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“There's never been a more exciting time
to be a part of Viasat.”
“The innovations we’ve developed
across communications have allowed
us to move farther up-market in
technology and service levels, and
with our ViaSat-3 constellation we
expect to realize our ambition to be the
first truly global, scalable,
broadband service provider.”
“Additionally, our work on cybersecurity, tactical
data links, virtualization, web acceleration, digital
media and more all contribute to our ability to
deliver connections that can
change the world.”
– Mark Dankberg
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A letter to shareholders
from Mark Dankberg
Dear shareholders,
I am pleased to report fiscal year 2019, ending March 31, 2019, was one of the most rewarding
in our 33 year history. The numbers are impressive and tell an exciting growth story:
›
›
›
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Record annual revenues of $2.1 billion, up 30% year-over-year. We added almost a half
billion dollars in revenue compared to fiscal year 2018.
New contract awards also reached a record, at $2.4 billion. That was approximately $700
million higher than fiscal year 2018, an increase of 42%, and a strong indication of growth
opportunities for fiscal year 2020.
Fourth quarter revenues set a new record at $557.2 million, a 27% increase over the same
quarter of fiscal year 2018.
Adjusted EBITDA grew 44% compared to fiscal year 2018, to $339.4 million. That growth
in Adjusted EBITDA almost off set approximately $109 million in incremental depreciation,
amortization and interest expense associated with placing the ViaSat-2 satellite in
service. We believe our Adjusted EBITDA gain is an indicator of continued earnings growth
opportunities.
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We’re not your traditional satellite operator
We aim to be the world’s leading satellite broadband service provider. We believe there is a large
attractive market opportunity where we can be the best choice for unserved, and underserved
people and devices wherever they may be — on the ground, in the air or at sea. Global internet
protocol (IP) traff ic is expected to nearly triple over the next five years. It is anticipated the global
internet community will swell by about a billion people — from 3 billion in 2015 to 4 billion by
2020. But that would still leave 4 billion unconnected people in the world, and even the otherwise
“connected” oft en get little or no service in many locations. We believe we are well positioned
to serve many of these unconnected people and places. We believe we can create greater global
economic opportunities and social inclusion, while earning attractive returns by building what we
believe to be the most cost eff ective global satellite broadband network.
Notably, fiscal year 2019 was among our best growth years yet, with fourth quarter total revenues
being greater than any of our satellite operator peers. It should be obvious, highest revenue coupled
with high annual growth rate is a powerful combination. However, we’re going aft er a much larger
opportunity than traditional Fixed Satellite Services (FSS) operators, the group by which Viasat has
oft en recently been measured for investment analysis purposes. In fact, as we’ve highlighted in
previous investor communications, we believe traditional metrics that were indicative of value in
the FSS broadcast market are counter-productive to serving the needs of today’s satellite broadband
data market. Our focus on metrics unique to broadband service has positioned us as a disruptor in
the satellite operator environment.
A common perception is that Viasat is a “complicated” company with a diff icult to understand
strategy. We’ll show here that our strategic concepts are clear and simple. We strongly believe the
success we achieved in fiscal year 2019 is compelling evidence of a thoughtful business strategy
that is designed to create even more value for our shareholders, customers and partners in the
coming years. We believe superior value creation depends on strategic diff erentiation. We want to
be diff erent in a value creating way. We also want to be diff icult to imitate — to establish a moat
around our success. Our main point in this year’s letter is to use the market realities illustrated in
fiscal year 2019 to more fully illuminate the foundations of our strategy — and why we believe Viasat
can continue to be an attractive investment opportunity for years to come.
Building an eff ective strategy
The essence of eff ective strategy centers on making diff icult choices that deliver value customers will
pay for — yet that competitors are unwilling or unable to imitate. The sequence of descriptors in that
last sentence is critically important when competing against entrenched incumbents. Disruption
theory holds that incumbents will predictably, and in a short-term sense, rationally, cling to existing
dimensions of value when those metrics are associated with success in their largest markets — even
if new emergent market trajectories demand diff erent, and oft en conflicting, metrics. Disruptors
don’t “cause” customers to seek new forms of value, they enable them to choose products or
services that better meet their evolving demands.
Viasat’s strategy reflects what is happening in the world: the internet is re-defining what users
want in almost every form of information, entertainment and communication. Because we had no
stake in the old (broadcast centric) dimensions of value we can embrace new market preferences in
ways that would undermine metrics key to incumbents’ identities, and/or investment theses. New
entrants, or disruptors, can displace incumbents when a few conditions hold:
6 | Viasat Annual Report 2019
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1. The strategic choices must be diff icult or there’s no damage to an incumbent’s existing
business model by embracing them. There has to be tangible downside to incumbents
imitating a disruptor or there’s no disruption opportunity. As a consequence, a disruptor’s
business model is oft en initially under-valued or even ridiculed — because at first there is
little evidence the choices underpinning the strategy are valued by suff iciently large markets.
That’s because the new entrant is purposely eschewing old metrics in favor of new ones.
In Viasat’s case, our consistent focus is on maximizing useful bandwidth per total lifetime
capital cost. We refer to this oft en as “bandwidth productivity” at investor conferences or on
quarterly calls. We see this metric as a key factor in return on satellite investment. We believe
our existing and planned satellite fleet substantially outperforms other satellite operators
on bandwidth productivity and would also outperform our expectations for proposed
low earth orbit (LEO) constellations from new entrants. Historically, incumbent broadcast
satellite operators have been less focused on bandwidth productivity — and benefited from
other metrics such as number of orbital slots, certain spectrum rights, number of satellites
in orbit, network eff ects of video broadcast “neighborhoods,” size of user installed base,
1-for-N redundancy advantages or other factors that still drive the majority of their value to
customers and investors. But, those legacy metrics don’t necessarily create the same value
for broadband services.
2. Disruptors must choose new metrics wisely. When markets shift it’s not always obvious
what the new dimensions of value are, or will be. For instance, non-geostationary orbit
(NGSO) constellation builders appear to value earth-to-satellite round trip latency as a
dominant metric. It’s diff icult to evolve from existing metrics associated with the success
of incumbents to new ones that may or may not ultimately lead to success in emergent
markets. It’s especially tricky when there are trade-off s that require sacrificing performance
in one dimension to achieve better performance in another. A disruptor, or other aspiring
new entrant, choosing the wrong new metrics is oft en disadvantaged. Incumbents could
adopt the strategic choices a disruptor makes, but are oft en unwilling to do so when
they perceive those choices as destroying value. We believe our growth rate in satellite
broadband, and our success in multiple vertical and geographic markets built on bandwidth
productivity, indicates Viasat has the market demand feedback to make wise choices. The
commercial in-flight connectivity (IFC) market is a great example. We are recognized as the
fastest growing IFC player, oft en causing incumbents to significantly alter their business
models to compete — even when their assets or processes are poorly suited to new market
demands and business models.
3. Finally, successful disruption benefits from new learning curves that enable the disruptor to
outperform incumbents, or other new entrants, in emergent markets and eventually in the
“old” markets, too. When disruptors benefit from learning curve eff ects that create value
and separation from competitors, then eventually the incumbents are unable to catch
up, even if they eventually decide to abandon old metrics for the new. For instance, we
expect the unique ViaSat-3 system architecture can yield a faster rate of improvement in our
chosen metric (bandwidth productivity) than any other currently known satellite system
architecture — from other geostationary orbit (GSO) operators to the newer NGSO providers
(such as LEO). If we are correct, then we could steadily improve our competitive position
across satellite centric broadband markets — while also growing our addressable markets
compared to some terrestrial alternatives. We can benefit from learning curves in related
dimensions that are consistent with our objectives of bandwidth productivity and return
on invested capital — for instance, optimizing total geographic coverage, economically
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matching bandwidth geographic density to a very wide dynamic range of end-user demand
and flexibility in allocating bandwidth supply to time varying demand over large geographic
areas. Each generation of Viasat broadband satellites has been designed to steadily improve
these metrics.
Breaking away from the past
One of the more diabolical elements of disruption is that the old metrics, honed by years or decades
of refinement, are seemingly so simple, clear and logical. Inevitable even. How could they be wrong?
And, how could any upstart that disdains those measures ever be successful? In the FSS industry
there are financial metrics that were valued by investors and drove incumbent strategy that we
believe are counter-productive for the satellite broadband data market.
A. Transponder market pricing is eroding steadily — a point seen as “bad” for satellite
operators. In fact, Viasat is a leading contributor to the decline in air time pricing. End-
user value is highly dependent on bandwidth pricing (unit bandwidth price, along with
speed, are critical metrics for broadband), and demand is highly elastic to price. Bandwidth
productivity gains and distribution eff iciencies that lower our unit cost of delivered
bandwidth can allow us to off er more value to end-users, grow addressable markets and
earn attractive returns, even with lower retail prices.
B. High EBITDA margins for FSS operators have been considered “good” indicators of both
operational eff iciency and market demand. Operators with “low” EBITDA margins may
be considered less eff icient, competing in “bad” markets, or battling supply/demand
imbalances. Over time, this led to strategic choices that outsourced or avoided activities
that reduced margins and were oft en better performed by other players in a broadcast
centric ecosystem. But, EBITDA margins are only proxies for value creation in a capital
intensive business. Absolute return on capital is the goal — and we may do better with highly
productive broadband satellites by undertaking more activities avoided by incumbents
and generating much more revenue and absolute earnings per invested dollar, even if those
activities reduce our EBITDA margin.
C. The combination of A and B above led to highly leveraged capital structures in a period of
stable transponder pricing. But stable transponder pricing and high EBITDA margins don’t
necessarily translate well to broadband service. The notion that long-term stable pricing
is needed to close business models has even led some to conclude shorter satellite lives
are “better” than longer — because longer lives make cash flow forecasting less certain.
That might be true if satellites with shorter lives had commensurate bandwidth capital
cost productivity, but given current technology trade-off s that’s not the case. Optimizing
productivity along with business models that anticipate pricing trajectories are better ways
to profitably serve broadband markets.
8 | Viasat Annual Report 2019
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Our strategy is built around a few clear and simple principles
We believe space-based broadband is a tremendously exciting and potentially highly-rewarding
market. Clearly prospective new entrants, successful in other markets, believe that, too. Our
challenge, and opportunity, is to leverage decades of unique technology innovation in virtually
every aspect of satellite networking into a highly diff erentiated strategy. We can prosper by taking
market share in “natural” satellite markets that are unsuitable for terrestrial networks, and by
driving down bandwidth costs to enable new markets. Satellite broadband — in any orbit — is very
likely to be capital intensive for decades, to come. A focus on bandwidth productivity, learning
curve trajectories and distribution optimized to leverage those advantages can gather momentum
and snowball over a long time.
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Capital eff iciency. Broadband satellites are capital intensive. Broadband users consume
ever increasing amounts of bandwidth, and the number of users keeps growing. Trends
point to global IP networks supporting up to 10 billion new devices and connections,
increasing from 16.3 billion in 2015 to 26.3 billion by 2020. We have experienced that most
users value speed, bandwidth volume (e.g. gigabytes per month) and economic value
(how much speed and/or bandwidth volume they are getting per dollar spent) more than
other attributes (e.g. latency). Speed, bandwidth volume and economic value are heavily
dependent on space system bandwidth productivity metrics and distribution eff iciency.
Prioritize the end-user. We learned many existing distribution channels were successful
by finding business models tolerant of high cost satellite bandwidth on low productivity
space systems. We believed those business models were conflicted and would not deliver
our productivity gains to end-users. We thought “sell-through” to end-users would be
decisive in ultimately winning market share and expanding addressable markets. That
caused us to invest significantly in vertically-integrated distribution capabilities focused
on sharing space system productivity gains with end-users. We believe this is working in
the market. We have had to invest in these capabilities, but are earning a reputation for
high performance and value. For example, we know our U.S. government end-users
require geographic reach and unique bandwidth intensive solutions. Coupling these
capabilities was a key objective of our ViaSat-3 project, and will enable us to deliver the
communications they need at the tactical edge. Our revenue growth is indicative of this
success in residential broadband, commercial IFC and government mobile broadband.
Additionally, we are pleased with our early market entry into the Community Wi-Fi and
enterprise broadband markets. We anticipate substantial growth opportunities as we
invest in additional verticals and geographic markets — and we believe our reputation
for delivering performance, quality and high-value broadband connectivity can continue
to grow.
Relentless execution. We believe successful strategic diff erentiation derives from making
diff icult choices. Our bandwidth productivity strategy is technically very diff icult. It would
be much easier to settle for far lower productivity than what we aim for. Or, to focus on
less meaningful metrics that are easier to achieve. We have an enviable track record for
identifying and bringing to market impactful communications technologies in space
systems. ViaSat-1 was the highest capacity communications satellite when it launched;
ViaSat-2 was almost double the capacity of its predecessor; and the ViaSat-3 constellation is
anticipated to have roughly eight times more capacity than Viasat’s current fleet combined.
We follow a rigorous methodology:
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– We study and learn about every known approach to satellite communications. We
believe we have fundamental understandings of competing/proposed broadband
space systems through regulatory filings, and/or market/competitive research. We
never assume we have a monopoly on innovation. We have a successful track record
of acquiring and successfully integrating companies with key technologies that can
enhance end-to-end space systems service delivery.
– We continually research, analyze and prototype innovative new techniques proprietary
to Viasat that can improve space system productivity. We believe we have strong
intellectual property protections for our unique technology.
– We compete to develop and deliver state-of-the-art technologies to other satellite
operators, and/or government customers, as the best way to thoroughly understand
those technologies. Viasat has been a leading provider of space payload and ground
technologies for both satellite operators and/or government customers across
narrowband LEO, broadband LEO, earth sensing NGSO, broadband mid earth orbit
(MEO), and broadband GSO. We believe we are the only satellite operator with this
capability.
– We buy, or lease, what we can on the open market.
– When economic analysis conclusively shows a business case for internally productizing
new technology consistent with substantial services productivity or distribution
advantages we develop the capability we need to earn those economic gains.
› Manage for the long run. Viasat has been in business for 33 years. We have always
managed for the long run. We believe the potential learning curve advantages we can
gain in space systems productivity represent the most exciting growth opportunity in our
history. Learning curves accrue value when organizations get exponentially “better” in the
most important dimension(s) of value with each iteration of a key operation. In this case,
an iteration would be development of a new generation of broadband satellite (e.g. from
ViaSat-1, to ViaSat-2, to ViaSat-3, etc.) and the dimension of value is “useful” bandwidth
per time weighted unit capital invested. Organizations benefit when their exponential gain
per iteration is greater than competitors, and/or when they perform iterations at a faster
cadence. We seek both forms of advantage. Scalable architecture is critical to learning
curves, and we believe ours can yield more exponential gain than alternatives. For instance,
leveraging low cost data centers for complex spatial processing computation is a scalable
way to gain high bandwidth productivity. While launch costs are coming down — that is a
transient eff ect and is unlikely to scale at the same pace as digital computation or payload
integration. Our network is pure last mile “access.” We leverage improvements in long haul,
thick route terrestrial fiber cost — we don’t compete with it. We also want a faster learning
curve cadence — more iterations. That is a key reason for entering multiple vertical markets.
If multiple outlets “fill up” our satellites faster than competitors we can iterate faster. The
long term benefits are substantial both for winning in “natural” satellite markets, as well
as expanding our addressable markets. When bandwidth “learning curve” productivity is
a fundamental competitive advantage, multiple vertical markets is a key element of speed
down the learning curve.
10 | Viasat Annual Report 2019
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Building a wider moat
We have been a leader in developing enabling system technologies and distribution approaches
for satellite broadband networks. We believe our results in fiscal year 2019 off er a glimpse of
the potential we can achieve as we come down our learning curve and continue to build market
momentum. While we’ve focused a majority of this letter on our bandwidth productivity strategy
— which represents the bulk of our investments over the past three years — we believe we have
pragmatically addressed other avenues of space system value creation.
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Leveraging new partner-based business models to gain traction in ‘hard-to-enter’
global markets. Not all satellite broadband systems are totally economically based.
Factors such as sovereign control of national infrastructure, the national interests of space-
faring nations or national politics are very important considerations. We have successfully
used our technology and market expertise to bring network operation and distribution
solution partnerships, with innovative win-win business models, to key markets including
Europe, Australia, Brazil and China leveraging partner-owned space assets. We also can use
our own space assets to enhance the value of governments, state-owned enterprises or
private regional operators’ own assets. Diff erent markets require diff erent models. We are
innovating steadily, learning quickly and adapting as needed.
Innovative integrated space/ground architectures. While our market experience has
consistently shown that bandwidth productivity is the single most important dimension
of value in delivering high-speed, high-quality broadband services, that doesn’t mean we
have stopped innovating elsewhere. Quite the contrary. Our innovative ground system
architectures, coupled with investments in artificial intelligence, machine learning, cloud/
virtualization techniques and more, are enabling us to further strengthen our moat by
testing new ways to reduce latency for key applications without sacrificing our productivity
advantage. We are prototyping and testing diff erent approaches to improving this aspect of
our service that we believe are much more capital eff icient than burdening all space assets
with a trade-off that would undermine bandwidth productivity. We plan to test some of
these in the market in fiscal year 2020.
Recognizing broadband connectivity is a means to an end, not an end in itself. The
value of the broadband network is in the applications it enables. With this understanding,
we have worked closely with leading edge providers including brands such as Apple,
Facebook, Amazon and Netflix to enhance end-users’ experiences with their online and
streaming media services over our network — helping them leverage the potential of making
aff ordable broadband available in places where it never was before. We have also worked
with leading U.S. government agencies, major airline brands on multiple continents and
others to ensure their end-users have great, and aff ordable, broadband experiences on our
network — while also being mindful of their future needs for global services reach, which
we believe will be met with our ViaSat-3 constellation. And finally, we have been working
with international governments to bring digital and social inclusion to their constituents,
through eff icient satellite-enabled Community Wi-Fi hotspots. By making broadband
connectivity accessible to millions of people living in regions where traditional terrestrial
and wireless internet services were either non-existent or cost prohibitive — we have
been able to help generate positive socio-economic impacts — in education, e-commerce,
finance, healthcare and more — at lower bandwidth costs.
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Our goal is simple: connect the unconnected and underconnected through advancements in
communications systems
We see huge opportunity to capture value through the deployment of innovative, high-capacity and
productive satellite broadband data networks. We are addressing this opportunity from a growing
position of strength, founded on disruptive technology, thoughtful strategic choices, strong global
partnerships, exposure to a diverse set of end markets and a vertically-integrated business model
that aff ords us the ability to learn quickly to build on our advantages.
Fiscal year 2019 was a satisfying illustration of what we can accomplish. We entered the year with an
ambitious growth agenda, and a commitment to capitalize on prior period investments in ViaSat-2,
in IFC and defense products. We executed well, transforming sales backlogs into record revenue
and compelling Adjusted EBITDA growth. We achieved impressive market share gains and global
recognition for quality and reliability. We also made good progress on our growth initiatives in new
vertical and geographic markets — aided by key agreements with global strategic and regional
satellite partners. But we think all of this is just the start of what we can achieve longer-term.
I’d like to thank our customers for giving us the opportunity to earn their business; our suppliers and
partners for their ongoing support; the Viasat team for their dedication to innovation and execution;
and to our investors for their trust in our commitment to use their resources wisely.
Sincerely,
Mark Dankberg
12 | Viasat Annual Report 2019
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Founders
& Executive officers
Mark Dankberg
Chairman of the Board,
CEO and Co-founder
Richard Baldridge
Director, President
and Chief Operating Off icer
Doug Abts
Vice President,
Global Mobility
Marc Agnew
Vice President,
Commercial Networks
Robert Blair
Vice President, General Counsel
and Secretary
Girish Chandran
Vice President and
Chief Technical Off icer
Melinda Del Toro
Senior Vice President,
People and Culture
and Chief People Off icer
Bruce Dirks
Senior Vice President,
Treasury and Corporate
Development
Shawn Duff y
Senior Vice President
and Chief Financial Off icer
Kevin Harkenrider
Senior Vice President
and President,
Broadband Services
Steve Hart
Co-founder
Keven Lippert
Executive Vice President of
Strategic Initiatives and Chief
Commercial Off icer
Mark Miller
Executive Vice President,
Chief Technical Off icer and
Co-founder
Ken Peterman
Senior Vice President
and President,
Government Systems
David Ryan
Vice President and
President, Space and
Commercial Networks
Earnings highlights
VIASAT FISCAL YEAR 2019
$2.1B
$2.4B
$339M
Annual
revenues
30% increase
year-over-year
Adjusted
EBITDA
44% increase
year-over-year
New contract
awards
42% increase
year-over-year
39
Office
locations
globally
~5,600
Employees
globally
SATELLITE SERVICES
$684M
Annual revenues
16% increase year-over-year
1,312
>1M
Commercial aircraft in-service with Viasat
in-flight connectivity, a 107% increase
year-over-year
Community Wi-Fi population reach in Mexico
>1.2M
586K
Students in Brazil served by Viasat
technology
Total number of U.S. fixed broadband
subscribers
COMMERCIAL NETWORKS
$428M
Annual revenues
84% increase year-over-year
$441M
In new contract awards, up 76%
year-over-year
$354M
In backlog, representing just over
a 1:1 book-to-bill ratio
704
Commercial aviation shipsets delivered
3+ Tbps
Total network capacity expected under
the ViaSat-3 global constellation program
GOVERNMENT SYSTEMS
$956M
Annual revenues
24% increase year-over-year
$1.2B
In new contract awards, up 50%
year-over-year
↑ 27%: Product revenues
year-over-year
↑ 15%: Service revenues
year-over-year
1,000+
AN/PRC-161 Battlefield Awareness Targeting
System-Dismounted handheld Link 16 radios
shipped
#1
Won a Platinum 'ASTORS' Homeland
Security Award from American Security
Today
16 | Viasat Annual Report 2019
Financial summary
$331
$341
$339
$235
2016
2017
2018
2019
Adjusted EBITDA*
Fiscal year
dollars in millions
$2,369
$1,483
$1,662
$1,667
2016
2017
2018
2019
New contract awards
Fiscal year
dollars in millions
$1,417
$1,559
$1,595
$2,068
2016
2017
2018
2019
Revenues dollars in millions
Fiscal year
*see page 95 for a reconciliation of Adjusted EBITDA to net income (loss) attributable to Viasat, Inc.
Financial performance
Table of contents
51
52
53
93
94
95
Consolidated statements
of cash flows
Consolidated statements
of equity
Notes to the consolidated
financial statements
Valuation and qualifying
accounts
Market for registrant's common
equity and related
stockholder matters
Use of non-GAAP
financial information
20
21
23
44
45
45
47
49
50
Performance graph
Selected financial data
Management's discussion and
analysis of financial condition
and results of operations
Quantitative and qualitative
disclosures about market risk
Summarized quarterly data
(unaudited)
Controls and procedures
Report of independent
registered public
accounting firm
Consolidated balance sheets
Consolidated statements of
operations and comprehensive
income (loss)
18 | Viasat Annual Report 2019
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Performance graph
The following graph shows the value of an investment of $100 in cash on April 4, 2014 in (1) Viasat’s
common stock, (2) the NASDAQ Telecommunications Index, (3) the NASDAQ Composite Index and (4)
the S&P MidCap 400 Index. The graph assumes that all dividends, if any, were reinvested. The stock
price performance shown on the graph is based on historical data and should not be considered
indicative of future performance. The information contained under this heading “Performance
graph” shall not be deemed to be “soliciting material,” or to be “filed” with the SEC, or subject to
Regulation 14A or Regulation 14C or to the liabilities of Section 18 of the Securities Exchange Act of
1934, and shall not be deemed to be incorporated by reference into any filing of Viasat, except to the
extent that Viasat specifically incorporates it by reference into a document filed under the Securities
Act of 1933 or the Securities Exchange Act of 1934.
200
175
150
125
100
7/4
10/3
4/4
2014
1/2
2015
4/3
6/30
9/30
12/31
6/30
9/30
12/31
3/31
2016
6/30
9/30
12/31
3/31
2017
3/31
2018
6/30
9/30
12/31
3/31
2019
Viasat, Inc.
NASDAQ Composite
NASDAQ Telecom
S&P 400 Midcap
20 | Viasat Annual Report 2019
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SELECTED FINANCIAL DATA
The following table provides our selected financial information for each of the fiscal years in the five-year period ended
March 31, 2019. The data as of and for each of the fiscal years in the five-year period ended March 31, 2019 have been derived from
our audited consolidated financial statements, except as otherwise noted. You should consider the financial statement data
provided below in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and
the consolidated financial statements and notes which are included elsewhere in this Annual Report.
Consolidated Statements of Operations Data:
Revenues:
Product revenues
Service revenues
Total revenues
Operating expenses:
Cost of product revenues
Cost of service revenues
Selling, general and administrative
Independent research and development
Amortization of acquired intangible assets
(Loss) income from operations
Interest expense, net
Loss on extinguishment of debt
(Loss) income before income taxes
Benefit from (provision for) income taxes
Equity in income of unconsolidated affiliate, net
Net (loss) income
Less: net income (loss) attributable to
noncontrolling interests, net of tax
Net (loss) income attributable to Viasat, Inc.
Basic net (loss) income per share attributable to
Viasat, Inc. common stockholders
Diluted net (loss) income per share attributable to
Viasat, Inc. common stockholders
Shares used in computing basic net (loss) income per
share
Shares used in computing diluted net (loss)
income per share
Consolidated Balance Sheets Data:
Cash and cash equivalents
Working capital (1) (2)
Total assets (2)
Senior notes (2)
Other long-term debt (2) (3)
Other liabilities
Total Viasat, Inc. stockholders’ equity
Fiscal Years Ended
March 31, 2019 March 31, 2018 March 31, 2017 March 31, 2016 April 3, 2015
(In thousands, except per share data)
$ 1,092,691 $
975,567
2,068,258
755,547 $
839,078
1,594,625
713,936 $
845,401
1,559,337
664,821 $ 728,074
654,461
752,610
1,417,431 1,382,535
834,472
703,249
458,458
123,044
9,655
(60,620 )
(49,861 )
—
(110,481 )
41,014
2,998
(66,469 )
553,677
567,137
385,420
168,347
12,231
(92,187 )
(3,066 )
(10,217 )
(105,470 )
35,217
1,978
(68,275 )
524,026
524,949
333,468
129,647
10,788
36,459
(11,075 )
—
25,384
(3,617 )
—
21,767
489,246
495,099
298,345
77,184
16,438
41,119
(23,522 )
—
17,597
4,173
—
21,770
519,483
444,431
270,841
46,670
17,966
83,144
(29,426 )
—
53,718
(13,827 )
—
39,891
1,154
(67,623 ) $
(970 )
(67,305 ) $
(2,000 )
23,767 $
29
21,741 $
(472 )
40,363
(1.13 ) $
(1.15 ) $
0.45 $
0.45 $
0.86
(1.13 ) $
(1.15 ) $
0.45 $
0.44 $
0.84
59,942
58,438
52,318
48,464
47,139
59,942
58,438
53,396
49,445
48,285
261,701 $
401,692
3,915,287
1,282,898
110,005
120,826
1,907,748
71,446 $
146,096
3,414,109
690,886
287,519
121,240
1,837,166
130,098 $
289,339
2,954,653
575,380
273,103
42,722
1,734,618
42,088 $
241,567
52,263
221,685
2,397,312 2,147,405
575,144
220,276
39,995
1,129,103 1,038,582
575,304
370,224
37,371
$
$
$
$
(1)
In November 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2015-17,
Income Taxes (ASC 740): Balance Sheet Classification of Deferred Taxes, which simplifies the presentation of deferred income
taxes by requiring deferred tax assets and liabilities be classified as non-current on the balance sheet. We early adopted this
standard retrospectively during the fourth quarter of fiscal year 2016 and reclassified all of our current deferred tax assets to
non-current deferred tax assets on our consolidated balance sheets for all periods presented.
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(2)
(3)
During the first quarter of fiscal year 2017, we adopted ASU 2015-03. The retrospective adoption of this guidance resulted in
the reclassification of unamortized debt issuance costs as a direct deduction from the carrying amounts of our former 6.875%
Notes due 2020 (the 2020 Notes) and our direct loan facility with the Export-Import Bank of the United States for ViaSat-2 (the
Ex-Im Credit Facility), consistent with unamortized discount, for all periods presented.
Includes only the long-term portion of the Ex-Im Credit Facility. The current portion of the Ex-Im Credit Facility totaled $19.9
million and $45.3 million as of March 31, 2019 and March 31, 2018, respectively. There was no current portion related to the
Ex-Im Credit Facility in any other period presented.
Our fiscal year 2015 information presented reflects the amounts realized under our settlement agreement with Space
Systems/Loral (SS/L) and Loral Space & Communications, Inc. (Loral) (the Settlement Agreement) of $53.7 million, of which
$33.0 million was recognized as product revenues in our satellite services segment, $18.7 million was recognized as a reduction to
selling, general and administrative (SG&A) expenses in our satellite services segment, and $2.0 million was recognized as interest
income in the consolidated financial statements. Our fiscal year 2016 information presented reflects the amounts realized under the
Settlement Agreement of $27.5 million, of which $25.3 million was recognized as product revenues in our satellite services segment,
and $2.2 million was recognized as interest income in the consolidated financial statements. Our fiscal year 2017 information
presented reflects amounts realized under the Settlement Agreement of $27.5 million, of which $26.8 million was recognized as
product revenues in our satellite services segment, and an insignificant amount was recognized as interest income in the
consolidated financial statements. As of March 31, 2017 all payments pursuant to the Settlement Agreement had been made. Our
fiscal year 2017 information presented also reflects the amounts accrued for uncharacterized damages and penalties of
$11.4 million and $0.4 million, respectively, in connection with the False Claims Act civil investigation related to our 52% majority-
owned subsidiary, TrellisWare Technologies, Inc. (TrellisWare), recognized in SG&A expenses in our government systems segment.
The impact of the loss contingency on net income attributable to Viasat, Inc. stockholders for fiscal year 2017, net of tax, was
$4.0 million, with the related amount of $3.7 million recorded to net (loss) income attributable to noncontrolling interests, net of
tax. The impact of the loss contingency on basic and diluted net income per share attributable to Viasat, Inc. common stockholders
for fiscal year 2017 was $0.08 per share and $0.07 per share, respectively. In the fourth quarter of fiscal year 2018, the TrellisWare
investigation was settled and the accrued amount of loss contingency was paid out in full. Refer to Note 12 to the consolidated
financial statements for further discussion of the False Claims Act civil investigation. Our fiscal year 2018 information presented
reflects the repurchase and redemption of our former 2020 Notes and the associated $10.2 million loss on extinguishment of debt.
Refer to Note 5 to the consolidated financial statements for discussion of the repurchase and redemption of all of the 2020 Notes
and loss on extinguishment of debt. Our fiscal year 2019 information presented reflects a $7.5 million gain related to ViaSat-2
insurance claims in SG&A expenses in our satellite services segment. Refer to Note 1 to the consolidated financial statements for
further discussion of the ViaSat-2 insurance claims.
22 | Viasat Annual Report 2019
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Company Overview
We are an innovator in communications technologies and services. 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 and government users around the globe, whether on the ground, on the move or in flight. In
addition, we develop and provide advanced wireless communications systems, military tactical data link systems, secure
networking systems and cybersecurity and information assurance products and services. Our product, system and service offerings
are often linked through common underlying technologies, customer applications and market relationships. We believe that our
portfolio of products and services, combined with our ability to effectively cross-deploy technologies between government and
commercial segments and across different geographic markets, provides us with a strong foundation to sustain and enhance our
leadership in advanced communications and networking technologies.
We conduct our business through three segments: satellite services, commercial networks and government systems.
Satellite Services
Our satellite services segment uses our proprietary technology platform to provide satellite-based high-speed broadband
services with multiple applications to consumers, enterprises and mobile broadband customers (including commercial airlines and
maritime vessels) both in the United States and abroad. Our Viasat Internet and Viasat Business Internet fixed broadband services
offer high-speed, high-quality broadband internet access. For commercial aircraft, we offer high-speed internet and other in-flight
services, including our wireless in-flight entertainment (W-IFE) platform. Our Community and Urban Wi-Fi hotspot services provide
satellite-powered Wi-Fi to rural, suburban and urban areas in a number of countries in the Americas.
Our proprietary Ka-band satellites are at the core of our technology platform. We own three Ka-band satellites in service:
ViaSat-2 (our second-generation high-capacity Ka-band spot beam satellite, which was placed into service in the fourth quarter of
fiscal year 2018), ViaSat-1 (our first-generation high-capacity Ka-band spot-beam satellite, which was placed into service in January
2012), and WildBlue-1 (which was placed into service in March 2007). We also have two third-generation ViaSat-3 class satellites that
have entered the phase of full construction, and in January 2019 we signed an agreement to proceed for a third ViaSat-3 class
satellite.
In the fourth quarter of fiscal year 2018, shortly before the launch of commercial broadband services on our ViaSat-2 satellite,
we reported an antenna deployment issue. We worked with the satellite manufacturer to determine the root cause of the antenna
deployment issue, potential correcting measures, and resulting damage. In the second quarter of fiscal year 2019, the root cause
analysis was completed. Based on that analysis, during the second quarter of fiscal year 2019, we recorded a reduction to the
carrying value of the ViaSat-2 satellite of $177.4 million, with a corresponding insurance receivable of $177.4 million, based on our
estimated ViaSat-2 output capabilities as compared to the anticipated, potential and configured capacity of the ViaSat-2 satellite.
During fiscal year 2019, we received $185.7 million in insurance recovery proceeds related to such claims. We recorded an insurance
receivable of $2.3 million as of March 31, 2019 with respect to probable remaining ViaSat-2 related insurance claims. As a result,
during fiscal year 2019, we recorded a $7.5 million gain related to ViaSat-2 insurance claims in SG&A expenses in the consolidated
statements of operations and comprehensive incomes (loss). The ViaSat-2 satellite was primarily financed by the Ex-Im Credit
Facility (see “Liquidity and Capital Resources—Ex-Im Credit Facility” below). Pursuant to the terms of the Ex-Im Credit Facility,
insurance proceeds received from such claims were used to pay down outstanding borrowings under the Ex-Im Credit Facility.
The primary services offered by our satellite services segment are comprised of:
•(cid:1)
•(cid:1)
•(cid:1)
Fixed broadband services, which provide consumers and businesses with high-speed broadband internet access and
Voice over Internet Protocol services. As of March 31, 2019, we provided fixed broadband services to approximately
586,000 subscribers. In addition, our satellite-powered Community and Urban Wi-Fi hotspot services are now available
within walking distance to more than one million people living and working in thousands of rural, suburban and urban
Mexican communities.
In-flight services, including our flagship Viasat in-flight internet, W-IFE and aviation software services. As of March 31,
2019, 1,312 commercial aircraft were in service receiving our in-flight services through our in-flight connectivity (IFC)
systems.
Mobile broadband services, which provide global network management and high-speed internet connectivity services
for customers using airborne, maritime and ground-mobile satellite systems.
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We also offer a variety of other broadband services and capabilities, including live on-line event streaming and oil and natural
gas data gathering services.
Commercial Networks
Our commercial networks segment develops and produces a variety of advanced satellite and wireless products, systems and
solutions that enable the provision of high-speed fixed and mobile broadband services. Our products, systems and solutions include an
array of satellite-based and wireless broadband platforms, networking equipment, space hardware, radio frequency and advanced
microwave solutions, space-to-earth connectivity systems, customer premise equipment (CPE), satellite modems and antenna
technologies, as well as satellite payload development and Application-Specific Integrated Circuit (ASIC) chip design. Our products,
systems and solutions are generally developed through a combination of customer and discretionary internal research and development
(R&D) funding, are utilized to provide services through our satellite services segment and are also sold to commercial networks customers
(with sales of complementary products, systems and solutions to government customers included in our government systems segment).
The primary products, systems, solutions and services offered by our commercial networks segment are comprised of:
•(cid:1)
•(cid:1)
•(cid:1)
•(cid:1)
•(cid:1)
Mobile broadband satellite communication systems, designed for use in aircraft and seagoing vessels.
Fixed satellite networks, including next-generation satellite network infrastructure and ground terminals to access Ka-
band broadband services on high-capacity satellites.
Antenna systems specializing in earth imaging, remote sensing, 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, including satellite and ground systems, fabless semiconductor design
for ASIC and Monolithic Microwave Integrated Circuit chips and network function virtualization, as well as modules and
subsystems for various commercial, military and space uses and radio frequency and advanced microwave solutions.
Space systems. We design and develop high-capacity Ka-band satellites for our own satellite fleet and for third parties,
including development and production of the associated satellite payload technologies.
Government Systems
Our government systems segment provides global mobile broadband services to military and government users, and
develops and produces network-centric Internet Protocol (IP)-based fixed and mobile secure communications products and
solutions. Our government systems products and solutions are designed to enable the collection and dissemination of secure real-
time digital information and intelligence between individuals on the tactical edge, in command centers, leveraging strategic
communications nodes, and those individuals on the ground, in the air or on a maritime platform. Customers of our government
systems segment include the U.S. Department of Defense, those serving the Five Eye intelligence alliance (Australia, Canada, New
Zealand, the United Kingdom and the United States), allied foreign governments, allied armed forces, public safety first-responders
and remote government employees.
The primary products and services of our government systems segment include:
•(cid:1)
•(cid:1)
•(cid:1)
•(cid:1)
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 comprise an array of portable, mobile and fixed broadband
modems, terminals, network access control systems and antenna systems using a range of satellite frequency bands
for Command and Control missions, satellite networking services and network management systems for Wi-Fi and
other internet access networks, and include products designed for manpacks, aircraft, unmanned aerial vehicles,
seagoing vessels, ground-mobile vehicles and fixed applications.
Cybersecurity and information assurance products, 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 AN/PRC-161 handheld
Link 16 radios, our Small Tactical Terminal KOR-24A 2-channel radios for manned and unmanned applications,
“disposable” defense data links, our Multifunctional Information Distribution System (MIDS) terminals for military
fighter jets and their successor, MIDS Joint Tactical Radio System terminals.
24 | Viasat Annual Report 2019
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Sources of Revenues
Our satellite services segment revenues are primarily derived from our fixed broadband services, in-flight services (including
services using our IFC systems and W-IFE platform) and worldwide managed network services.
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 90%, 88% and 87% of our total revenues for
these segments for fiscal years 2019, 2018 and 2017, 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 19% of our total revenues for fiscal years 2019, 2018 and 2017.
We also incur independent R&D (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 R&D
projects. IR&D expenses were approximately 6%, 11% and 8% of total revenues in fiscal years 2019, 2018 and 2017, respectively. As
a government contractor, we are able to recover a portion of our IR&D expenses pursuant to our government contracts.
Approximately 11%, 12% and 13% of our total revenues in fiscal years 2019, 2018 and 2017, respectively, were derived from
international sales. Doing business internationally creates additional risks related to global political and economic conditions and
other factors identified under the heading “Risk Factors” in our most recent Annual Report on Form 10-K.
Critical Accounting Policies and Estimates
Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses our 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 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.
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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 including leasing of related broadband
equipment. 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). From a recognition perspective, the leasing of broadband equipment is evaluated in
accordance with the authoritative guidance for leases (ASC 840). Our accounting for equipment leases involves specific
determinations under ASC 840, which may involve complex provisions and significant judgments. In accordance with ASC 840, we
apply the following criteria to determine the nature of the lease (e.g., as an operating or sales type lease): (1) review for transfers of
ownership of the equipment to the lessee by the end of the lease term, (2) review of the lease terms to determine if it contains an
option to purchase the leased equipment for a price which is sufficiently lower than the expected fair value of the equipment at the
date of the option, (3) review of the lease term to determine if it is equal to or greater than 75% of the economic life of the
equipment, and (4) review of the present value of the minimum lease payments to determine if they are equal to or greater than
90% of the fair market value of the equipment at the inception of the lease. Additionally, we consider the cancelability of the
contract and any related uncertainty of collections or risk in recoverability of the lease investment at lease inception. Revenue from
sales type leases is recognized at the inception of the lease or when the equipment has been delivered and installed at the customer
site, if installation is required. Revenues from equipment rentals under operating leases are recognized as earned over the lease
term, which is generally on a straight-line basis.
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 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.
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 March 31, 2019 would change our loss before income taxes by an insignificant amount.
26 | Viasat Annual Report 2019
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7110Fin.indd 26
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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 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.
Deferred costs to obtain or fulfill contract
Under ASC 340-40, Other Assets and Deferred Costs – Contracts with Customers, we recognize an asset from the incremental
costs of obtaining a contract with a customer, if we expect to recover those costs. The incremental costs of obtaining a contract are
those costs that we incur to obtain a contract with a customer that we would not have incurred if the contract had not been
obtained. ASC 340-40 also requires the recognition of an asset from the costs incurred to fulfill a contract when (1) the costs relate
directly to a contract or to an anticipated contract that we can specifically identify, (2) the costs generate or enhance our resources
that will be used in satisfying (or in continuing to satisfy) performance obligations in the future, and (3) the costs are expected to be
recovered. We recognize an asset related to commission costs incurred primarily in our satellite services segment and recognize an
asset related to costs incurred to fulfill contracts. Costs to acquire customer contracts are amortized over the estimated customer
contract life. Costs to fulfill customer contracts are amortized in proportion to the revenue to which the costs relate. For contracts
with an estimated amortization period of less than one year, we expense incremental costs immediately.
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 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
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7110Fin.indd 27
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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 own three satellites in service: ViaSat-2 (our second-generation high-capacity Ka-band spot-beam satellite, which was
placed into service in the fourth quarter of fiscal year 2018), ViaSat-1 (our first-generation high-capacity Ka-band spot-beam
satellite, which was placed into service in January 2012) and WildBlue-1 (which was placed into service in March 2007). We also have
two third-generation ViaSat-3 class satellites that have entered the phase of full construction, and in January 2019 we signed an
agreement to proceed for a third ViaSat-3 class satellite. In addition, we have an exclusive prepaid lifetime capital lease of Ka-band
capacity over the contiguous United States on Telesat Canada’s Anik F2 satellite (which was placed into service in April 2005) and
own related earth stations and networking equipment for all of our satellites. Property and equipment also includes the CPE units
leased to subscribers under a retail leasing program as part of our satellite services segment.
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 periodically review the remaining
estimated useful life of the satellite to determine if revisions to the estimated life are necessary. 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 fiscal years 2019, 2018 and 2017.
We account for our goodwill under the authoritative guidance for goodwill and other intangible assets (ASC 350) and the
provisions of ASU 2011-08, Testing Goodwill for Impairment, which simplifies how we test goodwill for impairment. Current
authoritative guidance allows us to first assess qualitative factors to determine whether it is necessary to perform the two-step
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. If it is more likely than not
that the carrying value of the reporting unit exceeds its estimated fair value, we compare the fair value of the reporting unit to its
carrying value. If the estimated fair value of the reporting unit is less than the carrying value, a second step is performed in which
the implied fair value of goodwill is compared to its carrying value. If the implied fair value of goodwill is less than its carrying value,
goodwill must be written down to its implied fair value, resulting in goodwill impairment. 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.
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 2019, 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, 2019 and, therefore,
determined it was not necessary to perform the two-step goodwill impairment test.
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 from $29.0 million at March 31, 2018 to $33.5 million at March 31, 2019.
The valuation allowance relates to state and foreign net operating loss carryforwards, state R&D tax credit carryforwards and
foreign tax credit carryforwards.
28 | Viasat Annual Report 2019
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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:
Revenues:
Product revenues
Service revenues
Operating expenses:
Cost of product revenues
Cost of service revenues
Selling, general and administrative
Independent research and development
Amortization of acquired intangible assets
(Loss) income from operations
Interest expense, net
Loss on extinguishment of debt
(Loss) income before income taxes
Benefit from income taxes
Net (loss) income
Net (loss) income attributable to Viasat, Inc.
Fiscal Year 2019 Compared to Fiscal Year 2018
Revenues
(In millions, except percentages)
Product revenues
Service revenues
Total revenues
March 31,
2019
Fiscal Years Ended
March 31,
2018
March 31,
2017
100.0 %
53
47
100.0 %
47
53
100.0 %
46
54
40
34
22
6
—
(3 )
(2 )
—
(5 )
2
(3 )
(3 )
35
36
24
11
1
(6 )
—
(1 )
(7 )
2
(4 )
(4 )
34
34
21
8
1
2
(1 )
—
2
—
1
2
Fiscal Years Ended
March 31,
2018
Dollar
Increase
(Decrease)
Percentage
Increase
(Decrease)
755.5 $
839.1
1,594.6 $
337.1
136.5
473.6
45 %
16 %
30 %
March 31,
2019
1,092.7 $
975.6
2,068.3 $
$
$
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Our total revenues grew by $473.6 million as a result of a $337.1 million increase in product revenues and a $136.5 million
increase in service revenues. The product revenue increase was driven primarily by increases of $185.5 million in our commercial
networks segment and $152.3 million in our government systems segment. The service revenue increase was due to increases of
$95.6 million in our satellite services segment, $31.2 million in our government systems segment and $9.7 million in our commercial
networks segment.
Cost of revenues
(In millions, except percentages)
Cost of product revenues
Cost of service revenues
Total cost of revenues
Fiscal Years Ended
March 31,
2019
March 31,
2018
Dollar
Increase
(Decrease)
Percentage
Increase
(Decrease)
$
$
834.5 $
703.2
1,537.7 $
553.7 $
567.1
1,120.8 $
280.8
136.1
416.9
51 %
24 %
37 %
Cost of revenues increased by $416.9 million due to increases of $280.8 million in cost of product revenues and $136.1 million
in cost of service revenues. The cost of product revenue increase was primarily due to increased revenues, mainly from our mobile
broadband satellite communication systems products and antenna systems products in our commercial networks segment and
tactical data link products and government satellite communication systems products in our government systems segment,
causing a $247.1 million increase in cost of product revenues on a constant margin basis. Additionally, cost of product revenues
increased due to lower margins, primarily from our antenna systems products in our commercial networks segment and
government satellite communication systems products in our government systems segment. The cost of service revenue increase
mainly related to increased revenues, mainly from our fixed broadband services and in-flight internet services, causing a $92.3
million increase in cost of service revenues on a constant margin basis. Additionally cost of service revenues increased due to lower
margins for fixed broadband services in our satellite services segment, primarily due to the ViaSat-2 service launch in the fourth
quarter of fiscal year 2018.
Selling, general and administrative expenses
(In millions, except percentages)
Selling, general and administrative
Fiscal Years Ended
March 31,
2019
March 31,
2018
Dollar
Increase
(Decrease)
Percentage
Increase
(Decrease)
$
458.5 $
385.4 $
73.0
19 %
The $73.0 million increase in SG&A expenses reflected an increase in support costs of $39.9 million and an increase in selling
costs of $37.1 million, partially offset by a gain of approximately $7.5 million related to our ViaSat-2 satellite insurance claims
recorded as a reduction to SG&A expenses in our satellite services segment during fiscal year 2019 (see “Liquidity and Capital
Resources–Satellite-related activities” for additional information). The increase in support costs was reflected in all three segments,
however we experienced the largest increase from our satellite services segment, mainly due to the higher employee-related costs
supporting the ViaSat-2 service launch. The increase in selling costs was primarily due to an increase in our satellite services
segment due to the ViaSat-2 service launch in the fourth quarter of fiscal year 2018. 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
(In millions, except percentages)
Independent research and development
Fiscal Years Ended
March 31,
2019
March 31,
2018
Dollar
Increase
(Decrease)
Percentage
Increase
(Decrease)
$
123.0 $
168.3 $
(45.3 )
(27 )%
The $45.3 million decrease in IR&D expenses was primarily the result of a decrease of $45.2 million in IR&D efforts in our
commercial networks segment (primarily related to a decrease in IR&D expenses related to next-generation satellite payload
technologies for our ViaSat-3 class satellites, as the first two ViaSat-3 class satellites have entered the phase of full construction, and
mobile broadband satellite communication systems).
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Amortization of acquired intangible assets
We amortize our acquired intangible assets from prior acquisitions over their estimated useful lives, which range from two to
ten years. The $2.6 million decrease in amortization of acquired intangible assets in fiscal year 2019 compared to fiscal year 2018
was primarily the result of certain acquired customer relationship intangibles in our satellite services segment becoming fully
amortized during the prior fiscal year. Current and expected amortization expense for acquired intangible assets for each of the
following periods is as follows:
Expected for fiscal year 2020
Expected for fiscal year 2021
Expected for fiscal year 2022
Expected for fiscal year 2023
Expected for fiscal year 2024
Thereafter
Amortization
(In thousands)
7,485
$
5,101
3,278
2,973
2,458
1,006
22,301
$
Interest income
The insignificant decrease in interest income for fiscal year 2019 compared to fiscal year 2018 was primarily the result of
lower average invested cash balances during fiscal year 2019 compared to fiscal year 2018.
Interest expense
The $46.0 million increase in interest expense in fiscal year 2019 compared to fiscal year 2018 was primarily due to a decrease
in the amount of interest capitalized, a net increase in interest expense related to our Ex-Im Credit Facility mainly due to the
increased interest accretion related to required payments of outstanding borrowings under our Ex-Im Credit Facility upon receipt of
insurance proceeds related to the ViaSat-2 satellite (see “Liquidity and Capital Resources – Ex-Im Credit Facility” for additional
information) and higher outstanding borrowings under our revolving credit facility (the Revolving Credit Facility) (which
outstanding borrowings were repaid prior to March 31, 2019 with proceeds from the issuance of our 5.625% Senior Secured Notes
due 2027 (the 2027 Notes) in March 2019). Capitalized interest expense during fiscal year 2019 related to the construction of our
ViaSat-3 class satellites, gateway and networking equipment and other assets. Capitalized interest expense during fiscal year 2018
related to the construction of our ViaSat-2 satellite, ViaSat-3 class satellites, gateway and networking equipment and other assets.
Income taxes
The income tax benefit in fiscal years 2019 and 2018 reflected the tax benefit from our loss before income taxes and the
benefit from federal and state R&D tax credits. Fiscal year 2018 also included an income tax expense due to the revaluation of net
deferred tax assets resulting from the lowering of the corporate federal income tax rate from 35% to 21% under H.R.1, informally
known as the Tax Cuts and Jobs Act, which was enacted into law on December 22, 2017 (the Tax Reform).
Segment Results for Fiscal Year 2019 Compared to Fiscal Year 2018
Satellite services segment
Revenues
(In millions, except percentages)
Segment product revenues
Segment service revenues
Total segment revenues
Fiscal Years Ended
March 31,
2019
March 31,
2018
Dollar
Increase
(Decrease)
Percentage
Increase
(Decrease)
$
$
— $
684.2
684.2 $
0.7 $
588.6
589.3 $
(0.7 )
95.6
94.9
(100 )%
16 %
16 %
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Our satellite services segment revenues increased by $94.9 million primarily as a result of a $95.6 million increase in service
revenues. The increase in service revenues was primarily driven by the expansion of our fixed broadband services and in-flight
internet services. The fixed broadband service revenue increase was driven by higher average revenue per fixed
broadband subscriber in the United States when compared to the same period last fiscal year, reflecting a higher mix of new and
existing subscribers choosing Viasat’s premium highest speed plans. Total subscribers at March 31, 2019 were
approximately 586,000 compared to 576,000 subscribers at March 31, 2018. The in-flight service revenue increase was driven
primarily by the increase in the number of commercial aircraft receiving our in-flight services through our IFC systems,
with 1,312 commercial aircraft in service utilizing our IFC systems as of March 31, 2019, compared to 635 commercial aircraft in
service as of March 31, 2018.
Segment operating (loss) profit
(In millions, except percentages)
Segment operating (loss) profit
Percentage of segment revenues
Fiscal Years Ended
March 31,
2019
March 31,
2018
Dollar
Increase
Percentage
Increase
(Decrease)
12.0
(Decrease)
$
2 %
(76.3 )
(635 )%
$
(64.3 )
$
(9 )%
The decrease in our satellite services segment operating profit was driven primarily by higher selling costs of $36.8 million
due to the increased promotion of our fixed broadband services following ViaSat-2 service launch, as well as an increase in support
costs of $21.6 million, mainly due to the higher employee-related costs supporting the ViaSat-2 service launch. In addition, our fixed
broadband services also experienced lower earnings contributions of $27.1 million, primarily due to lower margins, driven also by
the ViaSat-2 service launch in the fourth quarter of fiscal year 2018. This decrease in operating profit was partially offset by a gain of
approximately $7.5 million related to our ViaSat-2 satellite insurance claims recorded as a reduction to SG&A expenses in our
satellite services segment during fiscal year 2019 (see “Liquidity and Capital Resources–Satellite-related activities” for additional
information).
Commercial networks segment
Revenues
(In millions, except percentages)
Segment product revenues
Segment service revenues
Total segment revenues
Fiscal Years Ended
March 31,
2019
March 31,
2018
Dollar
Increase
(Decrease)
Percentage
Increase
(Decrease)
$
$
383.5 $
44.9
428.4 $
198.0 $
35.2
233.2 $
185.5
9.7
195.2
94 %
27 %
84 %
Our commercial networks segment revenues increased by $195.2 million, primarily due to a $185.5 million increase in
product revenues. The increase in product revenues was primarily due to increases of $147.5 million in mobile broadband satellite
communication systems products and $37.4 million in antenna systems products. The service revenue increase was mainly due to
an $8.9 million increase in mobile broadband satellite communication systems services.
Segment operating loss
(In millions, except percentages)
Segment operating loss
Percentage of segment revenues
Fiscal Years Ended
March 31,
2019
March 31,
2018
Dollar
(Increase)
Decrease
Percentage
(Increase)
Decrease
$
(166.6 )
$
(39 )%
(229.1 )
$
(98 )%
62.5
27 %
The $62.5 million decrease in our commercial networks segment operating loss was driven primarily by a $45.2 million
decrease in IR&D expenses related to next-generation satellite payload technologies for our ViaSat-3 class satellites, as the first two
ViaSat-3 class satellites have entered the phase of full construction, and mobile broadband satellite communication systems. In
addition, we experienced higher earnings contributions of $27.9 million, primarily due to increased revenues and improved margins
in our mobile broadband satellite communication systems products and satellite networking development programs. The decrease
in operating loss was partially offset by higher SG&A costs of $10.7 million.
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Government systems segment
Revenues
(In millions, except percentages)
Segment product revenues
Segment service revenues
Total segment revenues
Fiscal Years Ended
March 31,
2019
March 31,
2018
Dollar
Increase
(Decrease)
Percentage
Increase
(Decrease)
$
$
709.1 $
246.5
955.6 $
556.8 $
215.3
772.1 $
152.3
31.2
183.5
27 %
15 %
24 %
Our government systems segment revenues increased by $183.5 million due to increases of $152.3 million in product
revenues and $31.2 million in service revenues. The product revenue increase was due to a $62.0 million increase in tactical data
link products, a $31.5 million increase in government satellite communication systems, a $27.0 million increase in cybersecurity and
information assurance products and a $25.6 million increase in tactical satcom radio products. The service revenue increase was
primarily due to an $18.0 million increase in government mobile broadband services, a $7.8 million increase in tactical data link
services and a $4.7 million increase in government satellite communication systems services.
Segment operating profit
(In millions, except percentages)
Segment operating profit
Percentage of segment revenues
Fiscal Years Ended
Dollar
March 31,
2019
$
180.0
$
19 %
March 31,
2018
Increase
(Decrease)
$
42.8
18 %
137.1
Percentage
Increase
(Decrease)
31 %
The $42.8 million increase in our government systems segment operating profit was primarily due to higher earnings
contributions of $55.9 million, primarily due to an increase in revenues from our tactical data link products and increased revenues
and improved margins in our government mobile broadband services. This increase was partially offset by higher SG&A costs of
$11.6 million.
Fiscal Year 2018 Compared to Fiscal Year 2017
Revenues
(In millions, except percentages)
Product revenues
Service revenues
Total revenues
Fiscal Years Ended
March 31,
2018
March 31,
2017
$
$
755.5 $
839.1
1,594.6 $
713.9 $
845.4
1,559.3 $
Dollar
Increase
(Decrease)
41.6
(6.3 )
35.3
Percentage
Increase
(Decrease)
6 %
(1 )%
2 %
Our total revenues grew by $35.3 million as a result of a $41.6 million increase in product revenues, offset by a $6.3 million
decrease in service revenues. The product revenue increase was driven by an increase of $82.1 million in our government systems
segment, partially offset by decreases of $27.0 million in our satellite services segment and $13.4 million in our commercial
networks segment. The decrease in product revenue in our satellite services segment reflected the completion of payments under
the Settlement Agreement with SS/L in fiscal year 2017, which were previously recognized as product revenue. The service revenue
decrease was driven by a decrease of $13.3 million in our satellite services segment, partially offset by increases of $5.0 million in
our government systems segment and $2.0 million in our commercial networks segment.
Cost of revenues
(In millions, except percentages)
Cost of product revenues
Cost of service revenues
Total cost of revenues
Fiscal Years Ended
March 31,
2018
March 31,
2017
Percentage
Increase
(Decrease)
Dollar
Increase
(Decrease)
29.7
42.2
71.8
524.0 $
524.9
1,049.0 $
6 %
8 %
7 %
$
$
553.7 $
567.1
1,120.8 $
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Cost of revenues increased by $71.8 million due to increases of $42.2 million in cost of service revenues and $29.7 million in
cost of product revenues. The cost of service revenue increase mainly related to lower margins for fixed broadband services and in-
flight internet services in our satellite services segment primarily due to preparation for the ViaSat-2 service launch in the fourth
quarter of fiscal year 2018 and the ramp-up of large-scale commercial air in-flight IFC systems, partially offset by improved margins
in global mobile broadband services in our government systems segment. The cost of product revenue increase was mainly due to
increased revenues, causing a $52.2 million increase in cost of product revenues on a constant margin basis (excluding the effect of
the payments under the Settlement Agreement in the prior year period recognized as product revenues), partially offset by
improved margins mainly related to our tactical data links products, global mobile broadband products and cybersecurity and
information assurance products in our government systems segment.
Selling, general and administrative expenses
(In millions, except percentages)
Selling, general and administrative
Fiscal Years Ended
March 31,
2018
March 31,
2017
Dollar
Increase
(Decrease)
Percentage
Increase
(Decrease)
$
385.4 $
333.5 $
52.0
16 %
The $52.0 million increase in SG&A expenses reflected a $34.2 million increase in support costs primarily in our satellite
services and commercial networks segments, mainly due to the higher employee-related costs supporting the ViaSat-2 service
launch and our commercial air growth activities, as well as in support of the expansion of our international business. In addition,
selling costs increased $11.9 million, primarily due to an increase in our satellite services segment in preparation for the ViaSat-2
service launch in the fourth quarter of fiscal year 2018. New business proposal costs also increased $5.9 million, driven primarily by
increases in our government systems and commercial networks 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
(In millions, except percentages)
Independent research and development
Fiscal Years Ended
March 31,
2018
March 31,
2017
Dollar
Increase
(Decrease)
Percentage
Increase
(Decrease)
$
168.3 $
129.6 $
38.7
30 %
The $38.7 million increase in IR&D expenses was primarily the result of increases of $22.2 million in IR&D efforts in our
commercial networks segment (primarily related to an increase in IR&D efforts relating to next-generation satellite payload
technologies for our ViaSat-3 class satellites and next-generation consumer broadband integrated networking technologies) and
$15.8 million in our government systems segment (primarily related to R&D increases in the development of next-generation dual
band mobility solutions).
Amortization of acquired intangible assets
We amortize our acquired intangible assets from prior acquisitions over their estimated useful lives, which range from two to
ten years. The $1.4 million increase in amortization of acquired intangible assets in fiscal year 2018 compared to fiscal year 2017
was primarily the result of our acquisition of Aerodocs Limited in November 2016. Current and expected amortization expense for
acquired intangible assets for each of the following periods is as follows:
Expected for fiscal year 2019
Expected for fiscal year 2020
Expected for fiscal year 2021
Expected for fiscal year 2022
Expected for fiscal year 2023
Thereafter
Amortization
(In thousands)
9,571
$
7,726
5,277
3,451
3,146
2,691
31,862
$
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Interest income
The slight decrease in interest income for fiscal year 2018 compared to fiscal year 2017 was primarily due to payments in the
prior year period under the Settlement Agreement recognized as interest income. This decrease was partially offset by slightly
higher average interest rates on our investments coupled with higher average invested cash balances during fiscal year 2018
compared to fiscal year 2017.
Interest expense
The $8.1 million decrease in interest expense in fiscal year 2018 compared to fiscal year 2017 was primarily due to an increase
of $9.2 million in the amount of interest capitalized during fiscal year 2018 compared to fiscal year 2017. Capitalized interest
expense during fiscal years 2018 and 2017 related to the construction of our ViaSat-2 satellite and related gateway and networking
equipment, construction of our ViaSat-3 class satellites and other assets.
Income taxes
The income tax benefit in fiscal year 2018 reflected the tax benefit from our loss before income taxes and the benefit from
federal and state R&D tax credits. The income tax expense in fiscal year 2017 reflected the tax expense from our income before
income taxes and the benefit from federal and state R&D tax credits. Fiscal year 2018 also included an expense due to the
revaluation of net deferred tax assets resulting from the lowering of the corporate federal income tax rate from 35% to 21% under
tax legislation enacted in December 2017.
Segment Results for Fiscal Year 2018 Compared to Fiscal Year 2017
Satellite services segment
Revenues
Fiscal Years Ended
Dollar
(In millions, except percentages)
Segment product revenues
Segment service revenues
Total segment revenues
March 31,
2018
March 31,
2017
$
$
0.7 $
588.6
589.3 $
Increase
(Decrease)
(27.0 )
(13.3 )
(40.4 )
27.7 $
601.9
629.6 $
Percentage
Increase
(Decrease)
(98 )%
(2 )%
(6 )%
Our satellite services segment revenues decreased by $40.4 million as a result of a $27.0 million decrease in product revenues
and a $13.3 million decrease in service revenues. The $27.0 million decrease in product revenue in our satellite services segment
reflected the completion in fiscal year 2017 of payments under the Settlement Agreement. The decrease in service revenues was
primarily driven by a decrease in our fixed broadband services due to a decrease in the overall number of subscribers, partially
offset by higher average revenue per fixed broadband subscriber in the United States compared to the prior year period and the
expansion of our in-flight internet services. As of March 31, 2018, 635 commercial aircraft were in service utilizing our IFC systems,
compared to 559 commercial aircraft in service as of March 31, 2017. Total subscribers of our fixed broadband services decreased
year over year, with approximately 576,000 subscribers at March 31, 2018 compared to 659,000 subscribers at March 31, 2017.
Segment operating profit
(In millions, except percentages)
Segment operating profit
Percentage of segment revenues
Fiscal Years Ended
Dollar
March 31,
2018
$
12.0
$
2 %
March 31,
2017
Increase
(Decrease)
$
(119.1 )
21 %
131.1
Percentage
Increase
(Decrease)
(91 )%
The decrease in our satellite services segment operating profit was driven primarily by lower earnings contributions of $82.7
million, reflecting the decrease in product revenues resulting from the completion in fiscal year 2017 of payments under the
Settlement Agreement, as well as lower margins related to in-flight internet services and fixed broadband services due to large-
scale commercial air IFC ramp-up and preparation for the ViaSat-2 service launch in the fourth quarter of fiscal year 2018. The
decrease in operating profit was further impacted by higher SG&A costs of $35.6 million compared to the prior year period mainly
due to the higher employee-related costs supporting the ViaSat-2 service launch, as well as in support of the expansion of our
international businesses and higher selling costs due to promotion of our fixed broadband services in preparation for the ViaSat-2
service launch.
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7110Fin.indd 35
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Commercial networks segment
Revenues
(In millions, except percentages)
Segment product revenues
Segment service revenues
Total segment revenues
Fiscal Years Ended
March 31,
2018
March 31,
2017
Dollar
Increase
(Decrease)
Percentage
Increase
(Decrease)
$
$
198.0 $
35.2
233.2 $
211.5 $
33.1
244.6 $
(13.4 )
2.0
(11.4 )
(6 )%
6 %
(5 )%
Our commercial networks segment revenues decreased by $11.4 million, due to a $13.4 million decrease in product revenues,
partially offset by a $2.0 million increase in service revenues. The decrease in product revenues was primarily due to a decrease of
$52.1 million in fixed satellite networks products (mainly due to a decrease in broadband terminal orders from our large-scale
Australian Ka-band infrastructure project that completed last fiscal year and a decrease from our next-generation Ka-band system
contract in Canada) and a decrease of $3.7 million in satellite networking development programs products, partially offset by an
increase of $34.4 million in mobile broadband satellite communication systems products and an increase of $7.8 million in antenna
systems products. The increase in service revenues was primarily due to an increase of $2.6 million in mobile broadband satellite
communication systems services.
Segment operating loss
(In millions, except percentages)
Segment operating loss
Percentage of segment revenues
Fiscal Years Ended
March 31,
2018
March 31,
2017
Dollar
(Increase)
Decrease
Percentage
(Increase)
Decrease
$
(229.1 )
$
(98 )%
(180.5 )
$
(74 )%
(48.6 )
(27 )%
The $48.6 million increase in our commercial networks segment operating loss was driven primarily by a $22.2 million
increase in IR&D expenses (primarily due to an increase in IR&D efforts relating to next-generation satellite payload technologies for
our ViaSat-3 class satellites and next-generation consumer broadband integrated networking technologies). In addition, we
experienced lower earnings contributions of $15.1 million (primarily due to lower margins in our satellite networking development
programs products) and an $11.4 million increase in overall SG&A costs (primarily due to the higher employee-related costs
supporting our commercial air growth activities and the ViaSat-2 service launch).
Government systems segment
Revenues
(In millions, except percentages)
Segment product revenues
Segment service revenues
Total segment revenues
Fiscal Years Ended
March 31,
2018
March 31,
2017
Dollar
Increase
(Decrease)
Percentage
Increase
(Decrease)
$
$
556.8 $
215.3
772.1 $
474.8 $
210.3
685.1 $
82.1
5.0
87.0
17 %
2 %
13 %
Our government systems segment revenues increased by $87.0 million due to increases of $82.1 million in product revenues
and $5.0 million in service revenues. The product revenue increase was primarily due to a $55.2 million increase in tactical data link
products, a $14.8 million increase in global mobile broadband products, a $7.5 million increase in cybersecurity and information
assurance products and a $5.9 million increase in tactical satcom radio products. The service revenue increase was primarily due to
an $8.6 million increase in government satellite communication systems services, a $4.6 million increase in global mobile
broadband services and a $1.7 million increase in tactical data link services, partially offset by a $10.9 million decrease in our
network management services for Wi-Fi and other internet access networks.
Segment operating profit
(In millions, except percentages)
Segment operating profit
Percentage of segment revenues
Fiscal Years Ended
March 31,
2018
March 31,
2017
Dollar
Increase
(Decrease)
Percentage
Increase
(Decrease)
$
137.1
$
18 %
96.7
$
14 %
40.5
42 %
36 | Viasat Annual Report 2019
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The $40.5 million increase in our government systems segment operating profit reflected higher earnings contributions of
$61.3 million, primarily due to higher revenues in our tactical data links products, global mobile broadband products, government
satellite communication systems services and cybersecurity and information assurance products, coupled with improved margins
in global mobile broadband products and services. This operating profit increase was partially offset by higher IR&D costs of $15.8
million (primarily related to R&D increases in the development of next-generation dual band mobility solutions) and overall higher
SG&A costs of $5.0 million.
Backlog
As reflected in the table below, our overall firm and funded backlog increased during fiscal year 2019. The increases in both
firm and funded backlog were attributable to increases in all three of our segments.
Firm backlog
Satellite services segment
Commercial networks segment
Government systems segment
Total
Funded backlog
Satellite services segment
Commercial networks segment
Government systems segment
Total
As of
March 31, 2019
As of
March 31, 2018
(In millions)
$
$
$
$
581.3 $
353.8
931.2
1,866.3 $
581.3 $
353.8
912.0
1,847.1 $
130.5
288.3
671.2
1,090.0
130.5
288.3
592.1
1,010.9
The firm backlog does not include contract options. Of the $1.9 billion in firm backlog, a little over half is expected to be
delivered in fiscal year 2020, with the balance delivered thereafter. We include in our backlog only those orders for which we have
accepted purchase orders. Starting with the first quarter of fiscal year 2019, upon adoption of ASC 606, our backlog includes
contracts with subscribers for fixed broadband services in our satellite services segment. Backlog does not include anticipated
purchase orders and requests for the installation of IFC systems or future recurring in-flight internet service revenues under
commercial in-flight internet agreements recorded in our commercial networks and satellite services segments, respectively. As of
March 31, 2019, we expected to install IFC systems on approximately 490 additional aircraft under our existing customer
agreements with commercial airlines, approximately 260 of which relate to accepted purchase orders (and are included in firm
backlog in our commercial networks segment) and approximately 230 of which relate to anticipated purchase orders and requests
under existing customer agreements. There can be no assurance that all anticipated purchase orders and requests will be placed. In
addition, backlog as of March 31, 2018 does not include contracts with our subscribers for fixed broadband services in our satellite
services segment.
Our total new awards exclude future revenue under recurring consumer commitment arrangements and were approximately
$2.4 billion, $1.7 billion and $1.7 billion for fiscal years 2019, 2018 and 2017, 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.
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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 March 31, 2019, we had $261.7 million in cash and cash
equivalents, $401.7 million in working capital, and no outstanding borrowings and borrowing availability of $680.4 million under
the Revolving Credit Facility (which amount reflects the reduction of available commitments under the Revolving Credit Facility
from $800.0 million to $700.0 million in March 2019). At March 31, 2018, we had $71.4 million in cash and cash equivalents,
$146.1 million in working capital, and no outstanding borrowings and borrowing availability of $770.4 million under our Revolving
Credit Facility. We invest our cash in excess of current operating requirements in short-term, highly liquid bank money market
accounts.
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 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, we filed a universal shelf registration statement with the Securities and Exchange Commission (SEC) for the future sale of an
unlimited amount of common stock, preferred stock, debt securities, depositary shares, warrants and rights. The 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. 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.
Cash flows
Cash provided by operating activities for fiscal year 2019 was $327.6 million compared to cash provided by operating
activities of $358.6 million for fiscal year 2018. This $31.1 million decrease was primarily driven by a $110.0 million year-over-year
increase in cash used to fund net operating assets, partially offset by our operating results (net loss adjusted for depreciation,
amortization and other non-cash changes) which resulted in $78.9 million of higher cash provided by operating activities year-over-
year. The increase in cash used to fund net operating assets during fiscal year 2019 when compared to fiscal year 2018 was primarily
due to a decrease in cash inflows year-over-year from the long-term portion of deferred revenues included in other liabilities in our
satellite services segment as well as higher increase year-over-year of combined billed and unbilled accounts, receivable, net,
attributable to the timing of billings in our satellite services segment.
Cash used in investing activities for fiscal year 2019 was $489.4 million compared to $584.5 million for fiscal year 2018. This
$95.1 million decrease in cash used in investing activities year-over year reflects approximately $185.7 million of cash receipts
related to ViaSat-2 satellite insurance claim proceeds received during fiscal year 2019, a decrease of $30.6 million year-over-year in
cash used for capital software development, a decrease of $20.6 million in cash used for the construction of earth stations and
network operation systems and $14.0 million of cash proceeds from sales of real property during the second quarter of fiscal year
2019, partially offset by an increase of $101.4 million in capital expenditures used for property and other general purpose
equipment and $44.4 million in cash used for satellite construction.
38 | Viasat Annual Report 2019
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Cash provided by financing activities for fiscal year 2019 was $354.6 million compared to $165.8 million for fiscal year 2018.
This $188.8 million increase in cash provided by financing activities year-over-year was primarily due to the issuance of $600.0
million in aggregate principal amount of our 2027 Notes during the fourth quarter of fiscal year 2019. Cash provided by financing
activities for both periods included cash proceeds from borrowings under our long-term debt (net of repayments), cash received
from stock option exercises and employee stock purchase plan purchases, offset by cash used for payments of debt issuance costs
and the repurchase of common stock related to net share settlement of certain employee tax liabilities in connection with the
vesting of restricted stock unit awards.
Comparing cash flows in fiscal year 2018 to fiscal year 2017, the $52.7 million decrease in cash provided by operating
activities was primarily driven by our operating results (net (loss) income adjusted for depreciation, amortization and other non-
cash changes) which resulted in $99.3 million of higher cash outflows year-over-year, partially offset by a $46.6 million year-over-
year decrease in cash used to fund net operating assets. The $130.5 million decrease in cash used in investing activities reflected a
year-over-year decrease of $140.4 million in cash used for investment in unconsolidated affiliates, a decrease of $81.7 million in
cash used for satellite construction, and a decrease of $16.5 million in cash used for acquisitions. This decrease was partially offset
by an increase of $70.1 million in capital expenditures for property and other general purpose equipment, a year-over-year decrease
of $27.6 million in proceeds from the sale of real property adjacent to our current headquarters location in fiscal year 2017 and an
increase of $8.5 million in cash used for the construction of earth stations and network operation systems related to the ViaSat-2
satellite. The $227.0 million decrease in cash provided by financing activities year-over-year was primarily related to the repurchase
and redemption of $575.0 million in aggregate principal amount of our former 2020 Notes and the related payment of $10.6 million
of debt extinguishment costs during the second quarter of fiscal year 2018, a year-over-year decrease of $25.0 million in net
proceeds from borrowings under our Ex-Im Credit Facility, and a year-over-year increase of $3.1 million related to payments of debt
issuance costs during fiscal year 2018, as well as the $503.1 million we received in net proceeds from a public offering of our
common stock in the third quarter of fiscal year 2017 (after deducting underwriting discounts and offering expenses). This decrease
was partially offset by the issuance of $700.0 million in aggregate principal amount of our 5.625% Senior Notes due 2025 (the 2025
Notes) during the second quarter of fiscal year 2018 and a year-over-year decrease of $180.0 million in net payments on borrowings
under our Revolving Credit Facility.
Satellite-related activities
On June 1, 2017, our second-generation ViaSat-2 satellite was successfully launched into orbit. Following satellite launch, in
fiscal years 2018 and 2019 we incurred additional operating costs as we prepared for and launched commercial services on the
satellite. These additional operating costs included depreciation, amortization of capitalized software development, earth station
connectivity, marketing and advertising costs, logistics, customer care and various support systems, and contributed to an
operating loss for our satellite services segment in fiscal year 2019. However, as the services we provide using the new satellite start
to scale, we expect to expand the revenue base for our fixed broadband and in-flight services and gain operating cost efficiencies,
which together we expect will yield incremental segment earnings contributions, partially offset by investments associated with our
global business and emerging markets growth. However there can be no assurance that we will be successful in significantly
increasing revenues or achieving operating profit in our satellite services segment. Moreover, 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.
In the fourth quarter of fiscal year 2018, shortly before the launch of commercial broadband services on the ViaSat-2 satellite,
we reported an antenna deployment issue. We worked with the satellite manufacturer to determine the root cause of the antenna
deployment issue, potential correcting measures, and resulting damage. In the second quarter of fiscal year 2019, the root cause
analysis was completed. Based on that analysis, during the second quarter of fiscal year 2019, we recorded a reduction to the
carrying value of the ViaSat-2 satellite of $177.4 million, with a corresponding insurance receivable of $177.4 million, based on our
estimated ViaSat-2 output capabilities as compared to the anticipated, potential and configured capacity of the ViaSat-2 satellite.
During fiscal year 2019, we received $185.7 million in insurance recovery proceeds related to such claims. We recorded an insurance
receivable of $2.3 million as of March 31, 2019 with respect to probable remaining ViaSat-2 related insurance claims. As a result,
during fiscal year 2019, we recorded a $7.5 million gain related to ViaSat-2 insurance claims in SG&A expenses in our satellite
services segment in the consolidated statements of operations and comprehensive incomes (loss). The ViaSat-2 satellite was
primarily financed by the Ex-Im Credit Facility (see “—Ex-Im Credit Facility” below). Pursuant to the terms of the Ex-Im Credit
Facility, insurance proceeds received from such claims were used to pay down outstanding borrowings under the Ex-Im Credit
Facility.
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In July 2016, we entered into two separate agreements with The Boeing Company (Boeing) for the construction and purchase
of two ViaSat-3 class satellites and the integration of Viasat’s payload technologies into the satellites. Pursuant to these
agreements, as amended, the aggregate purchase price for the two satellites is approximately $390.1 million (subject to purchase
price adjustments based on factors such as launch delay and early delivery), plus an additional amount for launch support services
to be performed by Boeing. In addition, under one of these agreements, we had the option to order one additional ViaSat-3 class
satellite, with respect to which we signed an agreement to proceed in January 2019 for the third ViaSat-3 class satellite. The first
ViaSat-3 class satellite is expected to provide broadband services over the Americas, the second is expected to provide broadband
services over the Europe, Middle East and Africa (EMEA) region, and the third is expected to provide broadband services over the
Asia and Pacific (APAC) region, enabling us to deliver affordable connectivity worldwide. The projected aggregate total project cost
for the first two ViaSat-3 class satellites, including the satellites, launches, insurance and related earth station infrastructure,
through satellite launch is estimated to be between $1.2 billion and $1.4 billion, and will depend on the timing of the earth station
infrastructure roll-out of each satellite and the method we use to procure fiber access. Our total cash funding may be reduced
through various third-party agreements, including potential joint service offerings and other strategic partnering arrangements. We
believe we have adequate sources of funding for the ViaSat-3 class satellites, which include our cash on hand, borrowing capacity
and the cash we expect to generate from operations over the next few years.
The first two ViaSat-3 class satellites entered the phase of full construction during the second half of fiscal year 2018. IR&D
investments continued throughout fiscal year 2019 and are expected to continue beyond fiscal year 2019 relating to ViaSat-3
ground infrastructure and support of our growing government and commercial air mobility businesses. We 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,
although 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. In fiscal year 2020, capital expenditures are
expected to increase when compared to fiscal year 2019, as we will have a third ViaSat-3 class satellite under construction, as well
as increased ground network investments related to international expansion.
Revolving Credit Facility
As of March 31, 2019, the Revolving Credit Facility provided a $700.0 million revolving line of credit (including up to
$150.0 million of letters of credit), with a maturity date of January 18, 2024. On March 27, 2019, we reduced available commitments
under the Revolving Credit Facility from $800.0 million to $700.0 million.
Borrowings under the Revolving Credit Facility bear interest, at our 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 our total leverage ratio. The Revolving
Credit Facility is required to be guaranteed by certain significant domestic subsidiaries of Viasat (as defined in the Revolving Credit
Facility) and secured by substantially all of our assets. As of March 31, 2019, none of our subsidiaries guaranteed the Revolving
Credit Facility.
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, our ability to sell
assets, make investments and acquisitions, make capital expenditures, grant liens, pay dividends and make certain other restricted
payments.
At March 31, 2019, we had no outstanding borrowings under the Revolving Credit Facility and $19.6 million outstanding under
standby letters of credit, leaving borrowing availability under the Revolving Credit Facility as of March 31, 2019 of $680.4 million.
Ex-Im Credit Facility
The Ex-Im Credit Facility originally provided a $362.4 million senior secured direct loan facility, which was fully drawn. Of the
$362.4 million in principal amount of borrowings made under the Ex-Im Credit Facility, $321.2 million was used to finance up to 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 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 March 31, 2019, we had $139.6 million in
principal amount of outstanding borrowings under the Ex-Im Credit Facility.
40 | Viasat Annual Report 2019
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Borrowings under the Ex-Im Credit Facility bear interest at a fixed rate of 2.38%, payable semi-annually in arrears. The
effective interest rate on our 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%. 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. Pursuant to the terms of the Ex-Im Credit Facility, certain insurance recovery proceeds related to the ViaSat-2
satellite must be used to pay down outstanding borrowings under the Ex-Im Credit Facility upon receipt. During fiscal year 2019, we
received $185.7 million of insurance proceeds related to the ViaSat-2 satellite, all of which were 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, our ability to sell assets,
make investments and acquisitions, make capital expenditures, grant liens, pay dividends and make certain other restricted
payments.
The 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 our consolidated financial statements. The discount of $42.3 million
(comprising the initial $6.0 million pre-exposure fee, $35.3 million of 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 Secured Notes due 2027
In March 2019, we issued $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 our consolidated financial
statements. The 2027 Notes bear interest at the rate of 5.625% per year, payable semi-annually in cash in arrears, which interest
payments will commence in October 2019. Debt issuance 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 our existing and future subsidiaries that
guarantees the Revolving Credit Facility. As of March 31, 2019, none of our 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 our
assets.
The 2027 Notes are our general senior secured obligations and rank equally in right of payment with all of our existing and
future unsubordinated debt. The 2027 Notes are effectively senior to all of our existing and future unsecured debt (including the
2025 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 our 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 our existing and future subordinated
indebtedness.
The indenture governing the 2027 Notes limits, among other things, our and our 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 our satellite insurance; and consolidate or merge with, or sell substantially all of their assets to, another
person.
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Prior to April 15, 2022, we may redeem up to 40% of the 2027 Notes at a redemption price of 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. We may also redeem the 2027 Notes prior to April 15, 2022, in whole or in part, at a redemption price equal to 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%,
during the 12 months beginning on April 15, 2023 at a redemption price of 101.406%, and at any time on or after April 15, 2024 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 2027 Notes), each holder
will have the right to require us to repurchase all or any part of such holder’s 2027 Notes at a purchase price in cash equal to 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, we issued $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 our consolidated
financial statements. The 2025 Notes bear interest at the rate of 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 our existing and future subsidiaries
that guarantees the Revolving Credit Facility. As of March 31, 2019, none of our subsidiaries guaranteed the 2025 Notes. The 2025
Notes are our general senior unsecured obligations and rank equally in right of payment with all of our existing and future
unsecured unsubordinated debt. The 2025 Notes are effectively junior in right of payment to our existing and future secured debt,
including under our Revolving Credit Facility and Ex-Im Credit Facility (collectively, the Credit Facilities) (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 our
subsidiaries that do not guarantee the 2025 Notes, and are senior in right of payment to all of our existing and future subordinated
indebtedness.
The indenture governing the 2025 Notes limits, among other things, our and our 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 our satellite insurance; and consolidate or merge with, or sell substantially all of their assets to, another
person.
Prior to September 15, 2020, we may redeem up to 40% of the 2025 Notes at a redemption price of 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. We may also redeem the 2025 Notes prior to September 15, 2020, in whole or in part, at a redemption price equal
to 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 2025 Notes and
(ii) the excess, if any, of (a) the present value at such date of redemption of (1) the redemption price of such 2025 Notes on
September 15, 2020 plus (2) all required interest payments due on such 2025 Notes through September 15, 2020 (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 2025 Notes) plus 50 basis points, over (b) the then-outstanding principal amount of such 2025 Notes. 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 after September 15, 2022 at a redemption price of 100%, in each case plus accrued and unpaid interest, if any,
thereon to the redemption date.
42 | Viasat Annual Report 2019
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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 us to repurchase all or any part of such holder’s 2025 Notes at a purchase price in cash equal to 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).
Discharge of indenture and loss on extinguishment of debt
In connection with our issuance of the 2025 Notes in September 2017, we repurchased and redeemed all $575.0 million in
aggregate principal amount of our former 2020 Notes then outstanding through a cash tender offer and redemption, and the
indenture governing the 2020 Notes was satisfied and discharged in accordance with its terms. In September 2017, we repurchased
$298.2 million in aggregate principal amount of the 2020 Notes pursuant to the tender offer. The total cash payment to repurchase
the tendered 2020 Notes in the tender offer, including accrued and unpaid interest to, but excluding, the repurchase date, was
$309.3 million. Also in September 2017, in connection with the redemption of the remaining $276.8 million in aggregate principal
amount of 2020 Notes, we irrevocably deposited $287.4 million with Wilmington Trust, as trustee, as trust funds solely for the
benefit of the holders of such 2020 Notes. The redemption price for the 2020 Notes was 101.719% of the principal amount so
redeemed, plus accrued and unpaid interest to, but excluding, the redemption date of October 5, 2017.
In connection with the satisfaction and discharge of the indenture governing the 2020 Notes, all of our obligations (other than
certain customary provisions of the indenture that expressly survive pursuant to the terms of the indenture) were discharged in
September 2017.
As a result of the repurchase of the 2020 Notes in the tender offer and the redemption of the remaining 2020 Notes, we
recognized a $10.2 million loss on extinguishment of debt during the second quarter of fiscal year 2018, which was comprised of
$10.6 million in cash payments (including tender offer consideration, redemption premium and related professional fees), net of an
insignificant amount in non-cash gain (including unamortized premium, net of unamortized debt issuance costs).
Contractual Obligations
The following table sets forth a summary of our obligations at March 31, 2019:
(In thousands, including interest where applicable)
Operating leases and satellite capacity
agreements
2027 Notes
2025 Notes
Revolving Credit Facility
Ex-Im Credit Facility
Satellite performance incentive obligations
Purchase commitments including satellite-
related agreements
Total
Total
2020
For the Fiscal Years Ending
2021-2022 2023-2024 Thereafter
$ 629,710 $ 127,515 $ 195,511 $ 123,607 $ 183,077
718,125
759,063
—
41,062
17,943
871,781
955,938
—
150,668
36,991
67,500
78,750
—
44,864
6,134
18,656
39,375
—
21,784
2,645
67,500
78,750
—
42,958
10,269
1,638,095
48,759
$ 4,283,183 $ 1,147,017 $ 847,518 $ 520,619 $ 1,768,029
937,042
454,759
197,535
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.
(cid:1)
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Our consolidated balance sheets included $120.8 million and $121.2 million of “other liabilities” as of March 31, 2019 and
March 31, 2018, 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, our long-term warranty obligations, the
long-term portion of deferred rent and deferred income taxes. 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
incentive obligations”), 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 11 to our consolidated financial statements for additional information regarding satellite
performance incentive obligations relating to the ViaSat-1 and ViaSat-2 satellites. See Note 8 to our consolidated financial
statements for additional information regarding our income taxes and related tax positions and Note 13 to our consolidated
financial statements for a discussion of our product warranties.
Off-Balance Sheet Arrangements
We had no material off-balance sheet arrangements at March 31, 2019 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 consolidated financial statements included in
this report.
Recent Authoritative Guidance
For information regarding recently adopted and issued accounting pronouncements, see Note 1 to the consolidated financial
statements.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
Our financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable, short-term and long-
term obligations, including the Credit Facilities, the 2025 Notes and the 2027 Notes, and foreign currency forward contracts. 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 March 31, 2019, we had no outstanding borrowings under our Revolving Credit Facility,
$139.6 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 and $600.0 million in aggregate principal amount outstanding of the 2027 Notes, and we
held no short-term investments. Our 2025 Notes, 2027 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 fiscal years ended March 31, 2019 and March 31, 2018. 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.
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. Under the Revolving Credit Facility, the effective interest rate as of March 31, 2019 that would have been
applied to any new Eurodollar-based borrowings under the Revolving Credit Facility was approximately 4.46%. As of March 31, 2019,
we had no outstanding borrowings under our Revolving Credit Facility. Accordingly, assuming the outstanding balance remained
constant over a year, changes in interests rates applicable to our Revolving Credit Facility would have no effect on our interest
incurred and cash flow.
44 | Viasat Annual Report 2019
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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. Our investment in Euro Broadband Infrastructure
Sàrl during the fourth quarter of fiscal year 2017, which is denominated in Euros, increases our exposure to foreign currency risk. A
five percent variance in foreign currencies in which our international business is conducted would change our loss before income
taxes by an insignificant amount for the fiscal years ended March 31, 2019 and March 31, 2018. 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 March 31, 2019, we had a number of foreign currency forward contracts outstanding which are intended to reduce the
foreign currency risk for amounts payable to vendors in Euros and Australian dollars. The foreign currency forward contracts with a
notional amount of $9.9 million had an insignificant amount of fair value recorded in accrued liabilities as of March 31, 2019. If the
foreign currency forward rate on these foreign currency forward contracts had changed by 10%, the fair value of these foreign
currency forward contracts as of March 31, 2019 and March 31, 2018 would have changed by an insignificant amount.
SUMMARIZED QUARTERLY DATA (UNAUDITED)
The following financial information reflects all normal recurring adjustments which are, in the opinion of management,
necessary for the fair statement of the results for the interim periods. Summarized quarterly data for fiscal years 2019 and 2018 are
as follows:
2019
Total revenues
(Loss) income from operations
Net (loss) income
Net (loss) income attributable to Viasat, Inc.
Basic net (loss) income per share attributable to
Viasat, Inc.
Diluted net (loss) income per share attributable to
Viasat, Inc.
2018
Total revenues
Loss from operations
Net loss
Net loss attributable to Viasat, Inc.
Basic net loss per share attributable to Viasat, Inc.
Diluted net loss per share attributable to Viasat, Inc.
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
(In thousands, except per share data)
$
438,869 $
(54,479 )
(35,497 )
(34,010 )
517,474 $
(21,571 )
(25,598 )
(25,724 )
554,694 $
6,007
(10,737 )
(10,404 )
557,221
9,423
5,363
2,515
(0.57 )
(0.43 )
(0.17 )
0.04
(0.57 )
(0.43 )
(0.17 )
0.04
$
380,044 $
(17,950 )
(9,246 )
(9,039 )
(0.16 )
(0.16 )
393,074 $
(15,860 )
(13,892 )
(13,689 )
(0.24 )
(0.24 )
381,837 $
(25,326 )
(25,621 )
(24,631 )
(0.42 )
(0.42 )
439,670
(33,051 )
(19,516 )
(19,946 )
(0.34 )
(0.34 )
Summarized quarterly data for the second quarter of fiscal year 2018 reflects a $10.2 million loss on extinguishment of debt.
Refer to Note 5 to the consolidated financial statements for discussion of the refinancing of the 2020 Notes and associated loss on
extinguishment of debt. Summarized quarterly data for the third and fourth quarters of fiscal year 2019 reflects a $4.0 million and
$3.5 million gain, respectively, related to ViaSat-2 insurance claims in SG&A expenses in our satellite services segment. Refer to Note
1 to the consolidated financial statements for further discussion of the ViaSat-2 insurance claims.
Basic and diluted net (loss) income per share are computed independently for each of the quarters presented. Therefore, the
sum of quarterly basic and diluted per share information may not equal annual basic and diluted net income per share.
CONTROLS AND PROCEDURES
Evaluation of Disclosure 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
(cid:1)
7110Fin.indd 45
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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 March 31,
2019, 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 March 31, 2019.
Management’s Report on Internal Control Over Financial Reporting
The company’s management is responsible for establishing and maintaining adequate internal control over financial
reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Under the supervision and with the participation of
the company’s management, including our Chief Executive Officer and Chief Financial Officer, the company conducted an
evaluation of the effectiveness of its internal control over financial reporting based on criteria established in the framework in
Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Based on this evaluation, the company’s management concluded that its internal control over financial reporting was effective as of
March 31, 2019.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
The company’s independent registered public accounting firm has audited the effectiveness of the company’s internal
control over financial reporting as of March 31, 2019, as stated in their report which appears on page 47.
Changes in Internal Control Over Financial Reporting
We regularly review our system of internal control over financial reporting and make changes to our processes and systems to
improve controls and increase efficiency, while ensuring that we maintain an effective internal control environment. Changes may
include such activities as implementing new, more efficient systems, consolidating activities, and migrating processes. During the
quarter ended March 31, 2019, 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.
46 | Viasat Annual Report 2019
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Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Viasat, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Viasat, Inc. and its subsidiaries (the “Company”) as of March 31,
2019 and 2018, and the related statements of operations and comprehensive income (loss), cash flows, and equity for each of the
three years in the period ended March 31, 2019, including the related notes and financial statement schedule listed in the
accompanying index appearing under (cid:10)tem 15(a)(2) (collectively referred to as the “consolidated financial statements”). We also
have audited the Company's internal control over financial reporting as of March 31, 2019, based on criteria established in Internal
Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position
of the Company as of March 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the
period ended March 31, 2019 in conformity with accounting principles generally accepted in the United States of America. Also in
our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of March 31,
2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Change in Accounting Principle
As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it accounts for
revenues from contracts with customers in fiscal year 2019.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control
over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in
Management's Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express
opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based
on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)
(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and
the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement,
whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material
respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of
the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as
well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial
reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.
Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our
audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain
to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets
of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
7110Fin.indd 47
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statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that
could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
San Diego, California
May 28, 2019
We have served as the Company’s auditor since 1992.
48 | Viasat Annual Report 2019
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VIASAT, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
Current assets:
Cash and cash equivalents
Accounts receivable, net
Inventories
Prepaid expenses and other current assets
Total current assets
Satellites, net
Property and equipment, net
Other acquired intangible assets, net
Goodwill
Other assets
Total assets
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable
Accrued liabilities
Current portion of long-term debt
Total current liabilities
Senior notes
Other long-term debt
Other liabilities
Total liabilities
Commitments and contingencies (Notes 11 and 12)
Equity:
Viasat, Inc. stockholders’ equity
Preferred stock, $0.0001 par value; 5,000,000 shares authorized;
no shares issued and outstanding at March 31, 2019 and 2018,
respectively
Common stock, $0.0001 par value, 100,000,000 shares authorized;
60,550,093 and 58,905,274 shares outstanding at March 31, 2019
and 2018, respectively
Paid-in capital
Retained earnings
Accumulated other comprehensive income
Total Viasat, Inc. stockholders’ equity
Noncontrolling interest in subsidiaries
Total equity
Total liabilities and equity
As of
March 31,
2019
As of
March 31,
2018
(In thousands, except share data)
$
$
$
$
$
261,701
300,307
234,518
90,646
887,172
$
$
1,215,663
909,627
22,301
121,719
758,805
3,915,287
157,275
308,268
19,937
485,480
1,282,898
110,005
120,826
1,999,209
71,446
267,665
196,307
77,135
612,553
1,239,987
722,488
31,862
121,085
686,134
3,414,109
157,481
263,676
45,300
466,457
690,886
287,519
121,240
1,566,102
—
—
6
1,656,819
245,585
5,338
1,907,748
8,330
1,916,078
3,915,287
$
6
1,535,635
285,960
15,565
1,837,166
10,841
1,848,007
3,414,109
See accompanying notes to the consolidated financial statements.
(cid:1)
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VIASAT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
March 31,
2019
Fiscal Years Ended
March 31,
2018
(In thousands, except per share data)
March 31,
2017
Revenues:
Product revenues
Service revenues
Total revenues
Operating expenses:
Cost of product revenues
Cost of service revenues
Selling, general and administrative
Independent research and development
Amortization of acquired intangible assets
(Loss) income from operations
Other income (expense):
Interest income
Interest expense
Loss on extinguishment of debt
(Loss) income before income taxes
Benefit from (provision for) income taxes
Equity in income of unconsolidated affiliate, net
Net (loss) income
Less: net income (loss) attributable to noncontrolling
interests, net of tax
Net (loss) income attributable to Viasat, Inc.
Net (loss) income per share attributable to Viasat, Inc.
common stockholders:
Basic net (loss) income per share attributable to
Viasat, Inc. common stockholders
Diluted net (loss) income per share attributable to
Viasat, Inc. common stockholders
Shares used in computing basic net (loss) income
per share
Shares used in computing diluted net (loss) income
per share
Comprehensive income (loss):
Net (loss) income
Other comprehensive income (loss), net of tax:
Unrealized (loss) gain on hedging, net of tax
Foreign currency translation adjustments, net of tax
Other comprehensive (loss) income, net of tax
Comprehensive (loss) income
Less: comprehensive income (loss) attributable to
noncontrolling interests, net of tax
Comprehensive (loss) income attributable to
Viasat, Inc.
$
$
1,092,691
975,567
2,068,258
$
755,547
839,078
1,594,625
713,936
845,401
1,559,337
834,472
703,249
458,458
123,044
9,655
(60,620 )
149
(50,010 )
—
(110,481 )
41,014
2,998
(66,469 )
553,677
567,137
385,420
168,347
12,231
(92,187 )
960
(4,026 )
(10,217 )
(105,470 )
35,217
1,978
(68,275 )
1,154
(67,623 ) $
(970 )
(67,305 ) $
524,026
524,949
333,468
129,647
10,788
36,459
1,008
(12,083 )
—
25,384
(3,617 )
—
21,767
(2,000 )
23,767
(1.13 ) $
(1.15 ) $
(1.13 ) $
(1.15 ) $
0.45
0.45
59,942
58,438
52,318
59,942
58,438
53,396
$
$
$
$
(66,469 ) $
(68,275 ) $
21,767
(242 )
(9,985 )
(10,227 )
(76,696 )
67
15,785
15,852
(52,423 )
(182 )
(2,329 )
(2,511 )
19,256
1,154
(970 )
(2,000 )
$
(77,850 ) $
(51,453 ) $
21,256
See accompanying notes to the consolidated financial statements.
50 | Viasat Annual Report 2019
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VIASAT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Cash flows from operating activities:
Net (loss) income
Adjustments to reconcile net (loss) income to net cash provided
by operating activities:
Depreciation
Amortization of intangible assets
Deferred income taxes
Stock-based compensation expense
Loss on disposition of fixed assets
Loss on extinguishment of debt
Other non-cash adjustments
Increase (decrease) in cash resulting from changes in operating assets
and liabilities, net of effects of acquisitions:
Accounts receivable
Inventories
Other assets
Accounts payable
Accrued liabilities
Other liabilities
Net cash provided by operating activities
Cash flows from investing activities:
Purchase of property, equipment and satellites
Cash paid for patents, licenses and other assets
Proceeds from insurance claims on ViaSat-2 satellite
Payments related to acquisition of businesses, net of cash acquired
Proceeds from sale of real property
Investment in unconsolidated affiliate
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from issuance of Notes
Repayment of 2020 Notes
Payment of debt extinguishment costs
Proceeds from revolving credit facility borrowings
Payments of revolving credit facility borrowings
Payments of Ex-Im credit facility borrowings
Proceeds from Ex-Im credit facility borrowings, net of discount
Payment of debt issuance costs
Proceeds from issuance of common stock under equity plans
Purchase of common stock in treasury (immediately retired)
related to tax withholdings for stock-based compensation
Proceeds from common stock issued in public offering, net
of issuance costs
Proceeds from noncontrolling interest capital contribution
Other financing activities
Net cash provided by financing activities
Effect of exchange rate changes on cash
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of fiscal year
Cash and cash equivalents at end of fiscal year
Supplemental information:
Cash paid for interest (net of amounts capitalized)
Cash paid for income taxes, net
Non-cash investing and financing activities:
Issuance of common stock in satisfaction of certain accrued
employee compensation liabilities
Capital expenditures not paid for
Debt issuance costs not paid for
Exposure fees on Ex-Im credit facility financed through
Ex-Im credit facility
Issuance of common stock in connection with acquisition
March 31,
2019
Fiscal Years Ended
March 31,
2018
(In thousands)
March 31,
2017
$
(66,469 )
$
(68,275 )
$
21,767
262,289
56,324
(43,813 )
79,599
41,957
—
18,483
(46,108 )
(36,593 )
(2,349 )
(5,714 )
71,478
(1,533 )
327,551
(636,855 )
(49,965 )
185,706
(2,339 )
14,034
—
(489,419 )
600,000
—
—
510,000
(510,000 )
(222,840 )
—
(9,767 )
26,330
(28,826 )
—
—
(10,280 )
354,617
(2,494 )
190,255
71,446
261,701
$
210,441
45,211
(36,558 )
68,545
32,978
10,217
6,883
(12,439 )
(37,562 )
(25,975 )
32,503
60,042
72,622
358,633
(511,634 )
(72,853 )
—
—
—
—
(584,487 )
700,000
(575,000 )
(10,602 )
—
—
—
52,503
(9,759 )
26,165
(24,206 )
—
8,491
(1,816 )
165,776
1,426
(58,652 )
130,098
71,446
$
35,119
$
1,758
$
3,722
$
4,021
$
32,129
40,619
2,479
$
$
$
—
—
$
$
16,409
41,149
—
$
$
$
5,764
—
$
$
200,686
45,236
(218 )
55,775
35,431
—
10,018
16,071
(12,386 )
(15,259 )
972
48,039
5,166
411,298
(514,692 )
(70,966 )
—
(16,528 )
27,559
(140,378 )
(715,005 )
—
—
—
90,000
(270,000 )
—
77,469
(6,677 )
22,403
(21,670 )
503,061
—
(1,802 )
392,784
(1,067 )
88,010
42,088
130,098
10,094
1,468
13,080
29,813
—
8,505
4,988
$
$
$
$
$
$
$
$
See accompanying notes to the consolidated financial statements.
(cid:1)
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VIASAT, INC.
CONSOLIDATED STATEMENTS OF EQUITY
Viasat, Inc. Stockholders
Common Stock
Number of
Shares
Issued
Amount
Accumulated
Other
Comprehensive
Income (Loss)
(In thousands, except share data)
Retained
Earnings
Paid-in
Capital
Noncontrolling
Interest in
Subsidiaries
Total
Balance at March 31, 2016
Exercise of stock options
Issuance of stock under Employee Stock
Purchase Plan
Common stock issued in public offering, net of
issuance costs
Stock-based compensation
Shares issued in settlement of certain accrued
employee compensation liabilities
RSU awards vesting, net of shares withheld for taxes
which have been retired
Shares issued in connection with acquisition of
business
Other noncontrolling interest activity
Net income (loss)
Other comprehensive loss, net of tax
Balance at March 31, 2017
Exercise of stock options
Issuance of stock under Employee Stock
Purchase Plan
Stock-based compensation
Shares issued in settlement of certain accrued
employee compensation liabilities
RSU awards vesting, net of shares withheld for taxes
which have been retired
Cumulative effect adjustment upon adoption of new
stock compensation guidance (ASU 2016-09)
Reclassification of stranded tax effects in OCI due to
Tax Reform Revaluation
Proceeds from noncontrolling interest capital
contribution
Other noncontrolling interest activity
Net loss
Other comprehensive income, net of tax
Balance at March 31, 2018
Exercise of stock options
Issuance of stock under Employee Stock
Purchase Plan
Stock-based compensation
Shares and fully-vested RSUs issued in settlement of
certain accrued employee compensation liabilities,
net of shares withheld for taxes which have been
retired
RSU awards vesting, net of shares withheld for taxes
which have been retired
Cumulative effect adjustment upon adoption of new
revenue recognition guidance (ASU 2014-09)
Other noncontrolling interest activity
Net (loss) income
Other comprehensive loss, net of tax
Balance at March 31, 2019
48,926,417 $
273,050
5 $ 855,387 $ 273,704 $
—
—
12,117
188,938
—
10,286
7,475,000
—
1 503,060
62,397
—
176,731
—
13,080
—
—
—
—
498,585
—
(21,670 )
—
61,888
—
—
—
57,600,609 $
287,012
—
4,988
—
—
—
—
23,767
—
—
—
—
—
6 $ 1,439,645 $ 297,471 $
—
—
13,371
227,381
—
—
—
12,794
76,512
228,791
—
16,409
—
—
—
561,481
—
(24,206 )
—
—
—
1,110
58,011
7 $
—
—
—
—
—
—
—
—
—
(2,511 )
(2,504 ) $
—
—
—
—
—
—
5,321 $ 1,134,424
12,117
—
—
10,286
— 503,061
62,397
—
—
13,080
—
(21,670 )
—
(8 )
(2,000 )
—
4,988
(8 )
21,767
(2,511 )
3,313 $ 1,737,931
13,371
—
—
—
12,794
76,512
—
16,409
—
(24,206 )
—
59,121
—
—
—
(2,217 )
2,217
—
—
—
—
—
—
58,905,274 $
275,000
—
—
—
—
—
—
(67,305 )
—
—
—
—
—
6 $ 1,535,635 $ 285,960 $
—
—
11,087
—
—
—
15,852
15,565 $
—
289,024
—
—
—
15,243
91,470
—
—
438,433
—
27,701
—
642,362
—
(24,398 )
—
—
—
—
—
—
—
—
—
60,550,093 $
27,248
—
—
—
81
—
(67,623 )
—
—
—
—
—
6 $ 1,656,819 $ 245,585 $
—
—
—
(10,227 )
5,338 $
8,491
7
(970 )
—
8,491
7
(68,275 )
15,852
10,841 $ 1,848,007
11,087
—
—
—
15,243
91,470
—
27,701
—
(24,398 )
—
(3,665 )
1,154
—
27,248
(3,584 )
(66,469 )
(10,227 )
8,330 $ 1,916,078
See accompanying notes to the consolidated financial statements.
52 | Viasat Annual Report 2019
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VIASAT, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 1 — The Company and a Summary of Its Significant Accounting Policies
The Company
Viasat, Inc. (also referred to hereafter as the “Company” or “Viasat”) is an innovator in communications technologies and
services, including high-speed and cost-effective broadband and advanced communications products and services.
Principles of consolidation
The Company’s consolidated financial statements include the assets, liabilities and results of operations of Viasat, its wholly
owned subsidiaries and its majority-owned subsidiary, TrellisWare Technologies, Inc. (TrellisWare). During the third quarter of fiscal
year 2019, Viasat Europe Sàrl (formerly known as Euro Broadband Retail Sàrl), which was previously a majority-owned subsidiary,
became a wholly owned subsidiary when the Company purchased the remaining 49% interest in the company for an insignificant
amount. 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 consolidated balance sheets.
Certain prior period amounts have been reclassified to conform to the current period presentation.
Recent transactions
During the third quarter of fiscal year 2017, the Company completed the acquisition of Aerodocs Limited (Arconics), a
privately held company focused on wireless in-flight entertainment management software services. The Arconics purchase price of
approximately $21.6 million was comprised of approximately $16.6 million in cash consideration paid to former Arconics equity
holders and $5.0 million related to the fair value of 61,888 shares of the Company’s common stock issued at the closing. The
approximately $16.6 million in cash consideration paid to former Arconics equity holders less cash acquired of $0.6 million resulted
in a net cash outlay by the Company of approximately $16.0 million. The Arconics purchase price was primarily allocated to
acquired technology and customer relationships intangible assets, and goodwill. Through this acquisition, the Company gained
broader expertise, aviation-grade software and mobile applications to make flying safer and more efficient for pilots, cabin crews
and flight operations teams, as well as applications that are expected to create new opportunities for passenger entertainment and
airline services and revenue. This acquisition was accounted for as a purchase and, accordingly, the consolidated financial
statements include the operating results of Arconics in the Company’s satellite services segment from the date of the acquisition.
During the third quarter of fiscal year 2017, the Company also completed the sale of an aggregate of 7,475,000 shares of Viasat
common stock in an underwritten public offering. The Company’s net proceeds from the offering were approximately $503.1 million
after deducting underwriting discounts and offering expenses. The Company used $225.0 million of the net proceeds from the
offering to repay the then-outstanding borrowings under the Company’s revolving credit facility (the Revolving Credit Facility).
Management estimates and assumptions
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of
America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the financial statements, and reported amounts of revenues and
expenses during the reporting period. Estimates have been prepared on the basis of the most current and best available
information and actual results could differ from those estimates. Significant estimates made by management include revenue
recognition, stock-based compensation, self-insurance reserves, allowance for doubtful accounts, warranty accruals, valuation of
goodwill and other intangible assets, patents, orbital slots and other licenses, software development, property, equipment and
satellites, long-lived assets, derivatives, contingencies and income taxes including the valuation allowance on deferred tax assets.
Cash equivalents
Cash equivalents consist of highly liquid investments with original maturities of three months or less at the date of purchase.
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VIASAT, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Accounts receivable and allowance for doubtful accounts
The Company records any unconditional rights to consideration as receivables at net realizable value including an allowance
for estimated uncollectible accounts. The allowance for doubtful accounts is based on the Company’s assessment of the
collectability of customer accounts. The Company regularly reviews the allowance by considering factors such as historical
experience, credit quality, the age of accounts receivable balances and current economic conditions that may affect a customer’s
ability to pay. Amounts determined to be uncollectible are charged or written off against the reserve. Historically, the Company’s
allowance for doubtful accounts has been minimal primarily because a significant portion of its sales has been to the
U.S. government or with respect to its satellite services commercial business, the Company bills and collects in advance.
Concentration of risk
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of
cash equivalents and accounts receivable which are generally not collateralized. The Company limits its exposure to credit loss by
placing its cash equivalents with high credit quality financial institutions and investing in high quality short-term debt instruments.
The Company establishes customer credit policies related to its accounts receivable based on historical collection experiences
within the various markets in which the Company operates, historical past due amounts and any specific information that the
Company becomes aware of such as bankruptcy or liquidity issues of customers.
Revenues from the U.S. government as an individual customer comprised approximately 26%, 31% and 29% of total revenues
for fiscal years 2019, 2018 and 2017, respectively. Billed accounts receivable to the U.S. government as of March 31, 2019 and 2018
were approximately 32% and 36%, respectively, of total billed receivables. In addition, none of the Company’s commercial
customers comprised 10% or more of total revenues for fiscal years 2019, 2018 and 2017. The Company’s five largest contracts
generated approximately 20% of the Company’s total revenues for each of the fiscal years ended March 31, 2019, March 31, 2018
and March 31, 2017.
The Company relies on a limited number of contract manufacturers to produce its products.
Inventory
Inventory is valued at the lower of cost and net realizable value, cost being determined by the weighted average cost method.
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. 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 24 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.
54 | Viasat Annual Report 2019
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VIASAT, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
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, of approximately three to seven years. Capitalized costs for internal-
use software are included in property and equipment, net in the Company’s consolidated balance sheet.
Interest expense is capitalized on the carrying value of assets under construction, in accordance with the authoritative
guidance for the capitalization of interest (Accounting Standards Codification (ASC) 835-20). With respect to the ViaSat-3 class
satellites, gateway and networking equipment and other assets under construction, the Company capitalized $39.5 million of
interest expense for the fiscal year ended March 31, 2019. With respect to the ViaSat-2 satellite, ViaSat-3 class satellites, gateway
and networking equipment and other assets under construction, the Company capitalized $58.9 million and $49.7 million of interest
expense during the fiscal years ended March 31, 2018 and March 31, 2017, respectively.
The Company owns three satellites in service: ViaSat-2 (its second-generation high-capacity Ka-band spot-beam satellite,
which was placed into service in the fourth quarter of fiscal year 2018), ViaSat-1 (its first-generation high-capacity Ka-band spot-
beam satellite, which was placed into service in January 2012) and WildBlue-1 (which was placed into service in March 2007). The
Company also has two third-generation ViaSat-3 class satellites that have entered the phase of full construction, and in January
2019 it signed an agreement to proceed for a third ViaSat-3 class satellite. The Company also has an exclusive prepaid lifetime
capital lease of Ka-band capacity over the contiguous United States on Telesat Canada’s Anik F2 satellite (which was placed into
service in April 2005) and owns related earth stations and networking equipment for all of its satellites. The Company periodically
reviews the remaining estimated useful life of its satellites to determine if revisions to estimated lives are necessary. 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 and equipment in the accompanying 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
and equipment, net, as of March 31, 2019 were $373.4 million and $142.6 million, respectively. The total cost and accumulated
depreciation of CPE units included in property and equipment, net, as of March 31, 2018 were $298.7 million and $129.0 million,
respectively.
On June 1, 2017, the Company’s second-generation ViaSat-2 satellite was successfully launched into orbit. In the fourth
quarter of fiscal year 2018, shortly before the launch of commercial broadband services on the satellite, the Company reported an
antenna deployment issue. The Company worked with the satellite manufacturer to determine the root cause of the antenna
deployment issue, potential correcting measures, and resulting damage. In the second quarter of fiscal year 2019, the root cause
analysis was completed. Based on that analysis, during the second quarter of fiscal year 2019, the Company recorded a reduction to
the carrying value of the ViaSat-2 satellite of $177.4 million, with a corresponding insurance receivable of $177.4 million, based on
the Company’s estimated ViaSat-2 output capabilities as compared to the anticipated, potential and configured capacity of the
ViaSat-2 satellite. During fiscal year 2019, the Company received $185.7 million in insurance recovery proceeds related to such
claims. The Company recorded an insurance receivable of $2.3 million as of March 31, 2019 with respect to probable remaining
ViaSat-2 related insurance claims. As a result, during fiscal year 2019, the Company recorded a $7.5 million gain related to ViaSat-2
insurance claims in selling, general and administrative (SG&A) expenses in its satellite services segment in the consolidated
statements of operations and comprehensive incomes (loss). The ViaSat-2 satellite was primarily financed by the Company’s direct
loan facility with the Export-Import Bank of the United States for ViaSat-2 (the Ex-Im Credit Facility) (see Note 5 — Senior Notes and
Other Long-Term Debt for more information). Pursuant to the terms of the Ex-Im Credit Facility, insurance proceeds received from
such claims were used to pay down outstanding borrowings under the Ex-Im Credit Facility.
Occasionally, the Company may enter into capital lease arrangements for various machinery, equipment, computer-related
equipment, software, furniture or fixtures. The Company records amortization of assets leased under capital lease arrangements
within depreciation expense.
(cid:1)
7110Fin.indd 55
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VIASAT, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Goodwill and intangible assets
The authoritative guidance for business combinations (ASC 805) requires that all business combinations be accounted for
using the purchase method. The authoritative guidance for business combinations also specifies criteria for recognizing and
reporting intangible assets apart from goodwill; however, acquired workforce must be recognized and reported in goodwill. The
authoritative guidance for goodwill and other intangible assets (ASC 350) requires that intangible assets with an indefinite life
should not be amortized until their life is determined to be finite. All other intangible assets must be amortized over their useful life.
The authoritative guidance for goodwill and other intangible assets prohibits the amortization of goodwill and indefinite-lived
intangible assets, but instead requires these assets to be tested for impairment at least annually and more frequently upon the
occurrence of specified events. In addition, all goodwill must be assigned to reporting units for purposes of impairment testing.
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 $3.2 million related to patents were included in other assets as of March 31, 2019 and 2018.
The Company capitalized costs of $22.9 million and $15.4 million related to acquiring and obtaining orbital slots and other licenses
included in other assets as of March 31, 2019 and 2018, respectively. Accumulated amortization related to these assets was
$3.0 million and $2.5 million as of March 31, 2019 and 2018, respectively. Amortization expense related to these assets was an
insignificant amount for the fiscal years ended March 31, 2019, March 31, 2018 and March 31, 2017. If a patent, orbital slot or orbital
license is rejected, abandoned or otherwise invalidated, the unamortized cost is expensed in that period. During fiscal years 2019,
2018 and 2017, 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 fiscal years 2019, 2018
and 2017, $12.2 million, $9.8 million and $6.1 million, respectively, of debt issuance costs were capitalized. 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 consolidated statements of operations and comprehensive income. Debt issuance costs related to
the Revolving Credit Facility are recorded in prepaid expenses and other current assets and in other long-term assets in the
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) and the Company’s direct loan facility with the Ex-Im Credit Facility are recorded as a direct deduction from
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 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. Capitalized costs, net, of $244.4 million and $246.8 million related to
software developed for resale were included in other assets as of March 31, 2019 and 2018, respectively. The Company capitalized
$43.5 million and $75.6 million of costs related to software developed for resale for the fiscal years ended March 31, 2019 and 2018,
respectively. Amortization expense for software development costs was $45.9 million, $32.5 million and $32.5 million during fiscal
years 2019, 2018 and 2017, respectively.
56 | Viasat Annual Report 2019
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VIASAT, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
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), the Company
assesses potential impairments to 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. An impairment loss is
recognized 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 the Company for fiscal years 2019, 2018 and 2017.
The Company accounts for its goodwill under the authoritative guidance for goodwill and other intangible assets (ASC 350)
and the provisions of ASU 2011-08, Intangibles — Goodwill and Other (ASC 350): Testing Goodwill for Impairment, which simplifies
how the Company tests goodwill for impairment. Current authoritative guidance allows the Company to first assess qualitative
factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. If, after completing the
qualitative assessment, the Company determines that it is more likely than not that the estimated fair value is greater than the
carrying value, the Company concludes that no impairment exists. If it is more likely than not that the carrying value of the reporting
unit exceeds its estimated fair value, the Company compares the fair value of the reporting unit to its carrying value. If the
estimated fair value of the reporting unit is less than the carrying value, a second step is performed in which the implied fair value of
goodwill is compared to its carrying value. If the implied fair value of goodwill is less than its carrying value, goodwill must be
written down to its implied fair value, resulting in goodwill impairment. The Company tests 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.
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 its competitive environment since the
acquisition date, (3) changes in the overall economy, its 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 the Company’s qualitative assessment performed during the fourth quarter of fiscal year 2019, the Company
concluded that it was more likely than not that the estimated fair value of the Company’s reporting units exceeded their carrying
values as of March 31, 2019, and therefore, determined it was not necessary to perform the two-step goodwill impairment test. No
impairments were recorded by the Company related to goodwill and other intangible assets for fiscal years 2019, 2018 and 2017.
Warranty reserves
The Company provides limited warranties on its products for periods of up to five years. The Company records a liability for
its warranty obligations when the Company ships 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 consolidated financial statements. For
mature products, the Company estimates the warranty costs 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, the Company will make future adjustments to the recorded warranty obligation (see Note 13).
Fair value of financial instruments
The carrying amounts of the Company’s financial instruments, including cash equivalents, receivables, accounts payable and
accrued liabilities, approximate their fair values due to their short-term maturities. The estimated fair value of the Company’s long-
term borrowings and other long-term interest bearing liabilities is determined by using available market information for those
securities or similar financial instruments (see Note 3).
(cid:1)
7110Fin.indd 57
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VIASAT, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
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 $5.4 million and $4.5 million in accrued liabilities in the
consolidated balance sheets as of March 31, 2019 and 2018, respectively. 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 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 March 31, 2019 and 2018, no 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 consolidated financial statements at the
consolidated amounts, which include the amounts attributable to both the controlling and noncontrolling interest.
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 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 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 March 31, 2019 and 2018, the Company had no shares of common stock held in treasury.
During fiscal years 2019, 2018 and 2017, the Company issued 1,201,502, 896,776 and 792,616 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, the Company repurchased 427,088, 335,295 and 294,031 shares of common stock at cost and with a total value of
$28.8 million, $24.2 million and $21.7 million during fiscal years 2019, 2018 and 2017, 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.
58 | Viasat Annual Report 2019
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VIASAT, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Derivatives
The Company enters into foreign currency forward and option contracts from time to time to hedge certain forecasted
foreign currency transactions. Gains and losses arising from foreign currency forward and option contracts not designated as
hedging instruments are recorded in other income (expense) as gains (losses) on derivative instruments. Gains and losses arising
from the effective portion of foreign currency forward and option contracts which are designated as cash-flow hedging instruments
are recorded in accumulated other comprehensive income (loss) as unrealized gains (losses) on derivative instruments until the
underlying transaction affects the Company’s earnings, at which time they are then recorded in the same income statement line as
the underlying transaction.
During fiscal years 2019, 2018 and 2017, the Company settled certain foreign exchange contracts and in connection therewith
for each year recognized an insignificant gain or loss recorded in cost of revenues based on the nature of the underlying
transactions. The fair value of the Company’s foreign currency forward contracts was an insignificant amount recorded as an
accrued liability as of March 31, 2019 and as an other current asset as of March 31, 2018. The notional value of foreign currency
forward contracts outstanding was $9.9 million as of March 31, 2019 and an insignificant amount as of March 31, 2018.
At March 31, 2019 the estimated net amount of unrealized gains or losses related to foreign currency forward contracts that
was expected to be reclassified to earnings within the next 12 months was insignificant. The Company’s foreign currency forward
contracts outstanding as of March 31, 2019 will mature within approximately 21 months from their inception. There were no gains
or losses from ineffectiveness of these derivative instruments recorded for fiscal years 2019, 2018 and 2017.
Foreign currency
In general, the functional currency of a foreign operation is deemed to be the local country’s currency. Consequently, assets
and liabilities of operations outside the United States are generally translated into U.S. dollars, and the effects of foreign currency
translation adjustments are included as a component of accumulated other comprehensive income within Viasat, Inc. stockholders’
equity.
Other comprehensive loss related to the effects of foreign currency translation adjustments attributable to Viasat, Inc. during
fiscal year 2019 was $11.8 million, or $10.0 million net of tax. Other comprehensive income related to the effects of foreign currency
translation adjustments attributable to Viasat, Inc. during fiscal year 2018 was $22.8 million, or $15.8 million net of tax. Other
comprehensive loss related to the effects of foreign currency translation adjustments attributed to Viasat, Inc. during fiscal year
2017 was $2.4 million and the related tax effect was insignificant.
Revenue recognition
Effective April 1, 2018, the Company adopted Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with
Customers (commonly referred to as ASC 606). This update established ASC 606, Revenue from Contracts with Customers and ASC
340-40, Other Assets and Deferred Costs – Contracts with Customers.
In order to assess the impact of the new accounting standards, the Company applied the new standards to all open contracts
existing as of April 1, 2018. The Company elected the practical expedient to reflect the aggregate effect of all contract modifications
occurring before April 1, 2018 when identifying the satisfied and unsatisfied performance obligations, determining the transaction
price and allocating the transaction price to the satisfied and unsatisfied performance obligations. The aggregated effect of
applying this practical expedient did not have a significant impact on the Company’s conclusions.
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VIASAT, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
To reflect the adoption of the new standards, the Company and its equity method investment investee elected to use the
“modified retrospective method,” which resulted in the Company recording the retrospective cumulative effect to the opening
balance of retained earnings. The following table presents the summary of the impact of adopting the new standards:
Consolidated Balance Sheets:
Accounts receivable, net
Inventories
Prepaid expenses and other current assets
Other assets
Accrued liabilities
Retained earnings
As of
March 31,
2018
Adjustments Due to
ASC 606
(In thousands)
As of
April 1,
2018
$
$
267,665
196,307
77,135
686,134
263,676
285,960
(5,664 ) $
1,623
18,098
19,107
5,916
27,248
262,001
197,930
95,233
705,241
269,592
313,208
The key impact of adoption is the deferral of commissions primarily in the Company’s satellite services segment, which were
historically expensed as incurred as further described below.
The Company applied the five-step model under ASC 606 to its contracts with its customers to determine the impact of the
new standard. Under this model the Company (1) identifies the contract with the customer, (2) identifies its performance
obligations in the contract, (3) determines the transaction price for the contract, (4) allocates the transaction price to its
performance obligations and (5) recognizes revenue when or as it satisfies its performance obligations. These performance
obligations generally include the purchase of services (including broadband capacity and the leasing of broadband equipment), the
purchase of products, and 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 including leasing of related
broadband equipment. These contracts typically require advance or recurring monthly payments by the customer. The Company’s
obligation to provide connectivity services is satisfied over time as the customer 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). From a recognition perspective, the leasing of broadband
equipment is evaluated in accordance with the authoritative guidance for leases (ASC 840). The Company’s accounting for
equipment leases involves specific determinations under ASC 840, which may involve complex provisions and significant
judgments. In accordance with ASC 840, the Company applies the following criteria to determine the nature of the lease (e.g., as an
operating or sales type lease): (1) review for transfers of ownership of the equipment to the lessee by the end of the lease term,
(2) review of the lease terms to determine if it contains an option to purchase the leased equipment for a price which is sufficiently
lower than the expected fair value of the equipment at the date of the option, (3) review of the lease term to determine if it is equal
to or greater than 75% of the economic life of the equipment, and (4) review of the present value of the minimum lease payments to
determine if they are equal to or greater than 90% of the fair market value of the equipment at the inception of the lease.
Additionally, the Company considers the cancelability of the contract and any related uncertainty of collections or risk in
recoverability of the lease investment at lease inception. Revenue from sales type leases is recognized at the inception of the lease
or when the equipment has been delivered and installed at the customer site, if installation is required. Revenues from equipment
rentals under operating leases are recognized as earned over the lease term, which is generally on a straight-line basis.
60 | Viasat Annual Report 2019
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VIASAT, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The Company also derives a portion of its revenues from contracts with customers to provide products. Performance
obligations to provide products are satisfied at the point in time when control is transferred to the customer. These contracts
typically require payment by the customer upon passage of control and determining the point at which control is transferred may
require judgment. To identify the point at which control is transferred to the customer, the Company considers indicators that
include, but are not limited to, whether (1) the Company has the present right to payment for the asset, (2) the customer has legal
title to the asset, (3) physical possession of the asset has been transferred to the customer, (4) the customer has the significant risks
and rewards of ownership of the asset, and (5) the customer has accepted the asset. For product revenues, control generally passes
to the customer upon delivery of goods to the customer.
The vast majority of the Company’s revenues from long-term contracts to develop and deliver complex equipment built to
customer specifications are derived from contracts with the U.S. government (including foreign military sales contracted through
the U.S. government). The Company’s contracts with the U.S. government typically are subject to the Federal Acquisition
Regulation (FAR) and are priced based on estimated or actual costs of producing goods or providing services. The FAR provides
guidance on the types of costs that are allowable in establishing prices for goods and services provided under U.S. government
contracts. The pricing for non-U.S. government contracts is based on the specific negotiations with each customer. Under the
typical payment terms of the Company’s U.S. government fixed-price contracts, the customer pays the Company either
performance-based payments (PBPs) or progress payments. PBPs are interim payments based on quantifiable measures of
performance or on the achievement of specified events or milestones. Progress payments are interim payments based on a
percentage of the costs incurred as the work progresses. Because the customer can often retain a portion of the contract price until
completion of the contract, the Company’s U.S. government fixed-price contracts generally result in revenue recognized in excess of
billings which the Company presents as unbilled accounts receivable on the balance sheet. Amounts billed and due from the
Company’s customers are classified as receivables on the balance sheet. The portion of the payments retained by the customer
until final contract settlement is not considered a significant financing component because the intent is to protect the customer.
For the Company’s U.S. government cost-type contracts, the customer generally pays the Company for its actual costs incurred
within a short period of time. For non-U.S. government contracts, the Company typically receives interim payments as work
progresses, although for some contracts, the Company may be entitled to receive an advance payment. The Company recognizes a
liability for these advance payments in excess of revenue recognized and presents it as collections in excess of revenues and
deferred revenues on the balance sheet. An advance payment is not typically considered a significant financing component because
it is used to meet working capital demands that can be higher in the early stages of a contract and to protect the Company from the
other party failing to adequately complete some or all of its obligations under the contract.
Performance obligations related to developing and delivering complex equipment built to customer specifications under
long-term contracts are recognized over time as these performance obligations do not create assets with an alternative use to the
Company and the Company has an enforceable right to payment for performance to date. To measure the transfer of control,
revenue is recognized based on the extent of progress towards completion of the performance obligation. The selection of the
method to measure progress towards completion requires judgment and is based on the nature of the products or services to be
provided. The Company generally uses the cost-to-cost measure of progress for its contracts because that best depicts the transfer
of control to the customer which occurs as the Company incurs costs on its contracts. Under the cost-to-cost measure of progress,
the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at
completion of the performance obligation. When estimates of total costs to be incurred on a contract exceed total estimates of
revenue to be earned, a provision for the entire loss on the contract is recognized in the period the loss is determined.
Contract costs on U.S. government contracts are subject to audit and review by the Defense Contracting Management Agency
(DCMA), the Defense Contract Audit Agency (DCAA), and other U.S. government agencies, as well as negotiations with U.S.
government representatives. The Company’s incurred cost audits by the DCAA have not been concluded for fiscal year 2019. As of
March 31, 2019, the DCAA had completed its incurred cost audit for fiscal years 2004 and 2016 and approved the Company’s
incurred costs for those fiscal years, as well as approved the Company’s incurred costs for fiscal years 2005 through 2015, 2017 and
2018 without further audit based on a determination of low risk. Although the Company has recorded contract revenues
subsequent to fiscal year 2018 based upon an estimate of costs that the Company believes will be approved upon final audit or
review, the Company does not know the outcome of any ongoing or future audits or reviews and adjustments, and if future
adjustments exceed the Company’s estimates, its profitability would be adversely affected. As of March 31, 2019 and March 31,
2018, the Company had $4.9 million and $1.6 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 12).
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VIASAT, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Evaluation of transaction price
The evaluation of transaction price, including the amounts allocated to performance obligations, may require significant
judgments. Due to the nature of the work required to be performed on many of the Company’s performance obligations, the
estimation of total revenue, and where applicable the cost at completion, is complex, subject to many variables and requires
significant judgment. The Company’s contracts may contain award fees, incentive fees, or other provisions, including the potential
for significant financing components, that can either increase or decrease the transaction price. These amounts, which are
sometimes variable, can be dictated by performance metrics, program milestones or cost targets, the timing of payments, and
customer discretion. The Company estimates variable consideration at the amount to which it expects to be entitled. The Company
includes estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue
recognized will not occur when the uncertainty associated with the variable consideration is resolved. The Company’s estimates of
variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an
assessment of the Company’s anticipated performance and all information (historical, current and forecasted) that is reasonably
available to the Company. In the event an agreement includes embedded financing components, the Company recognizes interest
expense or interest income on the embedded financing components using effective interest method. This methodology uses an
implied interest rate which reflects the incremental borrowing rate which would be expected to be obtained in a separate financing
transaction. The Company has elected the practical expedient not to adjust the promised amount of consideration for the effects of
a significant financing component if the Company expects, at contract inception, that the period between when the Company
transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less.
If a contract is separated into more than one performance obligation, the total transaction price is allocated to each
performance obligation in an amount based on the estimated relative standalone selling prices of the promised goods or services
underlying each performance obligation. Estimating standalone selling prices may require judgment. When available, the Company
utilizes the observable price of a good or service when the Company sells that good or service separately in similar circumstances
and to similar customers. If a standalone selling price is not directly observable, the Company estimates the standalone selling
price by considering all information (including market conditions, specific factors, and information about the customer or class of
customer) that is reasonably available.
Transaction price allocated to remaining performance obligations
The Company’s remaining performance obligations represent the transaction price of firm contracts and orders for which
work has not been performed. The Company includes in its remaining performance obligations only those contracts and orders for
which it has accepted purchase orders. Remaining performance obligations associated with the Company’s subscribers for fixed
consumer and business broadband services in its satellite services segment exclude month-to-month service contracts in
accordance with a practical expedient and are estimated using a portfolio approach in which the Company reviews all relevant
promotional activities and calculates the remaining performance obligation using the average service component for the portfolio
and the average time remaining under the contract. The Company’s future recurring in-flight connectivity (IFC) service contracts in
its satellite services segment do not have minimum service purchase requirements and therefore are not included in the Company’s
remaining performance obligations. As of March 31, 2019, the aggregate amount of the transaction price allocated to remaining
performance obligations was $1.9 billion, of which the Company expects to recognize a little over half over the next twelve months,
with the balance recognized thereafter.
Disaggregation of revenue
The Company operates and manages its business in three 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.
62 | Viasat Annual Report 2019
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VIASAT, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The following sets forth disaggregated reported revenue by segment and product and services for the fiscal year ended
March 31, 2019:
Product revenues
Service revenues
Total revenues
Fiscal year Ended March 31, 2019
Satellite
Services
Commercial
Networks
Government
Systems
Total Revenues
$
$
—
684,205
684,205
$
$
383,547
44,857
428,404
$
709,144
246,505
955,649
$
$
1,092,691
975,567
2,068,258
(In thousands)
$
Revenues from the U.S. government as an individual customer comprised approximately 26% of total revenues for fiscal year
ended March 31, 2019, mainly reported within the government systems segment. The Company’s commercial customers, mainly
reported within the commercial networks and satellite services segments, comprised approximately 74% of total revenues for the
fiscal year ended March 31, 2019.
The Company’s satellite services segment revenues are primarily derived from the Company’s fixed broadband services, IFC
services and worldwide managed network services.
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 90% of the Company’s total
revenues for these segments for the fiscal year ended March 31, 2019. 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 19% of its total revenues for the fiscal year ended
March 31, 2019.
Revenues by geographic area for the fiscal year ended March 31, 2019 were as follows:
U.S. customers
Non U.S. customers (each country individually insignificant)
Total revenues
Fiscal year Ended
March 31, 2019
(In thousands)
$
$
1,836,304
231,954
2,068,258
The Company distinguishes revenues from external customers by geographic area based on customer location.
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.
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VIASAT, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
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 March 31, 2019 and April 1, 2018:
Unbilled accounts receivable
Collections in excess of revenues and deferred revenues
Deferred revenues, long-term portion
As of
March 31,
2019
As of
April 1,
2018
$
(In thousands)
83,743 $
125,540
71,230
79,492
127,355
77,831
Unbilled accounts receivable increased $4.3 million during fiscal year 2019, primarily driven by revenue recognized in the
Company’s satellite services segment in excess of billings.
Collections in excess of revenues and deferred revenues decreased $1.8 million during fiscal year 2019, primarily driven by
revenue recognized in excess of advances on goods or services received in the Company’s government systems segment.
During the fiscal year ended March 31, 2019, the Company recognized revenue of $100.0 million related to the Company’s
collections in excess of revenues and deferred revenues at April 1, 2018.
Other assets and deferred costs – contracts with customers
The adoption of ASU 2014-09 also included the establishment of ASC 340-40, Other Assets and Deferred Costs – Contracts with
Customers. The new standard requires the recognition of an asset from the incremental costs of obtaining a contract with a
customer, if the Company expects to recover those costs. The incremental costs of obtaining a contract are those costs that the
Company incurs to obtain a contract with a customer that it would not have incurred if the contract had not been obtained. ASC
340-40 also requires the recognition of an asset from the costs incurred to fulfill a contract when (1) the costs relate directly to a
contract or to an anticipated contract that the Company can specifically identify, (2) the costs generate or enhance resources of the
Company that will be used in satisfying (or in continuing to satisfy) performance obligations in the future, and (3) the costs are
expected to be recovered. Adoption of the standard has resulted in the recognition of an asset related to commission costs incurred
primarily in the Company’s satellite services segment, and recognition of an asset related to costs incurred to fulfill contracts. Costs
to acquire customer contracts are amortized over the estimated customer contract life. Costs to fulfill customer contracts are
amortized in proportion to the revenue to which the costs relate. For contracts with an estimated amortization period of less than
one year, the Company elected the practical expedient and expenses incremental costs immediately. The Company’s deferred
customer contract acquisition costs and costs to fulfill contract balances were $52.0 million and $9.9 million as of March 31, 2019,
respectively. Of the Company’s total deferred customer contract acquisition costs and costs to fulfill contracts, $20.6 million was
included in prepaid expenses and other current assets and $41.3 million was included in other assets on the Company’s
consolidated balance sheet as of March 31, 2019. For total deferred customer contract acquisition costs and contract fulfillment
costs, the Company’s amortization and reduction of carrying value associated with contract termination was $41.6 million for the
fiscal year ended March 31, 2019.
64 | Viasat Annual Report 2019
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VIASAT, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Comparative results
The Company adopted ASC 606 as of April 1, 2018 using the “modified retrospective method” under which the Company is
required to provide additional disclosures comparing results to previous accounting standards. Accordingly, the following table
presents the Company’s reported results under ASC 606 and the Company’s pro forma results using the historical accounting
method under ASC 605 for the fiscal year ended March 31, 2019 and as of March 31, 2019:
Fiscal Year Ended March 31, 2019
As Reported
Impact of
ASC 606
(In thousands, except per share data)
Historical
Accounting
Method
Consolidated Statements of Operations and Comprehensive
Income (Loss):
Product revenues
Service revenues
Total revenues
Cost of product revenues
Cost of service revenues
Selling, general and administrative
Independent research and development
Loss from operations
Interest expense
Loss before income taxes
Benefit from income taxes
Net loss
Net loss attributable to Viasat, Inc.
Basic net loss per share attributable to Viasat, Inc.
common stockholders
Diluted net loss per share attributable to Viasat, Inc.
common stockholders
Consolidated Balance Sheets:
Accounts receivable, net
Inventories
Prepaid expenses and other current assets
Other assets
Accrued liabilities
Retained earnings
Advertising costs
$
$
$
$
1,092,691
975,567
2,068,258
834,472
703,249
458,458
123,044
(60,620 )
(50,010 )
(110,481 )
41,014
(66,469 )
(67,623 )
(5,263 ) $
(3,062 )
(8,325 )
(3,877 )
(263 )
9,278
7,498
(20,961 )
4,206
(16,754 )
4,499
(12,256 )
(12,256 )
1,087,428
972,505
2,059,933
830,595
702,986
467,736
130,542
(81,581 )
(45,804 )
(127,235 )
45,513
(78,725 )
(79,879 )
(1.13 )
$
(0.20 ) $
(1.33 )
(1.13 )
$
(0.20 ) $
(1.33 )
As of March 31, 2019
As Reported
Impact of
ASC 606
(In thousands)
Historical
Accounting
Method
$
$
300,307
234,518
90,646
758,805
308,268
245,585
1,774 $
(1,681 )
(18,562 )
(26,723 )
(5,687 )
(39,504 )
302,081
232,837
72,084
732,082
302,581
206,081
In accordance with the authoritative guidance for advertising costs (ASC 720-35), advertising costs are expensed as incurred
and included in SG&A expenses. Advertising expenses for fiscal years 2019, 2018 and 2017 were $37.8 million, $14.4 million and
$4.8 million, respectively.
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VIASAT, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
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. Effective April 1, 2017, the Company adopted a change in accounting policy in accordance with ASU 2016-09,
Compensation — Stock Compensation (ASC 718) to account for forfeitures as they occur. Prior to April 1, 2017, forfeitures were
estimated at the date of grant and revised, if necessary, in subsequent periods if actual forfeitures differed from those estimates.
Independent research and development
Independent research and development (IR&D), which is not directly funded by a third party, is expensed as incurred. IR&D
expenses consist primarily of salaries and other personnel-related expenses, supplies, prototype materials and other expenses
related to research and development programs.
Rent expense, deferred rent obligations and deferred lease incentives
The Company leases all of its facilities under operating leases. Some of these lease agreements contain tenant improvement
allowances funded by landlord incentives, rent holidays and rent escalation clauses. The authoritative guidance for leases (ASC 840)
requires rent expense to be recognized on a straight-line basis over the lease term. The difference between the rent due under the
stated periods of the lease compared to that of the straight-line basis is recorded as deferred rent within other long-term liabilities
in the consolidated balance sheets.
For purposes of recognizing landlord incentives and minimum rental expenses on a straight-line basis over the terms of the
leases, the Company uses the date that it obtains the legal right to use and control the leased space to begin recording rent
expense, which is generally when the Company enters the space and begins to make improvements in preparation of occupying
new space. For tenant improvement allowances funded by landlord incentives and rent holidays, the Company records a deferred
lease incentive liability in accrued and other long-term liabilities on the consolidated balance sheets and amortizes the deferred
liability as a reduction to rent expense on the consolidated statements of operations and comprehensive income (loss) over the
term of the lease.
Certain lease agreements contain rent escalation clauses which provide for scheduled rent increases during the lease term or
for rental payments commencing at a date other than the date of initial occupancy. Such increasing rent expense is recorded in the
consolidated statements of operations and comprehensive income (loss) on a straight-line basis over the lease term.
At March 31, 2019 and 2018, deferred rent included in other long-term liabilities in the Company’s consolidated balance
sheets was $16.8 million and $13.8 million, respectively.
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.
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.
66 | Viasat Annual Report 2019
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VIASAT, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The Company’s analysis of the need for a valuation allowance on deferred tax assets considered historical as well as
forecasted future operating results. In addition, the Company’s evaluation considered other factors, including the Company’s
contractual backlog, history of positive earnings, current earnings trends assuming the Company’s satellite services segment
continues to grow, taxable income adjusted for certain items, and forecasted income by jurisdiction. The Company also considered
the period over which these net deferred tax assets can be realized and the Company’s history of not having federal tax loss
carryforwards expire unused.
Earnings per share
Basic earnings per share is computed based upon the weighted average number of common shares outstanding during the
period. Diluted earnings per share is based upon the weighted average number of common shares outstanding and potential
common stock, if dilutive during the period. Potential common stock includes options granted (including TSR performance stock
options) and restricted stock units awarded under the Company’s equity compensation plan which are included in the earnings per
share calculations using the treasury stock method, common shares expected to be issued under the Company’s employee stock
purchase plan, and shares potentially issuable under the ViaSat 401(k) Profit Sharing Plan in connection with the Company’s
decision to pay a discretionary match in common stock or cash.
Segment reporting
The Company’s reporting segments, namely its 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 services to customers, enterprises, commercial airlines and 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 (ASIC) 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 develops and offers network-
centric, Internet Protocol (IP)-based fixed and mobile secure government communications systems, products, services and
solutions and provides global mobile broadband service and product offerings. 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 (see Note 14).
Recent authoritative guidance
In May 2014, the Financial Accounting Standards Board (FASB) issued ASU 2014-09, Revenue from Contracts with Customers.
ASU 2014-09 requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised
goods or services to a customer. This guidance replaced most existing revenue recognition guidance and became effective for the
Company in fiscal year 2019, including interim periods within that reporting period, based on the FASB decision in July 2015 (ASU
2015-14, Revenue from Contracts with Customers — Deferral of the Effective Date) to delay the effective date of the new revenue
recognition standard by one year, but providing entities a choice to adopt the standard as of the original effective date. In March
2016, the FASB issued ASU 2016-08, Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which clarifies the
implementation guidance on principal versus agent considerations. In April 2016, the FASB issued ASU 2016-10, Identifying
Performance Obligations and Licensing, which clarifies the implementation guidance on identifying performance obligations and
the licensing implementation guidance. In May 2016, the FASB issued ASU 2016-12, Narrow-Scope Improvements and Practical
Expedients, which provides practical expedient for contract modifications and clarification on assessing the collectability criterion,
presentation of sales taxes, measurement date for non-cash consideration and completed contracts at transition. In December
2016, the FASB issued ASU 2016-20, Technical Corrections and Improvements to ASC 606, Revenue from Contracts with Customers,
which provides for correction or improvement to the guidance previously issued in ASU 2014-09. These standards permit the use of
either the retrospective or cumulative effect transition method. The Company adopted this standard effective as of April 1, 2018
utilizing the “modified retrospective method.” For additional information see Note 1 – Revenue recognition.
(cid:1)
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VIASAT, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities (ASC
825-10). ASU 2016-01 requires that most equity investments (except those accounted for under the equity method for accounting or
those that result in consolidation of the investee) be measured at fair value, with subsequent changes in fair value recognized in net
income (loss). The new guidance also impacts financial liabilities under the fair value option and the presentation and disclosure
requirements for financial instruments. The new guidance was required to be applied by means of a cumulative-effect adjustment to
the balance sheet as of the beginning of the fiscal year of adoption. In February 2018, the FASB issued ASU 2018-03, Technical
Corrections and Improvements to Financial Instruments – Overall (ASC 825-10), which clarified certain aspects of the guidance
issued in ASU 2016-01. ASU 2016-01 became effective for the Company in fiscal year 2019. The Company adopted the guidance in ASU
2016-01 beginning in the first quarter of fiscal year 2019 on a modified retrospective basis and adopted the guidance in ASU 2018-03
beginning in the second quarter of fiscal year 2019. The guidance in both ASU 2016-01 and ASU 2018-03 did not have a material
impact on the Company’s consolidated financial statements and disclosures.
In February 2016, the FASB issued ASU 2016-02, Leases (ASC 842). ASU 2016-02 requires lessees to recognize most leases on
their balance sheets as lease liabilities with corresponding right-of-use assets and eliminates certain real estate-specific provisions.
In January 2018, the FASB issued ASU 2018-01, Leases (ASC 842). ASU 2018-01 permits an entity to elect an optional transition
practical expedient to not evaluate land easements that exist or expired before the entity’s adoption of ASC 842 and that were not
previously accounted for as leases under ASC 840. In July 2018, the FASB issued ASU 2018-10, Codification Improvements to ASC
842, Leases, which was issued to provide more detailed guidance and additional clarification for implementing ASU 2016-02. In July
2018, the FASB issued ASU 2018-11, Leases (ASC 842): Targeted Improvements, which provides an additional (and optional)
transition method whereby the new lease standard is applied at the adoption date and recognized as an adjustment to retained
earnings. In December 2018, the FASB issued ASU 2018-20, Leases (ASC 842): Narrow-Scope Improvements for Lessors, and in March
2019, the FASB issued ASU 2019-01 (ASC 842): Codification Improvements, both of which provide certain amendments that affect
narrow aspects of the guidance issued in ASU 2016-02. The new guidance will become effective for the Company beginning in the
first quarter of fiscal year 2020, with early adoption permitted. The Company expects to adopt the new guidance using the optional
transition method. Therefore, it is expected that periods prior to the effective date of adoption will continue to be reported under
the current authoritative guidance for leases (ASC 840). Upon adoption, the Company expects a material impact to its consolidated
balance sheet due to the recognition of lease liabilities and right-of-use assets. The Company does not expect the new guidance to
have a material impact on its consolidated statement of operations and comprehensive income (loss) or statement of cash flows.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (ASC 326). ASU 2016-13 requires credit
losses on most financial assets measured at amortized cost and certain other instruments to be measured using an expected credit
loss model (referred to as the current expected credit loss (CECL) model). It also modifies the impairment model for available-for-
sale debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since
their origination. Subsequently, in November 2018, the FASB issued ASU 2018-19, Codification Improvements to Topic 326,
Financial Instruments – Credit Losses (ASC 326), which clarifies that impairment of receivables arising from operating leases should
be accounted for in accordance with ASC 842, Leases. The new guidance will become effective for the Company beginning in fiscal
year 2021, with early adoption permitted. The new guidance is required to be applied on a modified-retrospective basis. The
Company is currently evaluating the impact of this standard on its consolidated financial statements and disclosures.
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (ASC 230). ASU 2016-15 makes eight targeted changes
to how companies present and classify certain cash receipts and cash payments in the statement of cash flows. The new standard
requires adoption on a retrospective basis unless it is impracticable to apply, in which case the Company would be required to
apply the amendments prospectively as of the earliest date practicable. The Company early adopted the guidance on a
retrospective basis in the second quarter of fiscal year 2018 and as a result cash payments for debt prepayment and extinguishment
are classified as cash outflows for financing activities. Otherwise the adoption of this guidance did not have a material impact on its
consolidated financial statements and disclosures.
In October 2016, the FASB issued ASU 2016-16, Income Taxes (ASC 740). ASU 2016-16 requires that an entity should recognize the
income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs as opposed to when the
asset has been sold to an outside party. The new standard became effective for the Company beginning in the first quarter of fiscal year
2019. The new standard requires adoption on a modified retrospective basis through a cumulative-effect adjustment directly to
retained earnings as of the beginning of the period. The Company adopted this guidance beginning in the first quarter of fiscal year
2019 on a modified retrospective basis and the guidance did not have a material impact on the Company’s consolidated financial
statements and disclosures.
68 | Viasat Annual Report 2019
(cid:1)
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VIASAT, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows: Restricted Cash (ASC 230). The amendments
address diversity in practice that exists in the classification and presentation of changes in restricted cash and require that a
statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally
described as restricted cash or restricted cash equivalents. During the third quarter of fiscal year 2017, the Company early adopted
this standard on a retrospective basis. The guidance did not have a material impact on the Company’s consolidated financial
statements and disclosures.
In January 2017, the FASB issued ASU 2017-01, Business Combinations: Clarifying the Definition of a Business (ASC 805). ASU 2017-01
clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be
accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including
acquisitions, disposals, goodwill, and consolidation. The new standard became effective for the Company beginning in the first quarter of
fiscal year 2019. The Company adopted this guidance beginning in the first quarter of fiscal year 2019 on a prospective basis and the
guidance did not have a material impact on the Company’s consolidated financial statements and disclosures.
In January 2017, the FASB issued ASU 2017-04, Intangibles — Goodwill and Other: Simplifying the Test for Goodwill
Impairment (ASC 350). ASU 2017-04 removes Step 2 from the goodwill impairment test. The standard will become effective for the
Company beginning in fiscal year 2021, with early adoption permitted. The Company is currently evaluating the impact of this
standard on its consolidated financial statements and disclosures.
In February 2017, the FASB issued ASU 2017-05, Other Income — Gains and Losses from the Derecognition of Nonfinancial
Assets (ASC 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets.
ASU 2017-05 clarifies the scope and accounting of a financial asset that meets the definition of an “in-substance nonfinancial asset”
and defines the term “in-substance nonfinancial asset.” ASU 2017-05 also adds guidance for partial sales of nonfinancial assets. The
standard became effective for the Company beginning in the first quarter of fiscal year 2019. The Company adopted this guidance
beginning in the first quarter of fiscal year 2019 on a prospective basis and the guidance did not have a material impact on the
Company’s consolidated financial statements and disclosures.
In March 2017, the FASB issued ASU 2017-08, Receivables — Nonrefundable Fees and Other Costs (ASC 310-20): Premium
Amortization on Purchased Callable Debt Securities. ASU 2017-08 amends the amortization period for certain callable debt
securities held at a premium. The amendments require the premium to be amortized to the earliest call date. The standard will
become effective for the Company beginning in fiscal year 2020, with early adoption permitted. The Company is currently
evaluating the impact of this standard on its consolidated financial statements and disclosures.
In May 2017, the FASB issued ASU 2017-09, Compensation — Stock Compensation (ASC 718): Scope of Modification
Accounting. ASU 2017-09 provides guidance about which changes to the terms or conditions of a share-based payment award
require an entity to apply modification accounting. The standard became effective for the Company beginning in the first quarter of
fiscal year 2019. The Company early adopted this standard beginning in the fourth quarter of fiscal year 2018 and the guidance did
not have a material impact on the Company’s consolidated financial statements and disclosures.
In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (ASC 815): Targeted Improvements to Accounting for
Hedging Activities. ASU 2017-12 improves the financial reporting of hedging relationships to better portray the economic results of an
entity’s risk management activities in its financial statements and make certain targeted improvements to simplify the application of
the hedge accounting guidance in current GAAP. The amendments in this update better align an entity’s risk management activities
and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying
hedging relationships and presentation of hedge results. In October 2018, the FASB issued ASU 2018-16, Derivatives and Hedging
(ASC 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index SWAP (OIS) Rate as a Benchmark Interest Rate
for Hedge Accounting Purposes. ASU 2018-16 permits use of the OIS rate based on SOFR as a U.S. benchmark interest rate for hedge
accounting purposes. These standards will become effective for the Company beginning in fiscal year 2020, with early adoption
permitted. The Company is currently evaluating the impact of this standard on its consolidated financial statements and disclosures.
(cid:1)
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VIASAT, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
In February 2018, the FASB issued ASU 2018-02, Income Statement – Reporting Comprehensive Income (ASC 220) which
permits a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting
from the newly enacted federal corporate income tax rate under H.R.1, informally known as the Tax Cuts and Jobs Act, which was
enacted into law on December 22, 2017 (the Tax Reform). During the fourth quarter of fiscal year 2018, the Company early adopted
this standard and elected to reclassify the stranded tax effects from accumulated other comprehensive income to retained
earnings. Adoption of this standard resulted in a reclassification of $2.2 million from accumulated other comprehensive income to
retained earnings, which is reflected as a separate line within the Company’s consolidated statements of equity.
In June 2018, the FASB issued ASU 2018-07, Compensation – Stock Compensation (ASC 718): Improvements to Nonemployee
Share-Based Payment Accounting. ASU 2018-07 simplifies the accounting for nonemployee share-based payment transactions.
Consequently, the accounting for share-based payments to nonemployees and employees will be substantially aligned. The
Company early adopted the guidance in the first quarter of fiscal year 2019 and the guidance did not have a material impact on the
Company’s consolidated financial statements and disclosures.
In July 2018, the FASB issued ASU 2018-09, Codification Improvements, which is related to a project by the FASB to facilitate
codification updates for technical corrections, clarifications and other minor improvements. The new standard contains
amendments that affect a wide variety of topics in the ASC. The effective date of the standard is dependent on the facts and
circumstances of each amendment. Some amendments do not require transition guidance and were effective upon the issuance of
this standard. A majority of the amendments in ASU 2018-09 will become effective for the Company beginning in fiscal year 2020.
The Company is currently evaluating the impact of this standard on its consolidated financial statements and disclosures, however
this standard has not and is not expected to have a material impact on its consolidated financial statements and disclosures.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (ASC 820): Disclosure Framework—Changes to the
Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements for fair value measurements by
removing, modifying, or adding certain disclosures. The new standard will become effective for the Company beginning in fiscal
year 2021, with early adoption permitted. The Company is currently evaluating the impact of this standard on its consolidated
financial statements and disclosures.
In August 2018, the FASB issued ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (ASC 350-40):
Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which
aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the
requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements
that include an internal-use software license). The Company early adopted the guidance in the second quarter of fiscal year 2019 on
a prospective basis and the adoption of the guidance did not have a material impact on the Company’s consolidated financial
statements and disclosures.
70 | Viasat Annual Report 2019
(cid:1)
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VIASAT, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 2 — Composition of Certain Balance Sheet Captions
Accounts receivable, net:
Billed
Unbilled
Allowance for doubtful accounts
Inventories:
Raw materials
Work in process
Finished goods
Prepaid expenses and other current assets:
Prepaid expenses
Other
Satellites, net:
Satellites (estimated useful life of 10-17 years)
Capital lease of satellite capacity — Anik F2 (estimated useful life of 10 years)
Satellites under construction
Less: accumulated depreciation and amortization
Property and equipment, net:
Equipment and software (estimated useful life of 3-7 years)
CPE leased equipment (estimated useful life of 4-5 years)
Furniture and fixtures (estimated useful life of 7 years)
Leasehold improvements (estimated useful life of 2-17 years)
Building (estimated useful life of 24 years)
Land
Construction in progress
Less: accumulated depreciation
Other assets:
Investment in unconsolidated affiliate
Deferred income taxes
Capitalized software costs, net
Patents, orbital slots and other licenses, net
Other
Accrued liabilities:
Collections in excess of revenues and deferred revenues
Accrued employee compensation
Accrued vacation
Warranty reserve, current portion
Other
Other liabilities:
Deferred revenue, long-term portion
Deferred rent, long-term portion
Warranty reserve, long-term portion
Satellite performance incentive obligation, long-term portion
Other
(cid:1)
As of
March 31, 2019
As of
March 31, 2018
(In thousands)
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
218,276
83,743
(1,712 )
300,307
77,834
52,084
104,600
234,518
72,369
18,277
90,646
978,118
99,090
590,000
1,667,208
(451,545 )
1,215,663
1,027,293
373,357
46,678
126,528
8,923
2,291
167,178
1,752,248
(842,621 )
909,627
160,711
258,834
244,368
23,059
71,833
758,805
125,540
56,454
43,077
5,877
77,320
308,268
71,230
16,810
1,707
25,324
5,755
120,826
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
184,536
85,156
(2,027 )
267,665
62,252
47,465
86,590
196,307
68,516
8,619
77,135
1,152,503
99,090
362,342
1,613,935
(373,948 )
1,239,987
864,140
298,746
35,234
111,841
8,923
15,322
108,192
1,442,398
(719,910 )
722,488
163,835
222,274
246,792
16,100
37,133
686,134
121,439
46,106
39,022
5,357
51,752
263,676
77,831
13,769
1,557
18,181
9,902
121,240
7110Fin.indd 71
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VIASAT, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
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:
•(cid:1)
•(cid:1)
•(cid:1)
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 no assets and an insignificant amount of liabilities (Level 2) measured at fair value on a recurring basis as
of March 31, 2019, and had an insignificant amount of assets (Level 1) and no liabilities measured at fair value on a recurring basis as
of March 31, 2018.
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).
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 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).
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), as well as $700.0 million in aggregate principal amount of 2025 Notes and $600.0 million
in aggregate principal amount of 2027 Notes. 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, 2025 Notes and 2027 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 outstanding long-term debt as of March 31, 2019 related to the 2027 Notes
approximates its carrying amount due to the proximity of the closing of the 2027 Notes compared to the reporting date. As of
March 31, 2019 and 2018, the estimated fair value of the Company’s outstanding long-term debt related to the 2025 Notes was
determined based on actual or estimated bids and offers for the 2025 Notes in an over-the-counter market (Level 2) and was $670.3
million and $674.0 million, respectively. 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 March 31, 2019
and 2018, 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
$134.9 million and $347.4 million, respectively.
72 | Viasat Annual Report 2019
(cid:1)
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VIASAT, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
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
approximately fiscal year 2028, 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 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 March 31, 2019 and 2018, the Company’s estimated satellite
performance incentive obligations relating to the ViaSat-1 and ViaSat-2 satellites, including accrued interest, were $28.2 million and
$21.0 million, respectively.
Note 4 — Goodwill and Acquired Intangible Assets
During fiscal year 2019, the increase in the Company’s goodwill related to an insignificant acquisition, partially offset by the
effects of foreign currency translation recorded within all three of the Company’s segments. During fiscal year 2018, the increase in
the Company’s goodwill reflected the effects of foreign currency translation recorded within all three of the Company’s segments.
During fiscal year 2019, other acquired intangibles increased slightly due to an insignificant acquisition. Other acquired
intangible assets are amortized using the straight-line method over their estimated useful lives of two to ten years. Amortization
expense related to other acquired intangible assets was $9.7 million, $12.2 million and $10.8 million for the fiscal years ended
March 31, 2019, March 31, 2018 and March 31, 2017, respectively.
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. Expected amortization expense for acquired intangible assets
for each of the following periods is as follows:
Expected for fiscal year 2020
Expected for fiscal year 2021
Expected for fiscal year 2022
Expected for fiscal year 2023
Expected for fiscal year 2024
Thereafter
Amortization
(In thousands)
7,485
$
5,101
3,278
2,973
2,458
1,006
22,301
$
The allocation of the other acquired intangible assets and the related accumulated amortization as of March 31, 2019 and
2018 is as follows:
Technology
Contracts and customer relationships
Satellite co-location rights
Trade name
Other
Total other acquired intangible assets
As of March 31, 2019
As of March 31, 2018
Weighted
Average
Useful Life Total
(In years)
Accumulated
Amortization
Net Book
Value
Total
Accumulated
Amortization
Net Book
Value
(In thousands)
6 $ 89,972 $
7 103,283
8,600
9
5,940
3
9,989
6
$ 217,784 $
(73,992 ) $ 15,980 $ 90,652 $
6,313 103,808
(96,970 )
8,600
(8,592 )
8
5,940
(5,940 )
—
— 10,137
(9,989 )
(195,483 ) $ 22,301 $ 219,137 $
(69,387 ) $ 21,265
9,224
(94,584 )
932
(7,668 )
—
(5,940 )
441
(9,696 )
(187,275 ) $ 31,862
(cid:1)
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VIASAT, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 5 — Senior Notes and Other Long-Term Debt
Total long-term debt consisted of the following as of March 31, 2019 and 2018:
2027 Notes
2025 Notes
Revolving Credit Facility
Ex-Im Credit Facility
Total debt
Unamortized discount and debt issuance costs
Less: current portion of long-term debt
Total long-term debt
As of
March 31, 2019
As of
March 31, 2018
(In thousands)
$
600,000 $
700,000
—
139,560
1,439,560
(26,720 )
19,937
$ 1,392,903 $
—
700,000
—
362,401
1,062,401
(38,696 )
45,300
978,405
The estimated aggregate amounts and timing of payments on the Company’s long-term debt obligations as of March 31, 2019
for the next five fiscal years and thereafter were as follows (excluding the effects of discount accretion under the 2025 Notes, the
2027 Notes and the Ex-Im Credit Facility):
For the Fiscal Years Ending
2020
2021
2022
2023
2024
Thereafter
Plus: unamortized discount and debt issuance costs
Total
(In thousands)
19,937
$
19,937
19,937
19,937
19,937
1,339,875
1,439,560
(26,720 )
$ 1,412,840
Revolving Credit Facility
As of March 31, 2019, the Revolving Credit Facility provided a $700.0 million revolving line of credit (including up to
$150.0 million of letters of credit), with a maturity date of January 18, 2024. On March 27, 2019, the Company reduced available
commitments under the Revolving Credit Facility from $800.0 million to $700.0 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. 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 March 31, 2019, none of the Company’s subsidiaries guaranteed the Revolving
Credit Facility.
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.
74 | Viasat Annual Report 2019
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VIASAT, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The Company was in compliance with its financial covenants under the Revolving Credit Facility as of March 31, 2019. At
March 31, 2019, the Company had no outstanding borrowings under the Revolving Credit Facility and $19.6 million outstanding
under standby letters of credit, leaving borrowing availability under the Revolving Credit Facility as of March 31, 2019 of
$680.4 million.
Ex-Im Credit Facility
The Ex-Im Credit Facility originally provided a $362.4 million senior secured direct loan facility, which was fully drawn. Of the
$362.4 million in principal amount of borrowings made under the Ex-Im Credit Facility, $321.2 million was used to finance up to 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 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 March 31, 2019, the Company had $139.6
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%, 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%. 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. Pursuant to the terms of the Ex-Im Credit Facility, certain insurance recovery proceeds related to
the ViaSat-2 satellite must be used to pay down outstanding borrowings under the Ex-Im Credit Facility upon receipt. During fiscal
year 2019, the Company received $185.7 million of insurance proceeds related to the ViaSat-2 satellite, all of which were used to pay
down outstanding borrowings under the Ex-Im Credit Facility upon receipt (see Note 1 – Property, equipment and satellites for
more information). 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 March 31,
2019.
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 consolidated financial statements. The discount of $42.3
million (comprising the initial $6.0 million pre-exposure fee, $35.3 million of completion exposure fees, and other customary fees)
and deferred financing cost associated with the issuance of the borrowings under the Ex-Im Credit Facility is 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 Secured Notes due 2027
In March 2019, the Company issued $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
consolidated financial statements. The 2027 Notes bear interest at the rate of 5.625% per year, payable semi-annually in cash in
arrears, which interest payments will commence in October 2019. Debt issuance 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 March 31, 2019, 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.
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VIASAT, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
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) 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.
Prior to April 15, 2022, the Company may redeem up to 40% of the 2027 Notes at a redemption price of 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% 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%, during the 12 months beginning on April 15, 2023 at a redemption price of 101.406%, and at any time on or after
April 15, 2024 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 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% 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 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 consolidated financial statements. The 2025 Notes bear interest at the rate of 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 March 31, 2019, 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 Notes are effectively junior in right of payment to the
Company’s existing and future secured debt, including under the Credit Facilities (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.
76 | Viasat Annual Report 2019
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VIASAT, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Prior to September 15, 2020, the Company may redeem up to 40% of the 2025 Notes at a redemption price of 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 2025 Notes prior to September 15, 2020, in whole or in part, at a
redemption price equal to 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 2025 Notes and (ii) the excess, if any, of (a) the present value at such date of redemption of (1) the redemption price of such
2025 Notes on September 15, 2020 plus (2) all required interest payments due on such 2025 Notes through September 15, 2020
(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 2025 Notes) plus 50 basis points, over (b) the then-outstanding principal amount of such
2025 Notes. 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 after September 15, 2022 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% 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).
Discharge of indenture and loss on extinguishment of debt
In connection with the Company’s issuance of the 2025 Notes in September 2017, the Company repurchased and redeemed
all of its $575.0 million in aggregate principal amount of 2020 Notes then outstanding through a cash tender offer and redemption,
and the indenture governing the 2020 Notes was satisfied and discharged in accordance with its terms. In September 2017, the
Company repurchased $298.2 million in aggregate principal amount of the 2020 Notes pursuant to the tender offer. The total cash
payment to repurchase the tendered 2020 Notes in the tender offer, including accrued and unpaid interest to, but excluding, the
repurchase date, was $309.3 million. Also in September 2017, in connection with the redemption of the remaining $276.8 million in
aggregate principal amount of 2020 Notes, the Company irrevocably deposited $287.4 million with Wilmington Trust, as trustee, as
trust funds solely for the benefit of the holders of such 2020 Notes. The redemption price for the 2020 Notes was 101.719% of the
principal amount so redeemed, plus accrued and unpaid interest to, but excluding, the redemption date of October 5, 2017.
In connection with the satisfaction and discharge of the indenture governing the 2020 Notes, all of the obligations of the
Company (other than certain customary provisions of the indenture that expressly survive pursuant to the terms of the indenture)
were discharged in September 2017.
As a result of the repurchase of the 2020 Notes in the tender offer and the redemption of the remaining 2020 Notes, the
Company recognized a $10.2 million loss on extinguishment of debt during the second quarter of fiscal year 2018, which was
comprised of $10.6 million in cash payments (including tender offer consideration, redemption premium and related professional
fees), net of an insignificant amount in non-cash gain (including unamortized premium, net of unamortized debt issuance costs).
Note 6 — Common Stock and Stock Plans
In February 2019, the Company filed a universal shelf registration statement with the SEC for the future sale of an unlimited
amount of common stock, preferred stock, debt securities, depositary shares, warrants, and rights. The securities may be offered
from time to time, separately or together, directly by the Company, 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.
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VIASAT, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
In November 1996, the Company adopted the 1996 Equity Participation Plan (the Equity Participation Plan). The Equity
Participation Plan provides for the grant to executive officers, other key employees, consultants and non-employee directors of the
Company a broad variety of stock-based compensation alternatives such as nonqualified stock options, incentive stock options,
restricted stock units and performance awards. From November 1996 to September 2018 through various amendments of the
Equity Participation Plan, the Company increased the maximum number of shares reserved for issuance under this plan to
31,850,000 shares. The Company believes that such awards better align the interests of its employees with those of its stockholders.
Shares of the Company’s common stock granted under the Equity Participation Plan in the form of stock options or stock
appreciation right are counted against the Equity Participation Plan share reserve on a one for one basis and performance-based
stock options are calculated assuming “maximum” performance. Shares of the Company’s common stock granted under the Equity
Participation Plan as an award other than as an option or as a stock appreciation right with a per share purchase price lower than
100% of fair market value on the date of grant are counted against the Equity Participation Plan share reserve as two shares for
each share of common stock prior to September 22, 2010 and subsequent to September 19, 2012, and as 2.65 shares for each share
of common stock during the period beginning on September 22, 2010 and ending on September 19, 2012. Restricted stock units are
granted to eligible employees and directors and represent rights to receive shares of common stock at a future date.
In November 1996, the Company adopted the ViaSat, Inc. Employee Stock Purchase Plan (the Employee Stock Purchase Plan)
to assist employees in acquiring a stock ownership interest in the Company and to encourage them to remain in the employment of
the Company. The Employee Stock Purchase Plan is intended to qualify under Section 423 of the Internal Revenue Code. From
November 1996 to September 2017 through various amendments of the Employee Stock Purchase Plan, the Company increased the
maximum number of shares reserved for issuance under this plan to 3,650,000 shares. To facilitate participation for employees
located outside of the United States in light of non-U.S. law and other considerations, the amended Employee Stock Purchase Plan
also provides for the grant of purchase rights that are not intended to be tax-qualified. The Employee Stock Purchase Plan permits
eligible employees to purchase common stock at a discount through payroll deductions during specified six-month offering
periods. No employee may purchase more than $25,000 worth of stock in any calendar year. The price of shares purchased under
the Employee Stock Purchase Plan is equal to 85% of the fair market value of the common stock on the first or last day of the
offering period, whichever is lower.
Total stock-based compensation expense recognized in accordance with the authoritative guidance for share-based
payments was as follows:
March 31,
2019
Fiscal Years Ended
March 31,
2018
(In thousands)
March 31,
2017
Stock-based compensation expense before taxes
Related income tax benefits
Stock-based compensation expense, net of taxes
$
$
79,599 $
(18,824 )
60,775 $
68,545 $
(16,278 )
52,267 $
55,775
(21,057 )
34,718
Effective April 1, 2017, in accordance with ASU 2016-09, on a prospective basis, 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 classified within operating activities. Prior to April 1, 2017 any unrealized excess tax benefits were tracked off
the balance sheet and recognition of the benefits was deferred until realized through a reduction in taxes payable. When the excess
tax benefits or deficiencies were realized, they were recognized in paid-in-capital and the related cash flows were classified as an
outflow from operating activities and an inflow from financing activities.
The compensation cost that has been charged against income for the Equity Participation Plan under the authoritative
guidance for share-based payments was $75.3 million, $65.1 million and $52.6 million, and for the Employee Stock Purchase Plan
was $4.3 million, $3.4 million and $3.1 million, for the fiscal years ended March 31, 2019, March 31, 2018 and March 31, 2017,
respectively. The Company capitalized $11.9 million, $8.0 million and $6.6 million of stock-based compensation expense as a part of
the cost for software development for resale included in other assets and as a part of the equipment and software for internal use
included in property and equipment for fiscal years 2019, 2018 and 2017, respectively.
78 | Viasat Annual Report 2019
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VIASAT, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
As of March 31, 2019, total unrecognized compensation cost related to unvested stock-based compensation arrangements
granted under the Equity Participation Plan (including stock options, TSR performance stock options and restricted stock units) and
the Employee Stock Purchase Plan was $186.6 million and $1.3 million, respectively. These costs are expected to be recognized over
a weighted average period of 1.2 years, 1.9 years and 2.6 years, for stock options, TSR performance stock options and restricted
stock units, respectively, under the Equity Participation Plan and less than six months under the Employee Stock Purchase Plan.
Stock options, TSR performance stock options and employee stock purchase plan. The Company’s employee stock options
typically have a simple four-year vesting schedule and a six year contractual term. During the third quarter of fiscal year 2018, the
Company began granting TSR performance stock options to executive officers under the 1996 Equity Participation Plan. The
number of shares of TSR performance stock options that will become eligible to vest based on the time-based vesting schedule
described below is based on a comparison over a four-year performance period of the Company’s TSR to the TSR of the companies
included in the S&P Mid Cap 400 Index. The number of options that may become vested and exercisable will range from 0% to 175%
of the target number of options based on the Company’s relative TSR ranking for the performance period. The Company’s TSR
performance stock options have a four-year time-based vesting schedule and a six year contractual term. The TSR performance
stock options must be vested under both the time-based vesting schedule and the performance-based vesting conditions in order
to become exercisable. Expense for TSR performance stock options that time-vest is recognized regardless of the actual TSR
outcome achieved and is recognized on a graded-vesting basis. The weighted average estimated fair value of TSR performance
stock options granted during fiscal years 2019 and 2018 was $32.32 and $32.04 per share, respectively, using the Monte Carlo
simulation. The weighted average estimated fair value of employee stock options granted and employee stock purchase plan
shares issued during fiscal year 2019 was $18.35 and $15.14 per share, respectively, during fiscal year 2018 was $19.86 and $15.09
per share, respectively, and during fiscal year 2017 was $23.62 and $16.27 per share, respectively, using the Black-Scholes model.
The weighted average assumptions (annualized percentages) used in the Black-Scholes model and Monte Carlo simulation were as
follows:
Employee Stock Options
Fiscal
Year
2018
Fiscal
Year
2017
Fiscal
Year
2019
TSR Performance Stock
Options
Fiscal
Year
2019
Fiscal Year
2018 *
Employee Stock Purchase Plan
Fiscal
Year
2018
Fiscal
Year
2017
Fiscal
Year
2019
Volatility
Risk-free interest rate
Dividend yield
Expected life
27.9 %
2.8 %
0.0 %
30.4 %
1.9 %
0.0 %
33.4 %
1.7 %
0.0 %
28.2 %
2.8 %
0.0 %
27.5 %
1.9 %
0.0 %
32.8 %
2.4 %
0.0 %
22.0 %
1.3 %
0.0 %
31.1 %
0.5 %
0.0 %
5.0 years
5.4 years
5.5 years
5.0 years
5.0 years
0.5 years
0.5 years
0.5 years
*
The Company began granting TSR performance stock options to executive officers in the third quarter of fiscal year 2018.
The Company’s expected volatility is a measure of the amount by which its stock price is expected to fluctuate over the
expected term of the stock-based award. The estimated volatilities for stock options and TSR performance options are based on the
historical volatility calculated using the daily stock price of the Company’s stock over a recent historical period equal to the
expected term. The risk-free interest rate that the Company uses in determining the fair value of its stock-based awards is based on
the implied yield on U.S. Treasury zero-coupon issues with remaining terms equivalent to the expected term of its stock-based
awards. The expected terms or lives of employee stock options and TSR performance stock options represent the expected period
of time from the date of grant to the estimated date that the stock options under the Company’s Equity Participation Plan would be
fully exercised. The expected term assumption is estimated based primarily on the options’ vesting terms and remaining
contractual life and employees’ expected exercise and post-vesting employment termination behavior.
(cid:1)
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VIASAT, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
A summary of employee stock option activity for fiscal year 2019 is presented below:
Outstanding at March 31, 2018
Options granted
Options canceled
Options exercised
Outstanding at March 31, 2019
Vested and exercisable at March 31, 2019
1,164,250 $
Number of
Shares
1,766,500 $
40,000
—
(275,000 )
1,531,500 $
Weighted Average
Exercise Price
per Share
Weighted Average
Remaining
Contractual
Term in Years
Aggregate
Intrinsic
Value
(In thousands)
61.13
61.60
—
40.32
64.87
64.34
2.55 $
2.22 $
19,337
15,321
The total intrinsic value of stock options exercised during fiscal years 2019, 2018 and 2017 was $7.9 million, $5.2 million and
$8.3 million, respectively. All options issued under the Company’s stock option plans have an exercise price equal to the fair market
value of the Company’s stock on the date of the grant. The Company recorded an insignificant excess tax benefit during fiscal year
2019 and an insignificant excess tax deficiency during fiscal year 2018 related to stock options exercises. No excess tax benefits were
realized from stock options exercised during fiscal year 2017 as the excess tax benefit from stock options exercised increased the
Company’s net operating loss carryforward.
A summary of TSR performance stock option activity for fiscal year 2019 is presented below:
Number of
Shares (1)
Weighted Average
Exercise Price
per Share
Weighted Average
Remaining
Contractual
Term in Years
Aggregate
Intrinsic
Value
(In thousands)
Outstanding at March 31, 2018
TSR performance options granted
TSR performance options canceled
TSR performance options exercised
Outstanding at March 31, 2019
Vested and exercisable at March 31, 2019
497,500 $
530,000
—
—
1,027,500 $
— $
73.77
69.05
—
—
71.34
—
5.15 $
— $
6,334
—
(1)(cid:1) Number of shares is based on the target number of options under each TSR performance stock option.
Restricted stock units. Restricted stock units represent a right to receive shares of common stock at a future date determined
in accordance with the participant’s award agreement. There is no exercise price and no monetary payment required for receipt of
restricted stock units or the shares issued in settlement of the award. Instead, consideration is furnished in the form of the
participant’s services to the Company. Restricted stock units generally vest over four years. Compensation cost for these awards is
based on the fair value on the date of grant and recognized as compensation expense on a straight-line basis over the requisite
service period. For fiscal years 2019, 2018 and 2017, the Company recognized $58.8 million, $54.0 million and $44.9 million,
respectively, in stock-based compensation expense related to these restricted stock unit awards.
80 | Viasat Annual Report 2019
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VIASAT, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The per unit weighted average grant date fair value of restricted stock units granted during fiscal years 2019, 2018 and 2017
was $67.88, $72.89 and $69.99, respectively. A summary of restricted stock unit activity for fiscal year 2019 is presented below:
Outstanding at March 31, 2018
Awarded
Forfeited
Released
Outstanding at March 31, 2019
Vested and deferred at March 31, 2019
Number of
Restricted Stock
Units
2,862,194 $
1,321,914
(78,364 )
(1,201,502 )
2,904,242 $
173,334 $
Weighted
Average Grant
Date Fair Value
per Share
67.64
67.88
69.19
66.98
67.99
42.59
The total fair value of shares vested related to restricted stock units during the fiscal years 2019, 2018 and 2017 was
$81.1 million, $64.6 million and $58.4 million, respectively.
Note 7 — Shares Used In Computing Diluted Net (Loss) Income Per Share
Weighted average:
Common shares outstanding used in calculating basic
net (loss) income per share attributable to Viasat,
Inc. common stockholders
Options to purchase common stock as determined by
application of the treasury stock method
TSR performance options to purchase common stock
as determined by application of the treasury stock
method
Restricted stock units to acquire common stock as
determined by application of the treasury stock
method
Potentially issuable shares in connection with certain
terms of the ViaSat 401(k) Profit Sharing Plan and
Employee Stock Purchase Plan
Shares used in computing diluted net (loss) income per
share attributable to Viasat, Inc. common
stockholders
March 31, 2019
March 31, 2018
March 31, 2017
Fiscal Years Ended
(In thousands)
59,942
58,438
52,318
—
—
—
—
—
—
—
—
246
*
658
174
59,942
58,438
53,396
*
The Company began granting TSR performance stock options to executive officers in the third quarter of fiscal year 2018
(see Note 6).
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 fiscal years ended 2019 and 2018, as the Company incurred a net loss attributable to Viasat,
Inc. common stockholders for such periods and inclusion of potentially dilutive weighted average shares of common stock would
be antidilutive. Potentially dilutive weighted average shares of common stock excluded from the calculation for fiscal years 2019
and 2018 were 1,291,503 and 1,358,275, respectively, relating to stock options (other than TSR performance stock options), 871,343
and 175,598, respectively, relating to TSR performance stock options, 612,318 and 1,053,649, respectively, relating to restricted
stock units, and 215,956 and 193,608, respectively, relating to certain terms of the ViaSat 401(k) Profit Sharing Plan and Employee
Stock Purchase Plan.
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VIASAT, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Antidilutive shares relating to stock options excluded from the calculation consisted of 582,315 shares for the fiscal year
ended March 31, 2017. Antidilutive shares relating to restricted stock units excluded from the calculation consisted of 24 shares for
the fiscal year ended March 31, 2017.
Note 8 — Income Taxes
The components of (loss) income before income taxes by jurisdiction are as follows:
United States
Foreign
March 31,
2019
Fiscal Years Ended
March 31,
2018
(In thousands)
March 31,
2017
$
$
(102,643 ) $
(7,838 )
(110,481 ) $
(92,767 ) $
(12,703 )
(105,470 ) $
29,649
(4,265 )
25,384
The benefit from (provision for) income taxes includes the following:
Current tax provision
Federal
State
Foreign
Deferred tax benefit (provision)
Federal
State
Foreign
$
Total benefit from (provision for) income taxes
$
March 31,
2019
Fiscal Years Ended
March 31,
2018
(In thousands)
March 31,
2017
(821 ) $
(690 )
(1,619 )
(3,130 )
34,099
8,738
1,307
44,144
41,014 $
(284 ) $
(401 )
(953 )
(1,638 )
24,833
10,450
1,572
36,855
35,217 $
(2,041 )
(1,167 )
(600 )
(3,808 )
(4,410 )
4,509
92
191
(3,617 )
Significant components of the Company’s net deferred tax assets are as follows:
Deferred tax assets:
Net operating loss carryforwards
Tax credit carryforwards
Other
Deferred revenue
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Intangible assets
Property, equipment and satellites
Other
Total deferred tax liabilities
Net deferred tax assets
As of
March 31,
2019
March 31,
2018
(In thousands)
$
197,486 $
220,060
57,246
24,421
(33,499 )
465,714
184,177
189,970
52,958
1,127
(29,049 )
399,183
(72,776 )
(113,188 )
(21,160 )
(207,124 )
258,590 $
(73,403 )
(96,661 )
(7,709 )
(177,773 )
221,410
$
82 | Viasat Annual Report 2019
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VIASAT, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
A reconciliation of the benefit from (provision for) income taxes to the amount computed by applying the statutory federal
income tax rate to (loss) income before income taxes is as follows:
Tax benefit (provision) at federal statutory rate
State tax benefit (provision), net of federal benefit
Tax credits, net of valuation allowance
Non-deductible compensation
Non-deductible transaction costs
Non-deductible meals and entertainment
Stock-based compensation
Change in federal tax rate due to Tax Reform
Change in state effective tax rate
Foreign effective tax rate differential, net of
valuation allowance
Unremitted subsidiary gains
Other
Total benefit from (provision for) income taxes
March 31,
2019
Fiscal Years Ended
March 31,
2018
(In thousands)
March 31,
2017
$
$
23,201 $
1,815
26,836
(4,527 )
(70 )
(929 )
180
—
(684 )
(1,552 )
(1,388 )
(1,868 )
41,014 $
22,149 $
2,605
21,898
(2,852 )
—
(727 )
799
(5,335 )
(235 )
(2,054 )
(864 )
(167 )
35,217 $
(8,885 )
(1,681 )
15,121
(2,659 )
(645 )
(794 )
(886 )
—
(417 )
(2,391 )
162
(542 )
(3,617 )
Effective January 1, 2018, the Tax Reform reduced the corporate federal income tax rate from 35% to 21%. The Company
applied the 21% federal tax rate in the rate reconciliation for fiscal year 2019 and 2018. As the Company has a March 31 fiscal year-
end, the phase-in of tax rate from 35% to 21% in fiscal year 2018 resulted in a blended tax rate of 31.6%. However, the Company
applied the 21% federal tax rate in the rate reconciliation for fiscal year 2018 as the fiscal year 2018 taxable loss will not be subject
to federal tax at the 31.6% blended tax rate. Instead, the taxable loss increases the net operating loss carryforwards and will be
subject to the lower 21% federal tax rate in future periods.
As of March 31, 2019, the Company had federal and state research credit carryforwards of $163.5 million and $146.3 million,
respectively, which begin to expire in fiscal year 2026 and fiscal year 2020, respectively. As of March 31, 2019, the Company also had
foreign tax credit carryforwards of approximately $1.6 million, which begin to expire in fiscal year 2021. As of March 31, 2019, the
Company had federal and state net operating loss carryforwards of $761.5 million and $585.1 million, respectively, which begin to
expire in fiscal year 2021 and fiscal year 2020, respectively. The Tax Reform repealed the alternative minimum tax (AMT) for tax
years beginning January 1, 2018, and provides that existing AMT credit carryovers are refundable beginning in calendar year 2018.
The Company has an insignificant amount of AMT credit carryovers that are expected to be fully refunded by fiscal year 2022.
In accordance with ASU 2016-09, which the Company adopted during the first quarter of fiscal year 2018, the Company
recorded a cumulative effect adjustment as of the beginning of the first quarter of fiscal year 2018 to increase retained earnings by
$58.7 million with a corresponding increase to deferred tax assets to recognize net operating loss carryforwards attributable to
excess tax benefits on share-based compensation that had not been previously recognized. On a prospective basis 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 classified within operating activities.
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. 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. A valuation allowance of $33.5 million at March 31, 2019 and $29.0 million at March 31, 2018 has been
established relating to state and foreign net operating loss carryforwards, state R&D tax credit carryforwards, and foreign tax credit
carryforwards that, based on management’s estimate of future taxable income attributable to such jurisdictions and generation of
additional research credits, are considered more likely than not to expire unused.
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VIASAT, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The following table summarizes the activity related to the Company’s unrecognized tax benefits:
Balance, beginning of fiscal year
Decrease related to prior year tax positions
Increases related to current year tax positions
Balance, end of fiscal year
March 31,
2019
As of
March 31,
2018
(In thousands)
March 31,
2017
$
$
55,474 $
(1,183 )
13,865
68,156 $
49,066 $
(155 )
6,563
55,474 $
45,080
(421 )
4,407
49,066
Of the total unrecognized tax benefits at March 31, 2019, $61.2 million would reduce the Company’s annual effective tax rate
if recognized, subject to valuation allowance consideration.
In the next 12 months it is reasonably possible that the amount of unrecognized tax benefits will not change significantly.
The Company is subject to periodic audits by domestic and foreign tax authorities. By statute, the Company’s U.S. federal
income tax returns are subject to examination by the Internal Revenue Service (IRS) for fiscal years 2016 through 2018. Additionally,
tax credit carryovers that were generated in prior years and utilized in these years may also be subject to examination by the IRS.
With few exceptions, fiscal years 2015 to 2018 remain open to examination by state and foreign taxing jurisdictions. The Company
believes that it has appropriate support for the income tax positions taken on its tax returns and its accruals for tax liabilities are
adequate for all open years based on an assessment of many factors, including past experience and interpretations. The Company’s
policy is to recognize interest expense and penalties related to income tax matters as a component of income tax expense. There
were no accrued interest or penalties associated with uncertain tax positions as of March 31, 2019 and 2018.
U.S. Tax Reform
On December 22, 2017, the Tax Reform was enacted into law. Among other matters, the Tax Reform lowered the corporate
federal income tax rate from 35% to 21%, effective January 1, 2018, and transitioned U.S. international taxation from a worldwide
tax system to a modified territorial tax system, including a one-time transition tax on accumulated foreign earnings, and created
new taxes on certain foreign earnings.
The Company re-measured its deferred tax balances as of December 22, 2017 to reflect the 21% reduced tax rate and
recognized an income tax expense of $5.3 million for the fiscal year ended March 31, 2018. The one-time transition tax had no
impact to the Company’s income tax provision.
The Securities and Exchange Commission issued rules under SAB 118 that allowed for a measurement period of up to one
year after the enactment date of the Tax Reform to finalize the recording of the related enactment-date tax impacts. The Company
finalized its accounting for the related enactment-date tax impacts during fiscal year 2019 with no adjustments to the provisional
estimate recorded at December 31, 2017. The Company has accounted for the fiscal year 2019 impacts of the Tax Reform in its
benefit from (provision for) income taxes in accordance with its interpretation of the Tax Reform and available guidance. However,
additional Treasury regulations and other interpretive guidance are expected. The impact of any additional guidance will be
recorded in the subsequent periods in which the additional guidance is released.
84 | Viasat Annual Report 2019
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VIASAT, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 9 — Equity Method Investments and Related Party Transactions
Eutelsat strategic partnering arrangement
In March 2017, the Company acquired a 49% interest in Euro Broadband Infrastructure Sàrl (Euro Infrastructure Co.) for
$139.5 million as part of the consummation of the Company’s strategic partnering arrangement with Eutelsat. The Company’s total
net cash outlay for its investment in Euro Infrastructure Co., including approximately $2.4 million of transaction costs, was
approximately $141.9 million. The Company’s investment in Euro Infrastructure Co. is 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, is classified as a single line item, as an investment in unconsolidated affiliate, on the Company’s consolidated balance
sheets. Because the underlying net assets in Euro Infrastructure Co. and the related excess carrying value of investment over the
proportionate share of net assets are denominated in Euros, foreign currency translation gains or losses impact the recorded value
of the Company’s investment. The Company recorded a foreign currency translation loss, net of tax, of approximately $5.6 million
and a gain, net of tax, of approximately $12.7 million for the fiscal years ended March 31, 2019 and 2018, respectively, in
accumulated other comprehensive income (loss). The Company records its proportionate share of the results of Euro Infrastructure
Co., and any related basis difference amortization expense, within equity in income (loss) of unconsolidated affiliate, net, one
quarter in arrears. Accordingly, the Company included its share of the results of Euro Infrastructure Co. from the date of the
Company’s investment in Euro Infrastructure Co. on March 3, 2017 through December 31, 2017 in its consolidated financial
statements for the fiscal year ended March 31, 2018 and included its share of the results of Euro Infrastructure Co. for the twelve
months ended December 31, 2018 in its consolidated financial statements for the fiscal year ended March 31, 2019. The Company’s
investment in Euro Infrastructure Co. is 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.
The difference between the Company’s carrying value of its investment in Euro Infrastructure Co. and its proportionate share
of the net assets of Euro Infrastructure Co. as of March 31, 2019 and March 31, 2018 is summarized as follows:
Carrying value of investment in Euro Infrastructure Co.
Less: proportionate share of net assets of Euro Infrastructure Co.
Excess carrying value of investment over proportionate share of net assets
The excess carrying value has been primarily assigned to:
Goodwill
Identifiable intangible assets
Tangible assets
Deferred income taxes
As of March 31, 2019
As of March 31, 2018
$
$
$
$
(In thousands)
160,711
145,016
15,695
$
$
22,476
10,670
(18,522 )
1,071
15,695
$
$
163,835
147,115
16,720
23,523
12,839
(21,342 )
1,700
16,720
The identifiable intangible assets have useful lives of up to 11 years and a weighted average useful life of approximately ten
years, and tangible assets have 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 income on its investment in Euro Infrastructure Co. was $3.0 million and $2.0 million for the fiscal
years ended March 31, 2019 and 2018, respectively, consisting of the Company’s share of equity in Euro Infrastructure Co.’s income,
including amortization of the difference in the historical basis of the Company’s contribution. As the Company records its
proportionate share of the results of Euro Infrastructure Co., and any related basis difference amortization expense, within equity in
income (loss) of unconsolidated affiliate, net, one quarter in arrears, the Company did not have any share of income on its
investment in Euro Infrastructure Co. in fiscal year 2017.
Since acquiring its interest in Euro Infrastructure Co., the Company has recorded $6.4 million in retained earnings of
undistributed cumulative earnings in equity interests, net of tax, as of March 31, 2019.
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7110Fin.indd 85
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VIASAT, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Related-party transactions
Transactions with the equity method investee are considered related-party transactions. In addition, Richard Baldridge, the
President and Chief Operating Officer and a Director of the Company, also serves on the board of directors of Ducommun Inc. The
following tables set forth the material related-party transactions entered into between Euro Infrastructure Co. and its subsidiaries,
or Ducommon Inc. (inventory procurement) 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:
Revenue – Euro Infrastructure Co.
Expense – Euro Infrastructure Co.
Cash received – Euro Infrastructure Co.
Cash paid – Euro Infrastructure Co.
Cash paid – Ducommun Inc.
March 31,
2019
Fiscal Years Ended
March 31,
2018
(In thousands)
March 31,
2017
$
8,365 $
14,302
11,276
15,191
20,059
9,277 $
7,134
7,460
7,040
**
*
*
*
*
**
Accounts receivable – Euro Infrastructure Co.
Collections in excess of revenues and deferred revenues –
Euro Infrastructure Co.
Accounts payable – Ducommun Inc.
*
**
Amount was insignificant.
There was no related-party activity for the periods indicated.
Note 10 — Employee Benefits
As of
March 31,
2019
As of
March 31,
2018
$
(In thousands)
* $
4,703
*
3,307
3,246
2,073
The Company is a sponsor of a voluntary deferred compensation plan under Section 401(k) of the Internal Revenue Code.
Under the plan, the Company may make discretionary contributions to the plan which vest over three years. The Company’s
discretionary matching contributions to the plan are based on the amount of employee contributions and can be made in cash or
the Company’s common stock at the Company’s election. Subsequent to the 2019 fiscal year end, the Company elected to settle the
discretionary contributions liability in shares of the Company’s common stock, consistent with fiscal year 2018. Based on the
closing price of the Company’s common stock at the 2019 fiscal year end, the Company would issue approximately 294,839 shares
of common stock at this time. Discretionary contributions accrued by the Company as of March 31, 2019 and 2018 amounted to
$22.9 million and $19.4 million, respectively.
Note 11 — Commitments
In January 2008, the Company entered into several agreements with Space Systems/Loral, Inc. (SS/L), its former parent
company Loral Space & Communications, Inc. (Loral) and Telesat Canada related to the Company’s ViaSat-1 satellite, which was
placed into service in January 2012. In May 2013, the Company entered into an agreement to purchase the ViaSat-2 satellite from
The Boeing Company (Boeing), which satellite was placed into service during the fourth quarter of fiscal year 2018. The Company’s
contracts with SS/L and Boeing require the Company to make monthly in-orbit satellite performance incentive payments, including
interest through approximately fiscal year 2028, subject to the continued satisfactory performance of the satellites. The Company
records the net present value of these expected future payments as a liability and as a component of the cost of the satellites. As of
March 31, 2019, the Company’s estimated satellite performance incentive obligations and accrued interest for the ViaSat-1 and
ViaSat-2 satellites were approximately $28.2 million, of which $2.9 million and $25.3 million have been classified as current in
accrued liabilities and non-current in other liabilities, respectively. Under the satellite construction contracts with SS/L and Boeing,
the Company may incur up to $37.0 million in total costs for satellite performance incentive obligations and related interest earned
through approximately fiscal year 2028 with potential future minimum payments of $2.6 million, $2.8 million, $3.3 million,
$5.0 million and $5.3 million in fiscal years 2020, 2021, 2022, 2023 and 2024, respectively, with $18.0 million in commitments
thereafter.
86 | Viasat Annual Report 2019
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VIASAT, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
In July 2016, the Company entered into two separate agreements with Boeing for the construction and purchase of two
ViaSat-3 class satellites and the integration of Viasat’s payload technologies into the satellites. Pursuant to these agreements, as
amended, the aggregate purchase price for the two satellites is approximately $390.1 million (subject to purchase price
adjustments based on factors such as launch delay and early delivery), plus an additional amount for launch support services to be
performed by Boeing. In addition, under one of these agreements, the Company had the option to order one additional ViaSat-3
class satellite, with respect to which the Company signed an agreement to proceed in January 2019 for the third ViaSat-3 class
satellite. The first ViaSat-3 class satellite is expected to provide broadband services over the Americas, the second is expected to
provide broadband services over the Europe, Middle East and Africa (EMEA) region, and the third is expected to provide broadband
services over Asia and Pacific (APAC) region, enabling the Company to deliver affordable connectivity worldwide.
In addition to the satellite construction agreements described above, the Company also enters into various other satellite-
related purchase commitments, including with respect to the provision of launch services, operation of our satellites and satellite
insurance. As of March 31, 2019, future minimum payments under the Company’s satellite construction contracts and other
satellite-related purchase commitments for the next five fiscal years and thereafter were as follows:
Fiscal Years Ending
2020
2021
2022
2023
2024
Thereafter
(In thousands)
362,800
$
147,386
162,091
107,304
7,234
14,178
800,993
$
The Company has various other purchase commitments under satellite capacity agreements which are used to provide
satellite networking services to its customers for future minimum payments of approximately $68.4 million, $53.0 million,
$25.6 million, $19.8 million and $1.8 million in fiscal years 2020, 2021, 2022, 2023 and 2024, respectively, and no further minimum
payments thereafter.
The Company leases office and other facilities under non-cancelable operating leases which expire between fiscal year 2020
and fiscal year 2033 with initial terms ranging from one to 15 years and which provide for pre-negotiated fixed rental rates during
the terms of the lease. Certain of the Company’s facilities leases contain option provisions which allow for extension of the lease
terms.
For operating leases, minimum lease payments, including minimum scheduled rent increases, are recognized as rent expense
on a straight-line basis over the lease term as that term is defined in the authoritative guidance for leases including any option
periods considered in the lease term and any periods during which the Company has use of the property but is not charged rent by a
landlord (rent holiday). Leasehold improvement incentives paid to the Company by a landlord are recorded as a liability and
amortized as a reduction of rent expense over the lease term. Total rent expense was $53.5 million, $41.2 million and $34.0 million
in fiscal years 2019, 2018 and 2017, respectively.
As of March 31, 2019, future minimum lease payments for the next five fiscal years and thereafter were as follows:
Fiscal Years Ending
2020
2021
2022
2023
2024
Thereafter
(In thousands)
59,164
$
59,452
57,500
50,933
51,000
183,077
461,126
$
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7110Fin.indd 87
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VIASAT, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 12 — Contingencies
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 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.
In March 2016, the Company’s 52% majority-owned subsidiary TrellisWare was informed by the Civil Division of the U.S.
Attorney’s Office for the Southern District of California that it was investigating TrellisWare’s eligibility for certain prior government
contracts and whether TrellisWare’s conduct in connection therewith violated the False Claims Act. An estimated loss contingency
is accrued when it is probable that an asset has been impaired or a liability has been incurred and the amount of loss can be
reasonably estimated. The Company regularly evaluates current information available to determine whether such accruals should
be adjusted and whether new accruals are required. During the fourth quarter of fiscal year 2017, based on further developments in
that investigation and TrellisWare’s discussions with the U.S. Attorney’s Office, the Company accrued a total loss contingency of
$11.8 million in SG&A expenses in its government systems segment, which consisted of $11.4 million in uncharacterized damages
and $0.4 million in penalties. The impact of the loss contingency on net income attributable to Viasat, Inc. stockholders for fiscal
year 2017, net of tax, was $4.0 million, with the related amount of $3.7 million recorded to net (loss) income attributable to
noncontrolling interests, net of tax, while the impact on basic and diluted net income per share attributable to Viasat, Inc. common
stockholders for fiscal year 2017 was $0.08 per share and $0.07 per share, respectively. As of March 31, 2017, the total loss
contingency was recorded in accrued liabilities and other long term liabilities in the consolidated balance sheet in the amounts of
$8.8 million and $3.0 million, respectively. In the fourth quarter of fiscal year 2018, the TrellisWare investigation was settled and the
accrued amount of loss contingency was paid out in full.
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 year 2019. As of March 31, 2019, the DCAA had completed its incurred cost
audit for fiscal years 2004 and 2016 and approved the Company’s incurred costs for those fiscal years, as well as approved the
Company’s incurred costs for fiscal years 2005 through 2015, 2017 and 2018 without further audit based on a determination of low
risk. Although the Company has recorded contract revenues subsequent to fiscal year 2018 based upon an estimate of costs that the
Company believes will be approved upon final audit or review, the Company does not know the outcome of any ongoing or future
audits or reviews and adjustments, and if future adjustments exceed the Company’s estimates, its profitability would be adversely
affected. As of March 31, 2019 and 2018, the Company had $4.9 million and $1.6 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.
88 | Viasat Annual Report 2019
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VIASAT, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 13 — Product Warranty
The Company provides limited warranties on its products for periods of up to five 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 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 in fiscal years 2019, 2018 and 2017.
Balance, beginning of period
Change in liability for warranties issued in period
Settlements made (in cash or in kind) during the period
Balance, end of period
Note 14 — Segment Information
March 31, 2019
March 31, 2018
March 31, 2017
Fiscal Years Ended
$
$
(In thousands)
$
6,914
5,080
(4,410 )
$
7,584
$
11,058
897
(5,041 )
$
6,914
11,434
7,815
(8,191 )
11,058
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, customers accessing our
services via our Community and Urban Wi-Fi hotspot distribution channels, enterprises, commercial airlines and 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, ASIC 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, IP-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.
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VIASAT, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Segment revenues and operating profits (losses) for the fiscal years ended March 31, 2019, March 31, 2018 and March 31, 2017
were as follows:
Revenues:
Satellite services
Product (1)
Service
Total
Commercial networks
Product
Service
Total
Government systems
Product
Service
Total
Elimination of intersegment revenues
Total revenues
Operating profits (losses):
Satellite services (1)
Commercial networks
Government systems (2)
Elimination of intersegment operating profits
Segment operating (loss) profit before corporate and
amortization of acquired intangible assets
Corporate
Amortization of acquired intangible assets
(Loss) income from operations
Fiscal Years Ended
March 31, 2019 March 31, 2018 March 31, 2017
(In thousands)
$
— $
684,205
684,205
664 $
588,623
589,287
383,547
44,857
428,404
198,034
35,187
233,221
27,711
601,936
629,647
211,458
33,149
244,607
709,144
246,505
955,649
—
2,068,258 $
556,849
215,268
772,117
—
1,594,625 $
474,767
210,316
685,083
—
1,559,337
(64,321 ) $
(166,613 )
179,969
—
12,018 $
(229,105 )
137,131
—
131,085
(180,496 )
96,658
—
(50,965 )
—
(9,655 )
(60,620 ) $
(79,956 )
—
(12,231 )
(92,187 ) $
47,247
—
(10,788 )
36,459
$
$
$
(1)
Product revenues and operating profits in the satellite services segment included $26.8 million for the fiscal year ended
March 31, 2017, relating to amounts realized under the Company’s settlement agreement entered into in fiscal year 2015 with
SS/L and its former parent company Loral. As of March 31, 2017, all payments pursuant to this settlement agreement had
been recorded and no further impacts to the Company’s consolidated financial statements are anticipated related to this
settlement agreement.
(2) Operating profits for the government systems segment reflected $11.8 million of SG&A expenses for the fiscal year ended
March 31, 2017, relating to uncharacterized damages and penalties in connection with the False Claims Act civil investigation
related to the Company’s 52% majority-owned subsidiary TrellisWare. In the fourth quarter of fiscal year 2018, the TrellisWare
investigation was settled and the accrued amount of loss contingency was paid out in full. See Note 12.
90 | Viasat Annual Report 2019
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VIASAT, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
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 March 31, 2019 and March 31, 2018 were as follows:
Segment assets:
Satellite services
Commercial networks
Government systems
Total segment assets
Corporate assets
Total assets
As of
March 31,
2019
As of
March 31,
2018
(In thousands)
$
$
85,907 $
183,200
408,422
677,529
3,237,758
3,915,287 $
66,830
211,447
337,451
615,728
2,798,381
3,414,109
Other acquired intangible assets, net and goodwill included in segment assets as of March 31, 2019 and 2018 were as follows:
Satellite services
Commercial networks
Government systems
Total
Other Acquired Intangible
Assets, Net
Goodwill
As of
March 31,
2019
As of
March 31,
2018
As of
March 31,
2019
As of
March 31,
2018
(In thousands)
$
$
10,453 $
1,798
10,050
22,301 $
16,580 $
3,340
11,942
31,862 $
13,617 $
43,933
64,169
121,719 $
13,991
44,011
63,083
121,085
Amortization of acquired intangible assets by segment for the fiscal years ended March 31, 2019, March 31, 2018 and
March 31, 2017 was as follows:
Satellite services
Commercial networks
Government systems
Total amortization of acquired intangible assets
March 31,
2019
Fiscal Years Ended
March 31,
2018
(In thousands)
March 31,
2017
$
$
4,857 $
1,542
3,256
9,655 $
7,622 $
1,563
3,046
12,231 $
5,866
1,679
3,243
10,788
(cid:1)
7110Fin.indd 91
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VIASAT, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Revenue information by geographic area for the fiscal years ended March 31, 2019, March 31, 2018 and March 31, 2017 was as
follows:
U.S. customers
Non U.S. customers (each country individually
insignificant)
Total revenues
March 31,
2019
Fiscal Years Ended
March 31,
2018
March 31,
2017
(In thousands)
$ 1,836,304 $ 1,403,473 $ 1,352,002
231,954
207,335
$ 2,068,258 $ 1,594,625 $ 1,559,337
191,152
The Company distinguishes revenues from external customers by geographic area based on customer location.
The net book value of long-lived assets located outside the United States was $70.4 million at March 31, 2019 and
$53.4 million at March 31, 2018.
92 | Viasat Annual Report 2019
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VALUATION AND QUALIFYING ACCOUNTS
For the Three Fiscal Years Ended March 31, 2019
Balance, March 31, 2016
Charged (credited) to costs and expenses
Deductions
Balance, March 31, 2017
Charged (credited) to costs and expenses
Deductions
Balance, March 31, 2018
Charged (credited) to costs and expenses
Deductions
Balance, March 31, 2019
Balance, March 31, 2016
Charged (credited) to costs and expenses
Deductions
Balance, March 31, 2017
Charged (credited) to costs and expenses
Deductions
Balance, March 31, 2018
Charged (credited) to costs and expenses
Deductions
Balance, March 31, 2019
Allowance for
Doubtful Accounts
(In thousands)
$
$
$
$
$
$
$
$
1,153
7,139
(6,822 )
1,470
8,357
(7,800 )
2,027
7,462
(7,777 )
1,712
Deferred Tax
Asset Valuation
Allowance
(In thousands)
17,089
639
—
17,728
11,321
—
29,049
4,450
—
33,499
7110Fin.indd 93
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MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our common stock is traded on the Nasdaq Global Select Market under the symbol “VSAT.” As of May 10, 2019, there were
approximately 486 holders of record of our common stock. A substantially greater number of holders of Viasat common stock are
“street name” or beneficial holders, whose shares are held of record by banks, brokers and other financial institutions.
Dividend Policy
To date, we have neither declared nor paid any dividends on our common stock. We currently intend to retain all future
earnings, if any, for use in the operation and development of our business and, therefore, do not expect to declare or pay any cash
dividends on our common stock in the foreseeable future. Any future determination to pay cash dividends will be at the discretion
of the Board of Directors and will be dependent upon our financial condition, results of operations, capital requirements, general
business condition and such other factors as the Board of Directors may deem relevant. In addition, as more fully described in
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this Annual Report,
the existing terms of our Credit Facilities and the indentures governing our 2025 Notes and 2027 Notes restrict our ability to declare
or pay dividends on our common stock.
94 | Viasat Annual Report 2019
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(cid:17)(cid:15)(cid:5)(cid:1)(cid:12)(cid:6)(cid:1)(cid:11)(cid:12)(cid:11)(cid:2)(cid:7)(cid:3)(cid:3)(cid:13)(cid:1)(cid:6)(cid:8)(cid:11)(cid:3)(cid:11)(cid:4)(cid:8)(cid:3)(cid:9)(cid:1)(cid:8)(cid:11)(cid:6)(cid:12)(cid:14)(cid:10)(cid:3)(cid:16)(cid:8)(cid:12)(cid:11)(cid:1)
To supplement Viasat’s consolidated financial statements presented in accordance with generally accepted accounting
principles (GAAP), Viasat uses Adjusted EBITDA, a measure Viasat believes is appropriate to provide meaningful comparison with,
and enhance an overall understanding of, Viasat’s past financial performance and prospects for the future. We believe Adjusted
EBITDA provides useful information to both management and investors by excluding specific expenses that we believe are not
indicative of our core operating results. In addition, since we have historically reported non-GAAP results to the investment
community, we believe the inclusion of non-GAAP numbers provides consistency in our financial reporting and facilitates
comparisons to the company’s historical operating results. Further, these non-GAAP results are among the primary indicators that
management uses as a basis for evaluating the operating performance of our segments, allocating resources to such segments,
planning and forecasting in future periods. The presentation of this additional information is not meant to be considered in
isolation or as a substitute for measures of financial performance prepared in accordance with GAAP. A reconciliation of specific
adjustments to GAAP results is provided in the tables below.
(cid:15)(cid:36)(cid:1)(cid:32)(cid:40)(cid:29)(cid:35)(cid:32)(cid:43)(cid:29)(cid:28)(cid:1)(cid:38)(cid:29)(cid:27)(cid:37)(cid:36)(cid:27)(cid:32)(cid:34)(cid:32)(cid:25)(cid:40)(cid:32)(cid:37)(cid:36)(cid:1)(cid:26)(cid:29)(cid:40)(cid:42)(cid:29)(cid:29)(cid:36)(cid:1)(cid:36)(cid:29)(cid:40)(cid:1)(cid:32)(cid:36)(cid:27)(cid:37)(cid:35)(cid:29)(cid:1)(cid:2)(cid:34)(cid:37)(cid:39)(cid:39)(cid:3)(cid:1)(cid:25)(cid:40)(cid:40)(cid:38)(cid:32)(cid:26)(cid:41)(cid:40)(cid:25)(cid:26)(cid:34)(cid:29)(cid:1)(cid:40)(cid:37)(cid:1)(cid:23)(cid:32)(cid:25)(cid:39)(cid:25)(cid:40)(cid:4)(cid:1)(cid:20)(cid:36)(cid:27)(cid:5)(cid:1)(cid:25)(cid:36)(cid:28)(cid:1)(cid:15)(cid:28)(cid:33)(cid:41)(cid:39)(cid:40)(cid:29)(cid:28)(cid:1)(cid:18)(cid:16)(cid:20)(cid:22)(cid:17)(cid:15)(cid:1)(cid:32)(cid:39)(cid:1)(cid:25)(cid:39)(cid:1)(cid:30)(cid:37)(cid:34)(cid:34)(cid:37)(cid:42)(cid:39)(cid:14)(cid:1)
(cid:19)(cid:32)(cid:39)(cid:27)(cid:25)(cid:34)(cid:1)(cid:24)(cid:29)(cid:25)(cid:38)(cid:39)(cid:1)(cid:18)(cid:36)(cid:28)(cid:29)(cid:28)
(cid:2)(cid:20)(cid:36)(cid:1)(cid:40)(cid:31)(cid:37)(cid:41)(cid:39)(cid:25)(cid:36)(cid:28)(cid:39)(cid:3)
(cid:24)(cid:32)(cid:47)(cid:1)(cid:3)(cid:39)(cid:42)(cid:46)(cid:46)(cid:4)(cid:1)(cid:36)(cid:41)(cid:30)(cid:42)(cid:40)(cid:32)(cid:1)(cid:28)(cid:47)(cid:47)(cid:45)(cid:36)(cid:29)(cid:48)(cid:47)(cid:28)(cid:29)(cid:39)(cid:32)(cid:1)(cid:47)(cid:42)(cid:1)(cid:27)(cid:36)(cid:28)(cid:46)(cid:28)(cid:47)(cid:1)(cid:22)(cid:41)(cid:30)(cid:7)
(cid:3)(cid:19)(cid:32)(cid:41)(cid:32)(cid:33)(cid:36)(cid:47)(cid:1)(cid:33)(cid:45)(cid:42)(cid:40)(cid:4)(cid:1)(cid:43)(cid:45)(cid:42)(cid:49)(cid:36)(cid:46)(cid:36)(cid:42)(cid:41)(cid:1)(cid:33)(cid:42)(cid:45)(cid:1)(cid:36)(cid:41)(cid:30)(cid:42)(cid:40)(cid:32)(cid:1)(cid:47)(cid:28)(cid:50)(cid:32)(cid:46)
(cid:22)(cid:41)(cid:47)(cid:32)(cid:45)(cid:32)(cid:46)(cid:47)(cid:1)(cid:32)(cid:50)(cid:43)(cid:32)(cid:41)(cid:46)(cid:32)(cid:5)(cid:1)(cid:41)(cid:32)(cid:47)
(cid:20)(cid:32)(cid:43)(cid:45)(cid:32)(cid:30)(cid:36)(cid:28)(cid:47)(cid:36)(cid:42)(cid:41)(cid:1)(cid:28)(cid:41)(cid:31)(cid:1)(cid:28)(cid:40)(cid:42)(cid:45)(cid:47)(cid:36)(cid:51)(cid:28)(cid:47)(cid:36)(cid:42)(cid:41)
(cid:25)(cid:47)(cid:42)(cid:30)(cid:38)(cid:6)(cid:29)(cid:28)(cid:46)(cid:32)(cid:31)(cid:1)(cid:30)(cid:42)(cid:40)(cid:43)(cid:32)(cid:41)(cid:46)(cid:28)(cid:47)(cid:36)(cid:42)(cid:41)(cid:1)(cid:32)(cid:50)(cid:43)(cid:32)(cid:41)(cid:46)(cid:32)
(cid:23)(cid:42)(cid:46)(cid:46)(cid:1)(cid:42)(cid:41)(cid:1)(cid:32)(cid:50)(cid:47)(cid:36)(cid:41)(cid:34)(cid:48)(cid:36)(cid:46)(cid:35)(cid:40)(cid:32)(cid:41)(cid:47)(cid:1)(cid:42)(cid:33)(cid:1)(cid:31)(cid:32)(cid:29)(cid:47)(cid:1)
(cid:18)(cid:30)(cid:44)(cid:48)(cid:36)(cid:46)(cid:36)(cid:47)(cid:36)(cid:42)(cid:41)(cid:1)(cid:45)(cid:32)(cid:39)(cid:28)(cid:47)(cid:32)(cid:31)(cid:1)(cid:32)(cid:50)(cid:43)(cid:32)(cid:41)(cid:46)(cid:32)(cid:46)
(cid:18)(cid:31)(cid:37)(cid:48)(cid:46)(cid:47)(cid:32)(cid:31)(cid:1)(cid:21)(cid:19)(cid:22)(cid:26)(cid:20)(cid:18)
(cid:21)(cid:25)(cid:38)(cid:27)(cid:31)(cid:1)(cid:9)(cid:7)(cid:4)(cid:1)(cid:8)(cid:6)(cid:7)(cid:13)
(cid:21)(cid:25)(cid:38)(cid:27)(cid:31)(cid:1)(cid:9)(cid:7)(cid:4)(cid:1)(cid:8)(cid:6)(cid:7)(cid:12)
(cid:21)(cid:25)(cid:38)(cid:27)(cid:31)(cid:1)(cid:9)(cid:7)(cid:4)(cid:1)(cid:8)(cid:6)(cid:7)(cid:11)
(cid:21)(cid:25)(cid:38)(cid:27)(cid:31)(cid:1)(cid:9)(cid:7)(cid:4)(cid:1)(cid:8)(cid:6)(cid:7)(cid:10)
(cid:2)(cid:1)
(cid:2)(cid:1)
(cid:3)(cid:14)(cid:15)(cid:5)(cid:14)(cid:10)(cid:11)(cid:4)
(cid:1)
(cid:3)(cid:12)(cid:9)(cid:5)(cid:8)(cid:9)(cid:12)(cid:4)
(cid:1)
(cid:12)(cid:17)(cid:5)(cid:16)(cid:14)(cid:9)
(cid:1)
(cid:1)
(cid:11)(cid:9)(cid:16)(cid:5)(cid:14)(cid:9)(cid:11)
(cid:15)(cid:17)(cid:5)(cid:13)(cid:17)(cid:17)
(cid:1)
(cid:6)
(cid:6)
(cid:2)(cid:1)
(cid:3)(cid:14)(cid:15)(cid:5)(cid:11)(cid:8)(cid:13)(cid:4)
(cid:1)
(cid:3)(cid:11)(cid:13)(cid:5)(cid:10)(cid:9)(cid:15)(cid:4)
(cid:1)
(cid:11)(cid:5)(cid:8)(cid:14)(cid:14)
(cid:1)
(cid:1)
(cid:10)(cid:13)(cid:13)(cid:5)(cid:14)(cid:13)(cid:10)
(cid:14)(cid:16)(cid:5)(cid:13)(cid:12)(cid:13)
(cid:1)
(cid:9)(cid:8)(cid:5)(cid:10)(cid:9)(cid:15)
(cid:1)
(cid:6)
(cid:2)(cid:1)
(cid:1)(cid:1)
(cid:11)(cid:11)(cid:17)(cid:5)(cid:12)(cid:11)(cid:14)
(cid:2)(cid:1)
(cid:1)(cid:1)
(cid:10)(cid:11)(cid:12)(cid:5)(cid:17)(cid:13)(cid:16)
(cid:2)(cid:1)
(cid:10)(cid:11)(cid:5)(cid:15)(cid:14)(cid:15)
(cid:1)
(cid:11)(cid:5)(cid:14)(cid:9)(cid:15)
(cid:1)
(cid:9)(cid:9)(cid:5)(cid:8)(cid:15)(cid:13)
(cid:1)
(cid:1)
(cid:10)(cid:12)(cid:13)(cid:5)(cid:17)(cid:10)(cid:10)
(cid:13)(cid:13)(cid:5)(cid:15)(cid:15)(cid:13)
(cid:1)
(cid:6)(cid:1)
(cid:14)(cid:9)(cid:13)(cid:1)
(cid:1)(cid:1)
(cid:11)(cid:12)(cid:8)(cid:5)(cid:15)(cid:15)(cid:9)
(cid:2)(cid:1)
(cid:2)(cid:1)
(cid:10)(cid:9)(cid:5)(cid:15)(cid:12)(cid:9)
(cid:1)
(cid:3)(cid:12)(cid:5)(cid:9)(cid:15)(cid:11)(cid:4)
(cid:1)
(cid:10)(cid:11)(cid:5)(cid:13)(cid:10)(cid:10)
(cid:1)
(cid:1)
(cid:10)(cid:12)(cid:10)(cid:5)(cid:8)(cid:15)(cid:14)
(cid:12)(cid:15)(cid:5)(cid:13)(cid:9)(cid:8)
(cid:1)
(cid:6)(cid:1)
(cid:6)(cid:1)
(cid:1)(cid:1)
(cid:11)(cid:11)(cid:8)(cid:5)(cid:14)(cid:15)(cid:14)
7110Fin.indd 95
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Forward-looking statements
This Annual Report, 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 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 development, customer acceptance and
anticipated performance of technologies, products or services; satellite construction and launch activities, and the
entry into a construction contract for our third ViaSat-3 class satellite to replace and supersede our existing limited
agreement to proceed for the satellite; the performance and anticipated benefits of our ViaSat-2 and ViaSat-3 class
satellites and any future satellite we may construct or acquire; the impacts on overall coverage area, planned
services and financial results of the identified antenna deployment issue on the ViaSat-2 satellite; 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; 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 diff icult to predict. Factors that could cause actual results to diff er materially
include: 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; risks
associated with the construction, launch and operation of satellites, including the eff ect of any anomaly, operational
failure or degradation in satellite performance; our ability to realize the anticipated benefits of our acquisitions or
strategic partnering arrangements; 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 aff ecting the communications and defense industries generally; the eff ect of adverse
regulatory changes (including changes aff ecting spectrum availability or permitted uses) on our ability to 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 eff ect 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 in our most recent reports on Form
10-K, 10-Q and 8-K and our other filings with the SEC. Therefore, actual results may diff er 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.
96 | Viasat Annual Report 2019
7110Fin.indd 96
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Corporate information
Board of directors
Annual meeting
Mark Dankberg
Chairman of the Board, CEO and Co-founder
Richard Baldridge
Director, President and Chief Operating Off icer
Frank J. Biondi, Jr.
Senior Managing Director, WaterView Advisors LLC
Dr. Robert Johnson
Venture Capital Investor
Allen Lay *
Private Investor
Dr. Jeff rey Nash *
Private Investor
Sean Pak
Partner, Quinn Emanuel Urquhart & Sullivan LLP
Varsha Rao
Chief Executive Off icer, Nurx Inc.
John Stenbit
Private Consultant
Harvey White
Chairman, (SHW)2 Enterprises
Executive officers
Mark Dankberg
Chairman of the Board, CEO and Co-founder
Richard Baldridge
Director, President and Chief Operating Off icer
Doug Abts
Vice President, Global Mobility
Marc Agnew
Vice President, Commercial Networks
Robert Blair
Vice President, General Counsel and Secretary
Girish Chandran
Vice President and Chief Technical Off icer
Melinda Del Toro
Senior Vice President, People and Culture
and Chief People Off icer
Bruce Dirks
Senior Vice President, Treasury and
Corporate Development
Shawn Duff y
Senior Vice President and Chief Financial Off icer
Kevin Harkenrider
Senior Vice President and President,
Broadband Services
Keven Lippert
Executive Vice President of Strategic Initiatives
and Chief Commercial Off icer
Mark Miller
Executive Vice President, Chief Technical Off icer
and Co-founder
Ken Peterman
Senior Vice President and President,
Government Systems
David Ryan
Vice President and President, Space
and Commercial Networks
The 2019 Annual Meeting will be held at Viasat’s off ices,
located at 2501 Gateway Road, Pacific Conference Room,
Carlsbad, California 92009 on September 4 at 8:30 a.m.
Pacific Time.
Independent registered public
accounting firm
PricewaterhouseCoopers LLP
5375 Mira Sorrento Place, Suite 300
San Diego, California 92121
General legal counsel
Latham & Watkins LLP
12670 High Bluff Drive
San Diego, California 92130
Transfer agent and registrar
Computershare
P.O. Box 505000
Louisville, Kentucky 40233
+1 877-373-6374
web.queries@computershare.com
www.computershare.com/investor
Investor relations
For investor information, financial information, SEC
filings, and other useful information, visit our website at
www.viasat.com. To obtain a printed copy of our Form
10-K without charge, or to receive additional copies of
this Annual Report or other financial information, please
contact our Investor Relations department at:
Viasat, Inc.
Attn: Investor Relations
6155 El Camino Real
Carlsbad, California 92009
+1 760-476-2633
ir@viasat.com
The following are trademarks or service marks of Viasat,
Inc.: Viasat and the Viasat logo. All other product and
company names mentioned herein are the property of
their respective owners.
* Allen Lay and Dr. Jeff rey Nash will not be standing for
re-election at the 2019 Annual Meeting.
Untitled-1 4
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