Business Context and Reporting Period
Company: VIASAT INC
Filing Type: Form 10-Q (Quarterly Report)
Reporting Period: Nine months ended December 31, 2001 (Unaudited)
Business Overview: ViaSat provides commercial and government communication applications, including satellite network terminals and broadband systems. The company operates through Commercial and Government segments.
Key Financial Metrics
| Metric | Nine Months Ended Dec 31, 2001 | Nine Months Ended Dec 31, 2000 |
|---|---|---|
| Revenues | $148,447,000 | $119,449,000 |
| Gross Profit | $46,487,000 (31.3% margin) | $38,638,000 (32.4% margin) |
| Net Income | $5,590,000 | $7,104,000 |
| Diluted EPS | $0.24 | $0.32 |
| Cash from Operations | $3,198,000 | ($9,391,000) |
| Cash & Equivalents (Dec 31, 2001) | $5,147,000 | $17,721,000 (Mar 31, 2001) |
| Total Debt (Notes & Line of Credit) | $17,299,000 | $504,000 (Dec 31, 2000) |
| Working Capital | $64,475,000 | N/A |
Material Changes vs. Prior Period
- Revenue Growth: Revenues increased 24.3% year-over-year, driven by commercial terminal sales and the acquisition of Comsat Laboratories.
- Profitability Decline: Net income decreased 21.3% to $5.6 million. Operating income dropped 7.1% to $8.3 million due to increased operating expenses.
- Expense Increases:
- Selling, General, and Administrative (SG&A) expenses rose 27.8% to $25.6 million, largely due to Comsat Laboratories integration.
- Amortization of intangible assets increased 87.9% to $4.4 million following acquisitions.
- Acquired in-process research and development (IPR&D) charges totaled $2.5 million related to the Comsat Laboratories acquisition.
- Cash Flow Improvement: Operating cash flow turned positive ($3.2 million) compared to a $9.4 million outflow in the prior year, despite a net decrease in cash and equivalents of $12.6 million due to investing activities.
- Debt Expansion: Total debt obligations increased significantly to $17.3 million, including a $10.8 million draw on the line of credit and $6.5 million in notes payable to Wildblue Communications.
Guidance, Outlook, Risks, and Unusual Items
Acquisitions and Subsequent Events
- Comsat Laboratories: Acquired in July 2001 for ~$21.4 million (cash and stock) to augment satellite network capabilities.
- U.S. Monolithics, LLC (USM): Completed acquisition in January 2002 for ~$30 million. USM focuses on gallium arsenide (GaAs) millimeter wave Integrated Circuits.
- Stock Offering: In January 2002, the company sold 2 million shares for net proceeds of approximately $27.1 million.
Backlog
As of December 31, 2001, firm backlog was $162.5 million ($142.2 million funded), down from $236.2 million at March 31, 2001. Approximately $32.3 million is expected to be delivered in the fiscal year ending March 31, 2002.
Material Risks and Contingencies
- ORBCOMM Bankruptcy: ORBCOMM filed for Chapter 11 relief and rejected ViaSat contracts in November 2001. ViaSat has approximately $4.8 million in receivables and assets at risk. Recovery is uncertain, and no loss has been accrued as the amount cannot be reasonably estimated.
- Astrolink Termination: Astrolink International LLC terminated two ground segment contracts in December 2001. ViaSat has approximately $8.9 million in assets at risk (receivables and prepaid airtime). While contractual termination amounts may exceed assets at risk, full recovery is not assured.
- Performance Covenants: The company is not currently in compliance with performance milestones on certain contracts, though management does not expect termination or liquidated damages based on historical customer behavior.
Investor Verification Checklist
- Recovery of Contingent Assets: Verify the status of negotiations with ORBCOMM and Astrolink regarding the ~$13.7 million in combined assets at risk.
- Debt Covenants: Confirm compliance with financial covenants on the $25 million revolving/term loan facility (debt-to-EBITDA, quick ratio, tangible net worth).
- Acquisition Integration: Assess the financial performance and integration progress of Comsat Laboratories and U.S. Monolithics, LLC.
- Backlog Funding: Monitor the funding status of the $162.5 million backlog, particularly the unfunded portion, to ensure revenue realization.
- IPR&D Valuation: Review the assumptions used for the $2.5 million IPR&D charge related to Comsat Laboratories to ensure technological feasibility is maintained.