Business Segments |
Business Segments
The Company reports its operations under two segments, its Connectivity and Content businesses. The Company's Connectivity operating segment provides airline partners and their passengers Wi-Fi connectivity over Ku-band satellite transmissions through Row 44. The Company's Content operating segment selects, manages, and distributes owned and licensed media content, video and music programming, applications, and video games to the airline industry through AIA, PMG, IFES and Purple.
The decision to report two segments is principally based upon the Company's chief operating decision maker (“CODM”), and how he manages the Company's operations as two segments from a consolidated basis for purposes of evaluating financial performance and allocating resources. The CODM reviews revenue, expense, and contribution profit income (loss) information separately for its Connectivity and Content businesses. Total segment contribution profit income (loss) provides the CODM, investors and equity analysts a measure to analyze operating performance of each of the Company's business 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.
Segment revenue, expenses and contribution profit (loss) for the years ended December 31, 2014, 2013, and 2012 derived from the Company's Connectivity and Content operating segments were as follows (in thousands):
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Year Ended December 31, |
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2014 |
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2013 |
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2012 |
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Content |
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Connectivity |
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Consolidated |
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Content |
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Connectivity |
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Consolidated |
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Content |
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Connectivity |
Revenue: |
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License |
$ |
231,521 |
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$ |
— |
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$ |
231,521 |
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$ |
153,973 |
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$ |
— |
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$ |
153,973 |
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$ |
— |
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$ |
— |
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Service |
45,868 |
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74,839 |
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120,707 |
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27,912 |
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51,350 |
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79,262 |
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— |
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11,365 |
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Equipment |
— |
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35,507 |
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35,507 |
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— |
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26,487 |
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26,487 |
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— |
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57,845 |
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Total Revenue |
277,389 |
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110,346 |
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387,735 |
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181,885 |
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77,837 |
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259,722 |
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— |
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69,210 |
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Operating Expenses: |
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Cost of Sales |
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Licensing and Services |
195,454 |
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54,881 |
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250,335 |
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134,207 |
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42,590 |
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176,797 |
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— |
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22,327 |
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Equipment |
— |
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31,538 |
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31,538 |
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— |
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21,141 |
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21,141 |
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— |
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54,570 |
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Total Cost of Sales |
195,454 |
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86,419 |
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281,873 |
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134,207 |
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63,731 |
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197,938 |
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— |
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76,897 |
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Contribution Profit (Loss) |
81,935 |
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23,927 |
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105,862 |
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47,678 |
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14,106 |
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61,784 |
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— |
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(7,687 |
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Other Operating Expenses |
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142,845 |
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107,308 |
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21,149 |
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Loss from Operations |
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(36,983 |
) |
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(45,524 |
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(28,836 |
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Other income (expense) |
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(9,637 |
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(67,378 |
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(13,967 |
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Loss before income taxes |
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(46,620 |
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(112,902 |
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(42,803 |
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Income tax provision |
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10,574 |
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1,839 |
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— |
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Net loss |
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$ |
(57,194 |
) |
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$ |
(114,741 |
) |
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$ |
(42,803 |
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At December 31, 2014 and 2013, the Company’s net assets and liabilities by segment were as follows (in thousands):
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December 31, 2014 |
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Connectivity |
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Content |
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Corporate |
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Total |
Cash |
$ |
8,350 |
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$ |
74,447 |
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$ |
114,851 |
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$ |
197,648 |
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Accounts receivable, net |
18,422 |
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66,882 |
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213 |
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85,517 |
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Goodwill |
— |
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53,014 |
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— |
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53,014 |
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Intangibles |
749 |
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112,155 |
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— |
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112,904 |
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Other |
41,053 |
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39,081 |
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4,378 |
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84,512 |
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Assets |
68,574 |
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345,579 |
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119,442 |
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533,595 |
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— |
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Accounts payable and accrued expenses |
13,366 |
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78,592 |
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7,370 |
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99,328 |
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Deferred tax liability |
39 |
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23,367 |
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4 |
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23,410 |
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Notes payable |
— |
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981 |
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2,034 |
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3,015 |
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Derivative fair value |
— |
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— |
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52,671 |
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52,671 |
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Other |
11,800 |
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30,783 |
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(41 |
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42,542 |
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Liabilities |
25,205 |
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133,723 |
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62,038 |
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220,966 |
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Total net assets |
$ |
43,369 |
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$ |
211,856 |
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$ |
57,404 |
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$ |
312,629 |
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December 31, 2013 |
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Connectivity |
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Content |
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Corporate |
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Total |
Cash |
$ |
8,167 |
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$ |
38,843 |
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$ |
211,786 |
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$ |
258,796 |
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Accounts receivable, net |
12,274 |
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51,942 |
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— |
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64,216 |
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Goodwill |
— |
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52,345 |
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— |
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52,345 |
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Intangibles |
— |
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|
136,414 |
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— |
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136,414 |
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Other |
32,261 |
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31,864 |
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2,987 |
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67,112 |
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Assets |
52,702 |
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311,408 |
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214,773 |
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578,883 |
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Accounts payable and accrued expenses |
8,043 |
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70,850 |
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3,068 |
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81,961 |
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Deferred tax liability |
— |
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26,378 |
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— |
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26,378 |
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Notes payable |
38 |
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10,763 |
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— |
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10,801 |
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Derivative fair value |
— |
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— |
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71,570 |
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71,570 |
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Other |
14,777 |
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8,644 |
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8,568 |
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31,989 |
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Liabilities |
22,858 |
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116,635 |
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83,206 |
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222,699 |
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Total net assets |
$ |
29,844 |
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$ |
194,773 |
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$ |
131,567 |
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$ |
356,184 |
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Geographical revenues by segment for the years ended December 31, 2014, 2013, and 2012 were as follows (in thousands):
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2014 |
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2013 |
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2012 |
Connectivity: |
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United States |
$ |
92,914 |
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$ |
77,837 |
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$ |
69,210 |
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Europe |
13,807 |
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— |
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— |
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Other |
3,625 |
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— |
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— |
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Total Connectivity revenue by region |
110,346 |
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|
77,837 |
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|
69,210 |
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Content: |
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United States and Canada |
59,317 |
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|
89,520 |
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— |
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Europe |
47,917 |
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58,889 |
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— |
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Asia and the Middle East |
114,886 |
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29,871 |
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— |
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Other |
55,269 |
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3,605 |
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— |
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Total Content revenue by region |
$ |
277,389 |
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$ |
181,885 |
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$ |
— |
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