Anuvu Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Revenue

Revenue

12 Months Ended

Dec. 31, 2018

Revenue from Contract with Customer [Abstract]

On January 1, 2018, the Company 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 its Consolidated Balance Sheets as of December 31, 2018 (in thousands):



	December 31, 2018
	Without ASC 606 Adoption			Effect of Change Increase/ (Decrease)			As Reported

Cash and cash equivalents	$	39,154		—			$	39,154
Restricted cash	801			—			801
Accounts receivable, net	98,136			(513		)	97,623
Inventories	34,649			—			34,649
Prepaid expenses	9,104			—			9,104
Other current assets	10,498			—			10,498
TOTAL CURRENT ASSETS	192,342			(513		)	191,829
Content library	6,966			—			6,966
Property, plant and equipment	176,577			—			176,577
Goodwill	159,562			—			159,562
Intangible assets, net	84,136			—			84,136
Equity method investments	83,135			—			83,135
Other non-current assets	7,866			7,016			14,882
TOTAL ASSETS	$	710,584		$	6,503		$	717,087

Accounts payable and accrued liabilities	$	178,916		(1,860		)	$	177,056
Deferred revenue	7,574			(144		)	7,430
Current portion of long-term debt	22,673			—			22,673
Other current liabilities	5,032			—			5,032
TOTAL CURRENT LIABILITIES	214,195			(2,004		)	212,191
Deferred revenue, non-current	1,116			—			1,116
Long-term debt	686,938			—			686,938
Deferred tax liabilities	8,406			—			8,406
Other non-current liabilities	34,771			—			34,771
TOTAL LIABILITIES	945,426			(2,004		)	943,422

Preferred stock	—			—			—
Common stock	10			—			10
Treasury stock	(30,659		)	—			(30,659		)
Additional paid-in capital	814,488			—			814,488
Subscriptions receivable	(597		)	—			(597		)
Prior year accumulated deficit	(773,791		)	932			$	(772,859	)
Current year retained deficit	(244,174		)	7,575			$	(236,599	)
Accumulated other comprehensive loss	(119		)	—			(119		)
TOTAL STOCKHOLDERS’ DEFICIT	(234,842		)	8,507			(226,335		)
TOTAL LIABILITIES & STOCKHOLDERS’ DEFICIT	$	710,584		6,503			$	717,087

The following table presents the effect of the adoption of ASU 2014-09 on the Company’s Consolidated Statements of Operations for the twelve months ended December 31, 2018 (in thousands, except per share amounts):



	Twelve Months Ended December 31, 2018
	Without ASC 606 Adoption			Effect of Change Increase/ (Decrease)		As Reported
Revenue:
Licensing and services	$	607,648		(1,421	)	$	606,227
Equipment	35,375			5,492		40,867
Total revenue	643,023			4,071		647,094
Cost of sales:
Licensing and services	482,194			(1,330	)	480,864
Equipment	31,362			167		31,529
Total cost of sales	513,556			(1,163	)	512,393
Gross Margin	129,467			5,234		134,701
Operating expenses:
Sales and marketing	37,594			30		37,624
Product development	35,111			(2,371	)	32,740
General and administrative	134,663			—		134,663
Provision for legal settlements	1,317			—		1,317
Amortization of intangible assets	38,440			—		38,440
Goodwill impairment	—			—		—
Total operating expenses	247,125			(2,341	)	244,784
Loss from operations	(117,658		)	7,575		(110,083		)
Other income (expense):
Interest expense, net	(76,218		)	—		(76,218		)
Income from equity method investments	(46,310		)	—		(46,310		)
Change in fair value of derivatives	97			—		97
Other expense, net	(1,017		)	—		(1,017		)
Loss before income taxes	(241,106		)	7,575		(233,531		)
Income tax expense	3,068			—		3,068
Net loss	$	(244,174	)	7,575		$	(236,599	)

Net loss per share – basic and diluted	$	(2.67	)			$	(2.59	)
Weighted average shares outstanding – basic and diluted	91,325					91,325

The following table represents a disaggregation of the Company’s revenue from contracts with customers for the twelve months ended December 31, 2018 and 2017 (in thousands):



	Twelve Months Ended December 31,
	2018		2017
Revenue:
Media & Content
Licensing & Services	$	315,409	$	298,935
Total Media & Content	$	315,409	$	298,935

Connectivity
Aviation Services	$	120,130	$	113,167
Aviation Equipment	30,518		27,841
Maritime & Land Services	170,688		169,818
Maritime & Land Equipment	10,349		9,708
Total Connectivity	$	331,685	$	320,534

Total revenue	$	647,094	$	619,469

Contract 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 December 31, 2018, and December 31, 2017, of contract contingent revenue was not material.

For some customer contracts, the Company may invoice upfront for services recognized over time or for contracts in which it has 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, the Company has determined its contracts do not include a significant financing component.

The following table summarizes the significant changes in the contract liabilities balances during the period to December 31, 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	(6,480		)
Increase due to cash received, excluding amounts recognized as revenue during the period	7,557
Balance as of December 31, 2018	8,546

Deferred revenue, current	7,430
Deferred revenue, non-current	1,116
	$	8,546

As of December 31, 2018, the Company had $1.0 billion of remaining performance obligations, which it also refers to as total backlog. The Company expects to recognize approximately 25% of its remaining performance obligations as revenue in 2019, approximately 17% in 2020, 15% by 2021, and the remaining balance thereafter.

Accounts Receivable, net

The Company extends credit to its customers from time to time. The Company maintains an allowance for doubtful accounts for estimated losses resulting from its 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 its accounts receivable balances. If management 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):



	December 31,			December 31,
	2018			2017
Accounts receivable, gross	$	103,301		$	122,225
Less: Allowance for doubtful accounts	(5,678		)	(8,680		)
Accounts receivable, net	$	97,623		$	113,545

Movements in the balance for allowance for doubtful accounts for the twelve months ended December 31, 2018 and 2017 are as follows (in thousands):



	Twelve Months Ended December 31,
	2018			2017			2016
Beginning balance	$	8,680		$	10,091		$	8,640
Additions charged to statements of operations	1,227			2,788			2,624
Less: Bad debt write offs	(4,229		)	(4,199		)	(1,173		)
Ending balance	$	5,678		$	8,680		$	10,091

Capitalized Contract Costs

Certain of the Company’s sales incentive programs meet the requirements to be capitalized as incremental costs of obtaining a contract. The Company recognizes an asset for the incremental costs if it expects the benefit of those costs to be longer than one year and amortize those costs over the expected customer life. The Company applies 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, the Company capitalizes assets associated with costs incurred to fulfill a contract with a customer. For example, the Company capitalizes the costs incurred to obtain necessary STC or other customer-specific certifications for its aviation, maritime and land customers.

The following table summarizes the significant changes in the contract assets balances during the period ended December 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	—			3,367			3,367
Amortization	(29		)	(167		)	(196		)
Balance as of December 31, 2018	$	91		$	4,010		$	4,101

Contract assets are included within Other current assets on the Company’s Consolidated Balance Sheets.

Practical Expedients, Policy Elections and Exemptions

In circumstances where shipping and handling activities occur subsequent to the transfer of control, the Company has elected to treat shipping and handling as a fulfillment activity rather than a service to the customer.

The Company has 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).

The Company applies 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.