ViaSat(VSAT) - 2025 Q3 - Quarterly Report

Aircraft and Connectivity Systems - As of December 31, 2024, the company had approximately 4,030 commercial aircraft and 2,000 business jets equipped with its in-flight connectivity (IFC) systems[196] - The company anticipates an additional 1,570 commercial aircraft will be equipped with IFC systems under existing agreements, although activation is subject to various factors[196] Revenue Streams and Contracts - Approximately 96% of total revenues for the three and nine months ended December 31, 2024, were derived from fixed-price contracts[201] - A significant portion of revenues is derived from contracts with customers for connectivity services, which require advance or recurring monthly payments[206] - U.S. Government contracts often involve performance-based payments (PBPs) or progress payments, with revenue recognized in excess of billings presented as unbilled accounts receivable[208] - Revenue for long-term contracts is recognized over time based on the cost-to-cost measure of progress, which requires management to estimate total costs at completion[209] - The communication services segment includes aviation, government satcom, maritime, and fixed broadband services, contributing to diverse revenue streams[199] Financial Performance - Total revenues for the three months ended December 31, 2024, decreased by $4.8 million to$1,123.8 million, driven by a $16.1 million decrease in service revenues, partially offset by an$11.3 million increase in product revenues[231] - Service revenues accounted for 72% of total revenues in Q3 2024, down from 73% in Q3 2023, while product revenues increased to 28% from 27%[230] - Net income for the three months ended December 31, 2024, was a loss of $13 million, compared to a loss of$11 million in the same period last year[230] - Total revenues increased by $238.7 million to$3,372.5 million, driven by an 11% increase in service revenues to 2,428.4 million[243] Expenses and Cost Management - Operating expenses decreased, with selling, general and administrative (SG&A) expenses down by 33.7 million (12%) to $238.0 million, primarily due to lower support and selling costs[233] - Cost of revenues rose by$169.4 million to $2,247.9 million, with service revenue costs increasing by 15$1,576.0 million[244] - Selling, general and administrative expenses decreased by $878.7 million to$761.6 million, primarily due to a prior year satellite impairment loss[245] Acquisitions and Divestitures - The company completed the acquisition of Inmarsat on May 30, 2023, integrating its assets into the communication services segment[194] - The company divested its energy services system integration business on December 18, 2024, as it had minimal strategic synergies with core growth businesses[197] - The company completed the sale of its Link-16 tactical data link business in January 2023 for approximately $1.96 billion in cash[265] Tax and Financial Obligations - The effective tax rate for Q3 2024 was 7$11.8 million, compared to a 22% effective tax rate and a $34.5 million benefit in Q3 2023[238] - The effective tax rate for the nine months ended December 31, 2024, was 2$12.7 billion, with $2.3 billion due in the next 12 months[277] Cash Flow and Indebtedness - Cash provided by operating activities for the first nine months of fiscal year 2025 was$609.7 million, an increase of $153.5 million compared to the prior year period[267] - Cash used in investing activities for the first nine months of fiscal year 2025 was approximately$524.9 million, a decrease of $927.0 million year-over-year[268] - The total outstanding indebtedness as of December 31, 2024, was$7.2 billion, including $442.6 million in 2025 Notes and$1.975 billion in Inmarsat's 9.000% Senior Secured Notes due 2029[275] Workforce and Operational Changes - The company reduced its global workforce by approximately 800 positions, or about 10%, resulting in total costs of approximately 45 million[264] - The company expects to continue investing in IR&D for the development of new generation satellite designs and next-generation satellite network solutions[272] Asset Management and Impairment - Impairment assessments for long-lived assets are conducted when evidence suggests that carrying values may not be recoverable, with no material impairments recorded for the three and nine months ended December 31, 2024 and 2023[221] - Goodwill is tested for impairment annually and when circumstances change, with a qualitative assessment indicating that estimated fair values exceed carrying values as of March 31, 2024[224] Interest Rates and Financial Instruments - The effective interest rate on outstanding borrowings under the 2022 Term Loan Facility is 9.51%, and 10.05% under the 2023 Term Loan Facility as of December 31, 2024[285] - A 10% increase in interest rates would increase interest incurred by approximately 23.7 million over a 12-month period, assuming constant outstanding balances[285] - The company has entered into interest rate cap contracts covering $1.6 billion of the Inmarsat Term Loan Facilities, providing protection from Compound SOFR rates over 2$5.0 million (12%) to $36.7 million, primarily due to a reduction in the communication services segment[234] - Independent research and development expenses increased by$4.5 million to $108.7 million, mainly due to a rise in the defense and advanced technologies segment[246]