VIASAT INC 10-Q

Item 1. Financial Statements (Unaudited) VIASAT, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) As of September 30, 2021 As of March 31, 2021 (In thousands) ASSETS Current assets: Cash and cash equivalents $ 217,654 $ 295,949 Accounts receivable, net 369,222 238,652 Inventories 348,342 336,672 Prepaid expenses and other current assets 131,169 119,960 Total current assets 1,066,387 991,233 Property, equipment and satellites, net 3,465,367 3,050,483 Operating lease right-of-use assets 340,165 340,456 Other acquired intangible assets, net 243,331 9,568 Goodwill 191,125 122,300 Other assets 686,485 835,427 Total assets $ 5,992,860 $ 5,349,467 LIABILITIES AND EQUITY Current liabilities: Accounts payable $ 193,247 $ 145,134 Accrued and other liabilities 511,093 532,831 Current portion of long-term debt 29,965 30,472 Total current liabilities 734,305 708,437 Senior notes 1,684,744 1,683,264 Other long-term debt 425,829 119,420 Non-current operating lease liabilities 310,565 313,762 Other liabilities 163,947 137,350 Total liabilities 3,319,390 2,962,233 Commitments and contingencies (Note 8) Equity: Viasat, Inc. stockholders’ equity Common stock 7 7 Paid-in capital 2,382,356 2,092,595 Retained earnings 269,323 249,064 Accumulated other comprehensive (loss) income ( 16,873 ) 9,803 Total Viasat, Inc. stockholders’ equity 2,634,813 2,351,469 Noncontrolling interest in subsidiary 38,657 35,765 Total equity 2,673,470 2,387,234 Total liabilities and equity $ 5,992,860 $ 5,349,467 See accompanying notes to the condensed consolidated financial statements. 3 VIASAT, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (UNAUDITED) Three Months Ended Six Months Ended September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020 (In thousands, except per share data) Revenues: Product revenues $ 308,666 $ 255,980 $ 601,930 $ 506,614 Service revenues 392,688 298,298 764,284 578,152 Total revenues 701,354 554,278 1,366,214 1,084,766 Operating expenses: Cost of product revenues 234,721 191,890 454,068 379,782 Cost of service revenues 253,722 195,423 488,351 393,100 Selling, general and administrative 156,684 125,451 310,884 246,490 Independent research and development 40,530 27,531 74,993 55,167 Amortization of acquired intangible assets 7,399 1,300 13,328 2,858 Income from operations 8,298 12,683 24,590 7,369 Other income (expense): Interest income 71 128 134 360 Interest expense ( 6,093 ) ( 9,790 ) ( 12,385 ) ( 19,314 ) Other income, net — — 4,118 — Income (loss) before income taxes 2,276 3,021 16,457 ( 11,585 ) Benefit from income taxes 2,874 687 6,961 6,435 Equity in (loss) income of unconsolidated affiliate, net — ( 317 ) ( 256 ) 14 Net income (loss) 5,150 3,391 23,162 ( 5,136 ) Less: net income attributable to noncontrolling interest, net of tax 1,859 1,428 2,903 5,290 Net income (loss) attributable to Viasat, Inc. $ 3,291 $ 1,963 $ 20,259 $ ( 10,426 ) Basic net income (loss) per share attributable to Viasat, Inc. common stockholders $ 0.04 $ 0.03 $ 0.28 $ ( 0.16 ) Diluted net income (loss) per share attributable to Viasat, Inc. common stockholders $ 0.04 $ 0.03 $ 0.27 $ ( 0.16 ) Shares used in computing basic net income (loss) per share 73,544 66,576 72,549 64,554 Shares used in computing diluted net income (loss) per share 74,872 67,006 73,862 64,554 Comprehensive income (loss): Net income (loss) $ 5,150 $ 3,391 $ 23,162 $ ( 5,136 ) Other comprehensive income (loss), net of tax: Foreign currency translation adjustments, net of tax ( 10,934 ) 4,418 ( 26,676 ) 3,615 Other comprehensive (loss) income, net of tax ( 10,934 ) 4,418 ( 26,676 ) 3,615 Comprehensive (loss) income ( 5,784 ) 7,809 ( 3,514 ) ( 1,521 ) Less: comprehensive income attributable to noncontrolling interest, net of tax 1,859 1,428 2,903 5,290 Comprehensive (loss) income attributable to Viasat, Inc. $ ( 7,643 ) $ 6,381 $ ( 6,417 ) $ ( 6,811 ) See accompanying notes to the condensed consolidated financial statements. 4 VIASAT, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Six Months Ended September 30, 2021 September 30, 2020 (In thousands) Cash flows from operating activities: Net income (loss) $ 23,162 $ ( 5,136 ) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation 198,970 157,939 Amortization of intangible assets 42,890 31,675 Stock-based compensation expense 43,241 43,328 Loss on disposition of fixed assets 19,324 17,678 Other non-cash adjustments ( 7,534 ) ( 2,354 ) Increase (decrease) in cash resulting from changes in operating assets and liabilities, net of effect of acquisitions: Accounts receivable ( 59,047 ) 73,856 Inventories ( 8,927 ) ( 38,034 ) Other assets 25,660 19,513 Accounts payable 21,129 ( 14,481 ) Accrued liabilities ( 48,981 ) 52,510 Other liabilities ( 22,088 ) ( 2,972 ) Net cash provided by operating activities 227,799 333,522 Cash flows from investing activities: Purchase of property, equipment and satellites ( 448,345 ) ( 426,298 ) Cash paid for patents, licenses and other assets ( 26,633 ) ( 33,586 ) Payments related to acquisition of businesses, net of cash acquired ( 138,668 ) — Net cash used in investing activities ( 613,646 ) ( 459,884 ) Cash flows from financing activities: Proceeds from debt borrowings 320,000 400,000 Payments of debt borrowings ( 15,227 ) ( 402,940 ) Payment of debt issuance costs — ( 4,882 ) Proceeds from issuance of common stock under equity plans 8,776 9,206 Purchase of common stock in treasury (immediately retired) related to tax withholdings for stock-based compensation ( 1,742 ) ( 747 ) Proceeds from common stock issued in private placement, net of issuance costs — 174,749 Other financing activities ( 1,479 ) ( 3,454 ) Net cash provided by financing activities 310,328 171,932 Effect of exchange rate changes on cash ( 2,776 ) 554 Net (decrease) increase in cash and cash equivalents ( 78,295 ) 46,124 Cash and cash equivalents at beginning of period 295,949 304,309 Cash and cash equivalents at end of period $ 217,654 $ 350,433 Non-cash investing and financing activities: Right-of-use assets obtained in exchange for operating lease liabilities $ 18,099 $ 53,464 Issuance of common stock in connection with acquisition $ 207,169 $ — See accompanying notes to the condensed consolidated financial statements. 5 VIASAT, INC. CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED) Viasat, Inc. Stockholders Common Stock Number of Shares Issued Amount Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Noncontrolling Interest in Subsidiary Total (In thousands, except share data) For the Three Months Ended September 30, 2021 Balance at June 30, 2021 73,320,854 $ 7 $ 2,360,023 $ 266,032 $ ( 5,939 ) $ 36,887 $ 2,657,010 Exercise of stock options 1,894 — 59 — — — 59 Stock-based compensation — — 23,558 — — — 23,558 RSU awards vesting, net of shares withheld for taxes which have been retired 75,330 — ( 1,284 ) — — — ( 1,284 ) Other — — — — — ( 89 ) ( 89 ) Net income — — — 3,291 — 1,859 5,150 Other comprehensive loss, net of tax — — — — ( 10,934 ) — ( 10,934 ) Balance at September 30, 2021 73,398,078 $ 7 $ 2,382,356 $ 269,323 $ ( 16,873 ) $ 38,657 $ 2,673,470 For the Three Months Ended September 30, 2020 Balance at June 30, 2020 63,026,001 $ 6 $ 1,846,827 $ 232,984 $ ( 6,851 ) $ 26,217 $ 2,099,183 Common stock issued in private placement, net of issuance costs 4,474,559 1 174,748 — — — 174,749 Stock-based compensation — — 26,296 — — — 26,296 RSU awards vesting, net of shares withheld for taxes which have been retired 32,309 — ( 346 ) — — — ( 346 ) Net income — — — 1,963 — 1,428 3,391 Other comprehensive income, net of tax — — — — 4,418 — 4,418 Balance at September 30, 2020 67,532,869 $ 7 $ 2,047,525 $ 234,947 $ ( 2,433 ) $ 27,645 $ 2,307,691 See accompanying notes to the condensed consolidated financial statements. 6 VIASAT, INC. CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED) Viasat, Inc. Stockholders Common Stock Number of Shares Issued Amount Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Noncontrolling Interest in Subsidiary Total (In thousands, except share data) For the Six Months Ended September 30, 2021 Balance at March 31, 2021 68,529,133 $ 7 $ 2,092,595 $ 249,064 $ 9,803 $ 35,765 $ 2,387,234 Exercise of stock options 2,257 — 70 — — — 70 Issuance of stock under Employee Stock Purchase Plan 313,700 — 8,706 — — — 8,706 Stock-based compensation — — 51,070 — — — 51,070 Shares issued in settlement of certain accrued employee compensation liabilities 457,130 — 24,488 — — — 24,488 RSU awards vesting, net of shares withheld for taxes which have been retired 95,669 — ( 1,742 ) — — — ( 1,742 ) Shares issued in connection with acquisition of business 4,000,189 — 207,169 — — — 207,169 Other — — — — — ( 11 ) ( 11 ) Net income — — — 20,259 — 2,903 23,162 Other comprehensive loss, net of tax — — — — ( 26,676 ) — ( 26,676 ) Balance at September 30, 2021 73,398,078 $ 7 $ 2,382,356 $ 269,323 $ ( 16,873 ) $ 38,657 $ 2,673,470 For the Six Months Ended September 30, 2020 Balance at March 31, 2020 62,147,140 $ 6 $ 1,788,456 $ 245,373 $ ( 6,048 ) $ 22,355 $ 2,050,142 Issuance of stock under Employee Stock Purchase Plan 282,269 — 9,206 — — — 9,206 Common stock issued in private placement, net of issuance costs 4,474,559 1 174,748 — — — 174,749 Stock-based compensation — — 50,456 — — — 50,456 Shares issued in settlement of certain accrued employee compensation liabilities 580,846 — 25,406 — — — 25,406 RSU awards vesting, net of shares withheld for taxes which have been retired 48,055 — ( 747 ) — — — ( 747 ) Net (loss) income — — — ( 10,426 ) — 5,290 ( 5,136 ) Other comprehensive income, net of tax — — — — 3,615 — 3,615 Balance at September 30, 2020 67,532,869 $ 7 $ 2,047,525 $ 234,947 $ ( 2,433 ) $ 27,645 $ 2,307,691 See accompanying notes to the condensed consolidated financial statements. 7 VIASAT, INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Note 1 — Basis of Presentation The accompanying condensed consolidated balance sheet at September 30, 2021, the condensed consolidated statements of operations and comprehensive income (loss) for the three and six months ended September 30, 2021 and 2020, the condensed consolidated statements of cash flows for the six months ended September 30, 2021 and 2020 and the condensed consolidated statements of equity for the three and six months ended September 30, 2021 and 2020 have been prepared by the management of Viasat, Inc. (also referred to hereafter as the Company or Viasat), and have not been audited. These financial statements have been prepared on the same basis as the audited consolidated financial statements for the fiscal year ended March 31, 2021 and, in the opinion of management, include all adjustments (consisting only of normal recurring adjustments) necessary for a fair statement of the Company’s results for the periods presented. These financial statements should be read in conjunction with the financial statements and notes thereto for the fiscal year ended March 31, 2021 included in the Company’s Annual Report on Form 10-K. Interim operating results are not necessarily indicative of operating results for the full year. The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America (GAAP). The Company’s condensed consolidated financial statements include the assets, liabilities and results of operations of Viasat, its wholly owned subsidiaries and its majority-owned subsidiary, TrellisWare Technologies, Inc. (TrellisWare). During the first quarter of fiscal year 2022, the Company completed the acquisitions of the remaining 51% interest in Euro Broadband Infrastructure Sàrl (Euro Infrastructure Co.) and RigNet, Inc. (RigNet) (see Note 12 – Acquisitions for more information). The acquisitions were accounted for as purchases and accordingly, the condensed consolidated financial statements include the operating results of Euro Infrastructure Co. and RigNet from the dates of acquisition. All significant intercompany amounts have been eliminated. Investments in entities in which the Company can exercise significant influence, but does not own a majority equity interest or otherwise control, are accounted for using the equity method and are included as investment in unconsolidated affiliate in other assets (long-term) on the condensed consolidated balance sheets. During the second quarter of fiscal year 2021, the Company issued and sold an aggregate of 4,474,559 shares of the Company’s common stock at a purchase price of $ 39.11 per share to certain accredited investors in a private placement transaction exempt from registration under the Securities Act of 1933, as amended, resulting in net proceeds of approximately $ 174.7 million after deducting offering expenses. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and reported amounts of revenues and expenses during the reporting period. Estimates have been prepared on the basis of the most current and best available information and actual results could differ from those estimates. Significant estimates made by management include revenue recognition, stock-based compensation, allowance for doubtful accounts, valuation of goodwill and other intangible assets, patents, orbital slots and other licenses, software development, property, equipment and satellites, long-lived assets, contingencies and income taxes including the valuation allowance on deferred tax assets. Revenue recognition The Company applies the five-step model under Accounting Standards Codification (ASC) 606 to its contracts with its customers. Under this model the Company (1) identifies the contract with the customer, (2) identifies its performance obligations in the contract, (3) determines the transaction price for the contract, (4) allocates the transaction price to its performance obligations and (5) recognizes revenue when or as it satisfies its performance obligations. These performance obligations generally include the purchase of services (including broadband capacity and the leasing of broadband equipment), the purchase of products, and the development and delivery of complex equipment built to customer specifications under long-term contracts. Performance obligations The timing of satisfaction of performance obligations may require judgment. The Company derives a substantial portion of its revenues from contracts with customers for services, primarily consisting of connectivity services. These contracts typically require advance or recurring monthly payments by the customer. The Company’s obligation to provide 8 VIASAT, INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (UNAUDITED) connectivity services is satisfied over time as the customer simultaneously receives and consumes the benefits provided. The measure of progress over time is based upon either a period of time (e.g., over the estimated contractual term) or usage (e.g., bandwidth used/bytes of data processed). The Company evaluates whether broadband equipment provided to its customer s as part of the delivery of connectivity services represents a lease in accordance with ASC 842. As discussed further below under “Leases - Lessor accounting”, for broadband equipment leased to consumer broadband customers in conjunction with the delivery of connectivity services, the Company accounts for the lease and non-lease components of connectivity service arrangements as a single performance obligation as the connectivity services represent the predominant component. The Company also derives a portion of its revenues from contracts with customers to provide products. Performance obligations to provide products are satisfied at the point in time when control is transferred to the customer. These contracts typically require payment by the customer upon passage of control and determining the point at which control is transferred may require judgment. To identify the point at which control is transferred to the customer, the Company considers indicators that include, but are not limited to, whether (1) the Company has the present right to payment for the asset, (2) the customer has legal title to the asset, (3) physical possession of the asset has been transferred to the customer, (4) the customer has the significant risks and rewards of ownership of the asset, and (5) the customer has accepted the asset. For product revenues, control generally passes to the customer upon delivery of goods to the customer. The vast majority of the Company’s revenues from long-term contracts to develop and deliver complex equipment built to customer specifications are derived from contracts with the U.S. Government (including foreign military sales contracted through the U.S. Government). The Company’s contracts with the U.S. Government typically are subject to the Federal Acquisition Regulation (FAR) and are priced based on estimated or actual costs of producing goods or providing services. The FAR provides guidance on the types of costs that are allowable in establishing prices for goods and services provided under U.S. Government contracts. The pricing for non-U.S. Government contracts is based on the specific negotiations with each customer. Under the typical payment terms of the Company’s U.S. Government fixed-price contracts, the customer pays the Company either performance-based payments (PBPs) or progress payments. PBPs are interim payments based on quantifiable measures of performance or on the achievement of specified events or milestones. Progress payments are interim payments based on a percentage of the costs incurred as the work progresses. Because the customer can often retain a portion of the contract price until completion of the contract, the Company’s U.S. Government fixed-price contracts generally result in revenue recognized in excess of billings which the Company presents as unbilled accounts receivable on the balance sheet. Amounts billed and due from the Company’s customers are classified as receivables on the balance sheet. The portion of the payments retained by the customer until final contract settlement is not considered a significant financing component because the intent is to protect the customer. For the Company’s U.S. Government cost-type contracts, the customer generally pays the Company for its actual costs incurred within a short period of time. For non-U.S. Government contracts, the Company typically receives interim payments as work progresses, although for some contracts, the Company may be entitled to receive an advance payment. The Company recognizes a liability for these advance payments in excess of revenue recognized and presents it as collections in excess of revenues and deferred revenues on the balance sheet. An advance payment is not typically considered a significant financing component because it is used to meet working capital demands that can be higher in the early stages of a contract and to protect the Company from the other party failing to adequately complete some or all of its obligations under the contract. Performance obligations related to developing and delivering complex equipment built to customer specifications under long-term contracts are recognized over time as these performance obligations do not create assets with an alternative use to the Company and the Company has an enforceable right to payment for performance to date. To measure the transfer of control, revenue is recognized based on the extent of progress towards completion of the performance obligation. The selection of the method to measure progress towards completion requires judgment and is based on the nature of the products or services to be provided. The Company generally uses the cost-to-cost measure of progress for its contracts because that best depicts the transfer of control to the customer which occurs as the Company incurs costs on its contracts. Under the cost-to-cost measure of progress, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. Estimating the total costs at completion of a performance obligation requires management to make estimates related to items such as subcontractor performance, material costs and availability, labor costs and productivity and the costs of overhead. When estimates of total costs to be incurred on a contract exceed total estimates of revenue to be earned, a provision for the entire loss on the contract is recognized in the period the loss is determined. 9 VIASAT, INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (UNAUDITED) Contract costs on U.S. Government contracts are subject to audit and review by the Defense Contracting Management Agency (DCMA), the Defense Contract Audit Agency (DCAA), and other U.S. Government agencies, as well as negotiations with U.S. Government representatives. The Company’s incurred cost audits by the DCAA have not been concluded for fiscal years 2020 or 2021. As of September 30, 2021, the DCAA had completed its incurred cost audit for fiscal years 2004, 2016 and 2019 and approved the Company’s incurred costs for those fiscal years, as well as approved the Company’s incurred costs for fiscal years 2005 through 2015, 2017 and 2018 without further audit based on the determination of low risk. Although the Company has recorded contract revenues subsequent to fiscal year 2019 based upon an estimate of costs that the Company believes will be approved upon final audit or review, the Company does not know the outcome of any ongoing or future audits or reviews and adjustments, and if future adjustments exceed the Company’s estimates, its profitability would be adversely affected. As of September 30, 2021 and March 31, 2021, the Company had $ 10.9 million and $ 10.3 million, respectively, in contract-related reserves for its estimate of potential refunds to customers for potential cost adjustments on several multi-year U.S. Government cost reimbursable contracts (see Note 8 — Commitments and Contingencies for more information). Evaluation of transaction price The evaluation of transaction price, including the amounts allocated to performance obligations, may require significant judgments. Due to the nature of the work required to be performed on many of the Company’s performance obligations, the estimation of total revenue, and, where applicable, the cost at completion, is complex, subject to many variables and requires significant judgment. The Company’s contracts may contain award fees, incentive fees, or other provisions, including the potential for significant financing components, that can either increase or decrease the transaction price. These amounts, which are sometimes variable, can be dictated by performance metrics, program milestones or cost targets, the timing of payments, and customer discretion. The Company estimates variable consideration at the amount to which it expects to be entitled. The Company includes estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. The Company’s estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of the Company’s anticipated performance and all information (historical, current and forecasted) that is reasonably available to the Company. In the event an agreement includes embedded financing components, the Company recognizes interest expense or interest income on the embedded financing components using the effective interest method. This methodology uses an implied interest rate which reflects the incremental borrowing rate which would be expected to be obtained in a separate financing transaction. The Company has elected the practical expedient not to adjust the promised amount of consideration for the effects of a significant financing component if the Company expects, at contract inception, that the period between when the Company transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less. If a contract is separated into more than one performance obligation, the total transaction price is allocated to each performance obligation in an amount based on the estimated relative standalone selling prices of the promised goods or services underlying each performance obligation. Estimating standalone selling prices may require judgment. When available, the Company utilizes the observable price of a good or service when the Company sells that good or service separately in similar circumstances and to similar customers. If a standalone selling price is not directly observable, the Company estimates the standalone selling price by considering all information (including market conditions, specific factors, and information about the customer or class of customer) that is reasonably available. Transaction price allocated to remaining performance obligations The Company’s remaining performance obligations represent the transaction price of firm contracts and orders for which work has not been performed. The Company includes in its remaining performance obligations only those contracts and orders for which it has accepted purchase orders. Remaining performance obligations associated with the Company’s subscribers for fixed consumer and business broadband services in its satellite services segment exclude month-to-month service contracts in accordance with a practical expedient and are estimated using a portfolio approach in which the Company reviews all relevant promotional activities and calculates the remaining performance obligation using the average service component for the portfolio and the average time remaining under the contract. The Company’s future recurring in-flight connectivity service contracts in its satellite services segment do not have minimum service purchase requirements and therefore are not included in the Company’s remaining performance obligations. As of September 30, 2021, the aggregate amount of the transaction price allocated to remaining performance obligations was $ 2.3 billion, of which the Company expects to recognize approximately half over the next 12 months, with the balance recognized thereafter . 10 VIASAT, INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (UNAUDITED) Disaggregation of revenue The Company operates and manages its business in three reportable segments: satellite services, commercial networks and government systems. Revenue is disaggregated by products and services, customer type, contract type, and geographic area, respectively, as the Company believes this approach best depicts how the nature, amount, timing and uncertainty of its revenue and cash flows are affected by economic factors. The following sets forth disaggregated reported revenue by segment and product and services for the three and six months ended September 30, 2021 and 2020: Three Months Ended September 30, 2021 Satellite Services Commercial Networks Government Systems Total Revenues (In thousands) Product revenues $ — $ 118,935 $ 189,731 $ 308,666 Service revenues 300,110 15,871 76,707 392,688 Total revenues $ 300,110 $ 134,806 $ 266,438 $ 701,354 Six Months Ended September 30, 2021 Satellite Services Commercial Networks Government Systems Total Revenues (In thousands) Product revenues $ — $ 220,466 $ 381,464 $ 601,930 Service revenues 574,227 32,936 157,121 764,284 Total revenues $ 574,227 $ 253,402 $ 538,585 $ 1,366,214 Three Months Ended September 30, 2020 Satellite Services Commercial Networks Government Systems Total Revenues (In thousands) Product revenues $ — $ 66,751 $ 189,229 $ 255,980 Service revenues 215,887 12,109 70,302 298,298 Total revenues $ 215,887 $ 78,860 $ 259,531 $ 554,278 Six Months Ended September 30, 2020 Satellite Services Commercial Networks Government Systems Total Revenues (In thousands) Product revenues $ — $ 121,870 $ 384,744 $ 506,614 Service revenues 417,871 24,152 136,129 578,152 Total revenues $ 417,871 $ 146,022 $ 520,873 $ 1,084,766 Revenues from the U.S. Government as an individual customer comprised approximately 25 % and 27 % of total revenues for the three and six months ended September 30, 2021, respectively, and approximately 32 % and 31 % of total revenues for the three and six months ended September 30, 2020, respectively, mainly reported within the government systems segment. Revenues from the Company’s other customers, mainly reported within the commercial networks and satellite services segments, comprised approximately 75 % and 73 % of total revenues for the three and six months ended September 30, 2021, respectively, and approximately 68 % and 69 % of total revenues for the three and six months ended September 30, 2020, respectively. The Company’s satellite services segment revenues are primarily derived from the Company’s fixed broadband services, in-flight services and advanced software and communication infrastructure services (acquired through the RigNet acquisition). 11 VIASAT, INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (UNAUDITED) Revenues in the Company’s commercial networks and government systems segments are primarily derived from three types of contracts: fixed-price, cost-reimbursement and time-and-materials contracts. Fixed-price contracts (which require the Company to provide products and services under a contract at a specified price) comprised approximately 91 % and 90 % of the Company’s total revenues for these segments for the three and six months ended September 30, 2021, respectively, and approximately 87 % and 86 % of the Company’s total revenues for these segments for the three and six months ended September 30, 2020, respectively. The remainder of the Company’s revenues in these segments for such periods was derived primarily from cost-reimbursement contracts (under which the Company is reimbursed for all actual costs incurred in performing the contract to the extent such costs are within the contract ceiling and allowable under the terms of the contract, plus a fee or profit) and from time-and-materials contracts (under which the Company is reimbursed for the number of labor hours expended at an established hourly rate negotiated in the contract, plus the cost of materials utilized in providing such products or services). Historically, a significant portion of the Company’s revenues in its commercial networks and government systems segments has been derived from customer contracts that include the development of products. The development efforts are conducted in direct response to the customer’s specific requirements and, accordingly, expenditures related to such efforts are included in cost of sales when incurred and the related funding (which includes a profit component) is included in revenues. Revenues for the Company’s funded development from its customer contracts were approximately 23 % of its total revenues for both the three and six months ended September 30, 2021, and approximately 23 % and 25 % of its total revenues for the three and six months ended September 30, 2020, respectively. Contract balances Contract balances consist of contract assets and contract liabilities. A contract asset, or with respect to the Company, an unbilled accounts receivable, is recorded when revenue is recognized in advance of the Company’s right to bill and receive consideration, typically resulting from sales under long-term contracts. Unbilled accounts receivable are generally expected to be billed and collected within one year. The unbilled accounts receivable will decrease as provided services or delivered products are billed. The Company receives payments from customers based on a billing schedule established in the Company’s contracts. When consideration is received in advance of the delivery of goods or services, a contract liability, or with respect to the Company, collections in excess of revenues or deferred revenues, is recorded. Reductions in the collections in excess of revenues or deferred revenues will be recorded as the Company satisfies the performance obligations. The following table presents contract assets and liabilities as of September 30, 2021 and March 31, 2021: As of September 30, 2021 As of March 31, 2021 (In thousands) Unbilled accounts receivable $ 102,111 $ 70,785 Collections in excess of revenues and deferred revenues 201,050 216,594 Deferred revenues, long-term portion 86,569 84,654 Unbilled accounts receivable increased $ 31.3 million during the six months ended September 30, 2021, primarily driven by revenue recognized in the Company’s commercial networks and satellite services segments in excess of billings. The acquisition of RigNet contributed $ 17.5 million of unbilled accounts receivable. Collections in excess of revenues and deferred revenues decreased $ 15.5 million during the six months ended September 30, 2021, primarily driven by revenue recognized in excess of advances on goods or services received in the Company’s commercial networks segment. During the three and six months ended September 30, 2021, the Company recognized revenue of $ 43.8 million and $ 122.0 million, respectively, that was previously included in the Company’s collections in excess of revenues and deferred revenues at March 31, 2021. During the three and six months ended September 30, 2020, the Company recognized revenue of $ 17.0 million and $ 74.6 million, respectively, that was previously included in the Company’s collections in excess of revenues and deferred revenues at March 31, 2020. 12 VIASAT, INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (UNAUDITED) Property, equipment and satellites Satellites and other property and equipment, including internally developed software, are recorded at cost or, in the case of certain satellites and other property acquired, the fair value at the date of acquisition, net of accumulated depreciation. Capitalized satellite costs consist primarily of the costs of satellite construction and launch, including launch insurance and insurance during the period of in-orbit testing, the net present value of performance incentives expected to be payable to satellite manufacturers (dependent on the continued satisfactory performance of the satellites), costs directly associated with the monitoring and support of satellite construction, and interest costs incurred during the period of satellite construction. The Company also constructs earth stations, network operations systems and other assets to support its satellites, and those construction costs, including interest, are capitalized as incurred. At the time satellites are placed in service, the Company estimates the useful life of its satellites for depreciation purposes based upon an analysis of each satellite’s performance against the original manufacturer’s orbital design life, estimated fuel levels and related consumption rates, as well as historical satellite operating trends. The Company periodically reviews the remaining estimated useful life of its satellites to determine if revisions to estimated useful lives are necessary. Costs incurred for additions to property, equipment and satellites, together with major renewals and betterments, are capitalized and depreciated over the remaining life of the underlying asset. Costs incurred for maintenance, repairs and minor renewals and betterments are charged to expense as incurred. When assets are sold or otherwise disposed of, the cost and related accumulated depreciation or amortization are removed from the accounts and any resulting gain or loss is recognized in operations, which for the periods presented, primarily related to losses incurred for unreturned customer premise equipment (CPE). The Company computes depreciation using the straight-line method over the estimated useful lives of the assets ranging from two to 38 years . Leasehold improvements are capitalized and amortized using the straight-line method over the shorter of the lease term or the life of the improvement. Costs related to internally developed software for internal uses are capitalized after the preliminary project stage is complete and are amortized over the estimated useful lives of the assets, which are approximately three to seven years . Capitalized costs for internal-use software are included in p roperty, equipment and satellites, net in the Company’s condensed consolidated balance sheets. Interest expense is capitalized on the carrying value of assets under construction, in accordance with the authoritative guidance for the capitalization of interest (ASC 835-20). With respect to the construction of satellites, gateway and networking equipment and other assets under construction, the Company capitalized $ 24.8 million and $ 48.4 million of interest expense for the three and six months ended September 30, 2021, respectively, and $ 20.0 million and $ 35.9 million for the three and six months ended September 30, 2020, respectively. The Company owns three satellites in service over North America (ViaSat-2, ViaSat-1 and WildBlue-1) and, after acquiring the remaining interest in Euro Infrastructure Co. during the first quarter of fiscal year 2022, the Company also owns the KA-SAT satellite over Europe, Middle East, and Africa (EMEA). In addition, the Company has lifetime leases of Ka-band capacity on two satellites. The Company also has a global constellation of three third-generation ViaSat-3 class satellites under construction. In addition, the Company owns related earth stations and networking equipment for all of its satellites. The Company procures indoor and outdoor CPE units leased to subscribers under a retail leasing program as part of the Company’s satellite services segment, which are reflected in investing activities and property, equipment and satellites, net in the accompanying condensed consolidated financial statements. The Company depreciates the satellites, earth stations and networking equipment, CPE units and related installation costs over their estimated useful lives. The total cost and accumulated depreciation of CPE units included in property, equipment and satellites, net , as of September 30, 2021 were $ 405.3 million and $ 201.4 million, respectively. The total cost and accumulated depreciation of CPE units included in property, equipment and satellites, net , as of March 31, 2021 were $ 409.9 million and $ 193.7 million, respectively. 13 VIASAT, INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (UNAUDITED) Occasionally, the Company may enter into finance lease arrangements for various machinery, equipment, computer-related equipment, software, furniture , fixtures , or satellites . The Company records amortization of assets leased under finance lease arrangemen ts within depreciation expense ( see Note 1 — Basis of Presentation – Leases for more information) . The Company’s finance leases consist primarily of satellite lifetime Ka-band capacity leases and have remaining terms from less than one year to f i ve year s. The Company reports assets obtained under finance leases in property, equipment and satellites, net and the current and non-current portions of its finance lease liabilities in current portion of long-term debt and other long-term debt, respectively. Leases Lessee accounting For contracts entered into on or after April 1, 2019, the Company assesses at contract inception whether the contract is, or contains, a lease. Generally, the Company determines that a lease exists when (1) the contract involves the use of a distinct identified asset, (2) the Company obtains the right to substantially all economic benefits from use of the asset, and (3) the Company has the right to direct the use of the asset. A lease is classified as a finance lease when one or more of the following criteria are met: (1) the lease transfers ownership of the asset by the end of the lease term, (2) the lease contains an option to purchase the asset that is reasonably certain to be exercised, (3) the lease term is for a major part of the remaining useful life of the asset, (4) the present value of the lease payments equals or exceeds substantially all of the fair value of the asset or (5) the asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term. A lease is classified as an operating lease if it does not meet any of these criteria. At the lease commencement date, the Company recognizes a right-of-use asset and a lease liability for all leases, except short-term leases with an original term of 12 months or less. The right-of-use asset represents the right to use the leased asset for the lease term. The lease liability represents the present value of the lease payments under the lease. The right-of-use asset is initially measured at cost, which primarily comprises the initial amount of the lease liability, less any lease incentives received. All right-of-use assets are periodically reviewed for impairment in accordance with standards that apply to long-lived assets. The lease liability is initially measured at the present value of the lease payments, discounted using an estimate of the Company’s incremental borrowing rate for a collateralized loan with the same term as the underlying leases. Lease payments included in the measurement of lease liabilities consist of (1) fixed lease payments for the noncancelable lease term, (2) fixed lease payments for optional renewal periods where it is reasonably certain the renewal option will be exercised, and (3) variable lease payments that depend on an underlying index or rate, based on the index or rate in effect at lease commencement. Certain of the Company’s real estate lease agreements require variable lease payments that do not depend on an underlying index or rate established at lease commencement. Such payments and changes in payments based on a rate or index are recognized in operating expenses when incurred. Lease expense for operating leases consists of the fixed lease payments recognized on a straight-line basis over the lease term plus variable lease payments as incurred. Lease expense for finance leases consists of the depreciation of assets obtained under finance leases on a straight-line basis over the lease term and interest expense on the lease liability based on the discount rate at lease commencement. For both operating and finance leases, lease payments are allocated between a reduction of the lease liability and interest expense. The Company’s operating leases consist primarily of leases for office space, data centers and satellite ground facilities and have remaining terms from less than one year to 12 years, some of which include renewal options, and some of which include options to terminate the leases within one year. Certain earth station leases have renewal terms that have been deemed to be reasonably certain to be exercised and as such have been recognized as part of the Company’s right-of-use assets and lease liabilities. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. The Company recognized right-of-use assets and lease liabilities for such leases in connection with its adoption of ASC 842 as of April 1, 2019. The Company reports operating lease right-of-use assets in operating lease right-of-use assets and the current and non-current portions of its operating lease liabilities in accrued and other liabilities and non-current operating lease liabilities, respectively. Lessor accounting For broadband equipment leased to fixed broadband customers in conjunction with the delivery of connectivity services, the Company has made an accounting policy election not to separate the broadband equipment from the related 14 VIASAT, INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (UNAUDITED) connectivity services. The connectivity services are the predominant component of these arrangements. The connectivity services are accounted for in accordance with ASC 606. The Company is also a lessor for certain insignificant communications equipment. These leases meet the criteria for operating lease classification. Lease income associated with these leases is not material. Patents, orbital slots and other licenses The Company capitalizes the costs of obtaining or acquiring patents, orbital slots and other licenses. Amortization of intangible assets that have finite lives is provided for by the straight-line method over the shorter of the legal or estimated economic life. Total capitalized costs of $ 3.5 million related to patents were included in other assets as of both September 30, 2021 and March 31, 2021. The Company capitalized costs of $ 60.4 million and $ 53.8 million related to acquiring and obtaining orbital slots and other licenses included in other assets as of September 30, 2021 and March 31, 2021, respectively. Accumulated amortization related to these assets was $ 4.6 million and $ 4.4 million as of September 30, 2021 and March 31, 2021, respectively. Amortization expense related to these assets was an insignificant amount for the three and six months ended September 30, 2021 and 2020. If a patent, orbital slot or other license is rejected, abandoned or otherwise invalidated, the unamortized cost is expensed in that period. During the three and six months ended September 30, 2021 and 2020, the Company did not write off any significant costs due to abandonment or impairment. Debt issuance costs Debt issuance costs are amortized and recognized as interest expense using the effective interest rate method, or, when the results are not materially different, on a straight-line basis over the expected term of the related debt. During the six months ended September 30, 2021 and 2020, no debt issuance costs and $ 5.1 million of debt issuance costs were capitalized, respectively. Unamortized debt issuance costs related to extinguished debt are expensed at the time the debt is extinguished and recorded in loss on extinguishment of debt in the condensed consolidated statements of operations and comprehensive income (loss). Debt issuance costs related to the Company’s revolving credit facility (the Revolving Credit Facility) are recorded in prepaid expenses and other current assets and in other long-term assets in the condensed consolidated balance sheets in accordance with the authoritative guidance for imputation of interest (ASC 835-30). Debt issuance costs related to the Company’s 5.625% Senior Notes due 2025 (the 2025 Notes), the Company’s 5.625% Senior Secured Notes due 2027 (the 2027 Notes), the Company’s 6.500% Senior Notes due 2028 (the 2028 Notes and, together with the 2025 Notes and the 2027 Notes, the Notes) and the Ex-Im Credit Facility are recorded as a direct deduction from the carrying amount of the related debt, consistent with debt discounts, in accordance with the authoritative guidance for imputation of interest (ASC 835-30). Software development Costs of developing software for sale are charged to independent research and development expense when incurred, until technological feasibility has been established. Software development costs incurred from the time technological feasibility is reached until the product is available for general release to customers are capitalized and reported at the lower of unamortized cost or net realizable value. Once the product is available for general release, the software development costs are amortized based on the ratio of current to future revenue for each product with an annual minimum equal to straight-line amortization over the remaining estimated economic life of the product, generally within five years . Capitalized costs, net, of $ 228.9 million and $ 237.1 million related to software developed for resale were included in other assets as of September 30, 2021 and March 31, 2021, respectively. The Company capitalized $ 11.0 million and $ 20.9 million of costs related to software developed for resale for the three and six months ended September 30, 2021, respectively. The Company capitalized $ 14.2 million and $ 28.5 million of costs related to software developed for resale for the three and six months ended September 30, 2020, respectively. Amortization expense for capitalized software development costs was $ 14.6 million and $ 29.1 million for the three and six months ended September 30, 2021, respectively, and $ 14.9 million and $ 28.0 million for the three and six months ended September 30, 2020, respectively. 15 VIASAT, INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (UNAUDITED) Self-insurance liabilities The Company has self-insurance plans to retain a portion of the exposure for losses related to employee medical benefits and workers’ compensation. The self-insurance plans include policies which provide for both specific and aggregate stop-loss limits. The Company utilizes internal actuarial methods as well as other historical information for the purpose of estimating ultimate costs for a particular plan year. Based on these actuarial methods, along with currently available information and insurance industry statistics, the Company has recorded self-insurance liability for its plans of $ 7.0 million and $ 6.9 million in accrued and other liabilities in the condensed consolidated balance sheets as of September 30, 2021 and March 31, 2021, respectively. The Company’s estimate, which is subject to inherent variability, is based on average claims experience in the Company’s industry and its own experience in terms of frequency and severity of claims, including asserted and unasserted claims incurred but not reported, with no explicit provision for adverse fluctuation from year to year. This variability may lead to ultimate payments being either greater or less than the amounts presented above. Self-insurance liabilities have been classified as a current liability in accrued and other liabilities in accordance with the estimated timing of the projected payments. Indemnification provisions In the ordinary course of business, the Company includes indemnification provisions in certain of its contracts, generally relating to parties with which the Company has commercial relations. Pursuant to these agreements, the Company will indemnify, hold harmless and agree to reimburse the indemnified party for losses suffered or incurred by the indemnified party, including but not limited to losses relating to third-party intellectual property claims. To date, there have not been any material costs incurred in connection with such indemnification clauses. The Company’s insurance policies do not necessarily cover the cost of defending indemnification claims or providing indemnification, so if a claim was filed against the Company by any party that the Company has agreed to indemnify, the Company could incur substantial legal costs and damages. A claim would be accrued when a loss is considered probable and the amount can be reasonably estimated. At September 30, 2021 and March 31, 2021, no such amounts were accrued related to the aforementioned provisions. Noncontrolling interests A noncontrolling interest represents the equity interest in a subsidiary that is not attributable, either directly or indirectly, to the Company and is reported as equity of the Company, separately from the Company’s controlling interest. Revenues, expenses, gains, losses, net income (loss) and other comprehensive income (loss) are reported in the condensed consolidated financial statements at the consolidated amounts, which include the amounts attributable to both the controlling and noncontrolling interest. Investments in unconsolidated affiliate — equity method Investments in entities in which the Company can exercise significant influence, but does not own a majority equity interest or otherwise control, are accounted for using the equity method and are included as investment in unconsolidated affiliate in other assets (long-term) on the condensed consolidated balance sheets. The Company records its share of the results of such entities within equity in income (loss) of unconsolidated affiliate, net on the condensed consolidated statements of operations and comprehensive income (loss). The Company monitors such investments for other-than-temporary impairment by considering factors including the current economic and market conditions and the operating performance of the entities and records reductions in carrying values when necessary. The fair value of privately held investments is estimated using the best available information as of the valuation date, including current earnings trends, undiscounted cash flows, quoted stock prices of comparable public companies, and other company specific information, including recent financing rounds. Common stock held in treasury As of September 30, 2021 and March 31, 2021, the Company had no shares of common stock held in treasury. During the three months ended September 30, 2021 and 2020, the Company issued 99,947 and 40,676 shares of common stock, respectively, based on the vesting terms of certain restricted stock unit agreements. During the six months ended September 30, 2021 and 2020, the Company issued 129,007 and 64,970 shares of common stock, respectively, based on the vesting terms of certain restricted stock unit agreements. In order for employees to satisfy minimum statutory employee tax withholding requirements related to the issuance of common stock underlying these restricted stock unit agreements, during the three months ended September 30, 2021 and 2020, the Company repurchased 24,617 16 VIASAT, INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (UNAUDITED) and 8,367 share s of common stock, respectively, at cost and with a total value of $ 1.3 million and an insignificant amount , respectively . During the six months ended September 30, 2021 and 2020 , the Company repurchased 33,338 and 16,915 shares of common stock, respectively, at cost and with a total value of $ 1.7 million and an insignificant amount , respectively. Although shares withheld for employee withholding taxes are technically not issued, they are treated as common stock repurchases for accounting purposes (with such shares deemed to be repurchased and then immediately retired), as they reduce the number of shares that otherwise would have been issued upon vesting of the restricted stock units. These retired shares remain as authorized stock and are considered to be unissued. The retirement of treasury stock had no impact on the Company’s total consolidated stockholders’ equity. Stock-based compensation In accordance with the authoritative guidance for share-based payments (ASC 718), the Company measures stock-based compensation cost at the grant date, based on the estimated fair value of the award. Expense for restricted stock units and stock options is recognized on a straight-line basis over the employee’s requisite service period. Expense for total shareholder return (TSR) performance stock options that vest is recognized regardless of the actual TSR outcome achieved and is recognized on a graded-vesting basis. The Company accounts for forfeitures as they occur. The Company recognized $ 21.0 million and $ 43.2 million of stock-based compensation expense for the three and six months ended September 30, 2021, respectively. The Company recognized $ 22.4 million and $ 43.3 million of stock-based compensation expense for the three and six months ended September 30, 2020, respectively. The Company recognizes excess tax benefits or deficiencies on vesting or settlement of awards as discrete items within income tax benefit or provision within net income (loss) and the related cash flows are classified within operating activities. Income taxes Accruals for uncertain tax positions are provided for in accordance with the authoritative guidance for accounting for uncertainty in income taxes (ASC 740). The Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The authoritative guidance for accounting for uncertainty in income taxes also provides guidance on derecognition of income tax assets and liabilities, classification of deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, and income tax disclosures. The Company’s policy is to recognize interest expense and penalties related to income tax matters as a component of income tax expense. Ordinarily, the Company calculates its provision for income taxes at the end of each interim reporting period on the basis of an estimated annual effective tax rate adjusted for tax items that are discrete to each period. However, when a reliable estimate cannot be made, the Company computes its provision for income taxes using the actual effective tax rate (discrete method) for the year-to-date period. The Company’s effective tax rate is highly influenced by the amount of its research and development (R&D) tax credits. A small change in estimated annual pretax income (loss) can produce a significant variance in the annual effective tax rate given the Company’s expected amount of R&D tax credits. This variability provides an unreliable estimate of the annual effective tax rate. As a result, and in accordance with the authoritative guidance for accounting for income taxes in interim periods, the Company has computed its provision for income taxes for the three and six months ended September 30, 2021 and 2020 by applying the actual effective tax rate to the pretax income (loss) for the three-month and six-month periods. A deferred income tax asset or liability is established for the expected future tax consequences resulting from differences in the financial reporting and tax bases of assets and liabilities and for the expected future tax benefit to be derived from tax credit and loss carryforwards. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Recent authoritative guidance In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2019-12, Income Taxes (ASC 740): Simplifying the Accounting for Income Taxes, which is intended to simplify various areas related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in ASC 740 and also clarifies and amends existing guidance to improve consistent application. The Company adopted the new guidance in the first quarter of fiscal year 2022 on a prospective basis and as a result upon purchase of the remaining 51 % interest in Euro Infrastructure Co. from Eutelsat (see Note 12 — Acquisitions for more information), and assertion to 17 VIASAT, INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (UNAUDITED) permanently reinvest future earnings, the deferred tax liability recorded for Euro Infrastructure Co.’s outside basis difference of $ 8.1 million was reversed and recorded in the first quarter of fiscal year 2022 as an income tax benefit in the condensed consolidated statements of operations and comprehensive income (loss) . In January 2020, the FASB issued ASU 2020-01, Investments – Equity Securities (ASC 321), Investments – Equity Method and Joint Ventures (ASC 323) and Derivatives and Hedging (ASC 815). ASU 2020-01 clarifies the interaction of the accounting for equity securities under ASC 321 and investments accounted for under the equity method of accounting under ASC 323, and the accounting for certain forward contracts and purchased options accounted for under ASC 815. The Company adopted the new guidance in the first quarter of fiscal year 2022 on a prospective basis and the guidance did not have a material impact on the Company’s consolidated financial statements and disclosures. In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (ASC 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40). ASU 2020-06 simplifies the accounting for convertible instruments by removing the beneficial conversion and cash conversion accounting models for convertible instruments and removes certain settlement conditions that are required for contracts to qualify for equity classification. This new standard also simplifies the diluted earnings per share calculations by requiring that an entity use the if-converted method for convertible instruments and requires that the effect of potential share settlement be included in diluted earnings per share calculations when an instrument may be settled in cash or shares. The new standard requires entities to provide expanded disclosures about the terms and features of convertible instruments, how the instruments have been reported in the entity’s financial statements, and information about events, conditions, and circumstances that can affect how to assess the amount or timing of an entity’s future cash flows related to those instruments. The new standard will become effective for the Company beginning in fiscal year 2023, with early adoption permitted. The Company is currently evaluating the impact of this standard on its consolidated financial statements and disclosures. In October 2020, the FASB issued ASU 2020-08, Codification Improvements to Subtopic 310-20, Receivables – Nonrefundable Fees and Other Costs. ASU 2020-08 clarifies that a company should reevaluate whether a callable debt security is within the scope of ASC paragraph 310-20-35-33 for each reporting period. The Company adopted the new guidance in the first quarter of fiscal year 2022 on a prospective basis and the guidance did not have a material impact on the Company’s consolidated financial statements and disclosures. 18 VIASAT, INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (UNAUDITED) Note 2 — Composition of Certain Balance Sheet Captions As of September 30, 2021 As of March 31, 2021 (In thousands) Accounts receivable, net: Billed $ 272,689 $ 172,559 Unbilled 102,111 70,785 Allowance for doubtful accounts ( 5,578 ) ( 4,692 ) $ 369,222 $ 238,652 Inventories: Raw materials $ 86,810 $ 98,338 Work in process 75,657 71,875 Finished goods 185,875 166,459 $ 348,342 $ 336,672 Prepaid expenses and other current assets: Prepaid expenses $ 96,144 $ 94,405 Other 35,025 25,555 $ 131,169 $ 119,960 Property, equipment and satellites, net: Equipment and software (estimated useful life of 3 - 7 years ) $ 1,634,630 $ 1,505,697 CPE leased equipment (estimated useful life of 4 - 5 years ) 405,349 409,942 Furniture and fixtures (estimated useful life of 7 years) 58,497 57,433 Leasehold improvements (estimated useful life of 2 - 17 years ) 152,806 149,324 Buildings (estimated useful life of 12 - 38 years ) 12,385 8,923 Land 3,973 2,291 Construction in progress 277,795 219,482 Satellites (estimated useful life of 7 - 17 years ) 1,063,748 969,952 Satellite Ka-band capacity obtained under finance leases (estimated useful life of 7 - 11 years ) 173,480 173,467 Satellites under construction 1,570,169 1,338,408 5,352,832 4,834,919 Less: accumulated depreciation and amortization ( 1,887,465 ) ( 1,784,436 ) $ 3,465,367 $ 3,050,483 Other acquired intangible assets, net: Technology (weighted average useful life of 7 years) $ 151,739 $ 78,185 Contracts and customer relationships (weighted average useful life of 10 years) 168,204 55,161 Satellite co-location rights (weighted average useful life of 9 years) 8,600 8,600 Trade name (weighted average useful life of 7 years) 32,128 5,940 Other (weighted average useful life of 9 years) 18,641 3,663 379,312 151,549 Less: accumulated amortization ( 135,981 ) ( 141,981 ) $ 243,331 $ 9,568 Other assets: Investment in unconsolidated affiliate $ — $ 176,938 Deferred income taxes 290,463 273,288 Capitalized software costs, net 228,910 237,100 Patents, orbital slots and other licenses, net 59,338 52,889 Other 107,774 95,212 $ 686,485 $ 835,427 Accrued and other liabilities: Collections in excess of revenues and deferred revenues $ 201,050 $ 216,594 Accrued employee compensation 68,042 87,153 Accrued vacation 54,606 59,509 Warranty reserve, current portion 5,234 6,693 Operating lease liabilities 51,683 48,896 Other 130,478 113,986 $ 511,093 $ 532,831 Other liabilities: Deferred revenues, long-term portion $ 86,569 $ 84,654 Warranty reserve, long-term portion 6,036 5,193 Satellite performance incentive obligations, long-term portion 20,471 22,191 Deferred income taxes, long-term 15,651 — Other 35,220 25,312 $ 163,947 $ 137,350 19 VIASAT, INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (UNAUDITED) Note 3 — Fair Value Measurements In accordance with the authoritative guidance for financial assets and liabilities measured at fair value on a recurring basis (ASC 820), the Company determines fair value based on the exchange price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants, and prioritizes the inputs used to measure fair value from market-based assumptions to entity specific assumptions: • Level 1 — Inputs based on quoted market prices for identical assets or liabilities in active markets at the measurement date. • Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. • Level 3 — Inputs which reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. The inputs are unobservable in the market and significant to the instrument’s valuation. The Company had $ 5.0 million in cash equivalents (Level 1) and no liabilities measured at fair value on a recurring basis as of both September 30, 2021 and March 31, 2021. The following section describes the valuation methodologies the Company uses to measure financial instruments at fair value: Cash equivalents — The Company’s cash equivalents consist of money market funds. Money market funds are valued using quoted prices for identical assets in an active market with sufficient volume and frequency of transactions (Level 1). Contingencies — In connection with the acquisition of the remaining 51 % interest in Euro Infrastructure Co. on April 30, 2021 (see Note 12 — Acquisitions for more information), part of the purchase price consideration will not be determined until two years after the closing date, when the Company may pay or receive up to € 20.0 million, or approximately $ 23.4 million, in cash. The consideration to be paid in the future is contingent based on certain outcomes as defined in the acquisition agreement. Each reporting period, the Company estimates the fair value of the contingent consideration based on unobservable inputs and probability weightings using standard valuation techniques (Level 3). The fair value amount is currently recorded in other assets on the condensed consolidated balance sheets and any change to fair value is recorded in the Company’s condensed consolidated statements of operations each reporting period. As of and for the three-month and six-month periods ended September 30, 2021, the Company’s fair value estimate, and change in fair value of the contingent consideration since the acquisition date, were immaterial. Long-term debt — The Company’s long-term debt consists of borrowings under its Revolving Credit Facility and Ex-Im Credit Facility (collectively, the Credit Facilities), $ 700.0 million in aggregate principal amount of 2025 Notes, $ 600.0 million in aggregate principal amount of 2027 Notes, $ 400.0 million in aggregate principal amount of 2028 Notes and finance lease obligations reported at the present value of future minimum lease payments with current accrued interest. Long-term debt related to the Revolving Credit Facility is reported at the outstanding principal amount of borrowings, while long-term debt related to the Ex-Im Credit Facility, the 2025 Notes, the 2027 Notes and the 2028 Notes is reported at amortized cost. However, for disclosure purposes, the Company is required to measure the fair value of outstanding debt on a recurring basis. The fair value of the Company’s long-term debt related to the Revolving Credit Facility approximates its carrying amount due to its variable interest rate, which approximates a market interest rate. As of September 30, 2021 and March 31, 2021, the fair value of the Company’s long-term debt related to the Ex-Im Credit Facility was determined based on a discounted cash flow analysis using observable market interest rates for instruments with similar terms (Level 2) and was approximately $ 89.5 million and $ 100.1 million, respectively. As of September 30, 2021 and March 31, 2021, the estimated fair value of the Company’s outstanding long-term debt related to each series of Notes was determined based on actual or estimated bids and offers for such series of Notes in an over-the-counter market (Level 2) and was $ 708.1 million and $ 709.6 million, respectively, for the 2025 Notes, $ 624.0 million and $ 629.2 million, respectively, for the 2027 Notes, and $ 420.3 million and $ 420.5 million, respectively, for the 2028 Notes. Satellite performance incentive obligations — The Company’s contracts with the manufacturers of the ViaSat-1 and ViaSat-2 satellites require the Company to make monthly in-orbit satellite performance incentive payments, including interest, through fiscal year 2027 and fiscal year 2028 , respectively, subject to the continued satisfactory performance of 20 VIASAT, INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (UNAUDITED) the applicable satellite s . The Company records the net present value of these expected future payments as a liability and as a component of the cost of the satellite s . However, for disclosure purposes, the Company is required to measure the fair value of outstanding satellite performance incentive obligation s on a recurring basis. The fair value of the Company’s outstanding satellite performance incentive obligation s is estimated to approximate their carrying value based on current rates (Level 2). As of September 30, 2021 and March 31, 2021 , the Company’s estimated satellite performance incentive obligation s relating to the ViaSat-1 and ViaSat-2 satellite s , including accrued interest, w ere $ 25.6 million and $ 27.1 million, respectively. Note 4 — Shares Used In Computing Diluted Net Income (Loss) Per Share Three Months Ended Six Months Ended September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020 (In thousands) Weighted average: Common shares outstanding used in calculating basic net income (loss) per share attributable to Viasat, Inc. common stockholders 73,544 66,576 72,549 64,554 Options to purchase common stock as determined by application of the treasury stock method 10 — 8 — TSR performance stock options to purchase common stock as determined by application of the treasury stock method 178 — 144 — Restricted stock units to acquire common stock as determined by application of the treasury stock method 942 132 809 — Potentially issuable shares in connection with certain terms of the Viasat 401(k) Profit Sharing Plan and Employee Stock Purchase Plan 198 298 352 — Shares used in computing diluted net income (loss) per share attributable to Viasat, Inc. common stockholders 74,872 67,006 73,862 64,554 Antidilutive shares excluded from the calculation for the three months ended September 30, 2021 and 2020 consisted of 983,561 and 1,221,537 shares related to stock options (other than TSR performance stock options), respectively, no shares related to TSR performance stock options, 848,711 and 2,539,518 shares related to restricted stock units, respectively, and 8,861 and 15,572 shares related to certain terms of the Employee Stock Purchase Plan, respectively. Antidilutive shares excluded from the calculation for the six months ended September 30, 2021 consisted of 971,884 shares related to stock options (other than TSR performance stock options), zero shares related to TSR performance stock options, 917,918 shares related to restricted stock units, and 6,194 shares related to certain terms of the Employee Stock Purchase Plan. The weighted average number of shares used to calculate basic and diluted net loss per share attributable to Viasat, Inc. common stockholders is the same for the six months ended September 30, 2020, as the Company incurred a net loss attributable to Viasat, Inc. common stockholders for such periods and inclusion of potentially dilutive weighted average shares of common stock would be antidilutive. Potentially dilutive weighted average shares excluded from the calculation for the six months ended September 30, 2020 consisted of 1,223,375 shares related to stock options (other than TSR performance stock options), no shares related to TSR performance stock options, 2,623,634 shares related to restricted stock units and 416,650 shares related to certain terms of the Viasat 401(k) Profit Sharing Plan and Employee Stock Purchase Plan. 21 VIASAT, INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (UNAUDITED) Note 5 — Goodwill and Acquired Intangible Assets During the six months ended September 30, 2021, the increase in the Company’s goodwill primarily related to the acquisitions of the remaining 51% interest in Euro Infrastructure Co. and of RigNet on April 30, 2021 (see Note 12 – Acquisitions for more information) and an insignificant effect of foreign currency translation recorded within all three of the Company’s segments. During the six months ended September 30, 2020, the increase in the Company’s goodwill related to the effects of foreign currency translation recorded within all three of the Company’s segments. Other acquired intangible assets are amortized using the straight-line method over their estimated useful lives of two to 12 years (which approximates the economic pattern of benefit). Amortization expense related to other acquired intangible assets was $ 7.4 million and $ 1.3 million for the three months ended September 30, 2021 and 2020, respectively, and $ 13.3 million and $ 2.9 million for the six months ended September 30, 2021 and 2020, respectively. The expected amortization expense of amortizable acquired intangible assets may change due to the effects of foreign currency fluctuations as a result of international businesses acquired. The current and expected amortization expense for acquired intangible assets for each of the following periods is as follows: Amortization (In thousands) For the six months ended September 30, 2021 $ 13,328 Expected for the remainder of fiscal year 2022 $ 14,966 Expected for fiscal year 2023 29,935 Expected for fiscal year 2024 28,371 Expected for fiscal year 2025 26,252 Expected for fiscal year 2026 26,100 Thereafter 117,707 $ 243,331 In the first quarter of fiscal year 2022, the gross amount and accumulated amortization for acquired identifiable intangible assets were reduced by the retirement of fully amortized assets that were no longer in use. Note 6 — Senior Notes and Other Long-Term Debt Total long-term debt consisted of the following as of September 30, 2021 and March 31, 2021: As of September 30, 2021 As of March 31, 2021 (In thousands) 2028 Notes $ 400,000 $ 400,000 2027 Notes 600,000 600,000 2025 Notes 700,000 700,000 Revolving Credit Facility 320,000 — Ex-Im Credit Facility 88,435 98,261 Finance lease obligations (see Note 1) 51,116 56,336 Total debt 2,159,551 1,854,597 Unamortized discount and debt issuance costs ( 19,013 ) ( 21,441 ) Less: current portion of long-term debt 29,965 30,472 Total long-term debt $ 2,110,573 $ 1,802,684 22 VIASAT, INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (UNAUDITED) Revolving Credit Facility As of September 30, 2021, the Revolving Credit Facility provided a $ 700.0 million revolving line of credit (including up to $ 150.0 million of letters of credit), with a maturity date of January 18, 2024 . At September 30, 2021, the Company had $ 320.0 million in principal amount of outstanding borrowings under the Revolving Credit Facility and $ 52.8 million outstanding under standby letters of credit, leaving borrowing availability under the Revolving Credit Facility as of September 30, 2021 of $ 327.2 million. Borrowings under the Revolving Credit Facility bear interest, at the Company’s option, at either (1) the highest of the Federal Funds rate plus 0.50%, the Eurodollar rate plus 1.00%, or the administrative agent’s prime rate as announced from time to time, or (2) the Eurodollar rate, plus, in the case of each of (1) and (2), an applicable margin that is based on the Company’s total leverage ratio. As of September 30, 2021, the weighted average effective interest rate on the Company’s outstanding borrowings under the Revolving Credit Facility was 1.84 %. The Company has capitalized certain amounts of interest expense on the Revolving Credit Facility in connection with the construction of various assets during the construction period. The Revolving Credit Facility is required to be guaranteed by certain significant domestic subsidiaries of the Company (as defined in the Revolving Credit Facility) and secured by substantially all of the Company’s and any such subsidiaries’ assets. As of September 30, 2021, none of the Company’s subsidiaries guaranteed the Revolving Credit Facility. The Revolving Credit Facility contains financial covenants regarding a maximum total leverage ratio and a minimum interest coverage ratio. In addition, the Revolving Credit Facility contains covenants that restrict, among other things, the Company’s ability to sell assets, make investments and acquisitions, make capital expenditures, grant liens, pay dividends and make certain other restricted payments. The Company was in compliance with its financial covenants under the Revolving Credit Facility as of September 30, 2021. Ex-Im Credit Facility The Ex-Im Credit Facility originally provided a $ 362.4 million senior secured direct loan facility, which was fully drawn. Of the $ 362.4 million in principal amount of borrowings made under the Ex-Im Credit Facility, $ 321.2 million was used to finance up to 85 % of the costs of construction, launch and insurance of the ViaSat-2 satellite and related goods and services (including costs incurred on or after September 18, 2012), with the remaining $ 41.2 million used to finance the total exposure fees incurred under the Ex-Im Credit Facility (which included all previously accrued completion exposure fees). As of September 30, 2021, the Company had $ 88.4 million in principal amount of outstanding borrowings under the Ex-Im Credit Facility. Borrowings under the Ex-Im Credit Facility bear interest at a fixed rate of 2.38 %, payable semi-annually in arrears. The effective interest rate on the Company’s outstanding borrowings under the Ex-Im Credit Facility, which takes into account timing and amount of borrowings and payments, exposure fees, debt issuance costs and other fees, is 4.54 %. Borrowings under the Ex-Im Credit Facility are required to be repaid in 16 semi-annual principal installments, which commenced on April 15, 2018 , with a maturity date of October 15, 2025 . Pursuant to the terms of the Ex-Im Credit Facility, certain insurance proceeds related to the ViaSat-2 satellite must be used to pay down outstanding borrowings under the Ex-Im Credit Facility upon receipt. The Ex-Im Credit Facility is guaranteed by Viasat and is secured by first-priority liens on the ViaSat-2 satellite and related assets, as well as a pledge of the capital stock of the borrower under the facility. The Ex-Im Credit Facility contains financial covenants regarding Viasat’s maximum total leverage ratio and minimum interest coverage ratio. In addition, the Ex-Im Credit Facility contains covenants that restrict, among other things, the Company’s ability to sell assets, make investments and acquisitions, make capital expenditures, grant liens, pay dividends and make certain other restricted payments. The Company was in compliance with its financial covenants under the Ex-Im Credit Facility as of September 30, 2021. Borrowings under the Ex-Im Credit Facility are recorded as current portion of long-term debt and as other long-term debt, net of unamortized discount and debt issuance costs, in the Company’s condensed consolidated financial statements. The discount of $ 42.3 million (consisting of the initial $ 6.0 million pre-exposure fee, $ 35.3 million of completion exposure fees, and other customary fees) and deferred financing cost associated with the issuance of the borrowings under the Ex-Im Credit Facility are amortized to interest expense on an effective interest rate basis over the weighted average term of the Ex-Im Credit Facility and in accordance with the related payment obligations. 23 VIASAT, INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (UNAUDITED) Senior Notes Senior Notes due 2028 In June 2020, the Company issued $ 400.0 million in principal amount of 2028 Notes in a private placement to institutional buyers. The 2028 Notes were issued at face value and are recorded as long-term debt, net of debt issuance costs, in the Company’s condensed consolidated financial statements. The 2028 Notes bear interest at the rate of 6.500 % per year, payable semi-annually in cash in arrears, which interest payments commenced in January 2021. Debt issuance costs associated with the issuance of the 2028 Notes are amortized to interest expense on a straight-line basis over the term of the 2028 Notes, the results of which are not materially different from the effective interest rate basis. The 2028 Notes are required to be guaranteed on an unsecured senior basis by each of the Company’s existing and future subsidiaries that guarantees the Revolving Credit Facility. As of September 30, 2021, none of the Company’s subsidiaries guaranteed the 2028 Notes. The 2028 Notes are the Company’s general senior unsecured obligations and rank equally in right of payment with all of the Company’s existing and future unsecured unsubordinated debt. The 2028 Notes are effectively junior in right of payment to the Company’s existing and future secured debt, including under the Credit Facilities and the 2027 Notes (to the extent of the value of the assets securing such debt), are structurally subordinated to all existing and future liabilities (including trade payables) of the Company’s subsidiaries that do not guarantee the 2028 Notes, and are senior in right of payment to all of the Company’s existing and future subordinated indebtedness. The indenture governing the 2028 Notes limits, among other things, the Company’s and its restricted subsidiaries’ ability to: incur, assume or guarantee additional debt; issue redeemable stock and preferred stock; pay dividends, make distributions or redeem or repurchase capital stock; prepay, redeem or repurchase subordinated debt; make loans and investments; grant or incur liens; restrict dividends, loans or asset transfers from restricted subsidiaries; sell or otherwise dispose of assets; enter into transactions with affiliates; reduce the Company’s satellite insurance; and consolidate or merge with, or sell substantially all of their assets to, another person. Prior to July 15, 2023, the Company may redeem up to 40% of the 2028 Notes at a redemption price of 106.500 % of the principal amount thereof, plus accrued and unpaid interest, if any, thereon to the redemption date, from the net cash proceeds of specified equity offerings. The Company may also redeem the 2028 Notes prior to July 15, 2023, in whole or in part, at a redemption price equal to 100 % of the principal amount thereof plus the applicable premium and any accrued and unpaid interest, if any, thereon to the redemption date. The applicable premium is calculated as the greater of: (i) 1.0% of the principal amount of such 2028 Notes and (ii) the excess, if any, of (a) the present value at such date of redemption of (1) the redemption price of such 2028 Notes on July 15, 2023 plus (2) all required interest payments due on such 2028 Notes through July 15, 2023 (excluding accrued but unpaid interest to the date of redemption), computed using a discount rate equal to the treasury rate (as defined under the indenture governing the 2028 Notes) plus 50 basis points, over (b) the then-outstanding principal amount of such 2028 Notes. The 2028 Notes may be redeemed, in whole or in part, at any time during the 12 months beginning on July 15, 2023 at a redemption price of 103.250 % , during the 12 months beginning on July 15, 2024 at a redemption price of 101.625 % , and at any time on or after July 15, 2025 at a redemption price of 100 %, in each case plus accrued and unpaid interest, if any, thereon to the redemption date. In the event a change of control triggering event occurs (as defined in the indenture governing the 2028 Notes), each holder will have the right to require the Company to repurchase all or any part of such holder’s 2028 Notes at a purchase price in cash equal to 101 % of the aggregate principal amount of the 2028 Notes repurchased, plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date). Senior Secured Notes due 2027 In March 2019, the Company issued $ 600.0 million in principal amount of 2027 Notes in a private placement to institutional buyers. The 2027 Notes were issued at face value and are recorded as long-term debt, net of debt issuance costs, in the Company’s condensed consolidated financial statements. The 2027 Notes bear interest at the rate of 5.625 % per year, payable semi-annually in cash in arrears, which interest payments commenced in October 2019. Debt issuance costs associated with the issuance of the 2027 Notes are amortized to interest expense on a straight-line basis over the term of the 2027 Notes, the results of which are not materially different from the effective interest rate basis. The 2027 Notes are required to be guaranteed on a senior secured basis by each of the Company’s existing and future subsidiaries that guarantees the Revolving Credit Facility. As of September 30, 2021, none of the Company’s 24 VIASAT, INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (UNAUDITED) subsidiaries guaranteed the 2027 Notes. The 2027 Notes are secured, equally and ratably with the Revolving Credit Facility and any future parity lien debt, by liens on substantially all of the Company’s assets. The 2027 Notes are the Company’s general senior secured obligations and rank equally in right of payment with all of its existing and future unsubordinated debt. The 2027 Notes are effectively senior to all of the Company’s existing and future unsecured debt (including the 2025 Notes and the 2028 Notes) as well as to all of any permitted junior lien debt that may be incurred in the future, in each case to the extent of the value of the assets securing the 2027 Notes. The 2027 Notes are effectively subordinated to any obligations that are secured by liens on assets that do not constitute a part of the collateral securing the 2027 Notes, are structurally subordinated to all existing and future liabilities (including trade payables) of the Company’s subsidiaries that do not guarantee the 2027 Notes (including obligations of the borrower under the Ex-Im Credit Facility), and are senior in right of payment to all of the Company’s existing and future subordinated indebtedness. The indenture governing the 2027 Notes limits, among other things, the Company’s and its restricted subsidiaries’ ability to: incur, assume or guarantee additional debt; issue redeemable stock and preferred stock; pay dividends, make distributions or redeem or repurchase capital stock; prepay, redeem or repurchase subordinated debt; make loans and investments; grant or incur liens; restrict dividends, loans or asset transfers from restricted subsidiaries; sell or otherwise dispose of assets; enter into transactions with affiliates; reduce the Company’s satellite insurance; and consolidate or merge with, or sell substantially all of their assets to, another person. Prior to April 15, 2022, the Company may redeem up to 40% of the 2027 Notes at a redemption price of 105.625 % of the principal amount thereof, plus accrued and unpaid interest, if any, thereon to the redemption date, from the net cash proceeds of specified equity offerings. The Company may also redeem the 2027 Notes prior to April 15, 2022, in whole or in part, at a redemption price equal to 100 % of the principal amount thereof plus the applicable premium and any accrued and unpaid interest, if any, thereon to the redemption date. The applicable premium is calculated as the greater of: (i) 1.0% of the principal amount of such 2027 Notes and (ii) the excess, if any, of (a) the present value at such date of redemption of (1) the redemption price of such 2027 Notes on April 15, 2022 plus (2) all required interest payments due on such 2027 Notes through April 15, 2022 (excluding accrued but unpaid interest to the date of redemption), computed using a discount rate equal to the treasury rate (as defined under the indenture governing the 2027 Notes) plus 50 basis points, over (b) the then-outstanding principal amount of such 2027 Notes. The 2027 Notes may be redeemed, in whole or in part, at any time during the 12 months beginning on April 15, 2022 at a redemption price of 102.813 % , during the 12 months beginning on April 15, 2023 at a redemption price of 101.406 % , and at any time on or after April 15, 2024 at a redemption price of 100 %, in each case plus accrued and unpaid interest, if any, thereon to the redemption date. In the event a change of control triggering event occurs (as defined in the indenture governing the 2027 Notes), each holder will have the right to require the Company to repurchase all or any part of such holder’s 2027 Notes at a purchase price in cash equal to 101 % of the aggregate principal amount of the 2027 Notes repurchased, plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date). Senior Notes due 2025 In September 2017, the Company issued $ 700.0 million in principal amount of 2025 Notes in a private placement to institutional buyers. The 2025 Notes were issued at face value and are recorded as long-term debt, net of debt issuance costs, in the Company’s condensed consolidated financial statements. The 2025 Notes bear interest at the rate of 5.625 % per year, payable semi-annually in cash in arrears, which interest payments commenced in March 2018. Debt issuance costs associated with the issuance of the 2025 Notes are amortized to interest expense on a straight-line basis over the term of the 2025 Notes, the results of which are not materially different from the effective interest rate basis. The 2025 Notes are required to be guaranteed on an unsecured senior basis by each of the Company’s existing and future subsidiaries that guarantees the Revolving Credit Facility. As of September 30, 2021, none of the Company’s subsidiaries guaranteed the 2025 Notes. The 2025 Notes are the Company’s general senior unsecured obligations and rank equally in right of payment with all of the Company’s existing and future unsecured unsubordinated debt. The 2025 Notes are effectively junior in right of payment to the Company’s existing and future secured debt, including under the Credit Facilities and the 2027 Notes (to the extent of the value of the assets securing such debt), are structurally subordinated to all existing and future liabilities (including trade payables) of the Company’s subsidiaries that do not guarantee the 2025 Notes, and are senior in right of payment to all of the Company’s existing and future subordinated indebtedness. 25 VIASAT, INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (UNAUDITED) The indenture governing the 2025 Notes limits, among other things, the Company’s and its restricted subsidiaries’ ability to: incur, assume or guarantee additional debt; issue redeemable stock and preferred stock; pay dividends, make distributions or redeem or repurchase capital stock; prepay, redeem or repurchase subordinated debt; make loans and investments; grant or incur liens; restrict dividends, loans or asset transfers from restricted subsidiaries; sell or otherwise dispose of assets; enter into transactions with affiliates; reduce the Company’s satellite insurance; and consolidate or merge with, or sell substantially all of their assets to, another person. The 2025 Notes may be redeemed, in whole or in part, at any time during the 12 months beginning on September 15, 2021 at a redemption price of 101.406 % , and at any time on or after September 15, 2022 at a redemption price of 100 %, in each case plus accrued and unpaid interest, if any, thereon to the redemption date. In the event a change of control triggering event occurs (as defined in the indenture governing the 2025 Notes), each holder will have the right to require the Company to repurchase all or any part of such holder’s 2025 Notes at a purchase price in cash equal to 101 % of the aggregate principal amount of the 2025 Notes repurchased, plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date). Note 7 — Product Warranty The Company provides limited warranties on its products for periods of up to five years . The Company records a liability for its warranty obligations when products are shipped or they are included in long-term construction contracts based upon an estimate of expected warranty costs. Amounts expected to be incurred within 12 months are classified as accrued liabilities and amounts expected to be incurred beyond 12 months are classified as other liabilities in the condensed consolidated financial statements. For mature products, the warranty cost estimates are based on historical experience with the particular product. For newer products that do not have a history of warranty costs, the Company bases its estimates on its experience with the technology involved and the types of failures that may occur. It is possible that the Company’s underlying assumptions will not reflect the actual experience and, in that case, future adjustments will be made to the recorded warranty obligation. The following table reflects the change in the Company’s warranty accrual during the six months ended September 30, 2021 and 2020: Six Months Ended September 30, 2021 September 30, 2020 (In thousands) Balance, beginning of period $ 11,886 $ 11,643 Change in liability for warranties issued in period 4,064 3,423 Settlements made (in cash or in kind) during the period ( 4,680 ) ( 2,547 ) Balance, end of period $ 11,270 $ 12,519 Note 8 — Commitments and Contingencies The Company has entered into satellite construction agreements with The Boeing Company (Boeing) for the construction and purchase of three ViaSat-3 class satellites and the integration of Viasat’s payload and technologies into the satellites. See Note 12 – Commitments to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended March 31, 2021 for information regarding the Company’s future minimum payments under its satellite construction contracts and other satellite-related purchase commitments. From time to time, the Company is involved in a variety of claims, suits, investigations and proceedings arising in the ordinary course of business, including government investigations and claims, and other claims and proceedings with respect to intellectual property, breach of contract, labor and employment, tax and other matters. Such matters could result in fines; penalties, compensatory, treble or other damages; or non-monetary relief. A violation of government contract laws and regulations could also result in the termination of its government contracts or debarment from bidding on future government contracts. Although claims, suits, investigations and proceedings are inherently uncertain and their results cannot be predicted with certainty, the Company believes that the resolution of its current pending matters will not have a material adverse effect on its business, financial condition, results of operations or liquidity. 26 VIASAT, INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (UNAUDITED) The Company has contracts with various U.S. G overnment agencies. Accordingly, the Company is routinely subject to audit and review by the DCMA, the DCAA and other U.S. G overnment agencies of its performance on government contracts, indirect rates and pricing practices, accounting and management internal control business systems, and compliance with applicable contracting and procurement laws, regulations and standards. An adverse outcome to a review or audit or other failure to comply with applicable contracting and procurement laws, regulations and standards could result in material civil and criminal penalties and administrative sanctions being imposed on the Company, which may include termination of contracts, forfeiture of profits, triggering of price reduction clauses, suspension of payments, significant customer refunds, fines and suspension, or a prohibition on doing business with U.S. G overnment agencies. In addition, if the Company fails to obtain an “adequate” determination of its various accounting and management internal control business systems from applicable U.S. G overnment agencies or if allegations of impropriety are made against it, the Company could suffer serious harm to its business or its reputation, including its ability to bid on new contracts or receive contract renewals and its competitive position in the bidding process. The Company’s incurred cost audits by the DCAA have not been concluded for fiscal year s 2020 or 202 1 . As of September 30, 2021 , the DCAA had completed its incurred cost audit for fiscal year s 200 4 , 2016 and 2019 and approved the Company’s incurred costs for those fiscal years , as well as approved the Company’s incurred costs for fiscal years 2005 through 2 015, 2017 and 2018 without further audit based on the determination of low risk. Althoug h the Company has recorded contract revenues subsequent to fiscal year 201 9 based upon an estimate of costs that the Company believes will be approved upon final audit or review, the Company does not know the outcome of any ongoing or future audits or reviews and adjustments, and if future adjustments exceed the Company’s estimates, its profitability would be adversely affected. As of September 30, 2021 and March 31, 2021 , the Company had $ 10.9 million and $ 10.3 million , respectively, in contract-related reserves for its estimate of potential refunds to customers for potential cost adjustments on several multi-year U.S. G overnment cost reimbursable contracts. This reserve is classified as either an element of accrued liabilities or as a reduction of unbilled accounts receivable based on the status of the related contracts. Note 9 — Income Taxes Ordinarily, the Company calculates its provision for income taxes at the end of each interim reporting period on the basis of an estimated annual effective tax rate adjusted for tax items that are discrete to each period. However, when a reliable estimate cannot be made, the Company computes its provision for income taxes using the actual effective tax rate (discrete method) for the year-to-date period. The Company’s effective tax rate is highly influenced by the amount of its R&D tax credits. A small change in estimated annual pretax income (loss) can produce a significant variance in the annual effective tax rate given the Company’s expected amount of R&D tax credits. This variability provides an unreliable estimate of the annual effective tax rate. As a result, and in accordance with the authoritative guidance for accounting for income taxes in interim periods, the Company has computed its provision for income taxes for the three and six months ended September 30, 2021 and 2020 by applying the actual effective tax rate to the income (loss) for the three-month and six-month periods. For the three and six months ended September 30, 2021, the Company recorded an income tax benefit of $ 2.9 million and $ 7.0 million, respectively, resulting in effective tax benefit rates of negative 126 % and negative 42 %, respectively. The effective tax rates for such periods differed from the U.S. statutory rate primarily due to the benefit of federal and state R&D tax credits and in the six months ended September 30, 2021, due to the reversal of a deferred tax liability recorded for Euro Infrastructure Co.’s outside basis difference upon assertion made during the first quarter of fiscal year 2022 to indefinitely reinvest future earnings. For the three and six months ended September 30, 2020, the Company recorded an income tax benefit of an insignificant amount and $ 6.4 million, respectively, resulting in effective tax benefit rates of negative 23 % and positive 56 %, respectively. The effective tax rates for the periods differed from the U.S. statutory rate due primarily to the benefit of federal and state R&D tax credits. Future realization of existing deferred tax assets ultimately depends on future profitability and the existence of sufficient taxable income of appropriate character (for example, ordinary income versus capital gains) within the carryforward period available under tax law. In the event that the Company’s estimate of taxable income is less than that required to utilize the full amount of any deferred tax asset, a valuation allowance is established, which would cause a decrease to income in the period such determination is made. For the three and six months ended September 30, 2021, the Company’s gross unrecognized tax benefits increased by $ 4.8 million and $ 6.4 million, respectively, including interest and penalties of an insignificant amount, which were 27 VIASAT, INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (UNAUDITED) included as a component of the provision for income taxes . In the next 12 months it is reasonably possible that the amount of unrecognized tax benefits will not change significantly. Note 10 — Equity Method Investments and Related-Party Transactions Euro Broadband Infrastructure Sàrl In March 2017, the Company acquired a 49 % interest in Euro Infrastructure Co. for $ 139.5 million as part of the consummation of the Company’s strategic partnering arrangement with Eutelsat. On April 30, 2021, Euro Infrastructure Co. became a consolidated subsidiary when the Company purchased the remaining 51 % interest in Euro Infrastructure Co. from Eutelsat (see Note 12 — Acquisitions — Euro Infrastructure Co. for more information). Prior to the purchase of the remaining 51 % interest on April 30, 2021, the Company’s investment in Euro Infrastructure Co. was accounted for under the equity method and the total investment including basis difference allocated to tangible assets, identifiable intangible assets, deferred income taxes and goodwill, was classified as a single line item, as an investment in unconsolidated affiliate, in the Company’s condensed consolidated balance sheets. Because the underlying net assets in Euro Infrastructure Co. and the related excess carrying value of investment over the proportionate share of net assets was denominated in Euros, foreign currency translation gains or losses impacted the recorded value of the Company’s investment. Prior to the purchase, the Company’s investment in Euro Infrastructure Co. was presented at cost of investment plus its accumulated proportional share of income or loss, including amortization of the difference in the historical basis of the Company’s contribution, less any distributions it has received. The difference between the Company’s carrying value of its investment in Euro Infrastructure Co. and its proportionate share of the net assets of Euro Infrastructure Co. as of March 31, 2021 is summarized as follows: As of March 31, 2021 Carrying value of investment in Euro Infrastructure Co. $ 176,938 Less: proportionate share of net assets of Euro Infrastructure Co. 159,394 Excess carrying value of investment over proportionate share of net assets $ 17,544 The excess carrying value has been primarily assigned to: Goodwill $ 23,978 Identifiable intangible assets 8,332 Tangible assets ( 15,781 ) Deferred income taxes 1,015 $ 17,544 As of March 31, 2021, the identifiable intangible assets had useful lives of up to 11 years and a weighted average useful life of approximately ten years , and tangible assets had useful lives of up to 11 years and a weighted average useful life of approximately 11 years. Goodwill is not deductible for tax purposes. The Company’s share of earnings on its investment in Euro Infrastructure Co. was no ne and an insignificant amount for the three and six months ended September 30, 2021, respectively, and an insignificant amount for both the three and six months ended September 30, 2020, consisting of the Company’s share of equity in Euro Infrastructure Co.’s income (loss), including amortization of the difference in the historical basis of the Company’s contribution. Prior to the purchase of the remaining 51 % interest on April 30, 2021, the Company recorded its proportionate share of the results of Euro Infrastructure Co., and any related basis difference amortization expense, within equity in income of unconsolidated affiliate, net, one quarter in arrears. Subsequent to April 30, 2021, the results of Euro Infrastructure Co. have been included within the consolidated results of the Company and will no longer be recorded in arrears with no material impact. Since acquiring its initial interest in Euro Infrastructure Co. through the purchase date, the Company recorded $ 10.4 million in retained earnings of undistributed cumulative earnings in equity interests, net of tax, as of April 30, 2021. 28 VIASAT, INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (UNAUDITED) Related-party transactions Transactions with the equity method investee are considered related-party transactions. In the first quarter of fiscal year 2022, the Company acquired the remaining 51 % interest in its former equity method investee, Euro Infrastructure Co. Refer to Note 12 — Acquisitions — Euro Infrastructure Co. for further information. The following tables set forth the material related-party transactions entered into between Euro Infrastructure Co. and its subsidiaries, on the one hand, and the Company and its subsidiaries, on the other hand, in the ordinary course of business for the time periods presented: Three Months Ended Six Months Ended September 30, 2020 September 30, 2020 (In thousands) Revenue – Euro Infrastructure Co. $ * $ 1,424 Expense – Euro Infrastructure Co. 4,004 8,168 Cash received – Euro Infrastructure Co. 4,820 8,222 Cash paid – Euro Infrastructure Co. 4,886 13,080 As of March 31, 2021 Collections in excess of revenues and deferred revenues – Euro Infrastructure Co. $ 6,013 * Amount was insignificant. Note 11 — Segment Information The Company’s reporting segments, comprised of the satellite services, commercial networks and government systems segments, are primarily distinguished by the type of customer and the related contractual requirements. The Company’s satellite services segment provides satellite-based broadband and related services to residential customers, Community Internet hotspot users, enterprises, commercial airlines and other mobile broadband customers. The Company’s commercial networks segment develops and offers advanced satellite and wireless broadband platforms, ground networking equipment, radio frequency and advanced microwave solutions, Application-Specific Integrated Circuit chip design, satellite payload development and space-to-earth connectivity systems, some of which are ultimately used by the Company’s satellite services segment. The Company’s government systems segment provides global mobile broadband services to military and government users and develops and offers network-centric, internet protocol-based fixed and mobile secure communications products and solutions. The more regulated government environment is subject to unique contractual requirements and possesses economic characteristics which differ from the satellite services and commercial networks segments. The Company’s segments are determined consistent with the way management currently organizes and evaluates financial information internally for making operating decisions and assessing performance. 29 VIASAT, INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (UNAUDITED) Segment revenues and operating profits (losses) for the three and six months ended September 30, 2021 and 2020 were as follows: Three Months Ended Six Months Ended September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020 (In thousands) Revenues: Satellite services Product $ — $ — $ — $ — Service 300,110 215,887 574,227 417,871 Total 300,110 215,887 574,227 417,871 Commercial networks Product 118,935 66,751 220,466 121,870 Service 15,871 12,109 32,936 24,152 Total 134,806 78,860 253,402 146,022 Government systems Product 189,731 189,229 381,464 384,744 Service 76,707 70,302 157,121 136,129 Total 266,438 259,531 538,585 520,873 Elimination of intersegment revenues — — — — Total revenues $ 701,354 $ 554,278 $ 1,366,214 $ 1,084,766 Operating profits (losses): Satellite services $ 17,046 $ 11,483 $ 29,559 $ 9,626 Commercial networks ( 45,321 ) ( 45,363 ) ( 83,029 ) ( 96,757 ) Government systems 43,972 47,863 91,388 97,358 Elimination of intersegment operating profits — — — — Segment operating profit before corporate and amortization of acquired intangible assets 15,697 13,983 37,918 10,227 Corporate — — — — Amortization of acquired intangible assets ( 7,399 ) ( 1,300 ) ( 13,328 ) ( 2,858 ) Income from operations $ 8,298 $ 12,683 $ 24,590 $ 7,369 Assets identifiable to segments include: accounts receivable, unbilled accounts receivable, inventory, acquired intangible assets and goodwill. The Company’s property and equipment, including its satellites, earth stations and other networking equipment, are assigned to corporate assets as they are available for use by the various segments throughout their estimated useful lives. Segment assets as of September 30, 2021 and March 31, 2021 were as follows: As of September 30, 2021 As of March 31, 2021 (In thousands) Segment assets: Satellite services $ 451,194 $ 64,048 Commercial networks 231,186 168,334 Government systems 468,263 470,389 Total segment assets 1,150,643 702,771 Corporate assets 4,842,217 4,646,696 Total assets $ 5,992,860 $ 5,349,467 30 VIASAT, INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (UNAUDITED) Other acquired intangible assets, net and goodwill included in segment assets as of September 30, 2021 and March 31, 2021 were as follows: Other Acquired Intangible Assets, Net Goodwill As of September 30, 2021 As of March 31, 2021 As of September 30, 2021 As of March 31, 2021 (In thousands) Satellite services $ 240,419 $ 5,738 $ 82,764 $ 13,814 Commercial networks — — 44,067 44,044 Government systems 2,912 3,830 64,294 64,442 Total $ 243,331 $ 9,568 $ 191,125 $ 122,300 Amortization of acquired intangible assets by segment for the three and six months ended September 30, 2021 and 2020 was as follows: Three Months Ended Six Months Ended September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020 (In thousands) Satellite services $ 7,097 $ 546 $ 12,419 $ 1,055 Commercial networks — — — 257 Government systems 302 754 909 1,546 Total amortization of acquired intangible assets $ 7,399 $ 1,300 $ 13,328 $ 2,858 Revenues by geographic area for the three and six months ended September 30, 2021 and 2020 were as follows: Three Months Ended Six Months Ended September 30, 2021 September 30, 2021 (In thousands) U.S. customers $ 598,291 $ 1,165,777 Non-U.S. customers (each country individually insignificant) 103,063 200,437 Total revenues $ 701,354 $ 1,366,214 Three Months Ended Six Months Ended September 30, 2020 September 30, 2020 (In thousands) U.S. customers $ 513,015 $ 1,011,530 Non-U.S. customers (each country individually insignificant) 41,263 73,236 Total revenues $ 554,278 $ 1,084,766 The Company distinguishes revenues from external customers by geographic area based on customer location. Note 12 — Acquisitions Euro Infrastructure Co. On April 30, 2021, the Company acquired the remaining 51 % interest in Euro Infrastructure Co., a broadband services provider, from Eutelsat. By completing the acquisition, the Company gained 100 % ownership and control of Euro Infrastructure Co. and the KA-SAT satellite over EMEA and related ground infrastructure, which is expected to facilitate the diversification of the Company’s business portfolio in Europe, while establishing operations, distribution and sales of satellite-based broadband services, ahead of the anticipated ViaSat-3 (EMEA) satellite launch. The benefits and additional opportunities of the acquisition were among the factors that contributed to a purchase price resulting in the recognition of preliminary estimated goodwill, which was recorded within the Company’s satellite services segment. The goodwill recognized is not deductible for U.S. and foreign income tax purposes. 31 VIASAT, INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (UNAUDITED) Prior to the acquisition date, the Company owned a 49 % interest in Euro Infrastructure Co. and accounted for the investment using the equity method of accounting (see Note 10 – Equity Method Investments and Related-Party Transactions for more information). The acquisition of the remaining equity interest in Euro Infrastructure Co. was accounted for as a step acquisition in accordance with the authoritative guidance for business combinations (ASC 805). Accordingly, the Company allocated the purchase price of the acquired company to the net tangible assets and intangible assets acquired based upon their preliminary estimated fair values. The Company remeasured the previously held equity method investment to its fair value based upon a valuation of the acquired business, as of the date of acquisition. The Company considered multiple factors in determining the fair value of the previously held equity method investment, including, (i) the price negotiated with the selling shareholder for the remaining 51 % interest in Euro Infrastructure Co. and (ii) an income valuation model (discounted cash flow). As a result of the equity method investment remeasurement, recognition of previously unrecognized foreign currency gain and settlement of insignificant preexisting relationships, the Company recognized an insignificant total net gain included in other income, net, in the condensed consolidated statements of operations and comprehensive income (loss) in the first quarter of fiscal year 2022. The purchase price of $ 327.4 million was primarily comprised of $ 167.0 million of cash, net of what is currently estimated to be an immaterial amount of estimated purchase price consideration to be settled among the parties over the next 24 months ( up to plus or minus € 20.0 million , or approximately $ 23.4 million, see Note 3 — Fair Value Measurements for more information) from the closing date (which after consideration of approximately $ 121.7 million of Euro Infrastructure Co.’s cash on hand, resulted in a net cash outlay of approximately $ 51.0 million) and the fair value of previously held equity method investment of approximately $ 160.4 million. The purchase price allocation is preliminary primarily due to the finalization of the Company’s valuation analysis and review of various tax attributes . The preliminary purchase price allocation of the acquired assets and assumed liabilities based on the estimated fair values as of April 30, 2021, slightly adjusted during the second quarter of fiscal year 2022 primarily between goodwill and identifiable intangible assets, is as follows: (In thousands) Current assets $ 154,479 Property, equipment and satellites 109,433 Identifiable intangible assets 26,574 Goodwill 41,157 Other assets 1,004 Total assets acquired $ 332,647 Total liabilities assumed $ ( 5,296 ) Total consideration transferred $ 327,351 Amounts assigned to identifiable intangible assets are preliminary and are being amortized on a straight-line basis over their estimated useful lives (which approximates the economic pattern of benefit) and are as follows as of April 30, 2021: Preliminary Estimated Weighted Fair Value Average Useful Life (In thousands) (In years) Customer relationships $ 17,877 8 Other 7,851 7 Trade name 846 2 Total identifiable intangible assets $ 26,574 8 At the closing of the acquisition, Euro Infrastructure Co. became a wholly owned subsidiary of the Company and Euro Infrastructure Co.’s operations have been included in the Company’s condensed consolidated financial statements in the Company’s satellite services segment commencing on the acquisition date. As Euro Infrastructure Co.’s results of operations are not material to the Company’s consolidated results of operations, pro forma results of operations for this acquisition have not been presented. 32 VIASAT, INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (UNAUDITED) RigNet, Inc. On April 30, 2021, the Company completed the acquisition of all outstanding shares of RigNet, a publicly held leading provider of ultra-secure, intelligent networking solutions and specialized applications. The acquisition of RigNet is beneficial to the Company as it enables the Company to expand into new and adjacent industries, including renewable energy, transportation, maritime, mining and other enterprise markets. These benefits and additional opportunities were among the factors that contributed to a purchase price resulting in the recognition of preliminary estimated goodwill, which was recorded within the Company’s satellite services segment. The goodwill recognized is not deductible for U.S. and foreign income tax purposes. The consideration transferred of approximately $ 317.9 million was primarily comprised of $ 207.2 million of the fair value of approximately 4.0 million shares of the Company’s common stock issued at the closing date, $ 107.3 million related to the pay down of outstanding borrowings of RigNet’s revolving credit facility, a de minimis amount in cash consideration in respect of fractional shares to the former shareholders of RigNet and an insignificant amount of other consideration. In connection with the RigNet acquisition, the Company recorded merger-related transaction costs of an insignificant amount and approximately $ 7.1 million, respectively, for the three and six months ended September 30, 2021, included in selling, general and administrative expenses. The purchase price allocation is preliminary primarily due to the finalization of the Company’s valuation analysis and review of various tax attributes. The preliminary purchase price allocation of the acquired assets and assumed liabilities based on the estimated fair values as of April 30, 2021 is as follows: (In thousands) Current assets $ 88,166 Property, equipment and satellites 63,191 Identifiable intangible assets 221,540 Goodwill 29,132 Other assets 13,350 Total assets acquired $ 415,379 Current liabilities ( 66,006 ) Other long-term liabilities ( 31,433 ) Total liabilities assumed $ ( 97,439 ) Total consideration transferred $ 317,940 Amounts assigned to identifiable intangible assets are preliminary and are being amortized on a straight-line basis over their estimated useful lives (which approximates the economic pattern of benefit) and are as follows as of April 30, 2021: Preliminary Estimated Weighted Fair Value Average Useful Life (In thousands) (In years) Technology $ 85,440 8 Customer relationships 101,920 12 Trade name 25,540 8 Other 8,640 12 Total identifiable intangible assets $ 221,540 10 In connection with the acquisition, the Company assumed a contingent liability associated with a RigNet predecessor subsidiary of approximately $ 13.8 million, which represented the maximum amount payable under the terms of the agreement. As of September 30, 2021, no amount remains payable as the maximum amount payable was paid during the first and second quarters of fiscal year 2022. 33 VIASAT, INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (UNAUDITED) The condensed consolidated financial statements include the operating results of RigNet from the date of acquisition. Since the acquisition date, the Company recorded approximately $ 45.2 million and $ 79.2 million in revenue for the three and six months ended September 30, 2021, respectively, and $ 9.9 million and $ 16.2 million of net losses for the three and six months ended September 30, 2021, respectively, with respect to the RigNet business primarily in the Company’s satellite services segment (with a portion included in its commercial networks segment) in the condensed consolidated statements of operations . Unaudited Pro Forma Financial Information The unaudited financial information in the table below summarizes the combined results of operations for the Company and RigNet on a pro forma basis, as though the companies had been combined as of the beginning of the prior fiscal year, April 1, 2020. The pro forma information is presented for informational purposes only and may not be indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of the related fiscal periods. The pro forma financial information for the three-month and six-month periods ended September 30, 2021, and September 30, 2020 include the business combination accounting effects primarily related to the amortization and depreciation changes from acquired intangible and tangible assets, acquisition-related transaction costs and related tax effects. Three Months Ended Six Months Ended September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020 (In thousands) Total revenues $ 701,354 $ 603,000 $ 1,377,831 $ 1,186,879 Net income (loss) attributable to Viasat, Inc. $ 3,291 $ ( 7,582 ) $ 15,835 $ ( 43,356 ) Note 13 — Subsequent Event On November 8, 2021, the Company entered into a Share Purchase Agreement to combine with Connect Topco Limited, a private company limited by shares and incorporated in Guernsey (Inmarsat), with the shareholders of Inmarsat and certain management and employees who hold options and shares of a wholly owned subsidiary of Inmarsat whose options and shares will be exchanged for shares of Inmarsat prior to closing (collectively, the Sellers). Pursuant to the Share Purchase Agreement, the Company will purchase all of the issued and outstanding shares of Inmarsat from the Sellers upon the terms and subject to the conditions set forth in the Share Purchase Agreement. The total consideration payable by the Company under the Share Purchase Agreement consists of $ 850.0 million in cash, subject to adjustments, and approximately 46.36 million unregistered shares of the Company’s common stock. The closing of the transaction is subject to customary closing conditions, including receipt of regulatory approvals and clearances, and approval by the stockholders of the Company of the issuance of shares in the transaction and an amendment to the Company’s certificate of incorporation to increase the number of shares of common stock authorized for issuance. The Share Purchase Agreement contains certain termination rights for both the Company and certain of the Sellers and further provides that, upon termination of the Share Purchase Agreement under certain circumstances, the Company may be obligated to pay a termination fee of up to $ 200.0 million or to reimburse certain out-of-pocket expenses of certain Sellers up to $ 40.0 million. The Company has obtained financing commitments for $ 2.3 billion of new debt facilities in connection with the transaction. The Company also plans to assume $ 2.1 billion in principal amount of Inmarsat senior secured bonds and $ 1.7 billion outstanding under Inmarsat’s $ 2.4 billion senior secured credit facilities. The Company has also obtained commitments of $ 3.2 billion to backstop certain amendments required under the Credit Facilities and Inmarsat’s $2.4 billion senior secured credit facilities. Additional information regarding the proposed transaction and Share Purchase Agreement is contained in the Company’s Current Report on Form 8-K filed with the SEC on November 8, 2021. 34