May 18, 2022

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VIASAT : Management’s Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

Forward-Looking Statements

This Quarterly Report on Form 10-Q, including "Management's Discussion and
Analysis of Financial Condition and Results of Operations," contains
forward-looking statements regarding future events and our future results that
are subject to the safe harbors created under the Securities Act of 1933 and the
Securities Exchange Act of 1934. These statements are based on current
expectations, estimates, forecasts and projections about the industries in which
we operate and the beliefs and assumptions of our management. We use words such
as "anticipate," "believe," "continue," "could," "estimate," "expect," "goal,"
"intend," "may," "plan," "project," "seek," "should," "target," "will," "would,"
variations of such words and similar expressions to identify forward-looking
statements. In addition, statements that refer to the impact of the novel
coronavirus (COVID-19) pandemic on our business; our expectations regarding an
end to the pandemic and a lessening of its effects on our business, including
expectations for increased airline passenger traffic and in-flight connectivity
(IFC) growth; projections of earnings, revenue, costs or other financial items;
anticipated growth and trends in our business or key markets; future economic
conditions and performance; the anticipated benefits of our acquisitions RigNet,
Inc. (RigNet) and Euro Broadband Infrastructure Sàrl (Euro Infrastructure Co.);
the development, customer acceptance and anticipated performance of
technologies, products or services; satellite construction and launch
activities; the performance and anticipated benefits of our ViaSat-2 and
ViaSat-3 class satellites and any future satellite we may construct or acquire;
the expected completion, capacity, service, coverage, service speeds and other
features of our satellites, and the timing, cost, economics and other benefits
associated therewith; anticipated subscriber growth; plans, objectives and
strategies for future operations; international growth opportunities; the number
of additional aircraft under existing contracts with commercial airlines
anticipated to be put into service with our IFC systems; and other
characterizations of future events or circumstances, are forward-looking
statements. Readers are cautioned that these forward-looking statements are only
predictions and are subject to risks, uncertainties and assumptions that are
difficult to predict. Factors that could cause actual results to differ
materially include: our ability to realize the anticipated benefits of the
ViaSat-2 and ViaSat-3 class satellites and any future satellite we may construct
or acquire; unexpected expenses related to our satellite projects; our ability
to successfully implement our business plan for our broadband services on our
anticipated timeline or at all; capacity constraints in our business in the
lead-up to the launch of services on our ViaSat-3 satellites; risks associated
with the construction, launch and operation of satellites, including the effect
of any anomaly, operational failure or degradation in satellite performance; the
impact of the COVID-19 pandemic on our business, suppliers, consumers,
customers, and employees or the overall economy; our ability to realize the
anticipated benefits of our acquisitions or strategic partnering arrangements,
including the RigNet and Euro Infrastructure Co. acquisitions; our ability to
successfully develop, introduce and sell new technologies, products and
services; audits by the U.S. Government; changes in the global business
environment and economic conditions; delays in approving U.S. Government budgets
and cuts in government defense expenditures; our reliance on U.S. Government
contracts, and on a small number of contracts which account for a significant
percentage of our revenues; reduced demand for products and services as a result
of continued constraints on capital spending by customers; changes in
relationships with, or the financial condition of, key customers or suppliers;
our reliance on a limited number of third parties to manufacture and supply our
products; increased competition; introduction of new technologies and other
factors affecting the communications and defense industries generally; the
effect of adverse regulatory changes (including changes affecting spectrum
availability or permitted uses) on our ability to sell or deploy our products
and services; changes in the way others use spectrum; our inability to access
additional spectrum, use spectrum for additional purposes, and/or operate
satellites at additional orbital locations; competing uses of the same spectrum
or orbital locations that we utilize or seek to utilize; the effect of recent
changes to U.S. tax laws; our level of indebtedness and ability to comply with
applicable debt covenants; our involvement in litigation, including intellectual
property claims and litigation to protect our proprietary technology; our
dependence on a limited number of key employees; and other factors identified
under the heading "Risk Factors" in Part I, Item 1A of our Annual Report on Form
10-K for the fiscal year ended March 31, 2021, under the heading "Risk Factors"
in Part II, Item 1A of this report, elsewhere in this report and our other
filings with the Securities and Exchange Commission (the SEC). Therefore, actual
results may differ materially and adversely from those expressed in any
forward-looking statements. We undertake no obligation to revise or update any
forward-looking statements for any reason.

Company Overview

We are an innovator in communications technologies and services, focused on
making connectivity accessible, available and secure for all. Our end-to-end
platform of high-capacity Ka-band satellites, ground infrastructure and user
terminals enables us to provide cost-effective, high-speed, high-quality
broadband solutions to enterprises, consumers, military and government users
around the globe, whether on the ground, in the air or at sea. In addition, our
government business includes a market-leading portfolio of military tactical
data link systems, satellite communication products and services and
cybersecurity and information assurance products and services. We believe that
our diversification strategy-anchored in a broad portfolio of products and
services-our vertical integration approach and our ability to effectively
cross-deploy technologies between government and commercial applications and
segments as well as across

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different geographic markets, provide us with a strong foundation to sustain and
enhance our leadership in advanced communications and networking technologies.
Viasat, Inc. was incorporated in California in 1986, and reincorporated as a
Delaware corporation in 1996.

We conduct our business through three segments: satellite services, commercial
networks and government systems.

Acquisitions

On April 30, 2021, we completed our acquisition of the remaining 51% interest in
Euro Infrastructure Co., a leading KA-SAT satellite broadband internet service
provider in Europe, Middle East and Africa (EMEA) from Eutelsat. The acquisition
is expected to facilitate the diversification of our business portfolio in
Europe, while establishing operations, distribution and sales of satellite-based
broadband services, ahead of the anticipated ViaSat-3 (EMEA) satellite launch.
We paid approximately $167.0 million in cash, net of what is currently estimated
to be an immaterial amount of estimated purchase price consideration (resulting
in a cash outlay of approximately $51.0 million, net of approximately $121.7
million of Euro Infrastructure Co.'s cash on hand) and the fair value of
previously held equity method investment of approximately $160.4 million. In
connection with the acquisition, we remeasured the previously held equity method
investment to its fair value as of the date of the acquisition, recognized
previously unrecognized foreign currency gain and settlement of insignificant
preexisting relationships, and as a result recorded an insignificant total net
gain included in other income, net in the condensed consolidated statements of
operations and comprehensive income (loss).

On April 30, 2021, we completed our acquisition of RigNet, a leading provider of
ultra-secure, intelligent networking solutions and specialized applications. In
connection with the acquisition, we issued approximately 4.0 million shares of
our common stock to RigNet former shareholders, paid down $107.3 million of
outstanding borrowings of RigNet's revolving credit facility, paid a de minimis
amount of cash in respect of fractional shares and paid an insignificant amount
of other consideration. We retained approximately $20.6 million of RigNet's cash
on hand.

COVID-19

In March 2020, the global outbreak of COVID-19 was declared a pandemic by the
World Health Organization and a national emergency by the U.S. Government. The
COVID-19 pandemic and attempts to contain it, such as mandatory closures,
"shelter-in-place" orders and travel restrictions, have caused significant
disruptions and adverse effects on U.S. and global economies, including impacts
to supply chains, customer demand and financial markets. We have taken measures
to protect the health and safety of our employees and to work with our
customers, employees, suppliers, subcontractors, distributors, resellers and
communities to address the disruptions from the pandemic. Although our financial
results for the three months ended June 30, 2021 were impacted by the pandemic,
the impact was not material to our financial position, results of operations or
cash flows in such period, with negative impacts particularly in our commercial
aviation business offset by strong demand in our fixed broadband services
business and other parts of our business. We continue to expect our diversified
businesses to provide resiliency for the remainder of fiscal year 2022.

Our government systems segment, which represented 41% of our total revenues
during the three months ended June 30, 2021, continued to perform in line with
our expectations. Demand for products and services in our government systems
segment remained strong despite the evolving COVID-19 pandemic, although our
government business continued to experience some administrative delays on
certain contractual vehicles as government customers continue to adjust to the
challenges inherent in the remote work environment resulting from the COVID-19
pandemic.

Since the onset of pandemic lockdowns in March 2020, we have experienced
increased demand for our premium high-speed plans in our fixed broadband
services business, reflecting customers' increased bandwidth needs in a remote
working/distance schooling environment. However, the pandemic also caused a
severe decline in global air traffic, which reduced demand for our in-flight
services and IFC systems in our satellite services and commercial networks
segments, respectively. While current global airline traffic is still a fraction
of pre-pandemic activity, domestic airline traffic continues to show signs of
improvement. As a result, our in-flight services business showed modest
improvement in the quarter ended June 30, 2021 compared to the quarter ended
March 31, 2021, with increased planes in service and passenger volumes. We
expect to continue to see negative impacts on revenues and operating cash flows
from our IFC businesses in the remainder of fiscal year 2022 and potentially
beyond, but for the effects to continue to lessen over time with increases in
passenger air traffic and the return to service of additional currently inactive
aircraft. In fiscal year 2020, prior to the pandemic, less than 10% of our total
revenues were generated by services and products provided to commercial airlines
reported in our satellite services and commercial networks segments.

The extent of the impact of the COVID-19 pandemic on our business in fiscal year
2022 and potentially beyond will depend on many factors, including the duration
and scope of the public health emergency, the extent, duration and

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effectiveness of containment actions taken, the efficacy and extent of
vaccination programs, the extent of disruption to important global, regional and
local supply chains and economic markets, and the impact of the pandemic on
overall supply and demand, global air travel, consumer confidence, discretionary
spending levels and levels of economic activity.

Satellite Services

Our satellite services segment uses our proprietary technology platform to
provide satellite-based high-speed broadband services around the globe for use
in commercial applications. Our proprietary Ka-band satellites are at the core
of our technology platform, and we also have access to a number of Ka-band and
Ku-band satellites in service globally. We own three Ka-band satellites in
service over North America: our second-generation ViaSat-2 satellite (launched
in 2017), our first-generation ViaSat-1 satellite (launched in 2011) and the
WildBlue-1 satellite (launched in 2007), and, after acquiring the remaining
interest in Euro Infrastructure Co. in the first quarter of fiscal year 2022, we
also own the KA-SAT satellite over EMEA. In addition, we have lifetime leases of
Ka-band capacity on two satellites-one over North America and a second one over
EMEA. We also have a global constellation of three third-generation ViaSat-3
class satellites under construction. We expect our ViaSat-3 constellation, once
in service, to enable us to deliver affordable connectivity across most of the
world.

The primary services offered by our satellite services segment are comprised of:

• Fixed broadband services, which provide consumers and businesses with

high-speed, high-quality broadband internet access and Voice over Internet

        Protocol (VoIP) services, primarily in the United States as well as in
        various countries in Europe and Latin America.

• In-flight services, which provide industry-leading IFC, wireless in-flight

entertainment and aviation software services. As of June 30, 2021, we had

our IFC systems installed and in service on approximately 1,550 commercial

aircraft, of which, due to impacts of the COVID-19 pandemic approximately

        150 were inactive at quarter end. We anticipate that approximately 1,160
        additional commercial aircraft under existing customer agreements with
        commercial airlines will be put into service with our IFC systems.

However, the timing of installation and entry into service for additional

aircraft under existing customer agreements may be delayed due to COVID-19

impacts. Additionally, due to the nature of commercial airline contracts,

there can be no assurance that anticipated IFC services will be activated

on all such additional commercial aircraft. See the section entitled

“COVID-19” above for a discussion of the impact of the COVID-19 pandemic

        on our in-flight services business.


    •   Community Internet services, which offer innovative, affordable,

satellite-based connectivity in communities with that have little, or no,

access to the internet. The services help foster digital inclusion by

enabling millions of people to connect to affordable high-quality internet

services via a centralized community hotspot connected to the internet via

satellite. Since launch, our Community Internet services have reached

approximately 2 million people living and working in thousands of rural,

suburban and urban communities in Mexico. We are trialing services in

advance of full commercial launch in other countries, including Brazil,

Guatemala and Nigeria.

• Other mobile broadband services, which include high-speed, satellite-based

internet services to seagoing vessels (such as energy offshore vessels,

cruise ships, consumer ferries and yachts), as well as L-band managed

services enabling real-time machine-to-machine (M2M) position tracking,

management of remote assets and operations, and visibility into critical

areas of the supply chain.

• Advanced software and communication infrastructure services, which include

        ultra-secure solutions spanning global IP connectivity,
        bandwidth-optimized over-the-top applications, industrial
        Internet-of-Things big data enablement and industry-leading machine
        learning analytics. These services support the evolution of digital
        enablement, and primarily result from our acquisition of RigNet in the
        first quarter of fiscal year 2022.

The assets and results of operations of our recent acquisitions, Euro
Infrastructure Co.
and RigNet, are primarily included in our satellite services
segment (with insignificant amounts included in our commercial networks
segment).

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Commercial Networks

Our commercial networks segment develops and sells a wide array of advanced
satellite and wireless products, antenna systems and terminal solutions that
support or enable the provision of high-speed fixed and mobile broadband
services. We design, develop and produce space system solutions for multiple
orbital regimes, including geostationary (GEO), medium earth orbit (MEO) and low
earth orbit (LEO). The primary products, systems, solutions and services offered
by our commercial networks segment are comprised of:

• Mobile broadband satellite communication systems, designed for use in

aircraft, seagoing vessels and land-mobile systems.

• Fixed broadband satellite communication systems, including next-generation

satellite network infrastructure and ground terminals.

• Antenna systems, including state-of-the-art ground and airborne terminals,

antennas and gateways for terrestrial and satellite customer applications,

        mobile satellite communication, Ka-band earth stations and other
        multi-band antennas.

• Satellite networking development, including specialized design and

technology services covering all aspects of satellite communication system

architecture and technology.

• Space systems, including the design and development of high-capacity

        Ka-band satellites and associated payload technologies for our own
        satellite fleet as well as for third parties.




Government Systems

Our government systems segment offers a broad array of products and services
designed to enable the collection and transmission of secure real-time digital
information and communications between fixed and mobile command centers,
intelligence and defense platforms and individuals in the field. The primary
products and services of our government systems segment include:

• Government mobile broadband products and services, which provide military

and government users with high-speed, real-time, broadband and multimedia

        connectivity in key regions of the world, as well as line-of-sight and
        beyond-line-of-sight Intelligence Surveillance and Reconnaissance
        missions.

• Government satellite communication systems, which offer an array of

portable, mobile and fixed broadband modems, terminals, network access

        control systems and antenna systems, and include products designed for
        manpacks, aircraft, unmanned aerial vehicles, seagoing vessels,
        ground-mobile vehicles and fixed applications.

• Secure networking, cybersecurity and information assurance products and

services, which provide advanced, high-speed IP-based “Type 1” and High

Assurance Internet Protocol Encryption (HAIPE®)-compliant encryption

solutions that enable military and government users to communicate

information securely over networks, and that protect the integrity of data

stored on computers and storage devices.

• Tactical data links, including our Battlefield Awareness and Targeting

System – Dismounted (BATS-D) handheld Link 16 radios, our Small Tactical

Terminal (STT) 2-channel radios for manned and unmanned applications,

“disposable” defense data links, and our Multifunctional Information

Distribution System (MIDS) and MIDS Joint Tactical Radio Systems

(MIDS-JTRS) terminals for military fighter jets.

Sources of Revenues

Our satellite services segment revenues are primarily derived from our fixed
broadband services and in-flight services.

Revenues in our commercial networks and government systems segments are
primarily derived from three types of contracts: fixed-price, cost-reimbursement
and time-and-materials contracts. Fixed-price contracts (which require us to
provide products and services under a contract at a specified price) comprised
approximately 89% and 85% of our total revenues for these segments for the three
months ended June 30, 2021 and 2020, respectively. The remainder of our revenues
in these segments for such periods was derived primarily from cost-reimbursement
contracts (under which we are reimbursed for all actual costs incurred in
performing the contract to the extent such costs are within the contract ceiling
and allowable under the terms of the contract, plus a fee or profit) and from
time-and-materials contracts (which reimburse us for the number of labor hours
expended at an established hourly rate negotiated in the contract, plus the cost
of materials utilized in providing such products or services).

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Our ability to grow and maintain our revenues in our commercial networks and
government systems segments has to date depended on our ability to identify and
target markets where the customer places a high priority on the technology
solution, and our ability to obtain additional sizable contract awards. Due to
the nature of this process, it is difficult to predict the probability and
timing of obtaining awards in these markets.

Historically, a significant portion of our revenues in our commercial networks
and government systems segments has been derived from customer contracts that
include the development of products. The development efforts are conducted in
direct response to the customer's specific requirements and, accordingly,
expenditures related to such efforts are included in cost of sales when incurred
and the related funding (which includes a profit component) is included in
revenues. Revenues for our funded development from our customer contracts were
approximately 23% and 27% of our total revenues for the three months ended
June 30, 2021 and 2020, respectively.

We also incur independent research and development (IR&D) expenses, which are
not directly funded by a third party. IR&D expenses consist primarily of
salaries and other personnel-related expenses, supplies, prototype materials,
testing and certification related to research and development (R&D) projects.
IR&D expenses were approximately 5% of total revenues during both the three
months ended June 30, 2021 and 2020. As a government contractor, we are able to
recover a portion of our IR&D expenses pursuant to our government contracts.

Critical Accounting Policies and Estimates

Management's Discussion and Analysis of Financial Condition and Results of
Operations discusses our condensed consolidated financial statements, which have
been prepared in accordance with accounting principles generally accepted in the
United States of America (GAAP). The preparation of these financial statements
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. We consider the policies
discussed below to be critical to an understanding of our financial statements
because their application places the most significant demands on management's
judgment, with financial reporting results relying on estimation about the
effect of matters that are inherently uncertain. We describe the specific risks
for these critical accounting policies in the following paragraphs. For all of
these policies, we caution that future events rarely develop exactly as
forecast, and even the best estimates routinely require adjustment.

Revenue recognition

We apply the five-step revenue recognition model under Accounting Standards
Update (ASU) 2014-09, Revenue from Contracts with Customers (commonly referred
to as Accounting Standards Codification (ASC) 606) to our contracts with our
customers. Under this model, we (1) identify the contract with the customer, (2)
identify our performance obligations in the contract, (3) determine the
transaction price for the contract, (4) allocate the transaction price to our
performance obligations and (5) recognize revenue when or as we satisfy our
performance obligations. These performance obligations generally include the
purchase of services (including broadband capacity and the leasing of broadband
equipment), the purchase of products, and the development and delivery of
complex equipment built to customer specifications under long-term contracts.



The timing of satisfaction of performance obligations may require judgment. We
derive a substantial portion of our revenues from contracts with customers for
services, primarily consisting of connectivity services. These contracts
typically require advance or recurring monthly payments by the customer. Our
obligation to provide connectivity services is satisfied over time as the
customer simultaneously receives and consumes the benefits provided. The measure
of progress over time is based upon either a period of time (e.g., over the
estimated contractual term) or usage (e.g., bandwidth used/bytes of data
processed). We evaluate whether broadband equipment provided to our customer as
part of the delivery of connectivity services represents a lease in accordance
with ASC 842. As discussed in Note 1 - Basis of Presentation - Leases to our
condensed consolidated financial statements, for broadband equipment leased to
fixed broadband customers in conjunction with the delivery of connectivity
services, we account for the lease and non-lease components of connectivity
services arrangement as a single performance obligation as the connectivity
services represent the predominant component.

We also derive a portion of our revenues from contracts with customers to
provide products. Performance obligations to provide products are satisfied at
the point in time when control is transferred to the customer. These contracts
typically require payment by the customer upon passage of control and
determining the point at which control is transferred may require judgment. To
identify the point at which control is transferred to the customer, we consider
indicators that include, but are not limited to, whether (1) we have the present
right to payment for the asset, (2) the customer has legal title to the asset,
(3) physical possession of the asset has been transferred to the customer, (4)
the

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customer has the significant risks and rewards of ownership of the asset, and
(5) the customer has accepted the asset. For product revenues, control generally
passes to the customer upon delivery of goods to the customer.



The vast majority of our revenues from long-term contracts to develop and
deliver complex equipment built to customer specifications are derived from
contracts with the U.S. Government (including foreign military sales contracted
through the U.S. Government). Our contracts with the U.S. Government typically
are subject to the Federal Acquisition Regulation (FAR) and are priced based on
estimated or actual costs of producing goods or providing services. The FAR
provides guidance on the types of costs that are allowable in establishing
prices for goods and services provided under U.S. Government contracts. The
pricing for non-U.S. Government contracts is based on the specific negotiations
with each customer. Under the typical payment terms of our U.S. Government
fixed-price contracts, the customer pays us either performance-based payments
(PBPs) or progress payments. PBPs are interim payments based on quantifiable
measures of performance or on the achievement of specified events or milestones.
Progress payments are interim payments based on a percentage of the costs
incurred as the work progresses. Because the customer can often retain a portion
of the contract price until completion of the contract, our U.S. Government
fixed-price contracts generally result in revenue recognized in excess of
billings which we present as unbilled accounts receivable on the balance sheet.
Amounts billed and due from our customers are classified as receivables on the
balance sheet. The portion of the payments retained by the customer until final
contract settlement is not considered a significant financing component because
the intent is to protect the customer. For our U.S. Government cost-type
contracts, the customer generally pays us for our actual costs incurred within a
short period of time. For non-U.S. Government contracts, we typically receive
interim payments as work progresses, although for some contracts, we may be
entitled to receive an advance payment. We recognize a liability for these
advance payments in excess of revenue recognized and present it as collections
in excess of revenues and deferred revenues on the balance sheet. An advance
payment is not typically considered a significant financing component because it
is used to meet working capital demands that can be higher in the early stages
of a contract and to protect us from the other party failing to adequately
complete some or all of its obligations under the contract.



Performance obligations related to developing and delivering complex equipment
built to customer specifications under long-term contracts are recognized over
time as these performance obligations do not create assets with an alternative
use to us and we have an enforceable right to payment for performance to date.
To measure the transfer of control, revenue is recognized based on the extent of
progress towards completion of the performance obligation. The selection of the
method to measure progress towards completion requires judgment and is based on
the nature of the products or services to be provided. We generally use the
cost-to-cost measure of progress for our contracts because that best depicts the
transfer of control to the customer which occurs as we incur costs on our
contracts. Under the cost-to-cost measure of progress, the extent of progress
towards completion is measured based on the ratio of costs incurred to date to
the total estimated costs at completion of the performance obligation.
Estimating the total costs at completion of a performance obligation requires
management to make estimates related to items such as subcontractor performance,
material costs and availability, labor costs and productivity and the costs of
overhead. When estimates of total costs to be incurred on a contract exceed
total estimates of revenue to be earned, a provision for the entire loss on the
contract is recognized in the period the loss is determined. A one percent
variance in our future cost estimates on open fixed-price contracts as of
June 30, 2021 would change our income (loss) before income taxes by an
insignificant amount.



The evaluation of transaction price, including the amounts allocated to
performance obligations, may require significant judgments. Due to the nature of
the work required to be performed on many of our performance obligations, the
estimation of total revenue, and where applicable the cost at completion, is
complex, subject to many variables and requires significant judgment. Our
contracts may contain award fees, incentive fees, or other provisions, including
the potential for significant financing components, that can either increase or
decrease the transaction price. These amounts, which are sometimes variable, can
be dictated by performance metrics, program milestones or cost targets, the
timing of payments, and customer discretion. We estimate variable consideration
at the amount to which we expect to be entitled. We include estimated amounts in
the transaction price to the extent it is probable that a significant reversal
of cumulative revenue recognized will not occur when the uncertainty associated
with the variable consideration is resolved. Our estimates of variable
consideration and determination of whether to include estimated amounts in the
transaction price are based largely on an assessment of our anticipated
performance and all information (historical, current and forecasted) that is
reasonably available to us. In the event an agreement includes embedded
financing components, we recognize interest expense or interest income on the
embedded financing components using the effective interest method. This
methodology uses an implied interest rate which reflects the incremental
borrowing rate which would be expected to be obtained in a separate financing
transaction. We have elected the practical expedient not to adjust the promised
amount of consideration for the effects of a significant financing component if
we expect, at contract inception, that the period between when we transfer a
promised good or service to a customer and when the customer pays for that good
or service will be one year or less.



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If a contract is separated into more than one performance obligation, the total
transaction price is allocated to each performance obligation in an amount based
on the estimated relative standalone selling prices of the promised goods or
services underlying each performance obligation. Estimating standalone selling
prices may require judgment. When available, we utilize the observable price of
a good or service when we sell that good or service separately in similar
circumstances and to similar customers. If a standalone selling price is not
directly observable, we estimate the standalone selling price by considering all
information (including market conditions, specific factors, and information
about the customer or class of customer) that is reasonably available.

Warranty reserves

We provide limited warranties on our products for periods of up to five years.
We record a liability for our warranty obligations when we ship the products or
they are included in long-term construction contracts based upon an estimate of
expected warranty costs. Amounts expected to be incurred within 12 months are
classified as accrued liabilities and amounts expected to be incurred beyond 12
months are classified as other liabilities in the condensed consolidated
financial statements. For mature products, we estimate the warranty costs based
on historical experience with the particular product. For newer products that do
not have a history of warranty costs, we base our estimates on our experience
with the technology involved and the types of failures that may occur. It is
possible that our underlying assumptions will not reflect the actual experience,
and, in that case, we will make future adjustments to the recorded warranty
obligation.

Property, equipment and satellites

Satellites and other property and equipment are recorded at cost or in the case
of certain satellites and other property acquired, the fair value at the date of
acquisition, net of accumulated depreciation. Capitalized satellite costs
consist primarily of the costs of satellite construction and launch, including
launch insurance and insurance during the period of in-orbit testing, the net
present value of performance incentive payments expected to be payable to the
satellite manufacturers (dependent on the continued satisfactory performance of
the satellites), costs directly associated with the monitoring and support of
satellite construction, and interest costs incurred during the period of
satellite construction. We also construct earth stations, network operations
systems and other assets to support our satellites, and those construction
costs, including interest, are capitalized as incurred. At the time satellites
are placed in service, we estimate the useful life of our satellites for
depreciation purposes based upon an analysis of each satellite's performance
against the original manufacturer's orbital design life, estimated fuel levels
and related consumption rates, as well as historical satellite operating trends.
We periodically review the remaining estimated useful life of our satellites to
determine if revisions to the estimated useful lives are necessary.

We own three satellites in service over North America (ViaSat-2, ViaSat-1 and
WildBlue-1) and, after acquiring the remaining interest in Euro Infrastructure
Co. in the first quarter of fiscal year 2022, we also own the KA-SAT satellite
over EMEA. In addition, we have lifetime leases of Ka-band capacity on two
satellites. We also have a global constellation of three third-generation
ViaSat-3 class satellites under construction. In addition, we own related earth
stations and networking equipment for all of our satellites. Property, equipment
and satellites, net also includes the customer premise equipment units leased to
subscribers under a retail leasing program as part of our satellite services
segment.

Leases

For contracts entered into on or after April 1, 2019, we assess at contract
inception whether the contract is, or contains, a lease. Generally, we determine
that a lease exists when (1) the contract involves the use of a distinct
identified asset, (2) we obtain the right to substantially all economic benefits
from use of the asset, and (3) we have the right to direct the use of the asset.
A lease is classified as a finance lease when one or more of the following
criteria are met: (1) the lease transfers ownership of the asset by the end of
the lease term, (2) the lease contains an option to purchase the asset that is
reasonably certain to be exercised, (3) the lease term is for a major part of
the remaining useful life of the asset, (4) the present value of the lease
payments equals or exceeds substantially all of the fair value of the asset or
(5) the asset is of such a specialized nature that it is expected to have no
alternative use to the lessor at the end of the lease term. A lease is
classified as an operating lease if it does not meet any of these criteria.

At the lease commencement date, we recognize a right-of-use asset and a lease
liability for all leases, except short-term leases with an original term of 12
months or less. The right-of-use asset represents the right to use the leased
asset for the lease term. The lease liability represents the present value of
the lease payments under the lease. The right-of-use asset is initially measured
at cost, which primarily comprises the initial amount of the lease liability,
less any lease incentives received. All right-of-use assets are periodically
reviewed for impairment in accordance with standards that apply to long-lived
assets. The lease liability is initially measured at the present value of the
lease payments, discounted using an estimate of our incremental borrowing rate
for a collateralized loan with the same term as the underlying leases.

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Lease payments included in the measurement of lease liabilities consist of (1)
fixed lease payments for the noncancelable lease term, (2) fixed lease payments
for optional renewal periods where it is reasonably certain the renewal option
will be exercised, and (3) variable lease payments that depend on an underlying
index or rate, based on the index or rate in effect at lease commencement.
Certain of our real estate lease agreements require variable lease payments that
do not depend on an underlying index or rate established at lease commencement.
Such payments and changes in payments based on a rate or index are recognized in
operating expenses when incurred.

Lease expense for operating leases consists of the fixed lease payments
recognized on a straight-line basis over the lease term plus variable lease
payments as incurred. Lease expense for finance leases consists of the
depreciation of assets obtained under finance leases on a straight-line basis
over the lease term and interest expense on the lease liability based on the
discount rate at lease commencement. For both operating and finance leases,
lease payments are allocated between a reduction of the lease liability and
interest expense.

For broadband equipment leased to fixed broadband customers in conjunction with
the delivery of connectivity services, we have made an accounting policy
election not to separate the broadband equipment from the related connectivity
services. The connectivity services are the predominant component of these
arrangements. The connectivity services are accounted for in accordance ASC
606. We are also a lessor for certain insignificant communications equipment.
These leases meet the criteria for operating lease classification. Lease income
associated with these leases is not material.

Impairment of long-lived and other long-term assets (property, equipment and
satellites, and other assets, including goodwill)

In accordance with the authoritative guidance for impairment or disposal of
long-lived assets (ASC 360), we assess potential impairments to our long-lived
assets, including property, equipment and satellites and other assets, when
there is evidence that events or changes in circumstances indicate that the
carrying value may not be recoverable. We recognize an impairment loss when the
undiscounted cash flows expected to be generated by an asset (or group of
assets) are less than the asset's carrying value. Any required impairment loss
would be measured as the amount by which the asset's carrying value exceeds its
fair value, and would be recorded as a reduction in the carrying value of the
related asset and charged to results of operations. No material impairments were
recorded by us for the three months ended June 30, 2021 and 2020.

We account for our goodwill under the authoritative guidance for goodwill and
other intangible assets (ASC 350) and the provisions of ASU 2017-04, Simplifying
the Test for Goodwill Impairment, which we early adopted in fiscal year 2020.
Current authoritative guidance allows us to first assess qualitative factors to
determine whether it is necessary to perform the quantitative goodwill
impairment test. If, after completing the qualitative assessment, we determine
that it is more likely than not that the estimated fair value is greater than
the carrying value, we conclude that no impairment exists. Alternatively, if we
determine in the qualitative assessment that it is more likely than not that the
fair value is less than its carrying value, then we perform a quantitative
goodwill impairment test to identify both the existence of an impairment and the
amount of impairment loss, by comparing the fair value of the reporting unit
with its carrying amount, including goodwill. If the estimated fair value of the
reporting unit is less than the carrying value, then a goodwill impairment
charge will be recognized in the amount by which the carrying amount exceeds the
fair value, limited to the total amount of goodwill allocated to that reporting
unit. We test goodwill for impairment during the fourth quarter every fiscal
year and when an event occurs or circumstances change such that it is reasonably
possible that an impairment may exist.

In accordance with ASC 350, we assess qualitative factors to determine whether
goodwill is impaired. The qualitative analysis includes assessing the impact of
changes in certain factors including: (1) changes in forecasted operating
results and comparing actual results to projections, (2) changes in the industry
or our competitive environment since the acquisition date, (3) changes in the
overall economy, our market share and market interest rates since the
acquisition date, (4) trends in the stock price and related market
capitalization and enterprise values, (5) trends in peer companies' total
enterprise value metrics, and (6) additional factors such as management
turnover, changes in regulation and changes in litigation matters.

Based on our qualitative assessment performed during the fourth quarter of
fiscal year 2021, we concluded that it was more likely than not that the
estimated fair value of our reporting units exceeded their carrying value as of
March 31, 2021, and therefore, determined it was not necessary to perform a
quantitative goodwill impairment test.

Income taxes and valuation allowance on deferred tax assets

Management evaluates the realizability of our deferred tax assets and assesses
the need for a valuation allowance on a quarterly basis to determine if the
weight of available evidence suggests that an additional valuation allowance is

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needed. In accordance with the authoritative guidance for income taxes (ASC
740), net deferred tax assets are reduced by a valuation allowance if, based on
all the available evidence, it is more likely than not that some or all of the
deferred tax assets will not be realized. In the event that our estimate of
taxable income is less than that required to utilize the full amount of any
deferred tax asset, a valuation allowance is established, which would cause a
decrease to income in the period such determination is made. Our valuation
allowance against deferred tax assets increased $23.5 million from $47.1 million
at March 31, 2021 to $70.6 million at June 30, 2021. The valuation allowance
relates to state and foreign net operating loss carryforwards, state R&D tax
credit carryforwards and foreign tax credit carryforwards.

Our analysis of the need for a valuation allowance on deferred tax assets
considered historical as well as forecasted future operating results. In
addition, our evaluation considered other factors, including our contractual
backlog, our history of positive earnings, current earnings trends assuming our
satellite services segment continues to grow, taxable income adjusted for
certain items, and forecasted income by jurisdiction. We also considered the
period over which these net deferred tax assets can be realized and our history
of not having federal tax loss carryforwards expire unused.

Accruals for uncertain tax positions are provided for in accordance with the
authoritative guidance for accounting for uncertainty in income taxes (ASC 740).
Under the authoritative guidance, we may recognize the tax benefit from an
uncertain tax position only if it is more likely than not that the tax position
will be sustained on examination by the taxing authorities, based on the
technical merits of the position. The tax benefits recognized in the financial
statements from such a position should be measured based on the largest benefit
that has a greater than 50% likelihood of being realized upon ultimate
settlement. The authoritative guidance addresses the derecognition of income tax
assets and liabilities, classification of deferred income tax assets and
liabilities, accounting for interest and penalties associated with tax
positions, and income tax disclosures.

We are subject to income taxes in the United States and numerous foreign
jurisdictions. In the ordinary course of business, there are calculations and
transactions where the ultimate tax determination is uncertain. In addition,
changes in tax laws and regulations as well as adverse judicial rulings could
adversely affect the income tax provision. We believe we have adequately
provided for income tax issues not yet resolved with federal, state and foreign
tax authorities. However, if these provided amounts prove to be more than what
is necessary, the reversal of the reserves would result in tax benefits being
recognized in the period in which we determine that provision for the
liabilities is no longer necessary. If an ultimate tax assessment exceeds our
estimate of tax liabilities, an additional charge to expense would result.

Results of Operations

The following table presents, as a percentage of total revenues, income
statement data for the periods indicated:


                                                    Three Months Ended
                                                 June 30,        June 30,
                                                   2021            2020
Revenues:                                              100 %           100 %
Product revenues                                        44              47
Service revenues                                        56              53
Operating expenses:
Cost of product revenues                                33              35
Cost of service revenues                                35              37
Selling, general and administrative                     23              23
Independent research and development                     5               5
Amortization of acquired intangible assets               1               -
Income (loss) from operations                            2              (1 )
Interest expense, net                                   (1 )            (2 )
Income (loss) before income taxes                        2              (3 )
Benefit from income taxes                                1               1
Net income (loss)                                        3              (2 )
Net income (loss) attributable to Viasat, Inc.           3              (2 )




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Three Months Ended June 30, 2021 vs. Three Months Ended June 30, 2020

Revenues



                                               Three Months Ended            Dollar         Percentage
                                            June 30,        June 30,        Increase         Increase
(In millions, except percentages)             2021            2020         (Decrease)       (Decrease)
Product revenues                           $    293.3      $    250.6     $       42.6               17 %
Service revenues                                371.6           279.9             91.7               33 %
Total revenues                             $    664.9      $    530.5     $      134.4               25 %




Our total revenues grew by $134.4 million as a result of a $91.7 million
increase in service revenues and a $42.6 million increase in product revenues.
The service revenue increase was due to increases of $72.1 million in our
satellite services segment, $14.6 million in our government systems segment and
$5.0 million in our commercial networks segment. The product revenue increase
was driven primarily by an increase of $46.4 million in our commercial networks
segment, partially offset by a $3.8 million decrease in our government systems
segment.



Cost of revenues



                                               Three Months Ended            Dollar         Percentage
                                            June 30,        June 30,        Increase         Increase
(In millions, except percentages)             2021            2020         (Decrease)       (Decrease)
Cost of product revenues                   $    219.3      $    187.9     $       31.5               17 %
Cost of service revenues                        234.6           197.7             37.0               19 %
Total cost of revenues                     $    454.0      $    385.6     $       68.4               18 %




Cost of revenues increased $68.4 million due to increases of $37.0 million in
cost of service revenues and $31.5 million in cost of product revenues. The cost
of service revenue increase was primarily due to increased service revenues,
mainly from our satellite services segment, causing a $64.8 million increase in
cost of service revenues on a constant margin basis. The increase in cost of
service revenues was partially offset by improved margins, primarily driven by
our IFC services in our satellite services segment. The cost of product revenue
increase primarily related to increased product revenues, causing a $32.0
million increase in cost of product revenues on a constant margin basis, mainly
in our commercial networks segment.

Selling, general and administrative expenses


                                               Three Months Ended            Dollar         Percentage
                                            June 30,        June 30,        Increase         Increase
(In millions, except percentages)             2021            2020         (Decrease)       (Decrease)
Selling, general and administrative        $    154.2      $    121.0     $       33.2               27 %



The $33.2 million increase in selling, general and administrative (SG&A)
expenses reflected an increase in support costs of $25.6 million, which was
reflected in all three segments, with the highest increase in our satellite
services segment. The increase in SG&A expenses was also driven by $7.6 million
of higher selling costs, reflected primarily in our satellite services and
government systems segments. SG&A expenses consisted primarily of personnel
costs and expenses for business development, marketing and sales, bid and
proposal, facilities, finance, contract administration and general management.

Independent research and development


                                                Three Months Ended             Dollar         Percentage
                                            June 30,         June 30,         Increase         Increase
(In millions, except percentages)             2021             2020         

(Decrease) (Decrease)
Independent research and development $ 34.5 $ 27.6 $ 6.8

               25 %




The $6.8 million increase in IR&D expenses was primarily the result of increases
in our commercial networks and government systems segments primarily related to
an increase in IR&D expenses related to next-generation satellite platforms and
payload technologies.

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Amortization of acquired intangible assets

We amortize our acquired intangible assets from prior acquisitions over their
estimated useful lives, which range from two to 12 years. The $4.4 million
increase in amortization of acquired intangible assets in the first quarter of
fiscal year 2022 compared to the prior year period was primarily related to the
amortization of new intangibles acquired as a result of the acquisition of the
remaining 51% interest in Euro Infrastructure Co. and of RigNet in April 2021.
Current and expected amortization expense for acquired intangible assets for
each of the following periods is as follows:



                                                  Amortization
                                                 (In thousands)

For the three months ended June 30, 2021 $ 5,929

Expected for the remainder of fiscal year 2022 $ 23,756
Expected for fiscal year 2023

                             31,673
Expected for fiscal year 2024                             30,123
Expected for fiscal year 2025                             27,848
Expected for fiscal year 2026                             27,696
Thereafter                                               120,845
                                                 $       261,941




Interest income

The decrease in interest income for the three months ended June 30, 2021
compared to the prior year period was mainly the result of lower average
invested cash balances during the first quarter of fiscal year 2022 compared to
the prior year period.

Interest expense

The $3.2 million decrease in interest expense for the three months ended
June 30, 2021 compared to the prior year period was primarily the result of an
increase in the amount of interest capitalized compared to the period year
period, partially offset by an increase in interest expense attributable to our
6.500% Senior Notes due 2028 (the 2028 Notes), which were issued in late June
2020.

Income taxes

For the three months ended June 30, 2021, we recorded an income tax benefit of
$4.1 million, resulting in an effective tax benefit rate of 29%. For the three
months ended June 30, 2020, we recorded an income tax benefit of $5.7 million,
resulting in an effective tax benefit rate of 39%. The effective tax benefit
rates for the periods differed from the U.S. statutory rate primarily due to the
benefit of federal and state R&D tax credits. In addition, the effective tax
rate for the three months ended June 30, 2021 included a tax benefit for the
reversal of a deferred tax liability recorded for Euro Infrastructure Co.'s
outside basis difference upon assertion to indefinitely reinvest future
earnings.

Ordinarily, the effective tax rate at the end of an interim period is calculated
using an estimate of the annual effective tax rate expected to be applicable for
the full fiscal year. However, when a reliable estimate cannot be made, we
compute our provision for income taxes using the actual effective tax rate
(discrete method) for the year-to-date period. Our effective tax rate is highly
influenced by the amount of our R&D tax credits. A small change in estimated
annual pretax income (loss) can produce a significant variance in the annual
effective tax rate given our expected amount of R&D tax credits. This
variability provides an unreliable estimate of the annual effective tax rate. As
a result, and in accordance with the authoritative guidance for accounting for
income taxes in interim periods, we have computed our provision for income taxes
for the three months ended June 30, 2021 and 2020 by applying the actual
effective tax rates to the income (loss) for the three-month periods.

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Segment Results for the Three Months Ended June 30, 2021 vs. Three Months Ended
June 30, 2020

Satellite services segment

Revenues



                                               Three Months Ended            Dollar         Percentage
                                            June 30,        June 30,        Increase         Increase
(In millions, except percentages)             2021            2020         (Decrease)       (Decrease)
Segment product revenues                   $        -      $        -     $          -                - %
Segment service revenues                        274.1           202.0             72.1               36 %
Total segment revenues                     $    274.1      $    202.0     $       72.1               36 %




Our satellite services segment revenues increased by $72.1 million due to an
increase in service revenues. The increase in service revenues was primarily
attributable to the acquisition of RigNet in April 2021, as well as increases in
our in-flight services and fixed broadband businesses. The acquisition of RigNet
contributed approximately $27.5 million of service revenues in the first quarter
of fiscal year 2022 since the date of acquisition. The increase in in-flight
service revenue of $19.9 million was driven primarily by an increase in the
number of commercial aircraft receiving our in-flight services through our IFC
systems, as passenger air traffic increased and aircraft that were previously
inactive as a result of the COVID-19 pandemic returned to service. The increase
in fixed broadband service revenues was driven by a higher mix of new and
existing subscribers choosing Viasat's premium highest speed plans. In addition,
the acquisition of the remaining 51% interest in Euro Infrastructure Co.
contributed approximately $8.4 million of service revenues in the first quarter
of fiscal year 2022 since the date of its acquisition in April 2021.

Segment operating profit (loss)


                                                Three Months Ended              Dollar         Percentage
                                            June 30,         June 30,          Increase         Increase
(In millions, except percentages)             2021             2020           (Decrease)       (Decrease)
Segment operating profit (loss)            $     12.5       $      (1.9 )    $       14.4              774 %
Percentage of segment revenues                      5 %              (1 )%




The change in our satellite services segment operating loss to an operating
profit was driven primarily by higher earnings contributions of $39.9 million,
mainly due to an increase in revenues and improved margins from our in-flight
services and fixed broadband services, as both businesses continue to scale. The
change from operating loss to operating profit was partially offset by higher
SG&A costs of $25.8 million, of which $7.0 million related to the acquisitions
of RigNet and Euro Infrastructure Co. during the first quarter of fiscal year
2022.

Commercial networks segment

Revenues



                                               Three Months Ended             Dollar         Percentage
                                            June 30,         June 30,        Increase         Increase
(In millions, except percentages)             2021             2020         (Decrease)       (Decrease)
Segment product revenues                   $    101.5       $     55.1     $       46.4               84 %
Segment service revenues                         17.1             12.0              5.0               42 %
Total segment revenues                     $    118.6       $     67.2     $       51.4               77 %




Our commercial networks segment revenues increased by $51.4 million, due to a
$46.4 million increase in product revenues and a $5.0 million increase in
service revenues. The increase in product revenues was primarily due to
increases of $30.6 million in mobile broadband satellite communication systems
products, $11.3 million in antenna systems products and $6.5 million in RigNet
products since the date of acquisition. The increase in service revenues was
mainly driven by an increase in mobile broadband satellite communication systems
services.

Segment operating loss



                                               Three Months Ended              Dollar         Percentage
                                            June 30,         June 30,        (Increase)       (Increase)
(In millions, except percentages)             2021             2020           Decrease         Decrease
Segment operating loss                     $    (37.7 )     $    (51.4 )    $       13.7               27 %
Percentage of segment revenues                    (32 )%           (77 )%


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The $13.7 million reduction in our commercial networks segment operating loss
was driven primarily by higher earnings contributions of $18.9 million,
primarily due to higher revenues and improved margins in our mobile broadband
satellite communications systems products, slightly offset by an increase in
IR&D investments.

Government systems segment

Revenues



                                               Three Months Ended            Dollar         Percentage
                                            June 30,        June 30,        Increase         Increase
(In millions, except percentages)             2021            2020         (Decrease)       (Decrease)
Segment product revenues                   $    191.7      $    195.5     $       (3.8 )             (2 )%
Segment service revenues                         80.4            65.8             14.6               22 %
Total segment revenues                     $    272.1      $    261.3     $       10.8                4 %




Our government systems segment revenues increased by $10.8 million due to an
increase of $14.6 million in service revenues, partially offset by a decrease of
$3.8 million in product revenues. The service revenue increase was primarily due
to an $8.1 million increase in government mobile broadband services, a $4.2
million increase in government satellite communication systems services and a
$1.9 million increase in cybersecurity and information assurance services. The
decrease in product revenues was mainly due to an $11.9 million decrease in
tactical satcom radio products and a $4.3 million decrease in government
satellite communication systems products, partially offset by a $9.2 million
increase in tactical data link products, a $1.7 million increase in government
mobile broadband products and a $1.6 million increase in cybersecurity and
information assurance products. Our government systems segment continued to show
some impacts from the pandemic, which has somewhat complicated product
manufacturing and shipments, but new government systems segment awards remained
very strong in the first quarter of fiscal year 2022.



Segment operating profit



                                                Three Months Ended             Dollar         Percentage
                                            June 30,         June 30,         Increase         Increase
(In millions, except percentages)             2021             2020          (Decrease)       (Decrease)
Segment operating profit                   $     47.4       $      49.5     $       (2.1 )             (4 )%
Percentage of segment revenues                     17 %              19 %




The $2.1 million decrease in our government systems segment operating profit was
driven by a $5.3 million increase in SG&A costs and a $4.0 million increase in
IR&D investments. The decrease in operating profit was partially offset by
higher earnings contributions of $7.2 million, primarily due to an increase in
revenues in our tactical data link products and government mobile broadband
services.

Backlog

As reflected in the table below, our overall firm and funded backlog decreased
during the first three months of fiscal year 2022.


                                   As of               As of
                               June 30, 2021       March 31, 2021
                                         (In millions)
Firm backlog
Satellite services segment    $         617.8     $          633.7
Commercial networks segment             686.3                733.2
Government systems segment              920.0                939.4
Total                         $       2,224.1     $        2,306.3
Funded backlog
Satellite services segment    $         617.8     $          633.7
Commercial networks segment             600.7                639.6
Government systems segment              827.7                846.9
Total                         $       2,046.2     $        2,120.2


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The firm backlog does not include contract options. Of the $2.2 billion in firm
backlog, a little over half is expected to be delivered during the next 12
months, with the balance delivered thereafter. We include in our backlog only
those orders for which we have accepted purchase orders, and not anticipated
purchase orders and requests. In our satellite services segment, our backlog
includes fixed broadband service revenues under our subscriber agreements, but
does not include future recurring IFC service revenues under our agreements with
commercial airlines. As of June 30, 2021, our IFC systems were installed and in
service on approximately 1,550 commercial aircraft, of which, due to impacts of
the COVID-19 pandemic, approximately 150 were inactive at quarter end. While
current global airline traffic is still a fraction of the activity in fiscal
year 2020, domestic airline traffic continues to show signs of improvement. As a
result, our in-flight services business showed modest improvement in the quarter
ended June 30, 2021, with increased planes in service and passenger volumes. We
expect the negative impact on our IFC business from the pandemic to continue
through the remainder of fiscal year 2022 and potentially beyond due to the
severe decline in global air traffic and associated grounding of installed
aircraft, but to lessen over time with increases in passenger air traffic. We
anticipate that approximately 1,160 additional commercial aircraft under
existing customer agreements with commercial airlines will be put into service
with our IFC systems. However, the timing of installation and entry into service
of IFC systems on additional aircraft under existing customer agreements may be
delayed as a result of the impact of the COVID-19 pandemic on the global airline
industry. Accordingly, there can be no assurance that all anticipated purchase
orders and requests will be placed or that anticipated IFC services will be
activated.

Our total new awards exclude future revenue under recurring consumer commitment
arrangements and were approximately $595.0 million and $736.9 million for the
three months ended June 30, 2021 and 2020, respectively.

Backlog is not necessarily indicative of future sales. A majority of our
contracts can be terminated at the convenience of the customer. Orders are often
made substantially in advance of delivery, and our contracts typically provide
that orders may be terminated with limited or no penalties. In addition,
purchase orders may present product specifications that would require us to
complete additional product development. A failure to develop products meeting
such specifications could lead to a termination of the related contract.

Firm backlog amounts are comprised of funded and unfunded components. Funded
backlog represents the sum of contract amounts for which funds have been
specifically obligated by customers to contracts. Unfunded backlog represents
future amounts that customers may obligate over the specified contract
performance periods. Our customers allocate funds for expenditures on long-term
contracts on a periodic basis. Our ability to realize revenues from contracts in
backlog is dependent upon adequate funding for such contracts. Although we do
not control the funding of our contracts, our experience indicates that actual
contract funding has ultimately been approximately equal to the aggregate
amounts of the contracts.

Liquidity and Capital Resources

Overview

We have financed our operations to date primarily with cash flows from
operations, bank line of credit financing, debt financing, export credit agency
financing and equity financing. At June 30, 2021, we had $275.7 million in cash
and cash equivalents, $388.5 million in working capital, and $320.0 million in
principal amount of outstanding borrowings and borrowing availability of
$320.3 million under our Revolving Credit Facility. At March 31, 2021, we had
$295.9 million in cash and cash equivalents, $282.8 million in working capital,
and no outstanding borrowings and borrowing availability of $673.7 million under
our Revolving Credit Facility. We invest our cash in excess of current operating
requirements in short-term, highly liquid bank money market accounts.

Our future capital requirements will depend upon many factors, including the
timing and amount of cash required for our satellite projects and any future
broadband satellite projects we may engage in, expansion of our R&D and
marketing efforts, and the nature and timing of orders. Additionally, we will
continue to evaluate possible acquisitions of, or investments in complementary
businesses, products and technologies which may require the use of cash or
additional financing.

The general cash needs of our satellite services, commercial networks and
government systems segments can vary significantly. The cash needs of our
satellite services segment tend to be driven by the timing and amount of capital
expenditures (e.g., payments under satellite construction and launch contracts
and investments in ground infrastructure roll-out), investments in joint
ventures, strategic partnering arrangements and network expansion activities, as
well as the quality of customer, type of contract and payment terms. In our
commercial networks segment, cash needs tend to be driven primarily by the type
and mix of contracts in backlog, the nature and quality of customers, the timing
and amount of investments in IR&D activities (including with respect to
next-generation satellite payload technologies) and the payment terms of
customers (including whether advance payments are made or customer financing is
required). In our government

                                       46
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systems segment, the primary factors determining cash needs tend to be the type
and mix of contracts in backlog (e.g., product or service, development or
production) and timing of payments (including restrictions on the timing of cash
payments under U.S. Government procurement regulations). Other factors affecting
the cash needs of our commercial networks and government systems segments
include contract duration and program performance. For example, if a program is
performing well and meeting its contractual requirements, then its cash flow
requirements are usually lower.

To further enhance our liquidity position or to finance the construction and
launch of any future satellites, acquisitions, strategic partnering
arrangements, joint ventures or other business investment initiatives, we may
obtain additional financing, which could consist of debt, convertible debt or
equity financing from public and/or private credit and capital markets. In
February 2019, we filed a universal shelf registration statement with the SEC
for the future sale of an unlimited amount of common stock, preferred stock,
debt securities, depositary shares, warrants and rights. The securities may be
offered from time to time, separately or together, directly by us, by selling
security holders, or through underwriters, dealers or agents at amounts, prices,
interest rates and other terms to be determined at the time of the offering.

To date, COVID-19 has not had a significant impact on our liquidity, cash flows
or capital resources. However, we have taken measures to mitigate the impact of
COVID-19 on our business and financial position, including deferring certain
capital expenditures, reducing discretionary expenditures and undertaking
cost-reduction actions. Given our current cash position, outlook for funds
generated from operations, remaining borrowing availability under our Revolving
Credit Facility of $320.3 million, cash needs and debt structure, we have not
experienced to date, and do not expect to experience, any material issues with
liquidity. Although we can give no assurances concerning our future liquidity,
we believe that our current cash balances and net cash expected to be provided
by operating activities along with availability under our Revolving Credit
Facility will be sufficient to meet our anticipated operating requirements for
at least the next 12 months.

Cash flows

Cash provided by operating activities for the first three months of fiscal year
2022 was $65.1 million compared to $156.9 million in the prior year period. This
$91.8 million decrease was primarily driven by a $142.8 million year-over-year
increase in cash used to fund net operating assets, partially offset by our
operating results (net income adjusted for depreciation, amortization and other
non-cash charges) which resulted in $51.0 million of higher cash provided by
operating activities year-over-year. The increase in cash used to fund net
operating assets during the first three months of fiscal year 2022 when compared
to the prior year period was primarily due to a decrease in cash inflows
year-over-year from combined billed and unbilled accounts receivable, net,
attributable to billings for IFC terminals in our commercial networks segment in
the first quarter of fiscal year 2022 and a decrease in cash inflows
year-over-year from our collections in excess of revenues and deferred revenues
included in accrued liabilities due to the timing of milestone billings for
certain larger development projects in our commercial networks and government
systems segments.

Cash used in investing activities for the first three months of fiscal year 2022
was $399.6 million compared to $229.3 million in the prior year period. This
$170.3 million increase in cash used in investing activities year-over-year
reflects $138.7 million in cash used for the RigNet and Euro Infrastructure Co.
acquisitions in the first quarter of fiscal year 2022 and an increase of $26.0
million in cash used for construction of satellites.

Cash provided by financing activities for the first three months of fiscal year
2022 was $315.2 million compared to an insignificant amount for the prior year
period. This $315.1 million increase in cash provided by financing activities
year-over-year reflects proceeds from borrowings under our Revolving Credit
Facility of $320.0 million in the first quarter of fiscal year 2022.

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Satellite-related activities

In connection with the development of any new generation satellite design, and
the launch of any new satellite and the commencement of the related service, we
expect to incur additional operating costs that negatively impact our financial
results. For example, when ViaSat-2 was placed in service in the fourth quarter
of fiscal year 2018, this resulted in additional operating costs in our
satellite services segment during the ramp-up period prior to service launch and
in the fiscal year following service launch. These increased operating costs
included depreciation, amortization of capitalized software development, earth
station connectivity, marketing and advertising costs, logistics, customer care
and various support systems. In addition, interest expense increased during
fiscal year 2019 as we no longer capitalized the interest expense relating to
the debt incurred for the construction of ViaSat-2 and the related gateway and
networking equipment once the satellite was in service. As services using the
new satellite scaled, however, our revenue base for broadband services expanded
and we gained operating cost efficiencies, which together yielded incremental
segment earnings contributions. We anticipate that we will incur a similar cycle
of increased operating costs as we prepare for and launch commercial services on
future satellites, including our ViaSat-3 constellation, followed by increases
in revenue base and in scale. However, there can be no assurance that we will be
successful in significantly increasing revenues or achieving or maintaining
operating profit in our satellite services segment, and any such gains may also
be offset by investments in our global business.

We currently have three ViaSat-3 class satellites under construction. We have
entered into satellite construction agreements with Boeing for their
construction and purchase and the integration of our payload and technologies
into the satellites. In addition, we have entered into various other
satellite-related purchase commitments, including with respect to the provision
of launch services, satellite operation and satellite insurance. See Note 12 -
Commitments to our consolidated financial statements included in our Annual
Report on Form 10-K for the year ended March 31, 2021 for information regarding
our future minimum payments under our satellite construction contracts and other
satellite-related purchase commitments for the next five fiscal years and
thereafter. In addition, we will continue to incur costs related to the roll-out
of related earth station infrastructure to support the ViaSat-3 constellation,
the amount of which will depend, among other matters, on the timing of roll-out
and method used to procure fiber access. We believe we have adequate sources of
funding for the ViaSat-3 constellation, which include, but are not limited to,
our cash on hand, borrowing capacity and the cash we expect to generate from
operations over the next few years. Our total cash funding may be reduced
through various third-party agreements, including potential joint service
offerings and other strategic partnering arrangements.

Our IR&D investments are expected to continue through the remainder of fiscal
year 2022 and beyond relating to next generation satellite network solutions and
support of our government and commercial air mobility businesses. We expect to
continue to invest in IR&D at a significant level as we continue our focus on
leadership and innovation in satellite and space technologies. However, the
level of investment in a given fiscal year will depend on a variety of factors,
including the stage of development of our satellite projects, new market
opportunities and our overall operating performance. Our total capital
expenditures in fiscal year 2022 are expected to be higher than fiscal year
2021, as we head into the anticipated launch of the first ViaSat-3 satellite and
continue to invest in the second and third ViaSat-3 satellites, as well as
increase ground network investments related to international expansion.

Long-Term Debt

As of June 30, 2021, the aggregate principal amount of our total outstanding
indebtedness was $2.2 billion, which was comprised of $700.0 million in
principal amount of 2025 Notes, $600.0 million in principal amount of 2027
Notes, $400.0 million in principal amount of 2028 Notes (together with the 2025
Notes and 2027 Notes, the Notes), $320.0 million in principal amount of
outstanding borrowings under our $700.0 million Revolving Credit Facility, $88.4
million in principal amount of outstanding borrowings under our Ex-Im Credit
Facility with a maturity date of October 15, 2025 (together with the Revolving
Credit Facility, the Credit Facilities) and $54.0 million of finance lease
obligations. For information regarding our Credit Facilities and Notes, refer to
Note 6 - Senior Notes and Other Long-Term Debt to our condensed consolidated
financial statements.

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Contractual Obligations

The following table sets forth a summary of our obligations at June 30, 2021:



                                                         For the
                                                       Remainder of
                                                       Fiscal Year               For the Fiscal Years Ending
(In thousands, including interest
where applicable)                        Total             2022           2023-2024       2025-2026      Thereafter
Operating leases                      $   466,757     $       56,135     $   135,196     $   122,361     $   153,065
Finance leases                             61,483             10,232          24,251          24,000           3,000
2028 Notes                                595,000             26,000          52,000          52,000         465,000
2027 Notes                                802,500             16,875          67,500          67,500         650,625
2025 Notes                                877,188             39,375          78,750         759,063               -
Revolving Credit Facility (1)             333,188              3,877         329,311               -               -
Ex-Im Credit Facility                      93,701             10,882          42,344          40,475               -
Satellite performance incentives           31,444              4,258          10,269          11,269           5,648
Purchase commitments including
satellite-related
  agreements                            1,925,318          1,015,533         727,674         102,108          80,003
Total                                 $ 5,186,579     $    1,183,167     $ 1,467,295     $ 1,178,776     $ 1,357,341







(1) To the extent that the interest rate is variable and ultimate amounts

borrowed under the Revolving Credit Facility may fluctuate, amounts reflected

represent estimated interest payments on our current outstanding balances

based on the weighted average effective interest rate at June 30, 2021 until

    the maturity date in January 2024.




We purchase components from a variety of suppliers and use several
subcontractors and contract manufacturers to provide design and manufacturing
services for our products. During the normal course of business, we enter into
agreements with subcontractors, contract manufacturers and suppliers that either
allow them to procure inventory based upon criteria defined by us or that
establish the parameters defining our requirements. We also enter into
agreements and purchase commitments with suppliers for the construction, launch,
and operation of our satellites. In certain instances, these agreements allow us
the option to cancel, reschedule and adjust our requirements based on our
business needs prior to firm orders being placed. Consequently, only a portion
of our reported purchase commitments arising from these agreements are firm,
non-cancelable and unconditional commitments.

Our condensed consolidated balance sheets included $165.0 million and
$137.4 million of "other liabilities" as of June 30, 2021 and March 31, 2021,
respectively, which primarily consisted of the long-term portion of deferred
revenues, the long-term portion of our satellite performance incentive
obligations relating to the ViaSat-1 and ViaSat-2 satellites and our long-term
warranty obligations. With the exception of the long-term portion of our
satellite performance incentive obligations relating to the ViaSat-1 and
ViaSat-2 satellites (which is included under "Satellite performance
incentives"), these remaining liabilities have been excluded from the above
table as the timing and/or the amount of any cash payment is uncertain. See Note
12 - Commitments to our consolidated financial statements included in our Annual
Report on Form 10-K for the year ended March 31, 2021 for additional information
regarding satellite performance incentive obligations relating to the ViaSat-1
and ViaSat-2 satellites. See Note 7 - Product Warranty to our condensed
consolidated financial statements for a discussion of our product warranties.

Off-Balance Sheet Arrangements

We had no material off-balance sheet arrangements at June 30, 2021 as defined in
Regulation S-K Item 303(a)(4) other than as discussed under "Contractual
Obligations" above or disclosed in the notes to our condensed consolidated
financial statements included in this report or in our Annual Report on Form
10-K for the year ended March 31, 2021.

Recent Authoritative Guidance

For information regarding recently adopted and issued accounting pronouncements,
see Note 1 – Basis of Presentation to our condensed consolidated financial
statements.

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