Press Release

Feb 11, 2014



ViaSat Announces Third Quarter Fiscal Year 2014 Results


CARLSBAD, Calif., Feb. 11, 2014 /PRNewswire/ -- ViaSat Inc. (NASDAQ: VSAT), an innovator in satellite and other wireless networking systems and services, announced financial results for the third quarter of fiscal year 2014. Revenues increased 16% to $332.6 million compared to the same period last year, and Adjusted EBITDA hit record levels, growing 17% year-over-year to $56.7 million for the third quarter of fiscal year 2014. Non-GAAP diluted net income attributable to ViaSat common stockholders was $0.03 per share, or a loss of $0.13 per share on a diluted GAAP basis - compared to net income of $0.04 and a loss of $0.47 per share, respectively, for the third quarter of fiscal year 2013.


(Logo: http://photos.prnewswire.com/prnh/20091216/VIASATLOGO)


ViaSat's fiscal year-to-date results also reflected strong growth. Revenues increased 24% to $1.0 billion and Adjusted EBITDA grew 34% to $163.8 million compared to the same period last year. Net income attributable to ViaSat common stockholders increased to $0.35 per share on a non-GAAP diluted basis, or a loss of $0.13 per share on a diluted GAAP basis - compared to the prior year period losses of $0.18 and $0.99 per share, respectively.


"We are very pleased with the balance in our third quarter and year-to-date results," said Mark Dankberg, chairman and CEO of ViaSat. "We've maintained double-digit revenue and Adjusted EBITDA growth, and substantially increased discretionary investments to defend and extend our technology lead in fixed and mobile satellite broadband networks. The launch of Exede® In The Air via JetBlue's Fly-Fi™ service is an exciting example of opportunities uniquely enabled by our satellite network assets and innovative technologies. We aim to create an opportunity for disproportionately strong growth by redefining the in-flight Wi-Fi experience - engaging up to 10 times the number of passengers per flight, with speeds 10 to 100 times faster than competing systems, at costs far lower than possible with conventional infrastructure. We are fortunate to have similar disruptive opportunities in several key markets."


Financial Results1


(In millions, except per share data)


Q3 FY14


Q3 FY13


First 9 Mos. FY14


First 9 Mos. FY13


Revenues


$332.6


$286.4


$1,007.5


$811.0


Adjusted EBITDA


$56.7


$48.4


$163.8


$122.5


Net loss2


($6.0)


($20.8)


($5.9)


($43.1)


Diluted per share net loss2


($0.13)


($0.47)


($0.13)


($0.99)


Non-GAAP net income (loss)2


$1.6


$1.8


$15.8


($7.9)


Non-GAAP diluted per share net income (loss)2


$0.03


$0.04


$0.35


($0.18)


Fully diluted weighted average shares3


45.9


44.2


45.6


43.7







New contract awards


$326.8


$265.7


$971.9


$1,146.3


Sales backlog4


$797.9


$939.0


$797.9


$939.0




1


 ViaSat uses a 52 or 53 week fiscal year which ends on the Friday closest to March 31. ViaSat quarters for fiscal year 2014 end on June 28, 2013, October 4, 2013, January 3, 2014, and April 4, 2014. This results in a 53 week fiscal year approximately every four to five years. Fiscal year 2014 is a 53 week year, compared with a 52 week year in fiscal year 2013. As a result of the shift in the fiscal calendar, the second quarter of fiscal year 2014 included an additional week. ViaSat does not believe that the extra week resulted in any material impact on its financial results.




2


 Attributable to ViaSat Inc. common stockholders.




3


 As the third quarter and first nine months of fiscal years 2014 and 2013 financial information resulted in a net loss, the weighted average number of shares used to calculate basic and diluted net loss per share is the same, as diluted shares would be anti-dilutive.





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


Segment Results


(In millions)


 


Q3 FY14


 


Q3 FY13


First 9 Mos. FY14


First 9 Mos. FY13


Satellite Services






  New contract awards


$98.9


$71.4


$295.4


$212.5


  Revenues


$98.6


$71.8


$284.8


$198.4


  Adjusted EBITDA


$23.0


$11.0


$58.9


$24.1







Commercial Networks






  New contract awards


$64.5


$45.8


$235.8


$417.7


  Revenues


$91.9


$68.7


$299.4


$231.3


  Adjusted EBITDA


$2.3


$2.4


$22.2


$10.9







Government Systems






  New contract awards


$163.4


$148.5


$440.7


$516.1


  Revenues


$142.0


$146.0


$423.2


$381.3


  Adjusted EBITDA


$31.4


$35.1


$83.4


$87.7


Satellite Services


Our Satellite Services segment reported revenues of $98.6 million for the third quarter of fiscal year 2014, an increase of 37% year-over-year. We ended the quarter with nearly 620,000 consumer broadband subscribers and performed over 85,000 installations, including new additions and migrations. Our Satellite Services segment Adjusted EBITDA was $23.0 million for the third quarter, which more than doubled the amount reported for the same period last year, despite our substantial investments in intellectual property protection and legal expenses related to our high capacity satellite technologies. On a year-to-date basis, segment Adjusted EBITDA grew by 144% to $58.9 million for the first nine months of fiscal year 2014 compared to the same period last year.


Commercial Networks


Our Commercial Networks segment generated $91.9 million in revenues during the third quarter of fiscal year 2014, an increase of $23.2 million, or 34%, compared to the same period last year. Year-to-date revenues also grew significantly, increasing by $68.1 million to $299.4 million compared to the same period last year as we continue to make progress on our international Ka-band infrastructure projects (including commencement of initial gateway installation) and ramp up production on our aeronautical mobile broadband systems contracts. Segment Adjusted EBITDA results of $2.3 million for the third quarter were relatively unchanged compared to last year, overcoming the increased investments in next generation satellites and integrated networking systems, which more than doubled year over year. Nonetheless, year-to-date segment Adjusted EBITDA grew significantly to $22.2 million, representing a 104% increase compared to the same period last year.


Government Systems


Our Government Systems segment reported revenue of $142.0 million for the third quarter of fiscal year 2014, a decrease of $4.0 million compared to the same period last year as completion of a Blue Force Tracking satellite service bandwidth contract offset growth in both command and control system production as well as sales of information assurance and security platforms. Year-to-date revenue growth compared to the same period last year remained solid at 11%. Segment Adjusted EBITDA was $31.4 million and $83.4 million for the quarter and year-to-date, respectively, a decrease of 11% and 5%, respectively, compared to the same periods last year. These results reflect our investment in dual band mobility systems, as well as network expansion costs supporting our government mobility offerings. Our military mobile broadband service revenue base remains strong, including a $52 million contract renewal awarded in the third quarter of fiscal year 2014.


Selected Fiscal Third Quarter Business Highlights


  • JetBlue launched Exede In The Air in-flight Internet service with very positive media and passenger reviews and flight data showing from three to ten times the passenger participation per plane compared to publicly-disclosed usage figures for other in-flight Wi-Fi offerings.
  • Received an additional $51.9 million award for global mobile satellite services to continue support of military mobile broadband missions.
  • Won a $33.5 million development contract from the U.S. government for Block Upgrade 2 hardware and software upgrades to our Multifunctional Information Distribution System-Low Volume Terminal (MIDS-LVT) Link 16 terminals.
  • Received awards totaling over $21.7 million from the U.S. government for secure networking products and systems.
  • Received awards totaling over $13.8 million from international government organizations for tactical satcom networking equipment.
  • BAE Systems, U.K., and The Commonwealth of Australia announced separately that they have selected the ViaSat Small Tactical Terminal (STT) KOR-24 for Link 16 military communication applications.
  • Selected from a group of 33 nominated companies as the 2013 World Technology Award winner in the Communications Technology category by The World Technology Network for innovation in creating the high-capacity satellite system, featuring ViaSat-1.

Safe Harbor Statement


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 future earnings, performance and growth opportunities, including with respect to our Exede Internet service, the launch of our new in-flight service speeds and number of passengers per flight. 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 satellite; unexpected expenses related to the satellite project; our ability to successfully implement our business plan for our broadband satellite services on our anticipated timeline or at all, including with respect to the ViaSat-2 satellite system; risks associated with the construction, launch and operation of ViaSat-2 and our other satellites, including the effect of any anomaly, operational failure or degradation in satellite performance; negative audits by the U.S. government; continued turmoil 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; our ability to successfully develop, introduce and sell new technologies, products and services; 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 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.


Conference Call


ViaSat will host a conference call to discuss the fiscal year 2014 third quarter results at 5:00 p.m. Eastern Time on Tuesday, February 11, 2014. The dial-in number is (877) 640-9809 in the U.S. and (914) 495-8528 internationally. A replay of the conference call will be available from 8:00 p.m. Eastern Time on Tuesday, February 11 until midnight on Wednesday, February 12 by dialing (855) 859-2056 for U.S. callers and (404) 537-3406 for international callers, and entering the conference ID 59584979. You can also access our conference call webcast and other material financial information discussed on our conference call on the Investor Relations section of our website at investors.viasat.com. The call will be archived and available on that site for approximately one month immediately following the conference call.


About ViaSat (www.viasat.com)


ViaSat delivers fast, secure communications, Internet, and network access to virtually any location for consumers, governments, enterprises, and the military. The company offers fixed and mobile satellite network services including Exede by ViaSat, which features ViaSat-1, the world's highest capacity satellite; service to more than 2,900 mobile platforms, including Yonder® Ku-band mobile service; satellite broadband networking systems; and network-centric military communication systems and cybersecurity products for the U.S. and allied governments. ViaSat also offers communication system design and a number of complementary products and technologies. Based in Carlsbad, California, ViaSat employs over 3,000 people in a number of locations worldwide for technology development, customer service, and network operations.


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 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.


Exede and Yonder are registered trademarks of ViaSat Inc.


Fly-Fi is a trademark of JetBlue Airways Corporation.


 


 


 










Condensed Consolidated Statement of Operations


(Unaudited)


(In thousands, except per share data)











 Three months ended 



Nine months ended



January 3, 2014



December 28, 2012



January 3, 2014



December 28, 2012










Revenues:









Product revenues


$           193,846



$                  164,694



$           586,398



$                  480,898


Service revenues


138,709



121,748



421,140



330,129


Total revenues


332,555



286,442



1,007,538



811,027










Operating expenses:









Cost of product revenues


140,530



119,250



427,517



349,720


Cost of service revenues


102,606



92,145



313,010



266,096


Selling, general and administrative


69,100



62,209



207,474



172,789


Independent research and development


15,143



7,612



44,150



23,739


Amortization of acquired intangible assets


3,652



3,960



10,949



12,065


Income (loss) from operations


1,524



1,266



4,438



(13,382)


Interest expense, net


(9,166)



(10,634)



(29,173)



(33,628)


Loss on extinguishment of debt


-



(26,501)



-



(26,501)


Loss before income taxes 


(7,642)



(35,869)



(24,735)



(73,511)


Benefit from income taxes


(1,682)



(15,255)



(19,569)



(30,607)


Net loss


(5,960)



(20,614)



(5,166)



(42,904)










Less: Net income attributable to the noncontrolling interest, net of tax


33



162



764



199


Net loss attributable to ViaSat Inc. 


$             (5,993)



$                  (20,776)



$             (5,930)



$                  (43,103)










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


$               (0.13)



$                      (0.47)



$               (0.13)



$                      (0.99)


Diluted common equivalent shares


45,935



44,189



45,576



43,662










AN ITEMIZED RECONCILIATION BETWEEN NET INCOME (LOSS) ATTRIBUTABLE TO VIASAT INC.






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










Three months ended 



Nine months ended



January 3, 2014



December 28, 2012



January 3, 2014



December 28, 2012










GAAP net loss attributable to ViaSat Inc.


$             (5,993)



$                  (20,776)



$             (5,930)



$                  (43,103)


Amortization of acquired intangible assets


3,652



3,960



10,949



12,065


Stock-based compensation expense


8,687



6,986



24,365



19,410


Loss on extinguishment of debt


-



26,501



-



26,501


Income tax effect


(4,749)



(14,829)



(13,548)



(22,729)


Non-GAAP net income (loss) attributable to ViaSat Inc.


$               1,597



$                      1,842



$             15,836



$                    (7,856)


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


$                 0.03



$                        0.04



$                 0.35



$                      (0.18)


Diluted common equivalent shares


45,935



44,189



45,576



43,662










AN ITEMIZED RECONCILIATION BETWEEN NET INCOME (LOSS) ATTRIBUTABLE TO VIASAT INC.






AND ADJUSTED EBITDA IS AS FOLLOWS:










Three months ended 



Nine months ended



January 3, 2014



December 28, 2012



January 3, 2014



December 28, 2012










GAAP net loss attributable to ViaSat Inc.


$             (5,993)



$                  (20,776)



$             (5,930)



$                  (43,103)


Benefit from income taxes


(1,682)



(15,255)



(19,569)



(30,607)


Interest expense, net


9,166



10,634



29,173



33,628


Depreciation and amortization


46,500



40,324



135,751



116,717


Stock-based compensation expense


8,687



6,986



24,365



19,410


Loss on extinguishment of debt


-



26,501



-



26,501


Adjusted EBITDA


$             56,678



$                    48,414



$           163,790



$                  122,546


 


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 January 3, 2014 



Three months ended December 28, 2012




Satellite Services



Commercial Networks



Government Systems



Total



Satellite Services



Commercial Networks



Government Systems



Total


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



$  (9,761)



$       (6,528)



$      21,465



$    5,176



$(18,356)



$       (3,399)



$      26,981



$    5,226


Depreciation *



29,962



4,355



6,206



40,523



27,009



2,451



5,178



34,638


Stock-based compensation expense



1,834



3,472



3,381



8,687



1,460



2,653



2,873



6,986


Other amortization



990



1,032



303



2,325



934



740



55



1,729


Adjusted EBITDA before other



$ 23,025



$        2,331



$      31,355



56,711



$ 11,047



$        2,445



$      35,087



48,579


Other 









(33)









(165)


Adjusted EBITDA









$  56,678









$  48,414





















Nine months ended January 3, 2014



Nine months ended December 28, 2012




Satellite Services



Commercial Networks



Government Systems



Total



Satellite Services



Commercial Networks



Government Systems



Total


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



$(37,377)



$       (3,558)



$      56,322



$  15,387



$(60,245)



$       (7,304)



$      66,232



$   (1,317)


Depreciation *



88,656



12,348



16,738



117,742



77,607



8,076



13,314



98,997


Stock-based compensation expense



5,127



9,574



9,664



24,365



4,093



7,265



8,052



19,410


Other amortization



2,527



3,821



692



7,040



2,662



2,815



143



5,620


Adjusted EBITDA before other



$ 58,933



$      22,185



$      83,416



164,534



$ 24,117



$      10,852



$      87,741



122,710


Other 









(744)









(164)


Adjusted EBITDA









$163,790









$122,546




































* 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. 


 


Condensed Consolidated Balance Sheet


(Unaudited)


(In thousands)












As of



As of




As of



As of


Assets


January 3, 2014



March 29, 2013



Liabilities and Equity


January 3, 2014



March 29, 2013











Current assets:






 Current liabilities: 





Cash and cash equivalents


$           41,362



$        105,738



 Accounts payable 


$          112,238



$          83,009


Accounts receivable, net


282,594



266,970



 Accrued liabilities 


155,913



161,909


Inventories


126,491



106,281



 Current portion of other long-term debt 


1,518



2,230


Deferred income taxes


25,099



25,065



 Total current liabilities 


269,669



247,148


Prepaid expenses and other current assets


44,212



40,819



 Senior Notes, net 


584,151



584,993


Total current assets


519,758



544,873



 Other long-term debt 


85,914



1,456







 Other liabilities 


51,542



52,640


Property, equipment and satellites, net


1,031,301



913,781



 Total liabilities 


991,276



886,237


Other acquired intangible assets, net


39,042



47,170



 Total ViaSat Inc. stockholders' equity 


932,534



903,001


Goodwill


83,299



83,000



 Noncontrolling interest in subsidiary 


5,598



4,834


Other assets


256,008



205,248



 Total equity 


938,132



907,835


Total assets


$       1,929,408



$      1,794,072



 Total liabilities and equity 


$       1,929,408



$      1,794,072


 


 


SOURCE ViaSat Inc.




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