8-K: Viasat Introduces New Segment Reporting Structure Following Inmarsat Acquisition

Viasat is implementing a new segment reporting structure, dividing its business into Communication Services and Defense and Advanced Technologies, to better reflect its post-Inmarsat acquisition strategy.

Summary

• Viasat is changing its segment reporting structure to better align with its current business operations after acquiring Inmarsat in May 2023.
• The company will now report under two segments: Communication Services, and Defense and Advanced Technologies.
• Communication Services includes Aviation, Government Satcom, Maritime, and Fixed and Other business lines.
• Defense and Advanced Technologies includes Information Security and Cyber Defense, Space and Mission Systems, Tactical Networking, and Advanced Technologies and Other business lines.
• The new structure aims to improve the assessment of operational performance and resource allocation across Viasat's multiple business lines.
• Supplemental financial information is provided to illustrate Viasat's financial results for fiscal years 2023 and 2024 under the new structure, with no change to consolidated results.
• Adjusted EBITDA is presented as a non-GAAP measure to enhance understanding of past financial performance and future prospects.
• Unaudited supplemental adjusted combined financial information is provided to show Viasat's performance as if the Inmarsat acquisition had occurred earlier, including adjustments for purchase price accounting and IFRS to GAAP conversions.
• The adjusted combined financial information does not include pro forma adjustments for the Inmarsat acquisition or any cost savings or synergies resulting from the acquisition.

Sentiment

Score: 7

Explanation: The document is generally positive, outlining a strategic realignment of the business following a major acquisition. The provision of detailed supplemental financial information is a positive sign of transparency. However, the lack of pro forma adjustments and the exclusion of cost savings from the supplemental information temper the overall sentiment.

Positives

• The new segment reporting structure is expected to provide a clearer view of Viasat's operational performance.
• The adjusted combined financial information provides a more comprehensive view of the company's historical performance, including Inmarsat's results.
• The presentation of Adjusted EBITDA as a non-GAAP measure is intended to enhance understanding of the company's financial performance and future prospects.
• The company is proactively adapting its reporting structure to reflect its expanded business following the Inmarsat acquisition.

Negatives

• The adjusted combined financial information is unaudited and does not include pro forma adjustments for the Inmarsat acquisition.
• The supplemental information does not reflect any cost savings or synergies expected from the Inmarsat acquisition.
• The new segment reporting structure may require investors to adjust their analysis of Viasat's financial results.

Risks

• The new segment reporting structure may not fully capture the complexities of Viasat's business.
• The adjusted combined financial information is based on historical data and may not be indicative of future performance.
• The exclusion of pro forma adjustments and cost savings from the supplemental information may limit its usefulness for forecasting purposes.
• The integration of Inmarsat may present unforeseen challenges that could impact Viasat's financial results.

Future Outlook

The new segment reporting structure is expected to better reflect Viasat's strategy and allow for improved assessment of operational performance and resource allocation. The company is providing supplemental financial information to assist investors in evaluating historical and comparative financial performance.

Management Comments

• The new segment reporting structure is expected to better reflect Viasat's strategy following the acquisition of Inmarsat.
• The new structure is expected to allow Viasat to better assess the operational performance of, and allocated resources to, our multiple business lines.
• Viasat believes the presentation of Adjusted EBITDA is appropriate to enhance an overall understanding of Viasat's past financial performance and prospects for the future.

Industry Context

The change in reporting structure reflects a trend in the satellite communications industry where companies are adapting to mergers and acquisitions by reorganizing their business segments to better reflect their expanded operations and strategic focus. This is particularly relevant after large acquisitions such as the Inmarsat deal.

Comparison to Industry Standards

• Other satellite communication companies like Hughes Network Systems and Iridium Communications also report their financials based on business segments, such as broadband services and government solutions, which is similar to Viasat's new structure.
• The use of Adjusted EBITDA as a key performance indicator is common in the industry, as it provides a view of operational profitability excluding non-cash and non-recurring items.
• The adjustments made to combine Viasat and Inmarsat financials are similar to those made by other companies after mergers, including purchase price accounting and IFRS to GAAP conversions.
• The level of detail provided in the supplemental information, including segment revenues and adjusted EBITDA, is consistent with industry best practices for transparency.

Stakeholder Impact

• Shareholders will need to understand the new segment reporting structure to evaluate Viasat's performance.
• Employees may experience changes in their roles and responsibilities as the company aligns its operations under the new structure.
• Customers may see changes in the way Viasat offers its products and services.
• Suppliers and creditors will need to understand the impact of the new structure on Viasat's financial performance.

Next Steps

• Viasat will begin reporting its financial results under the new segment structure starting with the first quarter of fiscal year 2025.
• Investors will need to analyze Viasat's financial performance using the new segment reporting structure.
• The company will continue to provide supplemental financial information to assist investors in evaluating its performance.

Key Dates

Keywords

Viasat, Inmarsat, segment reporting, financial results, adjusted EBITDA, acquisition, communication services, defense technologies, non-GAAP, supplemental information