Annual report pursuant to Section 13 and 15(d)

Segment Information

v3.19.1
Segment Information
 12 Months Ended
Dec. 31, 2018
Segment Reporting [Abstract]  
Segment Information
Segment Information

During the first quarter of 2017, the Company reported its operations through three reportable segments: Media & Content, Aviation Connectivity and Maritime & Land Connectivity. Prior to the EMC Acquisition in the third quarter of 2016, the Company operated through two operating segments: Media & Content and Connectivity. Following the EMC Acquisition, because the Company had acquired a significant number of new customers in different markets and geographic areas of operations and given a then-new management structure and corresponding organizational changes the Company re-evaluated its reportable segments and concluded that a change to its reportable segments was appropriate and consistent with how its chief operating decision maker (“CODM”) would manage the Company’s operations for purposes of evaluating financial performance and allocating resources. As such, during the fourth quarter of 2016, as a result of the EMC Acquisition, the Company formed a Maritime & Land Connectivity segment.

In the second quarter of 2017, however, following changes in the Company’s senior management (including the Company’s CODM) and organizational changes across its business, the Company reorganized its business from three operating segments back into two operating segments—Media & Content and Connectivity—primarily through integrating the business and operations of its former Aviation Connectivity segment with that of its former Maritime & Land Connectivity segment. The Company’s CODM determined this was appropriate based on the similarities and synergies between these two segments relating to satellite bandwidth and equipment used in those businesses as well as on the Company’s restructured organizational reporting lines across its business departments.

The CODM evaluates financial performance and allocates resources by reviewing revenue, costs of sales and contribution profit separately for the Company’s two segments. Total segment gross margin provides the CODM a measure to analyze operating performance of each of the Company’s operating segments and its enterprise value against historical data and competitors’ data, although historical results may not be indicative of future results, as operating performance is highly contingent on many factors, including customer tastes and preferences. All other financial information is reviewed by the CODM on a consolidated basis.

Revenue and contribution profit by segment were as follows (in thousands):
 
Year Ended December 31,
 
2018
 
2017
 
2016
Revenue:
 
 
 
 
 
Media & Content
 
 
 
 
 
Licensing & Services
$
315,409

 
$
298,935

 
$
318,064

Connectivity
 
 
 
 
 
Services
290,818

 
282,985

 
178,471

Equipment
40,867

 
37,549

 
33,220

Total
331,685

 
320,534

 
211,691

Total revenue
$
647,094

 
$
619,469

 
$
529,755

Cost of sales(1):
 
 
 
 
 
Media & Content
 
 
 
 
 
Licensing & Services
225,318

 
217,909

 
214,028

Connectivity
 
 
 
 
 
Services
255,546

 
210,710

 
122,674

Equipment
31,529

 
33,501

 
28,768

Total
287,075

 
244,211

 
151,442

Total cost of sales
512,393

 
462,120

 
365,470

Gross Margin:
 
 
 
 
 
Media & Content
$
90,091

 
$
81,026

 
$
104,036

Connectivity
44,610

 
76,323

 
60,249

Total Gross Margin
134,701

 
157,349

 
164,285

Other operating expenses
244,784

 
437,157

 
326,948

Loss from operations
$
(110,083
)
 
$
(279,808
)
 
$
(162,663
)

(1)
Includes depreciation expense of $0.4 million (Media & Content) and $42.2 million (Connectivity) for the year ended December 31, 2018, $0.6 million (Media & Content) and $29.2 million (Connectivity) for the year ended December 31, 2017, and $0.7 million (Media & Content) and $10.2 million (Connectivity) for the year ended December 31, 2016.

The Company’s total assets by segment were as follows (in thousands):
 
 
 
 
 
 
 
December 31,
 
 
 
 
 
 
 
2018
 
2017
Segment assets:
 
 
 
 
 
 
 
 
 
Media & Content
 
 
 
 
 
 
$
346,280

 
$
362,216

Connectivity
 
 
 
 
 
 
355,144

 
479,714

Total segment assets
 
 
 
 
 
 
701,424

 
841,930

Corporate assets
 
 
 
 
 
 
15,663

 
18,654

Total assets
 
 
 
 
 
 
$
717,087

 
$
860,584



Geographical revenue by segment as presented below is based on the billing location of the customer. Revenue from external customers was as follows (in thousands):
 
Year Ended December 31,
 
2018
 
2017
 
2016
Media & Content:
 
 
 
 
 
United States and Canada
$
64,763

 
$
67,807

 
$
80,765

Europe
58,855

 
52,551

 
48,527

Asia and Middle East
160,009

 
149,644

 
152,758

Other
31,782

 
28,933

 
36,014

Total
$
315,409

 
$
298,935

 
$
318,064

Connectivity:
 
 
 
 
 
United States
$
284,498

 
$
195,363

 
$
150,532

Europe
37,998

 
77,102

 
37,319

Africa, Middle East and Asia
6,991

 
26,966

 
13,759

Other
2,198

 
21,103

 
10,081

Total
$
331,685

 
$
320,534

 
$
211,691

 
$
647,094

 
$
619,469

 
$
529,755



The following table summarizes net property, plant and equipment by country (in thousands):
 
December 31,
 
2018
 
2017
Media & Content:
 
 
 
United States and Canada
$
1,093

 
$
1,628

United Kingdom
3,890

 
4,531

India
1,663

 
1,745

Other
172

 
346

Total
$
6,818

 
$
8,250

Connectivity:
 
 
 
United States
$
141,887

 
$
162,133

Germany
16,507

 
15,316

Other
5,405

 
4,574

Total
$
163,799

 
$
182,023

Corporate
 
 
 
United States
$
5,960

 
$
4,756

Total
$
5,960

 
$
4,756

 
$
176,577

 
$
195,029