ViaSat(VSAT) - 2021 Q2 - Quarterly Report

Revenue Performance - The government systems segment represented 47% and 48% of total revenues for the three and six months ended September 30, 2020, respectively, indicating strong demand despite COVID-19 challenges [155]. - Total revenues decreased by $38.0 million to $554.3 million for the three months ended September 30, 2020, compared to $592.3 million for the same period in 2019, driven by a $50.9 million decrease in product revenues [195]. - Product revenues fell by 17% to $256.0 million, while service revenues increased by 5% to $298.3 million, reflecting a $43.5 million decrease in government systems and a $7.4 million decrease in commercial networks [195]. - Total revenues for the six months ended September 30, 2020, decreased by $44.5 million to $1,084.8 million, driven by a $63.8 million decrease in product revenues, partially offset by a $19.3 million increase in service revenues [213]. - The government systems segment revenues decreased by $39.0 million to $259.5 million, with a $43.5 million decrease in product revenues partially offset by a $4.5 million increase in service revenues [211]. Subscriber and Service Growth - As of September 30, 2020, the company provided fixed broadband services to approximately 603,000 U.S. subscribers, with an average revenue per fixed broadband subscriber (ARPU) of $102.66 [160]. - The company experienced an uptick in demand for fixed broadband services in the U.S. since mid-March 2020, with net subscriber additions and increased demand for premium plans [156]. - Total subscribers for satellite services reached approximately 603,000 as of September 30, 2020, up from 587,000 in the prior year, reflecting a higher mix of subscribers choosing premium plans [205]. - The satellite services segment revenues increased by $15.3 million to $417.9 million, primarily driven by an increase in service revenues of 4% [225]. Financial Position and Cash Flow - The company had $350.4 million in cash and cash equivalents as of September 30, 2020, with no outstanding borrowings [239]. - Cash provided by operating activities for the first six months of fiscal year 2021 was $333.5 million, an increase of $150.2 million compared to $183.3 million in the prior year period [244]. - Cash used in investing activities for the first six months of fiscal year 2021 was $459.9 million, reflecting a $97.2 million increase year-over-year, primarily due to an increase of $87.8 million in cash used for satellite construction [245]. - Cash provided by financing activities for the first six months of fiscal year 2021 was $171.9 million, a significant increase of $166.7 million compared to $5.2 million in the prior year period, mainly due to $174.7 million in net proceeds from a private placement of common stock [246]. Cost Management and Expenses - Cost of revenues decreased by $22.8 million to $387.3 million, with a $31.2 million decrease in cost of product revenues and an $8.4 million increase in cost of service revenues [196]. - Selling, general and administrative expenses decreased by $1.9 million to $125.5 million, primarily due to reductions in selling costs and bid and proposal costs [197]. - Independent research and development expenses decreased by $6.8 million to $27.5 million, mainly due to reduced efforts in the commercial networks and government systems segments [198]. - The operating profit for the satellite services segment increased by $6.4 million to $11.5 million, representing a 124% increase, attributed to lower selling costs and improved margins [206]. Impact of COVID-19 - The COVID-19 pandemic has negatively impacted the higher-margin in-flight services business due to a severe decline in global air traffic, but improvements are anticipated as airline traffic gradually increases [156]. - The company’s diversified business model is expected to provide resiliency against ongoing economic challenges posed by the COVID-19 pandemic [154]. - The company has taken measures to mitigate the impact of COVID-19, including deferring certain capital expenditures and reducing discretionary expenditures, without experiencing significant liquidity issues [243]. Future Outlook and Investments - The company anticipates activating its in-flight connectivity (IFC) services on approximately 750 additional commercial aircraft under existing customer agreements, although delays may occur due to COVID-19 impacts [160]. - The company expects to continue investing in IR&D at a significant level to support satellite and space technologies, with investments depending on various factors including project development stages and market opportunities [249]. - Capital expenditures are expected to increase in fiscal year 2021 compared to fiscal year 2020, driven by the construction of a third ViaSat-3 class satellite and increased ground network investments [249]. Debt and Obligations - The company has a Revolving Credit Facility with a borrowing availability of $667.5 million as of September 30, 2020, with no outstanding borrowings [250]. - The total contractual obligations of the company as of September 30, 2020, amounted to $4,659.5 million, with significant commitments in operating leases and purchase commitments [275]. - The company has limited its ability to incur additional debt and make distributions through the indentures governing its Notes [266].