Press Release

May 23, 2017



ViaSat Announces Fourth Quarter and Fiscal Year 2017 Results


CARLSBAD, Calif., May 23, 2017 /PRNewswire/ -- ViaSat Inc. (NASDAQ: VSAT), a global broadband services and technology company, today announced financial results for the fiscal fourth quarter ended March 31, 2017.


"Our strong fourth quarter wrapped up a fiscal year that featured multiple performance records including revenue, cash flow from operations and new contract awards," said Mark Dankberg, chairman and CEO of ViaSat. "Performance for both the quarter and full fiscal year were driven by our satellite services operations across the residential, aero and government mobility markets, and outstanding results from our government business, where we are capitalizing on our unique market position and capabilities. With our ViaSat-2 launch scheduled for June 1, we are poised to again set a new benchmark for low-cost bandwidth delivery and we're making great progress with R&D investments in the ViaSat-3 program. Our strategy is simple: we want to lead the way with the highest speeds and the most bandwidth at the lowest total cost, an approach that will continue to redefine global bandwidth economics and open significant opportunities for ViaSat to disrupt multiple markets."


Financial Results


(In millions, except per share data)


Q4 FY17


Q4 FY16


Year-Over-
Year
Change


FY17


FY16


Year-
Over-Year
Change


Revenues


$ 416.4


$ 372.0


12.0%


$ 1,559.3


$ 1,417.4


10.0%


Net income1 


$ 6.7


$ 4.5


49.4%


$ 23.8


$ 21.7


9.3%


Non-GAAP net income1


$ 18.5


$ 14.3


29.3%


$ 65.6


$ 61.0


7.5%


Adjusted EBITDA


$ 83.5


$ 80.7


3.5%


$ 340.8


$ 330.7


3.1%


Diluted per share net income1


$ 0.11


$ 0.09


22.2%


$ 0.45


$ 0.44


2.3%


Non-GAAP diluted per share net income1


$ 0.32


$ 0.29


10.3%


$ 1.23


$ 1.23


0.0%


Fully diluted weighted average shares


58.4


49.8


17.4%


53.4


49.4


8.0%









New contract awards


$ 385.6


$ 451.2


(14.5)%


$ 1,661.7


$ 1,483.3


12.0%


Sales backlog2,5


$ 1,024.4


$ 941.9


8.8%


$ 1,024.4


$ 941.9


8.8%


 


Segment Results


(In millions)


Q4 FY17


Q4 FY16


Year-Over-
Year
Change


FY17


FY16


Year-
Over-Year
Change


Satellite Services








  New contract awards


$ 153.0


$ 135.2


13.2%


$ 597.2


$ 511.1


16.8%


  Revenues


$ 160.9


$ 145.4


10.6%


$ 629.6


$ 559.2


12.6%


  Operating profit3


$ 32.8


$ 22.0


49.3%


$ 131.1


$ 81.8


60.2%


  Adjusted EBITDA


$ 75.0


$ 63.7


17.9%


$ 297.4


$ 243.7


22.1%









Commercial Networks








  New contract awards


$ 51.3


$ 74.6


(31.3)%


$ 213.8


$ 228.0


(6.3)%


  Revenues


$ 59.1


$ 62.2


(5.0)%


$ 244.6


$ 250.7


(2.4)%


  Operating loss3


$ (52.5)


$ (40.4)


(29.9)%


$ (180.5)


$ (111.3)


(62.1)%


  Adjusted EBITDA


$ (36.5)


$ (26.6)


(37.4)%


$ (119.0)


$ (56.5)


(110.4)%









Government Systems








  New contract awards


$ 181.3


$ 241.4


(24.9)%


$ 850.7


$ 744.2


14.3%


  Revenues


$ 196.5


$ 164.4


19.5%


$ 685.1


$ 607.5


12.8%


  Operating profit 3


$ 25.6


$ 28.7


(10.9)%


$ 96.7


$ 87.1


11.0%


  Adjusted EBITDA4


$ 45.0


$ 43.6


3.1%


$ 162.3


$ 143.6


13.1%



1 Attributable to ViaSat, Inc. common stockholders.


2 Amounts include certain backlog adjustments due to contract changes and amendments.


3 Before corporate and amortization of acquired intangible assets.


4 Government Systems' segment Adjusted EBITDA for the fourth quarter and fiscal year ended March 31, 2016 has been adjusted to exclude noncontrolling interest, net of tax.


5 Backlog does not include anticipated equipment purchase orders or future recurring internet service revenues under commercial in-flight internet agreements, nor does it include contracts with ViaSat's residential broadband internet subscribers.


Satellite Services
ViaSat's Satellite Services segment achieved strong growth in the fourth quarter of fiscal year 2017 driven primarily by its diverse broadband service offerings, generating an 11% year-over-year revenue increase to a new record high of $160.9 million. Operating profit and Adjusted EBITDA both grew faster than revenue, as operating profit grew significantly, rising 49% to $32.8 million and Adjusted EBITDA increased 18% to $75.0 million. Fiscal 2017 fourth quarter Adjusted EBITDA margins also remained high at 47%, up from 44% in the same quarter last year. Highlights for the quarter include:


  • Continued interest in premium, higher bandwidth broadband internet plans, plus growth in value-added services continued to drive gains in the residential broadband business, with an Average Revenue Per User (ARPU) of $66.02, up 13% year-over-year. This increase more than offset the effects of the slight decrease in the number of residential subscribers, which totaled approximately 659,000 subscribers at the close of fiscal year 2017.
  • On March 3, 2017, ViaSat and Eutelsat Communications closed their European broadband strategic partnering arrangement, with ViaSat acquiring a 49% interest in Eutelsat's wholesale services business for $139.5 million. A second entity, which is 51% owned by ViaSat, will focus on providing retail broadband internet services in the European region.
  • In-flight connectivity business grew strongly with in-flight internet services now deployed on 559 commercial aircraft as of March 31, 2017, which was approximately 85 more aircraft than the end of fiscal year 2016.
  • Now covering more than 90% of the world's most frequently traveled flight paths, ViaSat's in-flight internet services business continued to expand globally. Following the close of fiscal year 2017, ViaSat had more than 830 commercial aircraft in install backlog.
  • Specific to commercial airline customers:
    • JetBlue announced it became the only airline to offer free, high-speed Wi-Fi at every seat - using ViaSat's in-flight internet service.
    • Subsequent to the 2017 fiscal year end, Qantas held the first high-speed, high-performance connectivity media flight in Australia; marking a successful trial for ViaSat and partner, nbn™.
    • Following the close of fiscal year 2017, ViaSat announced Icelandair as the first airline to bring high-speed connectivity and internet streaming to transatlantic flights using ViaSat's in-flight internet system.

Fiscal 2017 Satellite Services segment results also reflected multiple record highs, with revenue growth of 13% to $629.6 million, an operating profit increase of 60% year-over-year to $131.1 million and Adjusted EBITDA of $297.4 million, up 22% over the same period last year.


Commercial Networks
In the fiscal fourth quarter of 2017, ViaSat's Commercial Networks segment activities were heavily focused on the Company's ViaSat-3 project, a next-generation satellite platform designed to deliver over 1 Terabit per second (Tbps) of high throughput Ka-band broadband capacity. These anticipated ViaSat-3 investments coupled with next-gen mobility solutions and supplement type certificate (STC) activities supporting recent commercial airline wins, drove R&D expenses up year-over-year by 77%. Additionally, quarterly revenues were down 5% compared to the same period last year. As a result, segment operating losses were higher and Adjusted EBITDA was lower for the fourth quarter of fiscal year 2017, as compared to the same period last year. Highlights for the quarter include:


  • The launch of ViaSat-2 was somewhat further delayed due to civil unrest in French Guiana, the location of the ViaSat-2 launch site. ViaSat-2 is now scheduled to launch on June 1, 2017, with broadband services expected to be available in the fourth quarter of fiscal year 2018 following in-orbit testing.
  • Development of first flight hardware for the ViaSat-3 program remained on track and is expected to begin arriving in ViaSat's Tempe, Arizona satellite integration facility in late calendar year 2017.
  • Following the close of fiscal 2017, ViaSat introduced its Gen-2 in-flight internet equipment for the ViaSat-2 and ViaSat-3 class satellite platforms. The Gen-2 equipment is expected to offer commercial and government aircraft even faster and higher-quality in-flight internet performance as compared to ViaSat's prior generation system.

Fiscal 2017 Commercial Networks segment revenues were lower, operating loss was higher and Adjusted EBITDA was lower compared to the same period last year. Earnings decreases were primarily a result of the Company's fiscal year 2017 ViaSat-3 R&D activities.


Government Systems
In the fourth quarter of fiscal year 2017, ViaSat's Government Systems segment revenues increased 20% to a record $196.5 million, and Adjusted EBITDA grew 3% to $45.0 million, compared to the prior year period, while the operating profit was slightly lower by $3.1 million. Included in the Company's fourth quarter and fiscal 2017 results was a loss contingency reserve recorded by ViaSat's 52% majority-owned subsidiary TrellisWare. This reserve impacted fiscal fourth quarter of 2017 consolidated and segment operating profit by a total amount of $11.8 million; with a net effect after noncontrolling interest impacts to net income attributable to ViaSat, Inc. common stockholders of $4.0 million or $0.07 per diluted share and Adjusted EBITDA of $8.1 million (See Table: 'An Itemized Reconciliation between Segment Operating Profit (Loss) Before Corporate, Amortization of Acquired Intangibles and Adjusted EBITDA'). Excluding the impacts of this reserve, year-over-year segment operating profits and Adjusted EBITDA for the fiscal fourth quarter of 2017 would have grown by 30% and 22%, respectively. Highlights for the quarter include:


  • Record year-to-date segment contract awards of $850.7 million, reflecting a 1.2 to 1 book-to-bill ratio, supported strong segment backlog of $633.3 million, a 30% increase over the same period last year.
  • Revenue growth in the quarter and year-to-date was driven by ViaSat's cybersecurity and information assurance, tactical data link and tactical satellite communication radio products.
  • Global mobile broadband service revenues were boosted by increased satellite service subscriptions for senior U.S. government leader aircraft in both the quarter and year-to-date periods.
  • Following the close of fiscal year 2017, the KOR-24A Small Tactical Terminal (STT) airborne radio continued to expand its presence on a number of U.S. and Allied radio programs and platforms, including the Boeing AV-8B Harrier aircraft.

ViaSat's Government Systems segment performance for fiscal year 2017 included a number of new record highs: revenue growth of 13% to $685.1 million, operating profit growth of 11% to $96.7 million and Adjusted EBITDA growth of 13% to $162.3 million compared to fiscal 2016.


Conference Call
ViaSat will host a conference call to discuss the fourth quarter and fiscal year 2017 results.  Details follow:


DATE/TIME:


Tuesday, May 23, 2017 at 5:00 p.m. Eastern Time


DIAL-IN:


(877) 640-9809 in the U.S.; (914) 495-8528 international


WEBCAST:


investors.viasat.com.


REPLAY:


Available from 8:00 p.m. Eastern Time on Tuesday, May 23 until 11:59 p.m. Eastern Time on Wednesday, May 24 by dialing (855) 859-2056 for U.S. callers and (404) 537-3406 for international callers; conference ID 24663268.


Forward-Looking Statements
This press release contains forward-looking statements that are subject to the safe harbors created under the Securities Act of 1933 and the Securities Exchange Act of 1934. Forward-looking statements include, among others, statements that refer to opportunities, growth and outlook for fiscal year 2018 and beyond; satellite construction and launch activities; including the launch, in-orbit testing and entry into service of the ViaSat-2 satellite; the performance and benefits of our ViaSat-2 and ViaSat-3 class satellites; the expected completion, capacity, service, coverage, service speeds, availability and other features of our satellites, and the timing, cost, economics and other benefits associated therewith; the development and performance of equipment and hardware for the ViaSat-2 and ViaSat-3 class satellite platforms and the benefits associated therewith; international expansion plans; our strategic partnering arrangement with Eutelsat and the costs, economics and other benefits associated therewith; and the roll-out and uptake of products and services by, and services offered by, our airline partners as well as our commercial networks and government systems customers. Readers are cautioned that actual results could differ materially from those expressed in any forward-looking statements. Factors that could cause actual results to differ include: our ability to realize the anticipated benefits of the ViaSat-2 and ViaSat-3 class satellites; unexpected expenses related to our satellite projects; our ability to successfully implement our business plan for our broadband satellite services on our anticipated timeline or at all; risks associated with the construction, launch and operation of our satellites, including the effect of any anomaly, operational failure or degradation in satellite performance; our ability to realize the anticipated benefits of our strategic partnership arrangement with Eutelsat; 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 on our ability to sell products and services; 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; and our dependence on a limited number of key employees. In addition, please refer to the risk factors contained in our SEC filings available at www.sec.gov, including our most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. Readers are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date on which they are made. We undertake no obligation to update or revise any forward-looking statements for any reason.


About ViaSat
ViaSat, Inc. (NASDAQ: VSAT) keeps the world connected. As a global broadband services and technology company, ViaSat ensures consumers, businesses, governments and military personnel have communications access - anywhere - whether on the ground or in-flight. The Company's innovations in designing highest-capacity satellites and secure ground infrastructure and terminal technologies coupled with its international network of managed Wi-Fi hotspots enable ViaSat to deliver a best available network that extends the reach and accessibility of broadband internet service, globally. For more information, visit: www.viasat.com, or follow ViaSat on FacebookTwitterLinkedIn or YouTube.


Use of Non-GAAP Financial Information
To supplement ViaSat's consolidated financial statements presented in accordance with generally accepted accounting principles (GAAP), ViaSat uses non-GAAP net income (loss) attributable to ViaSat Inc. and Adjusted EBITDA, measures ViaSat believes are appropriate to enhance an overall understanding of ViaSat's past financial performance and prospects for the future. We believe the non-GAAP results provide useful information to both management and investors by excluding specific expenses that we believe are not indicative of our core operating results. In addition, since we have historically reported non-GAAP results to the investment community, we believe the inclusion of non-GAAP numbers provides consistency in our financial reporting and facilitates comparisons to the Company's historical operating results. Further, these non-GAAP results are among the primary indicators that management uses as a basis for evaluating the operating performance of our segments, allocating resources to such segments, planning and forecasting in future periods. The presentation of this additional information is not meant to be considered in isolation or as a substitute for measures of financial performance prepared in accordance with GAAP. A reconciliation of specific adjustments to GAAP results is provided in the tables below.


Copyright © 2017 ViaSat, Inc. All rights reserved. ViaSat, and the ViaSat logo, are registered trademark of ViaSat, Inc. All other product or company names mentioned are used for identification purposes only and may be trademarks of their respective owners.


Condensed Consolidated Statements of Operations


(Unaudited)


(In thousands, except per share data)











Three months ended 



Twelve months ended



March 31, 2017



March 31, 2016



March 31, 2017



March 31, 2016










Revenues:









Product revenues


$          196,451



$          176,523



$          713,936



$          664,821


Service revenues


219,968



195,441



845,401



752,610


Total revenues


416,419



371,964



1,559,337



1,417,431










Operating expenses:









Cost of product revenues


141,942



133,414



524,026



489,246


Cost of service revenues


132,159



129,125



524,949



495,099


Selling, general and administrative


96,562



77,536



333,468



298,345


Independent research and development


39,857



21,615



129,647



77,184


Amortization of acquired intangible assets


3,223



2,780



10,788



16,438


Income from operations


2,676



7,494



36,459



41,119


Interest expense, net


(66)



(5,990)



(11,075)



(23,522)


Income before income taxes 


2,610



1,504



25,384



17,597


(Benefit from) provision for income taxes


(1,639)



(2,883)



3,617



(4,173)


Net income


4,249



4,387



21,767



21,770


Less: net (loss) income attributable to noncontrolling interests, net of tax


(2,401)



(63)



(2,000)



29


Net income attributable to ViaSat Inc. 


$              6,650



$              4,450



$            23,767



$            21,741










Diluted net income per share attributable to ViaSat Inc. common stockholders


$                0.11



$                0.09



$                0.45



$                0.44


Diluted common equivalent shares


58,425



49,782



53,396



49,445










AN ITEMIZED RECONCILIATION BETWEEN NET INCOME ATTRIBUTABLE TO VIASAT INC.


ON A GAAP BASIS AND NON-GAAP BASIS IS AS FOLLOWS:



Three months ended



Twelve months ended



March 31, 2017



March 31, 2016



March 31, 2017



March 31, 2016










GAAP net income attributable to ViaSat Inc.


$              6,650



$              4,450



$            23,767



$            21,741


Amortization of acquired intangible assets


3,223



2,780



10,788



16,438


Stock-based compensation expense


15,852



13,194



55,775



47,510


Acquisition related expenses


-



-



615



-


Income tax effect


(7,266)



(6,143)



(25,372)



(24,664)


Non-GAAP net income attributable to ViaSat Inc.


$            18,459



$            14,281



$            65,573



$            61,025


Non-GAAP diluted net income per share attributable to ViaSat Inc. common stockholders


$                0.32



$                0.29



$                1.23



$                1.23


Diluted common equivalent shares


58,425



49,782



53,396



49,445










AN ITEMIZED RECONCILIATION BETWEEN NET INCOME ATTRIBUTABLE TO VIASAT INC.


AND ADJUSTED EBITDA IS AS FOLLOWS:



Three months ended



Twelve months ended



March 31, 2017



March 31, 2016



March 31, 2017



March 31, 2016










GAAP net income attributable to ViaSat Inc.


$              6,650



$              4,450



$            23,767



$            21,741


(Benefit from) provision for income taxes


(1,639)



(2,883)



3,617



(4,173)


Interest expense, net


66



5,990



11,075



23,522


Depreciation and amortization


62,524



59,914



245,922



242,076


Stock-based compensation expense


15,852



13,194



55,775



47,510


Acquisition related expenses


-



-



615



-


Adjusted EBITDA


$            83,453



$            80,665



$          340,771



$          330,676


 


AN ITEMIZED RECONCILIATION BETWEEN SEGMENT OPERATING PROFIT (LOSS) BEFORE


CORPORATE AND AMORTIZATION OF ACQUIRED INTANGIBLE ASSETS AND ADJUSTED EBITDA IS AS FOLLOWS:


(In thousands)





















Three months ended March 31, 2017 



Three months ended March 31, 2016




Satellite
Services



Commercial
Networks



Government
Systems



Total



Satellite
Services



Commercial
Networks



Government
Systems



Total


Segment operating profit (loss) before corporate and amortization of acquired intangible assets



$  32,822



$     (52,499)



$      25,576



$    5,899



$  21,981



$     (40,411)



$      28,704



$  10,274


Depreciation *



34,724



6,093



8,988



49,805



35,025



4,928



8,692



48,645


Stock-based compensation expense



3,569



6,172



6,111



15,852



3,193



5,252



4,749



13,194


Other amortization



3,898



3,719



1,879



9,496



3,451



3,650



1,388



8,489


Acquisition related expenses



-



-



-



-



-



-



-



-


Noncontrolling interests



-



-



2,401



2,401



-



-



63


 ** 


63


Adjusted EBITDA 



$  75,013



$     (36,515)



$      44,955



$  83,453



$  63,650



$     (26,581)



$      43,596


 ** 


$  80,665





















Twelve months ended March 31, 2017



Twelve months ended March 31, 2016




Satellite
Services



Commercial
Networks



Government
Systems



Total



Satellite
Services



Commercial
Networks



Government
Systems



Total


Segment operating profit (loss) before corporate and amortization of acquired intangible assets



$131,085



$   (180,496)



$      96,658



$  47,247



$  81,830



$   (111,339)



$      87,066



$  57,557


Depreciation *



141,108



24,483



35,095



200,686



137,541



21,693



33,852



193,086


Stock-based compensation expense



11,917



22,225



21,633



55,775



10,798



19,029



17,683



47,510


Other amortization



13,136



14,631



6,681



34,448



13,499



14,068



4,985



32,552


Acquisition related expenses



190



179



246



615



-



-



-



-


Noncontrolling interests



-



-



2,000



2,000



-



-



(29)


 ** 


(29)


Adjusted EBITDA



$297,436



$   (118,978)



$    162,313



$340,771



$243,668



$     (56,549)



$    143,557


 ** 


$330,676



* Depreciation expenses not specifically recorded in a particular segment have been allocated based on other indirect allocable costs, which management believes is a reasonable method. 


** Government systems segment Adjusted EBITDA has been adjusted to exclude noncontrolling interest, net of tax.


 


Condensed Consolidated Balance Sheets


(Unaudited)


(In thousands)












As of



As of




As of



As of


Assets


March 31, 2017



March 31, 2016



Liabilities and Equity


March 31, 2017



March 31, 2016











Current assets:






 Current liabilities: 





Cash and cash equivalents


$        130,098



$          42,088



 Accounts payable 


$        100,270



$          95,645


Accounts receivable, net


263,721



286,724



 Accrued liabilities 


225,247



184,344


Inventories


163,201



145,161



 Total current liabilities 


325,517



279,989


Prepaid expenses and other current assets***


57,836



47,583



 Senior Notes, net*** 


575,380



575,304


Total current assets


614,856



521,556



 Other long-term debt, net*** 


273,103



370,224







 Other liabilities 


42,722



37,371







 Total liabilities 


1,216,722



1,262,888


Property, equipment and satellites, net


1,648,878



1,385,107







Other acquired intangible assets, net


41,677



33,604



 Total ViaSat Inc. stockholders' equity 


1,734,618



1,129,103


Goodwill


119,876



117,040



 Noncontrolling interest in subsidiaries 


3,313



5,321


Other assets***


529,366



340,005



 Total equity 


1,737,931



1,134,424


Total assets


$      2,954,653



$      2,397,312



 Total liabilities and equity 


$      2,954,653



$      2,397,312



*** The Company adopted Accounting Standards Updated 2015-03 Interest — Imputation of Interest (ASC 835-30): Simplifying the Presentation of Debt Issuance Costs retrospectively during the first quarter of fiscal 2017 and resultantly reclassified unamortized debt issuance costs as a direct deduction from the carrying amount of the Senior Notes and other long-term debt for all periods presented.


 


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SOURCE ViaSat, Inc.




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