Quarterly report pursuant to Section 13 or 15(d)

Revenue (Notes)

v3.8.0.1
Revenue (Notes)
 3 Months Ended
Mar. 31, 2018
Revenue from Contract with Customer [Abstract]  
Revenue
Revenue

On January 1, 2018, we adopted ASU 2014-09 using the modified retrospective method and applied it to contracts which were not completed as of January 1, 2018. The following table presents the effect of the adoption of ASU 2014-09 on our consolidated balance sheet as of March 31, 2018 (in thousands):

 
March 31, 2018
 
Without ASC 606 Adoption
 
Effect of change Increase/ (Decrease)
 
As Reported
 
 
 
 
 
 
 Cash and cash equivalents
168,931

 
 
 
168,931

 Restricted cash
3,388

 
 
 
3,388

 Accounts receivable, net
104,440

 
(2,176
)
 
102,264

 Inventories
32,593

 
 
 
32,593

 Prepaid expenses
13,888

 
 
 
13,888

 Other current assets
14,431

 
 
 
14,431

 TOTAL CURRENT ASSETS
337,671

 
(2,176
)
 
335,495

 Content library
9,523

 


 
9,523

 Property, plant and equipment
189,970

 
 
 
189,970

 Goodwill
159,654

 
 
 
159,654

 Intangible assets, net
112,019

 
 
 
112,019

 Equity method investments
138,495

 
 
 
138,495

 Other non-current assets
8,712

 
1,103

 
9,815

 TOTAL ASSETS
956,044

 
(1,073
)
 
954,971

 
 
 
 
 
 
 Accounts payable and accrued liabilities
198,798

 
(1,831
)
 
196,967

 Deferred revenue
8,736

 
(134
)
 
8,602

 Current portion of long-term debt
16,656

 
 
 
16,656

 Other current liabilities
7,996

 
 
 
7,996

 TOTAL CURRENT LIABILITIES
232,186

 
(1,965
)
 
230,221

 Deferred revenue, non-current
1,081

 
 
 
1,081

 Long-term debt
719,427

 
 
 
719,427

 Deferred tax liabilities
9,028

 
 
 
9,028

 Other non-current liabilities
30,256

 
 
 
30,256

 TOTAL LIABILITIES
991,978

 
(1,965
)
 
990,013

 
 
 
 
 
 
 Preferred stock
—

 
 
 
—

 Common stock
10

 
 
 
10

 Treasury stock
(30,659
)
 
 
 
(30,659
)
 Additional paid-in capital
807,355

 
 
 
807,355

 Subscriptions receivable
(584
)
 
 
 
(584
)
Prior year accumulated deficit
(773,791
)
 
933

 
(772,858
)
Current year retained deficit
(38,243
)
 
(41
)
 
(38,284
)
 Accumulated other comprehensive loss
(22
)
 
 
 
(22
)
 TOTAL STOCKHOLDERS' DEFICIT
(35,934
)
 
892

 
(35,042
)
 TOTAL LIABILTIES & STOCKHOLDERS' DEFICIT
956,044

 
(1,073
)
 
954,971



The following table presents the effect of the adoption of ASU 2014-09 on our condensed consolidated statements of operations for the three months ended March 31, 2018 (in thousands, except per share amounts):

 
March 31, 2018
 
Without ASC 606 Adoption
 
Effect of change Increase/ (Decrease)
 
As Reported
Revenue:
 
 
 
 
 
Licensing and services
147,182

 
(656
)
 
146,526

Equipment
9,971

 
—

 
9,971

Total revenue
157,153

 
(656
)
 
156,497

Cost of Sales
 
 
 
 
 
Cost of sales:
 
 
 
 
 
Licensing and services
112,856

 
(442
)
 
112,414

Equipment
6,060

 
22

 
6,082

Total cost of sales
118,916

 
(420
)
 
118,496

Gross Margin
38,237

 
(236
)
 
38,001

Operating expenses:
 
 
 
 
 
Sales and marketing
9,676

 
(22
)
 
9,654

Product development
8,531

 
(173
)
 
8,358

General and administrative
38,285

 
—

 
38,285

Provision for legal settlements
516

 
—

 
516

Amortization of intangible assets
10,747

 
—

 
10,747

Total operating expenses
67,755

 
(195
)
 
67,560

Loss from operations
(29,518
)
 
(41
)
 
(29,559
)
Other income (expense):
 
 
—

 
 
Interest expense, net
(15,597
)
 
—

 
(15,597
)
Income from equity method investments
1,161

 
—

 
1,161

Change in fair value of derivatives
564

 
—

 
564

Other expense, net
438

 
—

 
438

Loss before income taxes
(42,952
)
 
(41
)
 
(42,993
)
Income tax benefit
(4,709
)
 
—

 
(4,709
)
Net loss
(38,243
)
 
(41
)
 
(38,284
)
 
 
 
 
 
 
Net loss per share – basic and diluted
(0.42
)
 
 
 
(0.42
)
Weighted average shares outstanding – basic and diluted
90,792

 
 
 
90,792




The following table represents a disaggregation of our revenue from contracts with customers for the three months ended March 31, 2018 and 2017 (in thousands):

 
Three Months Ended March 31,
 
2018
 
2017
Revenue:
 
 
 
Media & Content
 
 
 
Licensing & Services
$
74,915

 
$
76,380

Total Media & Content
74,915

 
76,380

 
 
 
 
Connectivity
 
 
 
Aviation Services
29,325

 
28,195

Aviation Equipment
7,598

 
6,563

Maritime & Land Services
$
42,286

 
39,068

Maritime & Land Equipment
2,373

 
2,386

Total Connectivity
81,582

 
76,212

 
 
 
 
Total revenue
$
156,497

 
$
152,592


    
Contract Assets and Liabilities

Aviation connectivity contracts involve performance obligations primarily consisting of connectivity equipment and connectivity services. The connectivity equipment can be provided at a discount and is delivered upfront while the connectivity services are rendered and paid over time. Revenue is allocated based upon the SSP principal. Where the SSP exceeds the revenue allocation, the revenue to which the Company is entitled is contingent on performing the ongoing connectivity services and we record a contract asset accordingly. The balance as of March 31, 2018 and December 31, 2017 of contract contingent revenue was not material.

For some customer contracts we may invoice upfront for services recognized over time or for contracts in which we have unsatisfied performance obligations. Payment terms and conditions vary by contract type, although terms generally include payment terms of 30 to 45 days. In the above circumstances where the timing of invoicing differs from the timing of revenue recognition, we have determined our contracts do not include a significant financing component.

The following table summarizes the significant changes in the contract liabilities balances during the period to March 31, 2018 (in thousands);

 
 
 
 
Contract Liabilities
Balance as of December 31, 2017
 
7,587

Adjustments as a result of cumulative catch-up adjustment
 
(190
)
Revenue recognized that was included in the contract liability balance at the beginning of the period
 
(2,544
)
Increase due to cash received, excluding amounts recognized as revenue during the period
 
4,830

Balance as of March 31, 2018
 
9,683

 
 
 
Deferred revenue, current
 
8,602

Deferred revenue, non-current
 
1,081

 
 
$
9,683



As of March 31, 2018, we had $1.1 billion of remaining performance obligations, which we also refer to as total backlog. We expect to recognize approximately 19% of our remaining performance obligations as revenue in 2018, an additional 32% by 2020 and the balance thereafter.


Accounts Receivable, net

The Company extends credit to its customers from time to time. An allowance for doubtful accounts is maintained for estimated losses resulting from the inability of the Company’s customers to make required payments. Management analyzes the age of customer balances, historical bad debt experience, customer creditworthiness and changes in customer payment terms when making estimates of the collectability of the Company’s accounts receivable balances. If the Company determines that the financial condition of any of its customers has deteriorated, whether due to customer specific or general economic issues, an increase in the allowance may be made. After all attempts to collect a receivable have failed, the receivable is written off.

Accounts receivable consist of the following (in thousands):

 
March 31,
 
December 31,
 
2018
 
2017
Accounts receivable, gross
$
108,188

 
$
122,225

Less: Allowance for doubtful accounts
(5,924
)
 
(8,680
)
Accounts receivable, net
$
102,264

 
$
113,545


Movements in the balance for bad debt reserve and sales allowance for the three months ended March 31, 2018 and 2017 are as follows (in thousands):
 
March 31,
 
2018
 
2017
Beginning balance
$
8,680

 
10,091

(Recovery) additions charged to statements of operations
(326
)
 
595

Less: Bad debt write offs
(2,430
)
 
(426
)
Ending balance
$
5,924

 
$
10,260



Capitalized Contract Costs

Certain of our sales incentive programs meet the requirements to be capitalized as incremental costs of obtaining a contract. We recognize an asset for the incremental costs if we expect the benefit of those costs to be longer than one year and amortize those costs over the expected customer life. We apply a practical expedient to expense costs as incurred for costs to obtain a contract when the amortization period would have been one year or less.

Additionally, we capitalize assets associated with costs incurred to fulfill a contract with a customer. For example, we capitalize the costs incurred to obtain necessary STC or other customer specific certifications for our aviation, maritime and land customers.

The following table summarizes the significant changes in the contract assets balances during the period to March 31, 2018 (in thousands);

 
Contract Assets
 
Costs to Obtain
 
Costs to Fulfill
 
Total
Balance as of December 31, 2017
—

 
—

 
—

Increases as a result of cumulative catch-up adjustment
120

 
810

 
930

Capitalization during period
30

 
173

 
203

Amortization
(7
)
 
(22
)
 
(29
)
Balance as of March 31, 2018
142

 
961

 
1,103



Contract assets are included within Other current assets on our condensed consolidated balance sheet.
    
Practical Expedients, Policy Elections and Exemptions

In circumstances where shipping and handling activities occur subsequent to the transfer of control, we have elected to treat shipping and handling as a fulfillment activity rather than a service to the customer.
    
We have made a policy election to exclude from the measurement of the transaction price all taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by the entity from a customer (e.g., sales, use, value added, and some excise taxes).

We apply a practical expedient to expense costs as incurred for incremental costs to obtain a contract when the amortization period would have been one year or less and did not evaluate contracts of one year or less for variable consideration.

The Company does not believe the impact of electing to use such practical expedients have a material impact on the financial statements.