| 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 September 30, 2018 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2018 |
|
Without ASC 606 Adoption |
|
Effect of Change Increase/ (Decrease) |
|
As Reported |
|
|
|
|
|
|
Cash and cash equivalents |
$ |
31,731 |
|
|
— |
|
|
$ |
31,731 |
|
Restricted cash |
801 |
|
|
— |
|
|
801 |
|
Accounts receivable, net |
101,258 |
|
|
(1,580 |
) |
|
99,678 |
|
Inventories |
38,381 |
|
|
— |
|
|
38,381 |
|
Prepaid expenses |
16,141 |
|
|
— |
|
|
16,141 |
|
Other current assets |
17,261 |
|
|
— |
|
|
17,261 |
|
TOTAL CURRENT ASSETS |
205,573 |
|
|
(1,580 |
) |
|
203,993 |
|
Content library |
7,143 |
|
|
— |
|
|
7,143 |
|
Property, plant and equipment |
182,777 |
|
|
— |
|
|
182,777 |
|
Goodwill |
159,610 |
|
|
— |
|
|
159,610 |
|
Intangible assets, net |
92,210 |
|
|
— |
|
|
92,210 |
|
Equity method investments |
135,975 |
|
|
— |
|
|
135,975 |
|
Other non-current assets |
8,733 |
|
|
3,706 |
|
|
12,439 |
|
TOTAL ASSETS |
$ |
792,021 |
|
|
2,126 |
|
|
$ |
794,147 |
|
|
|
|
|
|
|
Accounts payable and accrued liabilities |
$ |
168,974 |
|
|
(1,839 |
) |
|
$ |
167,135 |
|
Deferred revenue |
11,204 |
|
|
(312 |
) |
|
10,892 |
|
Current portion of long-term debt |
20,946 |
|
|
— |
|
|
20,946 |
|
Other current liabilities |
9,137 |
|
|
— |
|
|
9,137 |
|
TOTAL CURRENT LIABILITIES |
210,261 |
|
|
(2,151 |
) |
|
208,110 |
|
Deferred revenue, non-current |
1,116 |
|
|
— |
|
|
1,116 |
|
Long-term debt |
666,493 |
|
|
— |
|
|
666,493 |
|
Deferred tax liabilities |
7,776 |
|
|
— |
|
|
7,776 |
|
Other non-current liabilities |
30,573 |
|
|
— |
|
|
30,573 |
|
TOTAL LIABILITIES |
916,219 |
|
|
(2,151 |
) |
|
914,068 |
|
|
|
|
|
|
|
Preferred stock |
— |
|
|
— |
|
|
— |
|
Common stock |
10 |
|
|
— |
|
|
10 |
|
Treasury stock |
(30,659 |
) |
|
— |
|
|
(30,659 |
) |
Additional paid-in capital |
811,906 |
|
|
— |
|
|
811,906 |
|
Subscriptions receivable |
(597 |
) |
|
— |
|
|
(597 |
) |
Prior year accumulated deficit |
(773,791 |
) |
|
933 |
|
|
(772,858 |
) |
Current year retained deficit |
(130,767 |
) |
|
3,344 |
|
|
(127,423 |
) |
Accumulated other comprehensive loss |
(300 |
) |
|
— |
|
|
(300 |
) |
TOTAL STOCKHOLDERS' DEFICIT |
(124,198 |
) |
|
4,277 |
|
|
(119,921 |
) |
TOTAL LIABILTIES & STOCKHOLDERS' DEFICIT |
$ |
792,021 |
|
|
2,126 |
|
|
$ |
794,147 |
|
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 September 30, 2018 (in thousands, except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2018 |
|
Without ASC 606 Adoption |
|
Effect of Change Increase/ (Decrease) |
|
As Reported |
Revenue: |
|
|
|
|
|
Licensing and services |
$ |
158,713 |
|
|
(1,109 |
) |
|
$ |
157,604 |
|
Equipment |
4,772 |
|
|
1,651 |
|
|
6,423 |
|
Total revenue |
163,485 |
|
|
542 |
|
|
164,027 |
|
Cost of Sales |
|
|
|
|
|
Cost of sales: |
|
|
|
|
|
Licensing and services |
123,623 |
|
|
(497 |
) |
|
123,126 |
|
Equipment |
5,408 |
|
|
35 |
|
|
5,443 |
|
Total cost of sales |
129,031 |
|
|
(462 |
) |
|
128,569 |
|
Gross Margin |
34,454 |
|
|
1,004 |
|
|
35,458 |
|
Operating expenses: |
|
|
|
|
|
Sales and marketing |
8,979 |
|
|
10 |
|
|
8,989 |
|
Product development |
7,597 |
|
|
(120 |
) |
|
7,477 |
|
General and administrative |
31,612 |
|
|
8 |
|
|
31,620 |
|
Provision for legal settlements |
(509 |
) |
|
— |
|
|
(509 |
) |
Amortization of intangible assets |
9,447 |
|
|
— |
|
|
9,447 |
|
Goodwill impairment |
— |
|
|
— |
|
|
— |
|
Total operating expenses |
57,126 |
|
|
(102 |
) |
|
57,024 |
|
Loss from operations |
(22,672 |
) |
|
1,106 |
|
|
(21,566 |
) |
Other income (expense): |
|
|
|
|
|
|
Interest expense, net |
(20,048 |
) |
|
— |
|
|
(20,048 |
) |
Income from equity method investments |
2,022 |
|
|
— |
|
|
2,022 |
|
Change in fair value of derivatives |
(196 |
) |
|
— |
|
|
(196 |
) |
Other expense, net |
(588 |
) |
|
— |
|
|
(588 |
) |
Loss before income taxes |
(41,482 |
) |
|
1,106 |
|
|
(40,376 |
) |
Income tax expense |
2,852 |
|
|
— |
|
|
2,852 |
|
Net loss |
$ |
(44,334 |
) |
|
1,106 |
|
|
$ |
(43,228 |
) |
|
|
|
|
|
|
Net loss per share – basic and diluted |
(0.49 |
) |
|
|
|
(0.47 |
) |
Weighted average shares outstanding – basic and diluted |
$ |
91,408 |
|
|
|
|
$ |
91,408 |
|
The following table presents the effect of the adoption of ASU 2014-09 on our condensed consolidated statements of operations for the nine months ended September 30, 2018 (in thousands, except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2018 |
|
Without ASC 606 Adoption |
|
Effect of Change Increase/ (Decrease) |
|
As Reported |
Revenue: |
|
|
|
|
|
Licensing and services |
$ |
461,931 |
|
|
(1,371 |
) |
|
$ |
460,560 |
|
Equipment |
24,365 |
|
|
1,562 |
|
|
25,927 |
|
Total revenue |
486,296 |
|
|
191 |
|
|
486,487 |
|
Cost of Sales |
|
|
|
|
|
|
Cost of sales: |
|
|
|
|
|
|
Licensing and services |
358,862 |
|
|
(1,339 |
) |
|
357,523 |
|
Equipment |
15,794 |
|
|
65 |
|
|
15,859 |
|
Total cost of sales |
374,656 |
|
|
(1,274 |
) |
|
373,382 |
|
Gross Margin |
111,640 |
|
|
1,465 |
|
|
113,105 |
|
Operating expenses: |
|
|
|
|
|
|
Sales and marketing |
29,477 |
|
|
22 |
|
|
29,499 |
|
Product development |
27,439 |
|
|
(1,903 |
) |
|
25,536 |
|
General and administrative |
100,382 |
|
|
2 |
|
|
100,384 |
|
Provision for legal settlements |
(134 |
) |
|
— |
|
|
(134 |
) |
Amortization of intangible assets |
30,367 |
|
|
— |
|
|
30,367 |
|
Goodwill impairment |
— |
|
|
— |
|
|
— |
|
Total operating expenses |
187,531 |
|
|
(1,879 |
) |
|
185,652 |
|
Loss from operations |
(75,891 |
) |
|
3,344 |
|
|
(72,547 |
) |
Other income (expense): |
|
|
|
|
|
|
Interest expense, net |
(55,399 |
) |
|
— |
|
|
(55,399 |
) |
Income from equity method investments |
3,611 |
|
|
— |
|
|
3,611 |
|
Change in fair value of derivatives |
(287 |
) |
|
— |
|
|
(287 |
) |
Other expense, net |
(936 |
) |
|
— |
|
|
(936 |
) |
Loss before income taxes |
(128,902 |
) |
|
3,344 |
|
|
(125,558 |
) |
Income tax expense |
1,865 |
|
|
— |
|
|
1,865 |
|
Net loss |
$ |
(130,767 |
) |
|
3,344 |
|
|
$ |
(127,423 |
) |
|
|
|
|
|
|
Net loss per share – basic and diluted |
$ |
(1.44 |
) |
|
|
|
$ |
(1.40 |
) |
Weighted average shares outstanding – basic and diluted |
91,101 |
|
|
|
|
91,101 |
|
The following table represents a disaggregation of our revenue from contracts with customers for the three and nine months ended September 30, 2018 and 2017 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Revenue: |
|
|
|
|
|
|
|
Media & Content |
|
|
|
|
|
|
|
Licensing & Services |
$ |
80,649 |
|
|
$ |
71,348 |
|
|
$ |
239,020 |
|
|
$ |
222,294 |
|
Total Media & Content |
80,649 |
|
|
71,348 |
|
|
239,020 |
|
|
222,294 |
|
|
|
|
|
|
|
|
|
Connectivity |
|
|
|
|
|
|
|
Aviation Services |
$ |
31,113 |
|
|
$ |
27,028 |
|
|
$ |
89,862 |
|
|
$ |
84,661 |
|
Aviation Equipment |
3,464 |
|
|
6,127 |
|
|
17,773 |
|
|
19,845 |
|
Maritime & Land Services |
45,842 |
|
|
45,234 |
|
|
131,678 |
|
|
126,445 |
|
Maritime & Land Equipment |
2,959 |
|
|
1,800 |
|
|
8,154 |
|
|
6,626 |
|
Total Connectivity |
83,378 |
|
|
80,189 |
|
|
247,467 |
|
|
237,577 |
|
|
|
|
|
|
|
|
|
Total revenue |
$ |
164,027 |
|
|
$ |
151,537 |
|
|
$ |
486,487 |
|
|
$ |
459,871 |
|
Contract Assets and Liabilities
Aviation connectivity contracts involve performance obligations primarily relating to the delivery 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 methodology. Where the SSP exceeds the revenue allocation, the revenue to which the Company is entitled is contingent on performing the ongoing connectivity services and the Company records a contract asset accordingly. The balance as of September 30, 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 September 30, 2018 (in thousands);
|
|
|
|
|
|
|
|
|
|
Contract Liabilities |
Balance as of December 31, 2017 |
|
$ |
7,587 |
|
Adjustments as a result of cumulative catch-up adjustment |
|
(118 |
) |
Revenue recognized that was included in the contract liability balance at the beginning of the period |
|
(4,084 |
) |
Increase due to cash received, excluding amounts recognized as revenue during the period |
|
8,623 |
|
Balance as of September 30, 2018 |
|
$ |
12,008 |
|
|
|
|
Deferred revenue, current |
|
$ |
10,892 |
|
Deferred revenue, non-current |
|
1,116 |
|
|
|
$ |
12,008 |
|
As of September 30, 2018, we had $1.1 billion of remaining performance obligations, which we also refer to as total backlog. We expect to recognize approximately 7% of our remaining performance obligations as revenue in 2018, approximately 23% in 2019, 16% by 2020 and the remaining balance thereafter.
Accounts Receivable, net
We extend credit to our customers from time to time. We maintain an allowance for doubtful accounts for estimated losses resulting from our customers’ inability 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 our accounts receivable balances. If we determine that the financial condition of any of our 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):
|
|
|
|
|
|
|
|
|
|
September 30, |
|
December 31, |
|
2018 |
|
2017 |
Accounts receivable, gross |
$ |
104,471 |
|
|
$ |
122,225 |
|
Less: Allowance for doubtful accounts |
(4,793 |
) |
|
(8,680 |
) |
Accounts receivable, net |
$ |
99,678 |
|
|
$ |
113,545 |
|
Movements in the balance for bad debt reserve and sales allowance for the nine months ended September 30, 2018 and 2017 are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
2018 |
|
2017 |
Beginning balance |
$ |
8,680 |
|
|
$ |
10,091 |
|
(Recovery) additions charged to statements of operations |
(313 |
) |
|
3,399 |
|
Less: Bad debt write offs |
(3,574 |
) |
|
(1,295 |
) |
Ending balance |
$ |
4,793 |
|
|
$ |
12,195 |
|
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 ended September 30, 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 |
— |
|
|
2,864 |
|
|
2,864 |
|
Amortization |
(22 |
) |
|
(66 |
) |
|
(88 |
) |
Balance as of September 30, 2018 |
$ |
98 |
|
|
$ |
3,608 |
|
|
$ |
3,706 |
|
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.
|