Business Context and Reporting Period
Company: VIASAT INC
Filing Type: Form 10-Q (Unaudited)
Reporting Period: Quarter and six months ended September 30, 2001
Business Overview: ViaSat provides commercial and government communication applications, including satellite network terminals and systems. The period included the acquisition of Comsat Laboratories on July 27, 2001, to augment its core satellite networks business.
Key Financial Metrics
| Metric | Three Months Ended Sep 30, 2001 |
Six Months Ended Sep 30, 2001 |
Six Months Ended Sep 30, 2000 |
|---|---|---|---|
| Revenues | $49,524,000 | $98,358,000 | $76,356,000 |
| Gross Profit | $15,546,000 (31.4%) | $30,438,000 (30.9%) | $25,011,000 (32.8%) |
| Net Income | $447,000 | $3,151,000 | $4,389,000 |
| Diluted EPS | $0.02 | $0.14 | $0.19 |
| Cash from Operations | N/A | $11,538,000 | ($12,504,000) |
| Cash & Equivalents | $12,785,000 | $12,785,000 | $20,443,000 |
| Working Capital | $76,600,000 | $76,600,000 | N/A |
| Debt (Line of Credit) | $5,518,000 | $5,518,000 | $0 |
Material Changes vs. Prior Period
- Revenue Growth: Revenues increased 24.7% for the quarter and 28.8% for the six-month period compared to the prior year, driven by increased development program volume and commercial terminal sales.
- Profitability Decline: Despite revenue growth, Net Income decreased significantly (81.7% for the quarter, 28.2% for six months). This was primarily due to a $2.5 million non-recurring charge for acquired in-process research and development (IPR&D) related to the Comsat Laboratories acquisition and increased amortization of intangible assets.
- Operating Cash Flow: The company reversed a negative operating cash flow trend, generating $11.5 million in the first six months of 2001 compared to a $12.5 million outflow in the same period of 2000.
- Balance Sheet: Total assets increased to $192.7 million from $169.4 million, reflecting the acquisition. Inventory increased to $31.5 million, and accounts receivable rose to $68.4 million.
Outlook, Risks, and Contingencies
- Acquisition Impact: The acquisition of Comsat Laboratories added $2.5 million in IPR&D charges and increased amortization expenses. Pro forma results for the six months ended Sept 30, 2001, would have shown a net income of $1.2 million.
- Astrolink Termination (Subsequent Event): On November 5, 2001, Astrolink International LLC terminated two ground segment contracts. This reduces firm backlog by $79.0 million. ViaSat has approximately $7.6 million in assets at risk (including receivables and prepaid airtime) and expects to incur additional costs winding down the program. Recovery of these assets is uncertain.
- ORBCOMM Bankruptcy: ViaSat has approximately $4.8 million in receivables and assets at risk related to ORBCOMM Global, L.P., which is in Chapter 11 bankruptcy. Recovery is not assured.
- Liquidity: The company maintains a $25.0 million revolving credit facility with $5.5 million outstanding. Management believes current cash and operating cash flows are sufficient for the next 12 months.
- Backlog: Firm backlog at September 30, 2001, was $253.2 million ($233.5 million funded). Excluding the terminated Astrolink contracts, backlog remains substantial but faces uncertainty regarding the Telespazio gateway contract suspension.
Investor Verification Checklist
- Astrolink Recovery: Verify the status of negotiations regarding the $79.0 million terminated contract and the collectibility of the $7.6+ million in assets at risk.
- ORBCOMM Exposure: Monitor the restructuring of ORBCOMM to assess the likelihood of recovering the $4.8 million in receivables.
- Comsat Integration: Assess whether the Comsat Laboratories acquisition will generate the projected revenue growth to offset the increased amortization and IPR&D charges.
- Backlog Realization: Confirm if the remaining backlog (excluding Astrolink) is fully funded and if the Telespazio contract suspension will lead to further terminations.
- Cash Burn vs. Generation: Monitor if operating cash flow remains positive given the reduction in Astrolink-related revenue and potential staff reductions.