced by the amount of our R&D tax credits. A small change in estimated annual pretax income (loss) can produce a significant variance in the annual effective tax rate given our expected amount of R&D tax credits. This variability provides an unreliable estimate of the annual effective tax rate. As a result, and in accordance with the authoritative guidance for accounting for income taxes in interim periods, we have computed our provision for income taxes for the three months ended June 30,December 31, 2021 and 2020 by applying the actual effective tax rates to the (loss) income for the three-month periods.

Segment Results for the Three Months Ended December 31, 2021 vs. Three Months Ended December 31, 2020

Satellite services segment

Revenues

 

 

Three Months Ended

 

 

Dollar

 

 

Percentage

 

(In millions, except percentages)

 

December 31,
2021

 

 

December 31,
2020

 

 

Increase
(Decrease)

 

 

Increase
(Decrease)

 

Segment product revenues

 

$

 

 

$

 

 

$

 

 

 

%

Segment service revenues

 

 

309.7

 

 

 

220.8

 

 

 

88.9

 

 

 

40

%

Total segment revenues

 

$

309.7

 

 

$

220.8

 

 

$

88.9

 

 

 

40

%

47


Our satellite services segment revenues increased by $88.9 million for the three months ended December 31, 2021 compared to the prior year period due to an increase in service revenues. The increase in service revenues was primarily attributable to the acquisition of RigNet, which closed in the first quarter of fiscal year 2022, as well as increases in our in-flight services and fixed broadband businesses. The acquisition of RigNet contributed approximately $43.1 million of service revenues in the three months ended December 31, 2021. The increase in in-flight service revenue of $34.4 million was driven primarily by an increase in the number of commercial aircraft receiving our in-flight services through our IFC systems, as the number of aircraft in service increased, passenger air traffic continued to increase and aircraft that were previously inactive as a result of the COVID-19 pandemic continued to return to service. The increase in fixed broadband service revenues was primarily attributable to the acquisition of the remaining 51% interest in EBI, which also closed during the first quarter of fiscal year 2022, with EBI contributing approximately $10.7 million of service revenues in the third quarter of fiscal year 2022.

Segment operating profit

 

 

Three Months Ended

 

 

Dollar

 

 

Percentage

 

(In millions, except percentages)

 

December 31,
2021

 

 

December 31,
2020

 

 

Increase
(Decrease)

 

 

Increase
(Decrease)

 

Segment operating profit

 

$

14.2

 

 

$

11.5

 

 

$

2.7

 

 

 

24

%

Percentage of segment revenues

 

 

5

%

 

 

5

%

 

 

 

 

 

 

The $2.7 million increase in satellite services segment operating profit was driven primarily by higher earnings contributions of $25.4 million, primarily due to an increase in revenues and improved margins from our in-flight services as the business continued to scale. The increase in our satellite services segment operating profit was partially offset by higher SG&A costs of $22.7 million (mainly attributable to RigNet, which was acquired during the first quarter of fiscal year 2022, as well as acquisition-related expenses related to the Inmarsat Transaction).

Commercial networks segment

Revenues

 

 

Three Months Ended

 

 

Dollar

 

 

Percentage

 

(In millions, except percentages)

 

December 31,
2021

 

 

December 31,
2020

 

 

Increase
(Decrease)

 

 

Increase
(Decrease)

 

Segment product revenues

 

$

123.1

 

 

$

75.7

 

 

$

47.4

 

 

 

63

%

Segment service revenues

 

 

16.6

 

 

 

14.4

 

 

 

2.2

 

 

 

15

%

Total segment revenues

 

$

139.7

 

 

$

90.1

 

 

$

49.6

 

 

 

55

%

Our commercial networks segment revenues increased by $49.6 million, due to a $47.4 million increase in product revenues and a $2.2 million increase in service revenues. The increase in product revenues was primarily due to increases of $32.7 million in mobile broadband satellite communication systems products, related to additional IFC terminal deliveries. There were also increases of $13.3 million in antenna systems products and $9.0 million in RigNet products, partially offset by a $10.0 million decrease in fixed satellite networks products. The increase in service revenues was primarily driven by an increase in mobile broadband satellite communication services.

Segment operating loss

 

 

Three Months Ended

 

 

Dollar

 

 

Percentage

 

(In millions, except percentages)

 

December 31,
2021

 

 

December 31,
2020

 

 

(Increase)
Decrease

 

 

(Increase)
Decrease

 

Segment operating loss

 

$

(44.6

)

 

$

(39.0

)

 

$

(5.5

)

 

 

(14

)%

Percentage of segment revenues

 

 

(32

)%

 

 

(43

)%

 

 

 

 

 

 

48


The $5.5 million increase in commercial networks segment operating loss was driven by a $5.9 million increase in IR&D expenses (primarily related to next-generation satellite payload technologies and commercial aeronautical broadband programs) and a $3.7 million increase in SG&A costs. The increase in commercial networks segment operating loss was partially offset by higher earnings contributions of $4.0 million, primarily due to higher revenues and improved margins in our mobile broadband satellite communication products.

Government systems segment

Revenues

 

 

Three Months Ended

 

 

Dollar

 

 

Percentage

 

(In millions, except percentages)

 

December 31,
2021

 

 

December 31,
2020

 

 

Increase
(Decrease)

 

 

Increase
(Decrease)

 

Segment product revenues

 

$

193.1

 

 

$

190.8

 

 

$

2.3

 

 

 

1

%

Segment service revenues

 

 

77.2

 

 

 

73.8

 

 

 

3.4

 

 

 

5

%

Total segment revenues

 

$

270.3

 

 

$

264.7

 

 

$

5.7

 

 

 

2

%

Our government systems segment revenues increased by $5.7 million due to a $3.4 million increase in service revenues and a $2.3 million increase in product revenues. The service revenue increase was primarily due to a $5.9 million increase in government satellite communication systems services and a $1.7 million increase in cybersecurity and information assurance services, offset by decreases of $3.4 million in tactical data link services and $1.3 million in tactical satcom radio services. The increase in product revenues was mainly due to a $7.2 million increase in tactical satcom radio products and a $3.0 million increase in tactical data link products, offset by a $6.4 million decrease in government mobile broadband products and a $1.9 million decrease in cybersecurity and information assurance products. Our government systems segment continued to show some impacts from the COVID-19 pandemic, due to complications in product manufacturing and shipments, but new government systems segment awards remained strong through the end of the third quarter of fiscal year 2022.

Segment operating profit

 

 

Three Months Ended

 

 

Dollar

 

 

Percentage

 

(In millions, except percentages)

 

December 31,
2021

 

 

December 31,
2020

 

 

Increase
(Decrease)

 

 

Increase
(Decrease)

 

Segment operating profit

 

$

42.5

 

 

$

50.6

 

 

$

(8.2

)

 

 

(16

)%

Percentage of segment revenues

 

 

16

%

 

 

19

%

 

 

 

 

 

 

The $8.2 million decrease in our government systems segment operating profit was driven by an $11.5 million increase in SG&A costs and a $2.6 million increase in IR&D expenses (primarily related to the development of next-generation dual band mobility solutions and the advancement of integrated government satellite communications platforms). The decrease in operating profit was partially offset by higher earnings contributions of $5.9 million, primarily due to an increase in revenues and improved margins in our tactical satcom radio products and tactical data link products.

Nine Months Ended December 31, 2021 vs. Nine Months Ended December 31, 2020

Revenues

 

 

Nine Months Ended

 

 

Dollar

 

 

Percentage

 

(In millions, except percentages)

 

December 31,
2021

 

 

December 31,
2020

 

 

Increase
(Decrease)

 

 

Increase
(Decrease)

 

Product revenues

 

$

918.1

 

 

$

773.1

 

 

$

144.9

 

 

 

19

%

Service revenues

 

 

1,167.9

 

 

 

887.2

 

 

 

280.7

 

 

 

32

%

Total revenues

 

$

2,085.9

 

 

$

1,660.3

 

 

$

425.6

 

 

 

26

%

49


Our total revenues grew by $425.6 million as a result of a $280.7 million increase in service revenues and a $144.9 million increase in product revenues. The service revenue increase was due to increases of $245.3 million in our satellite services segment, $24.4 million in our government systems segment and $11.0 million in our commercial networks segment. The increase in product revenues was driven primarily by a $146.0 million increase in our commercial networks segment, slightly offset by a $1.0 million decrease in our government systems segment.

Cost of revenues

 

 

Nine Months Ended

 

 

Dollar

 

 

Percentage

 

(In millions, except percentages)

 

December 31,
2021

 

 

December 31,
2020

 

 

Increase
(Decrease)

 

 

Increase
(Decrease)

 

Cost of product revenues

 

$

691.5

 

 

$

576.7

 

 

$

114.9

 

 

 

20

%

Cost of service revenues

 

 

751.0

 

 

 

587.5

 

 

 

163.5

 

 

 

28

%

Total cost of revenues

 

$

1,442.5

 

 

$

1,164.2

 

 

$

278.4

 

 

 

24

%

Cost of revenues increased by $278.4 million due to increases of $163.5 million in cost of service revenues and $114.9 million in cost of product revenues. The cost of service revenue increase primarily related to increased service revenues, mainly from our in-flight services business, causing a $185.9 million increase in cost of service revenues on a constant margin basis. The increase in cost of service revenues was partially offset by improved margins in our in-flight services business. The cost of product revenue increase was due to increased product revenues, causing a $108.1 million increase in cost of product revenues on a constant margin basis, mainly from our mobile broadband satellite communication systems products in our commercial networks segment and our tactical data link products in our government systems segment.

Selling, general and administrative expenses

 

 

Nine Months Ended

 

 

Dollar

 

 

Percentage

 

(In millions, except percentages)

 

December 31,
2021

 

 

December 31,
2020

 

 

Increase
(Decrease)

 

 

Increase
(Decrease)

 

Selling, general and administrative

 

$

481.1

 

 

$

378.9

 

 

$

102.2

 

 

 

27

%

The $102.2 million increase in SG&A expenses reflected an increase in support costs of $71.0 million, mainly related to RigNet, which was acquired during the first quarter of fiscal year 2022, as well as acquisition-related expenses related to the Inmarsat Transaction and acquisitions of RigNet and the remaining 51% interest in EBI. The increase in SG&A expenses was also driven by higher selling costs of $28.6 million, reflected primarily in our satellite services and government systems segments, and higher bid and proposal costs of $2.7 million. SG&A expenses consisted primarily of personnel costs and expenses for business development, marketing and sales, bid and proposal, facilities, finance, contract administration and general management.

Independent research and development

 

 

Nine Months Ended

 

 

Dollar

 

 

Percentage

 

(In millions, except percentages)

 

December 31,
2021

 

 

December 31,
2020

 

 

Increase
(Decrease)

 

 

Increase
(Decrease)

 

Independent research and development

 

$

112.3

 

 

$

84.0

 

 

$

28.3

 

 

 

34

%

The $28.3 million increase in IR&D expenses was mainly the result of an increase of $17.2 million in IR&D efforts in our commercial networks segment (primarily related to next-generation satellite payload technologies) and an increase of $11.1 million in our government systems segment (primarily related to the advancement of integrated government satellite communication platforms and the development of next-generation dual band mobility solutions).

50


Amortization of acquired intangible assets

We amortize our acquired intangible assets from prior acquisitions over their estimated useful lives, which range from two to 20 years. The $16.7 million increase in amortization of acquired intangible assets in the first nine months of fiscal year 2022 compared to the prior year period was primarily related to the amortization of new intangibles acquired as a result of the acquisition of RigNet and of the remaining 51% interest in EBI in April 2021. The current and expected amortization expense for acquired intangible assets for each of the following periods is as follows:

 

 

Amortization

 

 

 

(In thousands)

 

For the nine months ended December 31, 2021

 

$

20,859

 

 

 

 

 

Expected for the remainder of fiscal year 2022

 

$

7,532

 

Expected for fiscal year 2023

 

 

30,128

 

Expected for fiscal year 2024

 

 

28,678

 

Expected for fiscal year 2025

 

 

26,540

 

Expected for fiscal year 2026

 

 

26,388

 

Thereafter

 

 

118,584

 

 

 

$

237,850

 

Interest income

Interest income for the nine months ended December 31, 2021 was relatively flat compared to the prior year period.

Interest expense

The $9.4 million decrease in interest expense in the nine months ended December 31, 2021 compared to the prior year period was primarily due to an increase in the amount of interest capitalized during the first nine months of fiscal year 2022 compared to the prior year period, partially offset by an increase in interest expense attributable to our 6.500% Senior Notes due 2028 (the 2028 Notes), which were issued in the first quarter of fiscal year 2021.

Income taxes

For the nine months ended December 31, 2021, we recorded an income tax benefit of $3.5 million, resulting in an effective tax benefit rate of negative 22%. The effective tax rate for the period differed from the U.S. statutory rate due primarily to the benefit of federal and state R&D tax credits, the reversal of a deferred tax liability recorded for EBI’s outside basis difference upon assertion made during the first quarter of fiscal year 2022 to indefinitely reinvest future earnings and the expense for tax deficiencies upon settlement of stock-based compensation during the period. For the nine months ended December 31, 2020, we recorded an income tax provision of an insignificant amount, resulting in an effective tax rate of 24%. The effective tax rates for the period differed from the U.S. statutory rate due primarily to the expense for tax deficiencies upon settlement of stock-based compensation during the period and the benefit of federal and state R&D tax credits.

Ordinarily, the effective tax rate at the end of an interim period is calculated using an estimate of the annual effective tax rate expected to be applicable for the full fiscal year. However, when a reliable estimate cannot be made, we compute our provision for income taxes using the actual effective tax rate (discrete method) for the year-to-date period. Our effective tax rate is highly influenced by the amount of our R&D tax credits. A small change in estimated annual pretax income (loss) can produce a significant variance in the annual effective tax rate given our expected amount of R&D tax credits. This variability provides an unreliable estimate of the annual effective tax rate. As a result, and in accordance with the authoritative guidance for accounting for income taxes in interim periods, we have computed our provision for income taxes for the nine months ended December 31, 2021 and 2020 by applying the actual effective tax rates to the income (loss) for the three-monthnine-month periods.


51


Segment Results for the ThreeNine Months Ended June 30,December 31, 2021 vs. ThreeNine Months Ended June 30,December 31, 2020

Satellite services segment

Revenues

 

Three Months Ended

 

 

Dollar

 

 

Percentage

 

 

Nine Months Ended

 

 

Dollar

 

 

Percentage

 

(In millions, except percentages)

 

June 30,

2021

 

 

June 30,

2020

 

 

Increase

(Decrease)

 

 

Increase

(Decrease)

 

 

December 31,
2021

 

 

December 31,
2020

 

 

Increase
(Decrease)

 

 

Increase
(Decrease)

 

Segment product revenues

 

$

 

 

$

 

 

$

 

 

 

%

 

$

 

$

 

$

 

%

Segment service revenues

 

 

274.1

 

 

 

202.0

 

 

 

72.1

 

 

 

36

%

 

 

883.9

 

 

 

638.7

 

 

 

245.3

 

 

38

%

Total segment revenues

 

$

274.1

 

 

$

202.0

 

 

$

72.1

 

 

 

36

%

 

$

883.9

 

$

638.7

 

$

245.3

 

38

%

Our satellite services segment revenues increased by $72.1$245.3 million due to an increase in service revenues. The increase in service revenues was primarily attributable to the acquisition of RigNet in April 2021, as well as increases in our in-flight services and fixed broadband businesses. The acquisition of RigNet contributed approximately $27.5$113.0 million of service revenues in the first quarter of fiscal year 2022 since the date of acquisition.nine months ended December 31, 2021. The increase in in-flight service revenue of $19.9$72.9 million was driven primarily by an increase in the number of commercial aircraft receiving our in-flight services through our IFC systems, as the number of aircraft in service increased, passenger air traffic increased and aircraft that were previously inactive as a result of the COVID-19 pandemic returned to service. The increase in fixed broadband service revenues was primarily attributable to the acquisition of the remaining 51% interest in EBI, during the first quarter of fiscal year 2022, with EBI contributing approximately $30.6 million of service revenues in the first nine months of fiscal year 2022. In addition, the increase in fixed broadband services was also driven by a higher mix of new and existing subscribers choosing Viasat’sour premium highest speed plans. In addition, the acquisition of the remaining 51% interest in Euro Infrastructure Co. contributed approximately $8.4 million of service revenues in the first quarter of fiscal year 2022 since the date of its acquisition in April 2021.

Segment operating profit (loss)

 

Three Months Ended

 

 

Dollar

 

 

Percentage

 

 

Nine Months Ended

 

 

Dollar

 

 

Percentage

 

(In millions, except percentages)

 

June 30,

2021

 

 

June 30,

2020

 

 

Increase

(Decrease)

 

 

Increase

(Decrease)

 

 

December 31,
2021

 

 

December 31,
2020

 

 

Increase
(Decrease)

 

 

Increase
(Decrease)

 

Segment operating profit (loss)

 

$

12.5

 

 

$

(1.9

)

 

$

14.4

 

 

 

774

%

Segment operating profit

 

$

43.7

 

$

21.1

 

$

22.6

 

107

%

Percentage of segment revenues

 

 

5

%

 

 

(1

)%

 

 

 

 

 

 

 

 

 

5

%

 

3

%

 

 

 

 

 

 

The change$22.6 million increase in our satellite services segment operating loss to an operating profit was driven primarily by higher earnings contributions of $39.9$94.3 million, mainly due to an increase in revenues and improved margins from our in-flight services and fixed broadband services, as both businesses continuethe business continued to scale. The change from operating loss toincrease in operating profit was partially offset by higher SG&A costs of $25.8$72.0 million, ofmostly driven by RigNet, which $7.0 million related to the acquisitions of RigNet and Euro Infrastructure Co.was acquired during the first quarter of fiscal year 2022.2022, as well as $14.6 million of acquisition-related expenses incurred during fiscal year 2022 related to the Inmarsat Transaction and acquisitions of RigNet and the remaining 51% interest in EBI.

Commercial networks segment

Revenues

 

Three Months Ended

 

 

Dollar

 

 

Percentage

 

 

Nine Months Ended

 

 

Dollar

 

 

Percentage

 

(In millions, except percentages)

 

June 30,

2021

 

 

June 30,

2020

 

 

Increase

(Decrease)

 

 

Increase

(Decrease)

 

 

December 31,
2021

 

 

December 31,
2020

 

 

Increase
(Decrease)

 

 

Increase
(Decrease)

 

Segment product revenues

 

$

101.5

 

 

$

55.1

 

 

$

46.4

 

 

 

84

%

 

$

343.5

 

$

197.6

 

$

146.0

 

74

%

Segment service revenues

 

 

17.1

 

 

 

12.0

 

 

 

5.0

 

 

 

42

%

 

 

49.6

 

 

 

38.6

 

 

 

11.0

 

 

29

%

Total segment revenues

 

$

118.6

 

 

$

67.2

 

 

$

51.4

 

 

 

77

%

 

$

393.1

 

$

236.1

 

$

157.0

 

66

%

Our commercial networks segment revenues increased by $51.4$157.0 million, due to a $46.4$146.0 million increase in product revenues and a $5.0an $11.0 million increase in service revenues. The increase in product revenues was primarily due to increases of $30.6$100.2 million in mobile broadband satellite communication systems products, $11.3$39.6 million in antenna systems products and $6.5$18.3 million in RigNet products sincein connection with the dateacquisition of acquisition.RigNet in the first quarter of fiscal year 2022. This was slightly offset by a $14.4 million decrease in fixed satellite networks products. The increase in service revenues was mainlyprimarily driven by an increase inour mobile broadband satellite communication systems services.

52


Segment operating loss

 

Three Months Ended

 

 

Dollar

 

 

Percentage

 

 

Nine Months Ended

 

 

Dollar

 

 

Percentage

 

(In millions, except percentages)

 

June 30,

2021

 

 

June 30,

2020

 

 

(Increase)

Decrease

 

 

(Increase)

Decrease

 

 

December 31,
2021

 

 

December 31,
2020

 

 

(Increase)
Decrease

 

 

(Increase)
Decrease

 

Segment operating loss

 

$

(37.7

)

 

$

(51.4

)

 

$

13.7

 

 

 

27

%

 

$

(127.6

)

 

$

(135.8

)

 

$

8.2

 

6

%

Percentage of segment revenues

 

 

(32

)%

 

 

(77

)%

 

 

 

 

 

 

 

 

 

(32

)%

 

(58

)%

 

 

 

 

 

 

The $13.7$8.2 million reduction in our commercial networks segment operating loss was driven primarily by higher earnings contributions of $18.9$30.8 million, primarily due to higher revenues and improved margins in our mobile broadband satellite communications systems products, slightly offset by ana $17.2 million increase in IR&D investments.expenses (primarily related to next-generation satellite payload technologies) and a $5.1 million increase in SG&A costs.

Government systems segment

Revenues

 

Three Months Ended

 

 

Dollar

 

 

Percentage

 

 

Nine Months Ended

 

 

Dollar

 

 

Percentage

 

(In millions, except percentages)

 

June 30,

2021

 

 

June 30,

2020

 

 

Increase

(Decrease)

 

 

Increase

(Decrease)

 

 

December 31,
2021

 

 

December 31,
2020

 

 

Increase
(Decrease)

 

 

Increase
(Decrease)

 

Segment product revenues

 

$

191.7

 

 

$

195.5

 

 

$

(3.8

)

 

 

(2

)%

 

$

574.5

 

$

575.6

 

$

(1.0

)

 

%

Segment service revenues

 

 

80.4

 

 

 

65.8

 

 

 

14.6

 

 

 

22

%

 

 

234.4

 

 

 

210.0

 

 

 

24.4

 

 

12

%

Total segment revenues

 

$

272.1

 

 

$

261.3

 

 

$

10.8

 

 

 

4

%

 

$

808.9

 

$

785.5

 

$

23.4

 

3

%

Our government systems segment revenues increased by $10.8$23.4 million due to an increase of $14.6$24.4 million in service revenues, partially offset by a $1.0 million decrease of $3.8 million in product revenues. The service revenue increase was primarily due to an $8.1increases of $13.1 million increase in government mobile broadband services, a $4.2$12.9 million increase in government satellite communication systems services, and a $1.9$5.4 million increase in cybersecurity and information assurance services and $1.8 million in tactical satcom radio services, offset by a $7.7 million decrease in tactical data link services. The product revenue decrease was primarily driven by an $11.8 million decrease in product revenues was mainly due to an $11.9government satellite communication systems products, a $7.9 million decrease in government mobile broadband products, a $3.9 million decrease in tactical satcom radio products and a $4.3$1.1 million decrease in government satellite communication systems products, partially offset by a $9.2 million increase in tactical data link products, a $1.7 million increase in government mobile broadband products and a $1.6 million increase in cybersecurity and information assurance products. The decrease in product revenues was partially offset by an increase of $23.1 million in tactical data link products. Our government systems segment continued to show some impacts from the COVID-19 pandemic, which has somewhat complicateddue to complications in product manufacturing and shipments, but new government systems segment awards remained very strong in the first quarternine months of the fiscal year 2022.year.

Segment operating profit

 

Three Months Ended

 

 

Dollar

 

 

Percentage

 

 

Nine Months Ended

 

 

Dollar

 

 

Percentage

 

(In millions, except percentages)

 

June 30,

2021

 

 

June 30,

2020

 

 

Increase

(Decrease)

 

 

Increase

(Decrease)

 

 

December 31,
2021

 

 

December 31,
2020

 

 

Increase
(Decrease)

 

 

Increase
(Decrease)

 

Segment operating profit

 

$

47.4

 

 

$

49.5

 

 

$

(2.1

)

 

 

(4

)%

 

$

133.9

 

$

148.0

 

$

(14.1

)

 

(10

)%

Percentage of segment revenues

 

 

17

%

 

 

19

%

 

 

 

 

 

 

 

 

 

17

%

 

19

%

 

 

 

 

 

 

The $2.1$14.1 million decrease in our government systems segment operating profit was driven by a $5.3$25.2 million increase in SG&A costs and a $4.0an $11.1 million increase in IR&D investments. The decrease in operating profit was partially offset by higher earnings contributions of $7.2$22.1 million, primarily due to an increase in revenues in our tactical data link products and government mobile broadbandsatellite communication systems services.

Backlog53


Backlog

As reflected in the table below, our overall firm and funded backlog decreased during the first threenine months of fiscal year 2022.

 

As of

June 30, 2021

 

 

As of

March 31, 2021

 

 

As of
 December 31, 2021

 

 

As of
 March 31, 2021

 

 

(In millions)

 

 

(In millions)

 

Firm backlog

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Satellite services segment

 

$

617.8

 

 

$

633.7

 

 

$

588.2

 

$

633.7

 

Commercial networks segment

 

 

686.3

 

 

 

733.2

 

 

593.8

 

733.2

 

Government systems segment

 

 

920.0

 

 

 

939.4

 

 

 

955.7

 

 

 

939.4

 

Total

 

$

2,224.1

 

 

$

2,306.3

 

 

$

2,137.7

 

 

$

2,306.3

 

Funded backlog

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Satellite services segment

 

$

617.8

 

 

$

633.7

 

 

$

588.2

 

$

633.7

 

Commercial networks segment

 

 

600.7

 

 

 

639.6

 

 

498.9

 

639.6

 

Government systems segment

 

 

827.7

 

 

 

846.9

 

 

 

855.4

 

 

 

846.9

 

Total

 

$

2,046.2

 

 

$

2,120.2

 

 

$

1,942.5

 

 

$

2,120.2

 

The firm backlog does not include contract options. Of the $2.2$2.1 billion in firm backlog, a little over half is expected to be delivered during the next 12 months, with the balance delivered thereafter. We include in our backlog only those orders for which we have accepted purchase orders, and not anticipated purchase orders and requests. In our satellite services segment, our backlog includes fixed broadband service revenues under our subscriber agreements, but does not include future recurring IFC service revenues under our agreements with commercial airlines. As of June 30,December 31, 2021, our IFC systems were installed and in service on approximately 1,5501,880 commercial aircraft, of which, due to impacts of the COVID-19 pandemic, approximately 15080 were inactive at quarter end.While current global airline traffic is still a fraction of the activity in fiscal year 2020, domestic airline traffic continuescontinued to show signs of improvement. As a result, our in-flight services business showed modest improvement in the quarterthree months ended June 30,December 31, 2021, with increased planes in service and passenger volumes. We expect the negative impact on our IFC business from the COVID-19 pandemic to continue through the remainder of fiscal year 2022 and potentially beyond due to the severe decline in global air traffic and associated grounding of installed aircraft, but to lessen over time with increases in passenger air traffic. We anticipate that approximately 1,160860 additional commercial aircraft under existing customer agreements with commercial airlines will be put into service with our IFC systems. However, the timing of installation and entry into service of IFC systems on additional aircraft under existing customer agreements may be delayed as a result of the impact of the COVID-19 pandemic on the global airline industry. Accordingly, there can be no assurance that all anticipated purchase orders and requests will be placed or that anticipated IFC services will be activated.

Our total new awards exclude future revenue under recurring consumer commitment arrangements and were approximately $595.0$568.9 million and $736.9 million$2.0 billion for the three and nine months ended June 30,December 31, 2021, respectively, compared to approximately $643.4 million and $2.1 billion for the three and nine months ended December 31, 2020, respectively.

Backlog is not necessarily indicative of future sales. A majority of our contracts can be terminated at the convenience of the customer. Orders are often made substantially in advance of delivery, and our contracts typically provide that orders may be terminated with limited or no penalties. In addition, purchase orders may present product specifications that would require us to complete additional product development. A failure to develop products meeting such specifications could lead to a termination of the related contract.

Firm backlog amounts are comprised of funded and unfunded components. Funded backlog represents the sum of contract amounts for which funds have been specifically obligated by customers to contracts. Unfunded backlog represents future amounts that customers may obligate over the specified contract performance periods. Our customers allocate funds for expenditures on long-term contracts on a periodic basis. Our ability to realize revenues from contracts in backlog is dependent upon adequate funding for such contracts. Although we do not control the funding of our contracts, our experience indicates that actual contract funding has ultimately been approximately equal to the aggregate amounts of the contracts.

Liquidity and Capital Resources

Overview

We have financed our operations to date primarily with cash flows from operations, bank line of credit financing, debt financing, export credit agency financing and equity financing. At June 30,December 31, 2021, we had $275.7$166.0 million in cash and cash equivalents, $388.5$241.2 million in working capital, and $320.0$370.0 million in principal amount of outstanding borrowings and

54


borrowing availability of $320.3$271.1 million under our Revolving Credit Facility. At March 31, 2021, we had $295.9 million in cash and cash equivalents, $282.8 million in working capital, and no outstanding borrowings and borrowing availability of $673.7 million under our Revolving Credit Facility. During the second quarter of fiscal year 2021, we issued and sold an aggregate of 4,474,559 shares of our common stock at a purchase price of $39.11 per share to certain accredited investors in a private placement transaction exempt from registration under the Securities Act of 1933, as amended, resulting in net proceeds of approximately $174.7 million after deducting offering expenses. We invest our cash in excess of current operating requirements in short-term, highly liquid bank money market accounts.

In connection with the Inmarsat Transaction, we have obtained financing commitments for $2.3 billion of new debt facilities (which may be secured and/or unsecured), a portion of which is to be raised between the signing and closing of the Inmarsat Transaction to fund our standalone growth expenditures. We currently anticipate incurring $700.0 million of such additional debt facilities in the form of term loan borrowings that would be secured on a pari passu basis with borrowings under our Revolving Credit Facility and the 2027 Notes, with the remainder incurred as unsecured indebtedness. However, the total amount and mix of indebtedness incurred under these commitments may change, including in the event available cash from other sources is higher than expected. We also plan to assume $2.1 billion in principal amount of Inmarsat senior secured bonds and the outstanding indebtedness under Inmarsat’s $2.4 billion senior secured credit facilities. We had also obtained commitments of $3.2 billion to backstop certain amendments required under the Revolving Credit Facility and Ex-Im Credit Facility and Inmarsat’s $2.4 billion senior secured credit facilities, which amendments had been obtained under the Revolving Credit Facility and Inmarsat’s $2.4 billion senior secured credit facilities as of the date of this report.

Our future capital requirements will depend upon many factors, including the timing and amount of cash required for our satellite projects and any future broadband satellite projects we may engage in, expansion of our R&D and marketing efforts, and the nature and timing of orders. Additionally, we will continue to evaluate other possible acquisitions of, or investments in complementary businesses, products and technologies which may require the use of cash or additional financing.

The general cash needs of our satellite services, commercial networks and government systems segments can vary significantly. The cash needs of our satellite services segment tend to be driven by the timing and amount of capital expenditures (e.g., payments under satellite construction and launch contracts and investments in ground infrastructure roll-out), investments in joint ventures, strategic partnering arrangements and network expansion activities, as well as the quality of customer, type of contract and payment terms. In our commercial networks segment, cash needs tend to be driven primarily by the type and mix of contracts in backlog, the nature and quality of customers, the timing and amount of investments in IR&D activities (including with respect to next-generation satellite payload technologies) and the payment terms of customers (including whether advance payments are made or customer financing is required). In our government


systems segment, the primary factors determining cash needs tend to be the type and mix of contracts in backlog (e.g., product or service, development or production) and timing of payments (including restrictions on the timing of cash payments under U.S. Government procurement regulations). Other factors affecting the cash needs of our commercial networks and government systems segments include contract duration and program performance. For example, if a program is performing well and meeting its contractual requirements, then its cash flow requirements are usually lower.

To further enhance our liquidity position or to finance the construction and launch of any future satellites, acquisitions, strategic partnering arrangements, joint ventures or other business investment initiatives, we may obtain additional financing, which could consist of debt, convertible debt or equity financing from public and/or private credit and capital markets. In February 2019,From time to time, we filed afile universal shelf registration statementstatements with the SEC for the future sale of an unlimited amount of common stock, preferred stock, debt securities, depositary shares, warrants and rights. Therights, which securities may be offered from time to time, separately or together, directly by us, by selling security holders, or through underwriters, dealers or agents at amounts, prices, interest rates and other terms to be determined at the time of the offering.

To date, COVID-19 has not had a significant impact on our liquidity, cash flows or capital resources. However, we have taken measures to mitigate the impact of COVID-19 on our business and financial position, including deferring certain capital expenditures, reducing discretionary expenditures and undertaking cost-reduction actions. Given our current cash position, outlook for funds generated from operations, remaining borrowing availability under our Revolving Credit Facility of $320.3$271.1 million, cash needs, and debt structure and financing commitments related to the Inmarsat Transaction, we have not experienced to date, and do not expect to experience, any material issues with liquidity. Although we can give no assurances concerning our future liquidity, we believe that our current cash balances and net cash expected to be provided by operating activities along with availability under our Revolving Credit Facility will be sufficient to meet our anticipated operating requirements for at least the next 12 months.

55


Cash flows

Cash provided by operating activities for the first threenine months of fiscal year 2022 was $65.1$386.4 million compared to $156.9$557.4 million in the prior year period. This $91.8$171.0 million decrease was primarily driven by a $142.8$262.6 million year-over-year increase in cash used to fund net operating assets, partially offset by our operating results (net income adjusted for depreciation, amortization and other non-cash charges) which resulted in $51.0$91.6 million of higher cash provided by operating activities year-over-year. The increase in cash used to fund net operating assets during the first threenine months of fiscal year 2022 when compared to the prior year period was primarily due to a decrease in cash inflows year-over-year from combined billed and unbilled accounts receivable, net, primarily attributable to increased billings for IFC terminals in our commercial networks segment in the first quarter of fiscal year 2022 and a decrease in cash inflows year-over-year from our collections in excess of revenues and deferred revenues included in accrued liabilities primarily due to the timing of milestone billings for certain larger development projects in our commercial networks and government systems segmentssegment..

Cash used in investing activities for the first threenine months of fiscal year 2022 was $399.6$850.9 million compared to $229.3$702.8 million in the prior year period. This $170.3$148.1 million increase in cash used in investing activities year-over-year reflects $138.7 million in cash used for the RigNet and Euro Infrastructure Co.EBI acquisitions in the first quarter of fiscal year 2022 and ana remaining increase of $26.0approximately $10.3 million inmainly related to cash used for the construction of satellites.earth stations and network operation systems.

Cash provided by financing activities for the first threenine months of fiscal year 2022 was $315.2$338.3 million compared to an insignificant amount$156.9 million for the prior year period. This $315.1$181.4 million increase in cash provided by financing activities year-over-year reflects proceeds fromwas mainly due to a decrease in payments of debt borrowings under our Revolving Credit Facility of $320.0 million year-over-year, partially offset by $174.7 million in net proceeds from a private placement of common stock in the firstsecond quarter of fiscal year 2022.2021 (after deducting offering expenses).


Satellite-related activities

In connection with the development of any new generation satellite design, and the launch of any new satellite and the commencement of the related service, we expect to incur additional operating costs that negatively impact our financial results. For example, when ViaSat-2 was placed in service in the fourth quarter of fiscal year 2018, this resulted in additional operating costs in our satellite services segment during the ramp-up period prior to service launch and in the fiscal year following service launch. These increased operating costs included depreciation, amortization of capitalized software development, earth station connectivity, marketing and advertising costs, logistics, customer care and various support systems. In addition, interest expense increased during fiscal year 2019 as we no longer capitalized the interest expense relating to the debt incurred for the construction of ViaSat-2 and the related gateway and networking equipment once the satellite was in service. As services using the new satellite scaled, however, our revenue base for broadband services expanded and we gained operating cost efficiencies, which together yielded incremental segment earnings contributions. We anticipate that we will incur a similar cycle of increased operating costs as we prepare for and launch commercial services on future satellites, including our ViaSat-3 constellation, followed by increases in revenue base and in scale. However, there can be no assurance that we will be successful in significantly increasing revenues or achieving or maintaining operating profit in our satellite services segment, and any such gains may also be offset by investments in our global business.

We currently have three ViaSat-3 class satellites under construction. We have entered into satellite construction agreements with Boeing for their construction and purchase and the integration of our payload and technologies into the satellites. We are targeting to launch the first ViaSat-3 class satellite in late summer 2022, although the actual launch date will be dependent on the completion of deliverables by our contract manufacturers, subcontractors, and other third-party service providers, available launch windows and other variables. In addition, we have entered into various other satellite-related purchase commitments, including with respect to the provision of launch services, satellite operation and satellite insurance. See Note 12 – Commitments to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended March 31, 2021 for information regarding our future minimum payments under our satellite construction contracts and other satellite-related purchase commitments for the next five fiscal years and thereafter. In addition, we will continue to incur costs related to the roll-out of related earth station infrastructure to support the ViaSat-3 constellation, the amount of which will depend, among other matters, on the timing of roll-out and method used to procure fiber access. We believe we have adequate sources of funding for the ViaSat-3 constellation, which include, but are not limited to, our cash on hand, borrowing capacity and the cash we expect to generate from operations over the next few years. Our total cash funding may be reduced through various third-party agreements, including potential joint service offerings and other strategic partnering arrangements.

Our IR&D investments are expected to continue through the remainder of fiscal year 2022 and beyond relating to next generationnext-generation satellite network solutions and support of our government and commercial air mobility businesses. We

56


expect to continue to invest in IR&D at a significant level as we continue our focus on leadership and innovation in satellite and space technologies. However, the level of investment in a given fiscal year will depend on a variety of factors, including the stage of development of our satellite projects, new market opportunities and our overall operating performance.Our total capital expenditures in fiscal year 2022 are expected to be higher than fiscal year 2021, as we head intoin light of the anticipatedlead up to the launch of the first ViaSat-3 satellite and as we continue to invest in the second and third ViaSat-3 satellites, as well as increaseincreased ground network investments related to international expansion.expansion and initial expenditures on our ViaSat-4 satellite program.

Long-Term Debt

As of June 30,December 31, 2021, the aggregate principal amount of our total outstanding indebtedness was $2.2 billion, which was comprised of $700.0 million in principal amount of 2025 Notes, $600.0 million in principal amount of 2027 Notes, $400.0 million in principal amount of 2028 Notes (together with the 2025 Notes and 2027 Notes, the Notes), $320.0$370.0 million in principal amount of outstanding borrowings under our $700.0 million Revolving Credit Facility, $88.4$78.6 million in principal amount of outstanding borrowings under our Ex-Im Credit Facility with a maturity date of October 15, 2025 (together with the Revolving Credit Facility, the Credit Facilities) and $54.0$48.2 million of finance lease obligations. For information regarding our Credit Facilities and Notes, refer to Note 6 – Senior Notes and Other Long-Term Debt to our condensed consolidated financial statements.


Contractual Obligations

The following table sets forth a summary of our obligations at June 30,December 31, 2021:

 

 

 

 

 

For the
Remainder of
Fiscal Year

 

 

For the Fiscal Years Ending

 

(In thousands, including interest where applicable)

 

Total

 

 

2022

 

 

2023-2024

 

 

2025-2026

 

 

Thereafter

 

Operating leases

 

$

446,623

 

 

$

16,925

 

 

$

137,641

 

 

$

125,142

 

 

$

166,915

 

Finance leases

 

 

54,362

 

 

 

3,111

 

 

 

24,251

 

 

 

24,000

 

 

 

3,000

 

2028 Notes

 

 

582,000

 

 

 

13,000

 

 

 

52,000

 

 

 

52,000

 

 

 

465,000

 

2027 Notes

 

 

785,625

 

 

 

 

 

 

67,500

 

 

 

67,500

 

 

 

650,625

 

2025 Notes

 

 

857,500

 

 

 

19,687

 

 

 

78,750

 

 

 

759,063

 

 

 

 

Revolving Credit Facility (1)

 

 

384,300

 

 

 

1,721

 

 

 

382,579

 

 

 

 

 

 

 

Ex-Im Credit Facility

 

 

82,819

 

 

 

 

 

 

42,344

 

 

 

40,475

 

 

 

 

Satellite performance incentives

 

 

29,053

 

 

 

1,867

 

 

 

10,269

 

 

 

11,269

 

 

 

5,648

 

Purchase commitments including satellite-related
   agreements

 

 

2,034,998

 

 

 

681,240

 

 

 

1,115,965

 

 

 

141,397

 

 

 

96,396

 

Total

 

$

5,257,280

 

 

$

737,551

 

 

$

1,911,299

 

 

$

1,220,846

 

 

$

1,387,584

 

 

 

 

 

 

 

For the

Remainder of

Fiscal Year

 

 

For the Fiscal Years Ending

 

(In thousands, including interest where applicable)

 

Total

 

 

2022

 

 

2023-2024

 

 

2025-2026

 

 

Thereafter

 

Operating leases

 

$

466,757

 

 

$

56,135

 

 

$

135,196

 

 

$

122,361

 

 

$

153,065

 

Finance leases

 

 

61,483

 

 

 

10,232

 

 

 

24,251

 

 

 

24,000

 

 

 

3,000

 

2028 Notes

 

 

595,000

 

 

 

26,000

 

 

 

52,000

 

 

 

52,000

 

 

 

465,000

 

2027 Notes

 

 

802,500

 

 

 

16,875

 

 

 

67,500

 

 

 

67,500

 

 

 

650,625

 

2025 Notes

 

 

877,188

 

 

 

39,375

 

 

 

78,750

 

 

 

759,063

 

 

 

 

Revolving Credit Facility (1)

 

 

333,188

 

 

 

3,877

 

 

 

329,311

 

 

 

 

 

 

 

Ex-Im Credit Facility

 

 

93,701

 

 

 

10,882

 

 

 

42,344

 

 

 

40,475

 

 

 

 

Satellite performance incentives

 

 

31,444

 

 

 

4,258

 

 

 

10,269

 

 

 

11,269

 

 

 

5,648

 

Purchase commitments including satellite-related

   agreements

 

 

1,925,318

 

 

 

1,015,533

 

 

 

727,674

 

 

 

102,108

 

 

 

80,003

 

Total

 

$

5,186,579

 

 

$

1,183,167

 

 

$

1,467,295

 

 

$

1,178,776

 

 

$

1,357,341

 

(1)
To the extent that the interest rate is variable and ultimate amounts borrowed under the Revolving Credit Facility may fluctuate, amounts reflected represent estimated interest payments on our current outstanding balances based on the weighted average effective interest rate at December 31, 2021 until the maturity date in January 2024.

(1)

To the extent that the interest rate is variable and ultimate amounts borrowed under the Revolving Credit Facility may fluctuate, amounts reflected represent estimated interest payments on our current outstanding balances based on the weighted average effective interest rate at June 30, 2021 until the maturity date in January 2024.

We purchase components from a variety of suppliers and use several subcontractors and contract manufacturers to provide design and manufacturing services for our products. During the normal course of business, we enter into agreements with subcontractors, contract manufacturers and suppliers that either allow them to procure inventory based upon criteria defined by us or that establish the parameters defining our requirements. We also enter into agreements and purchase commitments with suppliers for the construction, launch, and operation of our satellites. In certain instances, these agreements allow us the option to cancel, reschedule and adjust our requirements based on our business needs prior to firm orders being placed. Consequently, only a portion of our reported purchase commitments arising from these agreements are firm, non-cancelable and unconditional commitments.

Our condensed consolidated balance sheets included $165.0$157.1 million and $137.4 million of “other liabilities” as of June 30,December 31, 2021 and March 31, 2021, respectively, which primarily consisted of the long-term portion of deferred revenues, the long-term portion of our satellite performance incentive obligations relating to the ViaSat-1 and ViaSat-2 satellites, deferred income taxes and our long-term warranty obligations. With the exception of the long-term portion of our satellite performance incentive obligations relating to the ViaSat-1 and ViaSat-2 satellites (which is included under “Satellite performance incentives”), these remaining liabilities have been excluded from the above table as the timing and/or the amount of any cash payment is uncertain. See Note 12 — Commitments to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended March 31, 2021 for additional information regarding satellite performance incentive obligations relating to the ViaSat-1 and ViaSat-2 satellites. See Note 7 — Product Warranty to our condensed consolidated financial statements for a discussion of our product warranties.

57


Off-Balance Sheet Arrangements

We had no material off-balance sheet arrangements at June 30,December 31, 2021 as defined in Regulation S-K Item 303(a)(4) other than as discussed under “Contractual Obligations” above or disclosed in the notes to our condensed consolidated financial statements included in this report or in our Annual Report on Form 10-K for the year ended March 31, 2021.

Recent Authoritative Guidance

For information regarding recently adopted and issued accounting pronouncements, see Note 1 — Basis of Presentation to our condensed consolidated financial statements.


58


Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

Our financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable and short-term and long-term obligations, including the Credit Facilities and the Notes, and foreign currency forward contracts.Notes. We consider investments in highly liquid instruments purchased with a remaining maturity of three months or less at the date of purchase to be cash equivalents. As of June 30,December 31, 2021, we had $320.0 million$370.0 million in principal principal amount of outstanding borrowings under our Revolving Credit Facility, $88.4$78.6 million in principal amount of outstanding borrowings under our Ex-Im Credit Facility, $700.0 million in aggregate principal amount outstanding of the 2025 Notes, $600.0 million in aggregate principal amount outstanding of the 2027 Notes and $400.0 million in aggregate principal amount outstanding of the 2028 Notes, and we held no short-term investments. The Notes and borrowings under our Ex-Im Credit Facility bear interest at a fixed rate and therefore our exposure to market risk for changes in interest rates relates primarily to borrowings under our Revolving Credit Facility, cash equivalents, short-term investments and short-term obligations.

The primary objective of our investment activities is to preserve principal while at the same time maximizing the income we receive from our investments without significantly increasing risk. To minimize this risk, we maintain a significant amount of our cash balance in money market accounts. In general, money market accounts are not subject to interest rate risk because the interest paid on such funds fluctuates with the prevailing interest rate. Our cash and cash equivalents earn interest at variable rates. Our interest income has been and may continue to be negatively impacted by low market interest rates. Fixed rate securities may have their fair market value adversely impacted due to a rise in interest rates, while floating rate securities may produce less income than expected if interest rates fall. If the underlying weighted average interest rate on our cash and cash equivalents, assuming balances remain constant over a year, changed by 50 basis points, interest income would have increased or decreased by an insignificant amount for the three and nine months ended June 30,December 31, 2021 and 2020. Because our investment policy restricts us to invest in conservative, interest-bearing investments and because our business strategy does not rely on generating material returns from our investment portfolio, we do not expect our market risk exposure on our investment portfolio to be material.

As of June 30,December 31, 2021, we had $320.0$370.0 million in principal amount of outstanding borrowings under our Revolving Credit Facility. Our primary interest rate under the Revolving Credit Facility is the Eurodollar rate plus an applicable margin that is based on our total leverage ratio. As of June 30,December 31, 2021, the weighted average effective interest rate on our outstanding borrowings under the Revolving Credit Facility was 1.59%1.86%. Assuming the outstanding balance remained constant over a year, a 50 basis point increase in the interest rates would increase interest incurred, prior to effects of capitalized interest, by approximately $1.6$1.9 million over a 12-month period.

Foreign Exchange Risk

We generally conduct our business in U.S. dollars. However, as our international business is conducted in a variety of foreign currencies, we are exposed to fluctuations in foreign currency exchange rates. A five percent variance in foreign currencies in which our international business is conducted would change our (loss) income (loss) before income taxes by an insignificant amount for both the three and nine months ended June 30,December 31, 2021, and 2020.by an insignificant amount and $1.0 million for the three and nine months ended December 31, 2020, respectively. Our objective in managing our exposure to foreign currency risk is to reduce earnings and cash flow volatility associated with foreign exchange rate fluctuations. Accordingly, from time to time, we may enter into foreign currency forward contracts to mitigate risks associated with foreign currency denominated assets, liabilities, commitments and anticipated foreign currency transactions.

As of June 30,December 31, 2021 and March 31, 2021, we had no foreign currency forward contracts outstanding.


59


Item 4. Controls and Procedures

We maintain disclosure controls and procedures designed to provide reasonable assurance of achieving the objective that information in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified and pursuant to the requirements of the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosures. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by SEC Rule 13a-15(b), we carried out an evaluation, with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of June 30,December 31, 2021, the end of the period covered by this report. Based upon the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of June 30,December 31, 2021.

During the period covered by this report, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

From time to time, we are involved in a variety of claims, suits, investigations and proceedings arising in the ordinary course of business, including government investigations and claims, and other claims and proceedings with respect to intellectual property, breach of contract, labor and employment, tax and other matters. Such matters could result in fines; penalties, compensatory, treble or other damages; or non-monetary relief. A violation of government contract laws and regulations could also result in the termination of our government contracts or debarment from bidding on future government contracts. Although claims, suits, investigations and proceedings are inherently uncertain and their results cannot be predicted with certainty, we believe that the resolution of our current pending matters will not have a material adverse effect on our business, financial condition, results of operations or liquidity. Regardless of the outcome, litigation can have an adverse impact on us because of defense costs, diversion of management resources and other factors. In addition, it is possible that an unfavorable resolution of one or more such proceedings could in the future materially and adversely affect our business, financial condition, results of operations or liquidity in a particular period. For further information on the risks we face from existing and future claims, suits, investigations and proceedings, see “Risk Factors” in Part I, Item 1A in our Annual Report on Form 10-K for the fiscal year ended March 31, 2021.

Item 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended March 31, 2021, as updated by our Quarterly Report on Form 10-Q for the quarter ended September 30, 2021, which factors could materially affect our business, financial condition, liquidity or future results. The risks described in our reports on Forms 10-K and 10-Q are not the only risks facing our company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, liquidity or future results.


60


Item 6. Exhibits

Incorporated by Reference

Exhibit

Number

Exhibit Description

Form 

 

 

 

 

Incorporated by Reference

 

 

Exhibit

Number

 

Exhibit Description

 

Form

 

File No.

 

Exhibit

 

Filing Date

 

Filed or

Furnished

Herewith

 

 

 

 

 

 

 

 

 

 

 

 

 

2.1*

 

Share Purchase Agreement, dated as of November 8, 2021, by and among Viasat, Inc. and the shareholders of Connect Topco Limited party thereto

 

8-K

 

000-21767

 

2.1

 

11/08/2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10.1

 

Voting and Support Agreement, dated as of November 8, 2021, by and among Viasat, Inc., Baupost Group Securities, L.L.C. and the shareholders of Connect Topco Limited party thereto

 

8-K

 

000-21767

 

10.1

 

11/08/2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10.2

 

Form of Voting and Support Agreement (executive officers and directors)

 

8-K

 

000-21767

 

10.2

 

11/08/2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10.3*

 

Stockholders Agreement, dated as of November 8, 2021, by and among Viasat, Inc. and the shareholders of Connect Topco Limited party thereto

 

8-K

 

000-21767

 

10.3

 

11/08/2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10.4

 

Fifth Amendment to Credit Agreement, dated as of November 23, 2021, by and among Viasat, Inc., MUFG Union Bank, N.A. (as administrative agent and collateral agent), and the other lenders party thereto

 

8-K

 

000-21767

 

10.1

 

11/30/20/21

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

31.1

 

Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

 

 

 

 

 

 

 

 

X

 

 

 

 

 

 

 

 

 

 

 

 

 

31.2

 

Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

 

 

 

 

 

 

 

 

X

 

 

 

 

 

 

 

 

 

 

 

 

 

32.1

 

Certifications Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

 

 

 

 

 

 

 

 

X

 

 

 

 

 

 

 

 

 

 

 

 

 

101.INS

 

Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the inline XBRL document.

 

 

 

 

 

 

 

 

 

X

 

 

 

 

 

 

 

 

 

 

 

 

 

101.SCH

 

Inline XBRL Taxonomy Extension Schema

 

 

 

 

 

 

 

 

 

X

 

 

 

 

 

 

 

 

 

 

 

 

 

101.CAL

 

Inline XBRL Taxonomy Extension Calculation Linkbase

 

 

 

 

 

 

 

 

 

X

 

 

 

 

 

 

 

 

 

 

 

 

 

101.DEF

 

Inline XBRL Taxonomy Extension Definition Linkbase

 

 

 

 

 

 

 

 

 

X

 

 

 

 

 

 

 

 

 

 

 

 

 

101.LAB

 

Inline XBRL Taxonomy Extension Labels Linkbase

 

 

 

 

 

 

 

 

 

X

 

 

 

 

 

 

 

 

 

 

 

 

 

101.PRE

 

Inline XBRL Taxonomy Extension Presentation Linkbase

 

 

 

 

 

 

 

 

 

X

 

 

 

 

 

 

 

 

 

 

 

 

 

104

 

Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

 

 

 

 

 

 

 

 

 

X

 

 

 

 

 

 

 

 

 

 

 

 

 

* Certain schedules to this Exhibit omitted pursuant to Regulation S-K Item 601(b)(2) or 601(a)(5) (as applicable). The registrant agrees to furnish supplementally a copy of any omitted schedule or exhibit to the SEC upon request; provided, however, that the registrant may request confidential treatment pursuant to Rule 24b-2 of the Exchange Act for any document so furnished.

61


SIGNATURES

File No.

Exhibit

Filing Date

Filed or

Furnished

Herewith

10.1*

Amendment to 1996 Equity Participation Plan of Viasat, Inc. (As Amended and Restated Effective September 3, 2020)

S-8

333-255690

10.2

04/30/2021

10.2*

RigNet, Inc. 2010 Omnibus Incentive Plan

S-8

333-255690

10.3

04/30/2021

10.3*

Amendment to RigNet, Inc. 2010 Omnibus Incentive Plan

S-8

333-255690

10.4

04/30/2021

10.4*

RigNet, Inc. 2019 Omnibus Incentive Plan

S-8

333-255690

10.5

04/30/2021

10.5*

Amendment to RigNet, Inc. 2019 Omnibus Incentive Plan

S-8

333-255690

10.6

04/30/2021

10.6*

Nonqualified Stock Option Award Agreement, by and between RigNet, Inc. and Errol Olivier, effective as of January 8, 2020

S-8

333-255690

10.7

04/30/2021

10.7*

Restricted Stock Unit Award Agreement, by and between RigNet, Inc. and Errol Olivier, effective as of January 8, 2020

S-8

333-255690

10.8

04/30/2021

31.1

Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

X

31.2

Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

X

32.1

Certifications Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

X

101.INS

Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the inline XBRL document.

X

101.SCH

Inline XBRL Taxonomy Extension Schema

X

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase

X

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase

X

101.LAB

Inline XBRL Taxonomy Extension Labels Linkbase

X

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase

X

104

Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

X

*

Indicates management contract, compensatory plan or arrangement.


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

VIASAT, INC.

August 9, 2021February 4, 2022

/s/ RICHARD BALDRIDGE

Richard Baldridge

President and Chief Executive Officer

(Principal Executive Officer)

/s/ SHAWN DUFFY

Shawn Duffy

Senior Vice President and Chief Financial Officer

(Principal Financial Officer)

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