VIASAT INC. - Form 10-Q Summary
Business Context and Reporting Period
This is a quarterly report (Form 10-Q) for VIASAT, INC., covering the period ended September 30, 1999. The Company provides services primarily to the United States Government and its prime contractors under cost-plus-fixed fee, fixed-price, and time-and-material contracts. As of November 8, 1999, there were 8,120,843 shares of common stock outstanding.
Key Financial Metrics
| Metric | Three Months Ended Sep 30, 1999 | Six Months Ended Sep 30, 1999 |
|---|---|---|
| Revenues | $17.0 million | $34.1 million |
| Gross Profit | $7.5 million (43.8% margin) | $14.8 million (43.4% margin) |
| Net Income | $1.8 million | $3.6 million |
| Diluted EPS | $0.22 | $0.44 |
| Cash & Equivalents | $12.5 million (Balance Sheet) | N/A |
| Short-term Investments | $6.2 million (Balance Sheet) | N/A |
| Working Capital | $36.0 million | N/A |
| Notes Payable (Total) | $1.8 million | N/A |
Cash Flow (Six Months Ended Sep 30, 1999): Operating activities used $0.8 million (compared to $4.7 million provided in the prior year). Investing activities provided $7.6 million, primarily from the net sale of short-term investments. Financing activities used $0.3 million.
Material Changes vs. Prior Period
- Revenue: Decreased 5.7% for the three months and 0.8% for the six months compared to the prior year. This was driven by lower volumes of defense products, partially offset by commercial product growth.
- Gross Margin: Improved significantly, rising from 37.8% to 43.8% (three months) and 38.7% to 43.4% (six months) due to a favorable product mix and volume improvements in commercial programs.
- Operating Expenses: SG&A expenses decreased 3.5% for the quarter but increased 10.4% for the six months due to increased marketing and bid/proposal efforts. IR&D expenses increased 5.9% for the quarter but decreased 5.4% for the six months.
- Liquidity: Cash and cash equivalents increased from $6.0 million to $12.5 million. Total current assets rose to $46.0 million.
- Debt: Total outstanding equipment loans decreased from $3.2 million (Sep 1998) to $1.8 million (Sep 1999). There were no borrowings under the line of credit.
Outlook, Risks, and Contingencies
- Backlog: Firm backlog stood at $39.9 million ($28.7 million funded) as of September 30, 1999, down from $44.9 million at the end of the prior fiscal year. Contract options of $56.3 million are not included in the firm backlog.
- Year 2000 Compliance: The Company believes its systems and products are compliant. Estimated implementation costs are less than $100,000. Management anticipates no material adverse effect, though risks remain regarding third-party suppliers and government systems.
- Contract Contingencies: The Company is not currently in compliance with performance covenants on certain contracts. However, management does not believe customers will terminate contracts or seek liquidated damages, and no reserves have been accrued.
- Capital Resources: Management believes current cash balances and expected operating cash flows are sufficient to meet requirements for the next 12 months. Credit facilities are being renegotiated with Union Bank of California.
Investor Verification Checklist
- Verify the sustainability of the improved gross margins (43.4% vs 38.7% prior year) given the decline in defense product volumes.
- Confirm the status of the renegotiation of credit facilities with Union Bank of California, which expired in December 1998.
- Assess the risk of contract terminations related to non-compliance with performance covenants mentioned in Note 6.
- Monitor the conversion of the $39.9 million firm backlog into revenue, noting that a majority can be terminated at the government's convenience.
- Review the timing of receivable collections, which caused a shift from positive to negative operating cash flow for the six-month period.