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ViaSat Announces Third Quarter Fiscal Year 2014 Results

Revenue up 16%; Adjusted EBITDA up 17% to record levels; New contract awards increase 23%

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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Without a clear strategy for cost control and an architecture designed with cloud services in mind, costs and operational performance can quickly get out of control. To avoid multiple architectural redesigns requires extensive thought and planning. Boundary (now part of BMC) launched a new public-facing multi-tenant high resolution monitoring service on Amazon AWS two years ago, facing challenges and learning best practices in the early days of the new service.