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ViaSat Announces First Quarter Fiscal Year 2018 Results
[August 08, 2017]

ViaSat Announces First Quarter Fiscal Year 2018 Results


CARLSBAD, Calif., Aug. 8, 2017 /PRNewswire/ -- ViaSat Inc. (NASDAQ: VSAT), a global broadband services and technology company, today announced financial results for the fiscal first quarter ended June 30, 2017.

"ViaSat-2 is launched!" said Mark Dankberg, ViaSat chairman and CEO. "While we prepare to bring the satellite into service, we continue to deliver strong operating results. First quarter government results were exceptional, demonstrating the strategic benefits we seek from research and development (R&D) investments - rapid, profitable growth through differentiated products and services that meet end-user demands in complex market spaces. Government revenue has grown at a five-year 11% Compound Annual Growth Rate (CAGR), and operating profit at a five-year 17% CAGR, and this fiscal year started even stronger, with record backlog and opportunities for rapid market expansion. Commercial in-flight Wi-Fi is now also poised for exciting growth with a highly-differentiated service, and around 840 additional planes under contract. Our investments there will enable installations for new customers to start in the second quarter of fiscal 2018. Consumer broadband growth is next, expected to begin in the second half of our fiscal year. As top-line performance across these businesses trend upward, we also expect the uptick in R&D expenses, driven by the ViaSat-3 payload and investments in commercial airline platforms, to largely subside later this fiscal year. Our goal is to execute the substantial growth opportunities we've enabled in each segment as we wind down R&D expenses to more normal proportions."

 



Financial Results

(In millions, except per share data)

Q1 FY18

Q1 FY17

Year-Over-Year  Change

Revenues

$ 380.0

$ 363.1

4.7%

Net (loss) income1 

$ (9.0)

$ 1.9

*

Non-GAAP net income1

$ 2.5

$ 11.3

(77.8)%

Adjusted EBITDA

$ 61.2

$ 80.2

(23.7)%

Diluted per share net (loss) income1

$ (0.16)

$ 0.04

*

Non-GAAP diluted per share net income1

$ 0.04

$ 0.23

(82.6)%

Fully diluted weighted average shares2

57.8

50.2

15.3%





New contract awards

$ 441.8

$ 336.3

31.4%

Sales backlog3

$ 1,085.8

$ 912.9

18.9%



* Percentage not meaningful.

 

Segment Results

(In millions)

Q1 FY18

Q1 FY17

Year-Over-Year  Change

Satellite Services




  New contract awards

$ 151.3

$ 141.8

6.7%

  Revenues

$ 152.2

$ 152.4

(0.1)%

  Operating profit4

$ 18.8

$ 30.9

(39.0)%

  Adjusted EBITDA

$ 62.0

$ 71.9

(13.8)%





Commercial Networks




  New contract awards

$ 42.6

$ 62.9

(32.3)%

  Revenues

$ 45.2

$ 65.6

(31.0)%

  Operating loss4

$ (66.1)

$ (38.5)

(71.6)%

  Adjusted EBITDA

$ (50.0)

$ (24.2)

(106.8)%





Government Systems




  New contract awards

$ 247.9

$ 131.6

88.3%

  Revenues

$ 182.6

$ 145.2

25.8%

  Operating profit4

$ 32.6

$ 18.0

81.5%

  Adjusted EBITDA5

$ 49.2

$ 32.5

51.4%


1 Attributable to ViaSat, Inc. common stockholders.

2 As the first quarter of fiscal year 2018 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.

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 in-flight broadband systems or future recurring internet services revenues under commercial in-flight internet agreements recorded in our commercial networks and satellite services segments, respectively

4 Before corporate and amortization of acquired intangible assets.

5 Government Systems' segment Adjusted EBITDA for the first quarter ended June 30, 2016 has been adjusted to exclude $0.3 million of income attributable to noncontrolling interest, net of tax.

Satellite Services
In the first quarter of fiscal year 2018, ViaSat's Satellite Services segment revenues were essentially flat year-over-year. Results were led by strong revenue growth in commercial air, coupled with increased consumer broadband revenues. The prior year period reflects a benefit of $6.6 million associated with payments under the Space Systems/Loral (SS/L) settlement, which concluded in the fourth quarter of fiscal 2017. The absence of the SS/L settlement proceeds in the current year period, coupled with expenses relating to preparations for the ViaSat-2 service launch and large-scale commercial air in-flight connectivity service ramp, both expected to occur in the current fiscal year, led to lower segment operating profits and Adjusted EBITDA compared with the prior year period. Highlights for the quarter include:

  • ARPU in the residential business grew 11% year-over-year to a new record high of $66.61, reflecting a greater proportion of higher bandwidth, higher value plans, and a greater proportion of retail subscribers. This increase offsets the effects of a decrease in the total number of residential subscribers, which at the close of the first quarter of fiscal 2018 was approximately 625,000 residential subscribers.
  • Strong in-flight connectivity services revenue growth continued compared to the same period last year driven by more commercial aircraft in service, and a greater amount of ViaSat's Ka-band fleet bandwidth allocated to serve more passengers. At the close of the first quarter of fiscal 2018, there were 568 aircraft in service and approximately 840 additional aircraft under contract. The rate of new installations is anticipated to accelerate significantly during fiscal year 2018 based on Supplemental Type Certificate (STC) approvals and completion of airline-specific acceptance tests.
  • ViaSat introduced its second-generation (Gen-2) in-flight entertainment and connectivity (IFEC) equipment for the ViaSat-2 and ViaSat-3 class satellite platforms. Following the close of the first quarter of fiscal year 2018, ViaSat completed its first Gen-2 installation on a Qantas 737-800 aircraft and received Gen-2 STC approval from the Federal Aviation Administration, allowing ViaSat to offer internet service on Boeing 737 aircraft.

Commercial Networks
In the first quarter of fiscal year 2018, ViaSat's Commercial Networks segment activities continued to be heavily focused on R&D investment in the Company's ViaSat-3 project, a next-generation, global coverage satellite platform expected to comprise of three satellites that are each designed to deliver over 1 Terabit per second (Tbps) of high throughput Ka-band broadband capacity; as well as investment in expanded commercial airline platforms, such as the Gen-2 IFEC system and related STC and line-fit programs. This accelerated investment activity resulted in a 67% increase in R&D expenses compared to the prior year period. Quarterly revenues were down 31% compared to the same period last year, primarily as a result of lower fixed terminal sales for Australia's nbn™ satellite broadband service that commenced last fiscal year. Finally, the first quarter also included accelerated product manufacturing support activities in preparation for ViaSat-2 service launch, and a steep ramp of mobile terminal deliveries that are expected to occur in the second half of fiscal year 2018. As a result, segment operating losses were higher and Adjusted EBITDA was lower for the first quarter of fiscal year 2018, as compared to the same period last year. Highlights for the quarter include:

  • Following the successful launch of the ViaSat-2 satellite on June 1, 2017, the satellite completed its chemical orbit raising phase and initial deployments, including its solar arrays. The ViaSat-2 satellite is currently in its electronic propulsion orbit raising phase, and is expected to reach its geostationary orbital slot in the third quarter of fiscal year 2018.
  • ViaSat-2 network infrastructure, terminals and system testing remain on schedule for service delivery in the fourth quarter of fiscal year 2018.
  • The engineering test and qualification phase of the ViaSat-3 payload development program continued to achieve milestones toward its target performance and is expected to be substantially complete this fiscal year. The first production flight hardware is expected to begin arriving in ViaSat's Tempe Arizona facility in the third quarter of fiscal year 2018.

Government Systems
In the first quarter of fiscal year 2018, ViaSat's Government Systems segment achieved record operating profit and Adjusted EBITDA assisted by revenues which increased 26% year-over-year to $182.6 million. A growing service base coupled with strong momentum in tactical datalink products, government mobility platforms and satellite communications solutions drove the segment's revenue gains. Operating profit increased to $32.6 million, an 82% increase year-over-year and Adjusted EBITDA was $49.2 million, up 51% compared to the prior year period. Operating profit, revenue and new contract award growth continue to be driven by strong demand for ViaSat's Government Systems segment unique Non-Developmental Item products and services initiated under company funded R&D programs in prior periods. Highlights for the quarter include:

  • ViaSat's Government Systems segment contract awards were exceptionally strong at $247.9 million in the first quarter of fiscal year 2018, reflecting a 1.4 to 1 book-to-bill ratio. The Government Systems segment fiscal first quarter backlog closed at a record high level of $696.1 million, a 48% increase over the same period last year.
  • ViaSat announced key awards:
    • Lot 5 and Lot 5a contracts totaling $88.3 million from the U.S. Navy Space and Naval Warfare Systems Command to provide Multifunctional Information Distribution System Joint Tactical Radio System terminals to the U.S. Navy and Air Force.
    • A multi-year contract from Boeing for the production of ViaSat's KOR-24A Link 16 Small Tactical Terminal for AH-64E Apache Guardian aircraft for U.S. Army and International Foreign Military Sales cases.
    • A follow-on contract from Lockheed Martin to deliver datalink communications for the integration and test phase of the U.S. Navy's Long Range Anti-Ship Missile program.

Conference Call
ViaSat will host a conference call to discuss the first quarter of fiscal year 2018 results.  Details follow:

DATE/TIME:      

Tuesday, August 8, 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, August 8 until 11:59 p.m. Eastern Time on Wednesday, August 9 by dialing (855) 859-2056 for U.S. callers and (404) 537-3406 for international callers; conference ID 59394993.

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 orbit raising, orbital placement, in-orbit testing and entry into service of the ViaSat-2 satellite and the timing thereof; 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, the timing thereof and the benefits associated therewith; international expansion plans; and the roll-out, ramp-up 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: the failure of the ViaSat-2 satellite to successfully complete orbit raising, orbital placement or in-orbit testing; 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 


June 30, 2017


June 30, 2016





Revenues:




Product revenues

$       166,118


$       160,676

Service revenues

213,926


202,454

Total revenues

380,044


363,130





Operating expenses:




Cost of product revenues

122,645


120,680

Cost of service revenues

137,851


127,582

Selling, general and administrative

89,173


79,400

Independent research and development

45,065


25,177

Amortization of acquired intangible assets

3,260


2,513

(Loss) income from operations

(17,950)


7,778

Interest income (expense), net

37


(4,811)

(Loss) income before income taxes 

(17,913)


2,967

Benefit from (provision for) income taxes

9,180


(810)

Equity in losses of unconsolidated affiliate, net

(513)


-

Net (loss) income

(9,246)


2,157

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

(207)


302

Net (loss) income attributable to ViaSat Inc. 

$          (9,039)


$           1,855





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

$            (0.16)


$             0.04

Diluted common equivalent shares

57,842


50,170





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

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




(In thousands, except per share data)

Three months ended 


June 30, 2017


June 30, 2016





GAAP net (loss) income attributable to ViaSat Inc.

$          (9,039)


$           1,855

Amortization of acquired intangible assets

3,260


2,513

Stock-based compensation expense

15,507


12,761

Income tax effect

(7,217)


(5,839)

Non-GAAP net income attributable to ViaSat Inc.

$           2,511


$         11,290

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

$             0.04


$             0.23

Diluted common equivalent shares

57,842


50,170





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

AND ADJUSTED EBITDA IS AS FOLLOWS:




(In thousands)

Three months ended 


June 30, 2017


June 30, 2016





GAAP net (loss) income attributable to ViaSat Inc.

$          (9,039)


$           1,855

(Benefit from) provision for income taxes

(9,180)


810

Interest (income) expense, net

(37)


4,811

Depreciation and amortization

63,935


59,998

Stock-based compensation expense

15,507


12,761

Adjusted EBITDA

$         61,186


$         80,235

 

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 June 30, 2017 


Three months ended June 30, 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


$      18,843


$      (66,125)


$      32,592


$      (14,690)


$      30,867


$     (38,531)


$      17,955


$       10,291

Depreciation *


35,637


6,526


8,665


50,828


35,340


5,792


8,640


49,772

Stock-based compensation expense


3,632


5,971


5,904


15,507


2,808


5,081


4,872


12,761

Other amortization


4,044


3,588


2,215


9,847


2,922


3,456


1,335


7,713

Equity in losses of unconsolidated affiliate, net


(513)


-


-


(513)


-


-


-


-

Noncontrolling interests


377


-


(170)


207


-


-


(302)

 ** 

(302)

Adjusted EBITDA 


$      62,020


$      (50,040)


$      49,206


$      61,186


$      71,937


$     (24,202)


$      32,500

 ** 

$       80,235


















* 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 for the first quarter ended June 30, 2016 has been adjusted to exclude $0.3 million of income attributable to noncontrolling interest, net of tax.


 

Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands)












As of
June 30, 2017


As of
March 31, 2017


Liabilities and Equity

As of
June 30, 2017


As of
March 31, 2017










Current assets:





 Current liabilities: 




Cash and cash equivalents

$      160,556


$        130,098


 Accounts payable 

$        84,014


$        100,270

Accounts receivable, net

215,053


263,721


 Accrued liabilities 

204,231


224,959

Inventories

177,943


163,201


 Current portion of long-term debt 

19,300


288

Prepaid expenses and other current assets

66,194


57,836


 Total current liabilities 

307,545


325,517

Total current assets

619,746


614,856


 Senior notes 

575,385


575,380






 Other long-term debt 

255,458


273,103






 Other liabilities 

109,890


42,722






 Total liabilities 

1,248,278


1,216,722

Property, equipment and satellites, net

1,693,524


1,648,878






Other acquired intangible assets, net

39,497


41,677


 Total ViaSat Inc. stockholders' equity 

1,827,330


1,734,618

Goodwill

120,419


119,876


 Noncontrolling interest in subsidiaries 

3,106


3,313

Other assets

605,528


529,366


 Total equity 

1,830,436


1,737,931

Total assets

$    3,078,714


$      2,954,653


 Total liabilities and equity 

$    3,078,714


$      2,954,653

 

View original content:http://www.prnewswire.com/news-releases/viasat-announces-first-quarter-fiscal-year-2018-results-300501439.html

SOURCE ViaSat, Inc.


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