Viasat Announces Third Quarter Fiscal Year 2018 Results
"Fiscal 2018 is a year of investment and positioning
business, we're enthused by the market testing to date for our
construction phase - resulting in a decrease in R&D expenses in the third quarter relative to the second quarter of this fiscal year. Overall, I'm really pleased with the execution and our team's ability to achieve the milestones that position us for exciting growth in fiscal year 2019 and beyond."
Financial Results |
||||||
(In millions, except per share data) |
Q3 FY18 |
Q3 FY17 |
Year- |
First 9 FY18 |
First 9 FY17 |
Year-Over- |
Revenues |
|
|
0.3% |
|
|
1.1% |
Net (loss) income1 |
|
|
* |
|
|
* |
Non-GAAP net (loss) income1 |
|
|
* |
|
|
(88.7)% |
Adjusted EBITDA |
|
|
(33.0)% |
|
|
(30.3)% |
Diluted per share net (loss) income1 |
|
|
* |
|
|
* |
Non-GAAP diluted per share net (loss) income1 |
|
|
* |
|
|
(90.1)% |
Fully diluted weighted average shares2 |
58.6 |
54.0 |
8.6% |
58.2 |
51.6 |
12.8% |
New contract awards |
|
|
23.2% |
|
|
(1.1)% |
Sales backlog3 |
$ 1,128.7 |
|
6.3% |
|
|
6.3% |
* Percentage not meaningful. |
||||||
Segment Results |
||||||
(In millions) |
Q3 FY18 |
Q3 FY17 |
Year- |
First 9 FY18 |
First 9 FY17 |
Year-Over- |
Satellite Services |
||||||
New contract awards |
|
|
(2.5)% |
|
$ 444.2 |
0.9% |
Revenues |
|
|
(9.7)% |
|
|
(5.2)% |
Operating profit4 |
|
|
(95.2)% |
|
|
(66.3)% |
Adjusted EBITDA |
|
|
(39.4)% |
|
|
(26.3)% |
Commercial Networks |
||||||
New contract awards |
|
|
80.8% |
|
|
13.4% |
Revenues |
|
|
1.9% |
|
|
(15.3)% |
Operating loss4 |
|
|
(10.1)% |
|
|
(39.9)% |
Adjusted EBITDA |
|
|
(16.4)% |
|
|
(61.3)% |
Government Systems |
||||||
New contract awards |
|
|
30.9% |
|
|
(5.9)% |
Revenues |
|
|
9.5% |
|
|
13.3% |
Operating profit4 |
|
|
23.0% |
|
|
35.7% |
Adjusted EBITDA |
|
|
19.7% |
|
|
26.5% |
1 Attributable to |
2 As the three and nine months ended |
3 Amounts include certain backlog adjustments due to contract changes and amendments. Backlog does not include contracts with our broadband internet subscribers in our Satellite Services segment, nor does it include anticipated purchase orders and requests for the installation of IFC systems or future recurring internet services revenues under commercial IFC agreements recorded in our Commercial Networks and Satellite Services segments, respectively. |
4 Before corporate and amortization of acquired intangible assets. |
The Tax Cuts and Jobs Act (the Tax Reform), enacted on
months ended
Accompanying Announcement from
Today,
Viasat's
Satellite Services
In the third quarter of fiscal year 2018,
revenue decrease as well as increased expenses related to the expected
- ARPU in the residential business grew 8% year-over-year to a record high of
$68.23 , as the Company continued to see good response to its selective introduction of higher-value premium service plans ahead of theViaSat -2 commercial service launch. - As of quarter end, approximately 43,000 subscribers were already on "
ViaSat -2 like" unlimited plans on theViaSat -1 satellite, indicating consumers' interest for higher-value premium service plans that deliver higher speeds, more data and more video streaming. - At the close of the third quarter of fiscal year 2018, there were 589 commercial aircraft in service equipped with
Viasat's IFC system andViasat expects to install its system on 912 additional aircraft under existing contracts, a sequential increase of 92 planes to a total of 1,501 aircraft either in service or under contract. The Company anticipates a significant increase in new installations of its IFC system to begin in the fourth quarter of fiscal year 2018. Viasat expanded its relationship with JetBlue, signing a contract to upgrade JetBlue aircraft to the latest Viasat connectivity hardware. This will provide JetBlue direct access to the expanded coverage and capacity of theViaSat -2 and ViaSat-3 satellite platforms and create new opportunities for innovative passenger information and entertainment options.
Fiscal year-to-date, Satellite Services segment revenues, operating profit and Adjusted EBITDA were lower compared to the same period last year. This decrease reflected the
Commercial Networks
In the third quarter of fiscal year 2018,
- New contract awards for the segment were higher by 81% compared to the same period last fiscal year, and by 13% on a fiscal year-to-date basis, primarily due to demand for IFC equipment and new contract wins for next-generation broadband capabilities, including phased array antenna solutions for residential and on-the-move applications. The book-to-bill ratio for the third quarter and year-to-date were 1.6:1 and 1.2:1, respectively.
Viasat expects to launch commercial broadband services on theViaSat -2 satellite inFebruary 2018 .Viasat and Boeing have proceeded with full construction, integration and testing of the first twoViaSat -3 class satellites. As a result, R&D for the quarter decreased sequentially from the second quarter of fiscal year 2018.
Fiscal year-to-date, Commercial Networks segment operating loss was higher and Adjusted EBITDA was lower compared to the same period last year, reflecting year-over-year impacts and investment trends similar to those seen in the third quarter of fiscal year 2018. Fiscal year-to-date segment revenues were down 15% compared to the same period last year, primarily as a result of lower fixed terminal sales for
Government Systems
Non-Developmental Item (NDI) products initiated under Company funded R&D programs in prior periods, alongside expanding demand for cybersecurity and information assurance products. Highlights for the quarter include:
- Fiscal year-to-date segment contract awards equaled
$629.9 million , reflecting a 1.1 to 1 book-to-bill ratio, and a record segment backlog of$702.2 million , driving total Company backlog to$1.1 billion . - Key awards:
Viasat was awarded a contract to upgrade the NATO UHF satellite communications control stations to comply with the Integrated Waveform baseline, givingNATO greater communications interoperability, scalability and flexibility across legacy and next-generation platforms.Viasat received a five-year, sole-source Indefinite Delivery Indefinite Quantity (IDIQ) contract with an initial ceiling of$350 million for advanced equipment, systems, services and support to modernize ground/air situational awareness, tactical data links, terrestrial networking, intelligence, surveillance and reconnaissance, tactical satellite communications, information assurance, network management and cybersecurity for Special Operations Forces.- Key milestones achieved:
- The first ever handheld Link 16 radio, the Viasat Battlefield Awareness and Targeting System - Dismounted (BATS-D) device, known to the
United States Department of Defense as the AN/PRC-161, becameNational Security Agency (NSA) Type 1 certified. - The
U.S. Air Force andViasat completed production readiness review on the Mini Crypto program for the development of an embeddable cryptographic security/data module for military handheld devices and unmanned systems that communicates sensitive and classified data.
Fiscal year-to-date,
Conference Call
DATE/TIME: |
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DIAL-IN: |
(877) 640-9809 in the |
WEBCAST: |
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REPLAY: |
Available from |
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 completion of in-orbit testing and launch of commercial service on the
ViaSat
systems customers; and future impacts of the Tax Reform. 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: the failure of the
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; the number of purchase orders that are submitted and accepted for the installation of IFC systems with respect to aircraft under contract; audits by the
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
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
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Use of Non-GAAP Financial Information
To supplement
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 © 2018 Viasat, Inc. All rights reserved.
Condensed Consolidated Statements of Operations |
|||||||
(Unaudited) |
|||||||
(In thousands, except per share data) |
|||||||
Three months ended |
Nine months ended |
||||||
|
|
|
|
||||
Revenues: |
|||||||
Product revenues |
$ 175,957 |
$ 169,574 |
$ 523,858 |
$ 517,485 |
|||
Service revenues |
205,880 |
211,056 |
631,097 |
625,433 |
|||
Total revenues |
381,837 |
380,630 |
1,154,955 |
1,142,918 |
|||
Operating expenses: |
|||||||
Cost of product revenues |
126,437 |
124,579 |
382,932 |
382,084 |
|||
Cost of service revenues |
137,275 |
130,967 |
410,538 |
392,790 |
|||
Selling, general and administrative |
100,125 |
80,282 |
279,382 |
236,906 |
|||
Independent research and development |
40,149 |
34,436 |
131,482 |
89,790 |
|||
Amortization of acquired intangible assets |
3,177 |
2,775 |
9,757 |
7,565 |
|||
(Loss) income from operations |
(25,326) |
7,591 |
(59,136) |
33,783 |
|||
Interest income (expense), net |
512 |
(2,119) |
529 |
(11,009) |
|||
Loss on extinguishment of debt |
- |
- |
(10,217) |
- |
|||
(Loss) income before income taxes |
(24,814) |
5,472 |
(68,824) |
22,774 |
|||
(Provision for) benefit from income taxes |
(2,172) |
(850) |
18,472 |
(5,256) |
|||
Equity in income of unconsolidated affiliate, net |
1,365 |
- |
1,593 |
- |
|||
Net (loss) income |
(25,621) |
4,622 |
(48,759) |
17,518 |
|||
Less: net (loss) income attributable to noncontrolling interests, net of tax |
(990) |
379 |
(1,400) |
401 |
|||
Net (loss) income attributable to Viasat Inc. |
$ (24,631) |
$ 4,243 |
$ (47,359) |
$ 17,117 |
|||
Diluted net (loss) income per share attributable to |
$ (0.42) |
$ 0.08 |
$ (0.81) |
$ 0.33 |
|||
Diluted common equivalent shares |
58,638 |
54,015 |
58,237 |
51,647 |
|||
AN ITEMIZED RECONCILIATION BETWEEN |
|||||||
ON A GAAP BASIS AND NON-GAAP BASIS IS AS FOLLOWS: |
|||||||
(In thousands, except per share data) |
Three months ended |
Nine months ended |
|||||
|
|
|
|
||||
GAAP net (loss) income attributable to |
$ (24,631) |
$ 4,243 |
$ (47,359) |
$ 17,117 |
|||
Amortization of acquired intangible assets |
3,177 |
2,775 |
9,757 |
7,565 |
|||
Stock-based compensation expense |
17,642 |
14,505 |
49,132 |
39,923 |
|||
Loss on extinguishment of debt |
- |
- |
10,217 |
- |
|||
Acquisition related expenses |
- |
615 |
- |
615 |
|||
Income tax effect (1) |
1,383 |
(6,636) |
(16,426) |
(18,106) |
|||
Non-GAAP net (loss) income attributable to |
$ (2,429) |
$ 15,502 |
$ 5,321 |
$ 47,114 |
|||
Non-GAAP diluted net (loss) income per share attributable to |
$ (0.04) |
$ 0.29 |
$ 0.09 |
$ 0.91 |
|||
Diluted common equivalent shares |
58,638 |
54,015 |
58,237 |
51,647 |
|||
(1) The income tax effect is calculated using the tax rate applicable for the non-GAAP adjustments. |
|||||||
AN ITEMIZED RECONCILIATION BETWEEN |
|||||||
AND ADJUSTED EBITDA IS AS FOLLOWS: |
|||||||
(In thousands) |
Three months ended |
Nine months ended |
|||||
|
|
|
|
||||
GAAP net (loss) income attributable to |
$ (24,631) |
$ 4,243 |
$ (47,359) |
$ 17,117 |
|||
Provision for (benefit from) income taxes |
2,172 |
850 |
(18,472) |
5,256 |
|||
Interest (income) expense, net |
(512) |
2,119 |
(529) |
11,009 |
|||
Depreciation and amortization |
61,567 |
61,578 |
186,376 |
183,398 |
|||
Stock-based compensation expense |
17,642 |
14,505 |
49,132 |
39,923 |
|||
Loss on extinguishment of debt |
- |
- |
10,217 |
- |
|||
Acquisition related expenses |
- |
615 |
- |
615 |
|||
Adjusted EBITDA |
$ 56,238 |
$ 83,910 |
$ 179,365 |
$ 257,318 |
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 |
Three months ended |
|||||||||||||||
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 |
$ 1,681 |
$ (53,505) |
$ 29,675 |
|
$ 34,846 |
$ (48,598) |
$ 24,118 |
$ 10,366 |
||||||||
Depreciation(2) |
35,151 |
7,301 |
9,100 |
51,552 |
35,136 |
6,364 |
8,840 |
50,340 |
||||||||
Stock-based compensation expense |
4,394 |
6,660 |
6,588 |
17,642 |
3,117 |
5,788 |
5,600 |
14,505 |
||||||||
Other amortization |
3,093 |
1,549 |
2,196 |
6,838 |
3,330 |
3,632 |
1,501 |
8,463 |
||||||||
Equity in income of unconsolidated affiliate, net |
1,365 |
- |
- |
1,365 |
- |
- |
- |
- |
||||||||
Acquisition related expenses |
- |
- |
- |
- |
190 |
179 |
246 |
615 |
||||||||
Noncontrolling interests |
754 |
- |
236 |
990 |
- |
- |
(379) |
(379) |
||||||||
Adjusted EBITDA |
$ 46,438 |
$ (37,995) |
$ 47,795 |
$ 56,238 |
$ 76,619 |
$ (32,635) |
$ 39,926 |
$ 83,910 |
||||||||
Nine months ended December 31, 2017 |
Nine months ended December 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 |
$ 33,140 |
$ (179,007) |
$ 96,488 |
|
$ 98,263 |
$ (127,997) |
$ 71,082 |
$ 41,348 |
||||||||
Depreciation(2) |
106,095 |
20,556 |
26,560 |
153,211 |
106,384 |
18,390 |
26,107 |
150,881 |
||||||||
Stock-based compensation expense |
11,842 |
18,740 |
18,550 |
49,132 |
8,348 |
16,053 |
15,522 |
39,923 |
||||||||
Other amortization |
9,639 |
6,710 |
7,059 |
23,408 |
9,238 |
10,912 |
4,802 |
24,952 |
||||||||
Equity in income of unconsolidated affiliate, net |
1,593 |
- |
- |
1,593 |
- |
- |
- |
- |
||||||||
Acquisition related expenses |
- |
- |
- |
- |
190 |
179 |
246 |
615 |
||||||||
Noncontrolling interests |
1,567 |
- |
(167) |
1,400 |
- |
- |
(401) |
(401) |
||||||||
Adjusted EBITDA |
|
$ (133,001) |
$ 148,490 |
|
|
$ (82,463) |
$ 117,358 |
|
||||||||
(2) 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 Sheets |
||||||||
(Unaudited) |
||||||||
(In thousands) |
||||||||
As of |
As of |
As of |
As of |
|||||
Assets |
|
|
Liabilities and Equity |
|
|
|||
Current assets: |
Current liabilities: |
|||||||
Cash and cash equivalents |
$ 161,821 |
$ 130,098 |
Accounts payable |
$ 115,112 |
$ 100,270 |
|||
Accounts receivable, net |
228,037 |
263,721 |
Accrued liabilities |
225,868 |
224,959 |
|||
Inventories |
182,059 |
163,201 |
Current portion of long-term debt |
45,599 |
288 |
|||
Prepaid expenses and other current assets |
76,356 |
57,836 |
Total current liabilities |
386,579 |
325,517 |
|||
Total current assets |
648,273 |
614,856 |
Senior notes |
690,581 |
575,380 |
|||
Other long-term debt |
285,557 |
273,103 |
||||||
Other liabilities |
117,838 |
42,722 |
||||||
Total liabilities |
1,480,555 |
1,216,722 |
||||||
Property, equipment and satellites, net |
1,853,977 |
1,648,878 |
||||||
Other acquired intangible assets, net |
33,862 |
41,677 |
Total Viasat Inc. stockholders' equity |
1,833,161 |
1,734,618 |
|||
|
120,682 |
119,876 |
Noncontrolling interest in subsidiaries |
1,891 |
3,313 |
|||
Other assets |
658,813 |
529,366 |
Total equity |
1,835,052 |
1,737,931 |
|||
Total assets |
$ 3,315,607 |
$ 2,954,653 |
Total liabilities and equity |
$ 3,315,607 |
$ 2,954,653 |
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