VIASAT INC - 10-Q Summary (Quarter Ended June 30, 1998)
Business Context and Reporting Period
This is a quarterly report (Form 10-Q) for VIASAT, INC., covering the three-month period ended June 30, 1998. The company primarily derives revenue from services performed for the United States Government and its prime contractors under cost-plus-fixed fee, fixed-price, and time-and-material contracts. As of July 30, 1998, there were 7,976,649 shares of common stock outstanding.
Key Financial Metrics
| Metric | Q2 1998 | Q2 1997 |
|---|---|---|
| Revenues | $16.3 million | $14.5 million |
| Gross Profit | $6.5 million (39.7% margin) | $5.1 million (35.3% margin) |
| Net Income | $1.4 million | $1.2 million |
| Diluted EPS | $0.17 | $0.15 |
| Operating Cash Flow | $2.5 million | $1.1 million |
| Cash & Equivalents | $6.8 million | $12.9 million (end of period) |
| Total Debt (Notes Payable) | $3.4 million | $2.1 million (end of period) |
| Working Capital | $26.4 million | N/A |
Material Changes vs. Prior Period
- Revenue Growth: Revenues increased 12.6% year-over-year, driven by higher sales in the Joint Communication Simulator (JCS) and Multifunction Information Distribution System (MIDS) product lines. This was partially offset by a decline in UHF DAMA network control station revenues.
- Margin Expansion: Gross profit margin improved from 35.3% to 39.7% due to a sales mix shift toward higher-margin products.
- Expense Increases: Selling, General, and Administrative (SG&A) expenses rose 31.6% to $2.4 million, reflecting increased marketing for commercial products and bid/proposal efforts. Independent Research and Development (IR&D) expenses increased 19.7% to $1.9 million.
- Cash Flow: Net cash provided by operating activities more than doubled to $2.5 million, primarily due to improved timing of receivable collections.
- Debt Levels: Total outstanding equipment loans increased from $2.1 million to $3.4 million to finance capital equipment purchases.
Outlook, Risks, and Contingencies
- Backlog: Firm backlog stood at $66.9 million as of June 30, 1998, with $43.3 million funded. Approximately $38.5 million is expected to be delivered in the fiscal year ending March 31, 1999. Backlog excludes $24.2 million in contract options.
- Liquidity: The company holds $11.8 million in cash, cash equivalents, and short-term investments. It maintains a $6.0 million line of credit (currently zero balance) and $4.5 million in equipment financing commitments. Management believes current resources are sufficient for the next 12 months.
- Performance Contingencies: The company is not currently in compliance with performance or milestone requirements for many contracts. While customers have historically not terminated contracts or sought liquidated damages, failure to meet future milestones could result in termination or penalties. No accruals have been made for potential damages.
- Year 2000 Compliance: The company is evaluating systems for Year 2000 compliance. Management does not currently anticipate material adverse effects or significant additional investment costs, though no assurances are provided.
Investor Verification Checklist
- Verify the sustainability of the improved gross margin (39.7%) given the shift in product mix.
- Monitor the status of contracts where the company is currently non-compliant with performance milestones to assess termination risk.
- Confirm the funding status of the $23.6 million unfunded portion of the backlog.
- Review the expiration date of the credit facility (September 15, 1998) and renewal terms.
- Assess the impact of increased SG&A and IR&D spending on future profitability if revenue growth slows.