Viasat Announces Fourth Quarter and Fiscal Year 2018 Results

CARLSBAD, Calif., May 24, 2018 /PRNewswire/ -- Viasat Inc. (NASDAQ: VSAT), a global communications company, today announced financial results for the fiscal fourth quarter and fiscal year ended March 31, 2018.

"Viasat ended its fiscal year 2018 positioned to drive strong, sustained growth in fiscal year 2019 and beyond," said Mark Dankberg, Viasat chairman and CEO.  "Each business segment executed its mission this year. Government Systems leveraged astute investments in prior years to again deliver record revenue, operating profit  and Adjusted EBITDA—up 13%, 42% and 27%, respectively, compared to fiscal year 2017. Commercial Networks delivered the technology that will drive growth—ramping IFC deliveries to American Airlines and several other new customers; lighting up our state-of-the-art ViaSat-2 ground network; completing critical pre-flight testing milestones for ViaSat-3; and setting the stage to scale rapidly with 29% year-over-year gains in both fourth quarter revenue and new contract awards. The Satellite Services segment managed through launch and in-service delays for the ViaSat-2 spacecraft by introducing innovative new premium high-speed data plans on ViaSat-1 that lifted ARPU to record levels. We also invested to prepare for growth in residential broadband and IFC services, as well as new vertical and geographic markets. Now all three segments share a common mission in fiscal year 2019—to leverage these strategic positions to deliver solid performance and growth in revenue and Adjusted EBITDA while paving the way for ViaSat-3. We're looking forward to an exciting year."

Satellite Services
The fourth quarter of fiscal year 2018 marked the entry of the ViaSat-2 satellite into commercial service. Sequential quarter-over-quarter revenues grew slightly despite having two fewer days in the fourth quarter fiscal period as compared to the third quarter of fiscal year 2018. Year-over-year segment revenues reflected growth in Viasat's IFC services business, while residential broadband revenues reflected a lower subscriber base as a result of the ViaSat-2 satellite service launch delay. ARPU continued to increase sequentially and year-over-year as subscribers moved to higher-value service plans. Additionally, the fourth quarter of the prior fiscal year included a revenue benefit of $6.8 million associated with payments under the Space Systems/Loral (SS/L) settlement. Segment operating profits and Adjusted EBITDA were lower compared to the prior year period primarily as a result of the revenue decrease and increased sales, marketing and operating expenses—for the existing and new vertical and geographic markets— associated with the ViaSat-2 commercial service launch. The segment's fiscal fourth quarter also reflected additional investments in commercial IFC support expenses as the Company prepares for an accelerated pace of IFC installations in fiscal year 2019. Highlights for the quarter include:

• Internet on the ground
• Viasat launched commercial broadband services on the ViaSat-2 satellite in the fourth quarter of fiscal year 2018. The service offers a range of unlimited data plans and is the industry's fastest satellite-based internet service—with speeds up to 100 Mbps in select geographic regions.
• ARPU grew 8% year-over-year to a record high of $71.06, reflecting a higher mix of new and existing subscribers choosing premium service plans and value-added services, as well as a slightly higher proportion of retail subscribers. This ARPU increase offset the effects of a decrease in fixed broadband subscribers. At the close of the fourth quarter of fiscal year 2018 subscribers totaled approximately 576,000.
• As of fourth quarter end, almost 100,000 subscribers were on premium unlimited plans on the ViaSat-1 and ViaSat-2 satellites.
• Viasat announced sales and fulfillment partnerships to cover broadband service expansion on the ViaSat-1 and ViaSat-2 satellites; including an expanded residential fulfillment partnership with Perfect 10 and new Master Agent service agreements serving Viasat's growing enterprise internet solutions business.
• Viasat continued to expand its operations and service offering globally by building its satellite broadband business in Europe in preparation for the ViaSat-3 Europe Middle East Africa (EMEA) service entry. Additionally, after the quarter end, the Company announced the availability of its fast, affordable satellite-enabled Community Wi-Fi platform to nearly all of Mexico.
• Internet in the air
• During the fourth quarter, United Airlines and Viasat signed a new agreement to bring Viasat's latest generation in-flight entertainment and connectivity system to more than 70 new aircraft, including at least 58 of United's new Boeing 737MAX aircraft.
• At the close of the fourth quarter of fiscal year 2018, there were 635 commercial aircraft in service equipped with Viasat's IFC system. Viasat expects to significantly ramp IFC installations in fiscal year 2019, and currently has 1,590 aircraft either in service or under contract.

In fiscal year 2018, Satellite Services segment revenues, operating profit and Adjusted EBITDA were lower compared to the same period last year. This decrease reflected a $26.8 million year-over-year impact to revenues and operating profit due to the completion of payments under the SS/L settlement agreement in the prior fiscal year, plus costs associated with the preparation and launch of the ViaSat-2 satellite service in the fourth quarter of fiscal year 2018 and upcoming IFC service ramp anticipated in fiscal year 2019.

Commercial Networks
In the fourth quarter of fiscal year 2018, Viasat's Commercial Networks revenues reflected strong sequential quarter growth of 37% primarily driven by ramping in-flight terminal deliveries and, to a lesser extent, revenue growth from fiscal year 2018 next-generation broadband contract wins. The segment also saw another sequential quarter of decreased research and development (R&D) expenses of $3.0 million, as the Company's ViaSat-3 payload program transitions to the capital portion of the project. Achieving these operating milestones drove the segment's operating loss slightly down, and improved Adjusted EBITDA on both a sequential quarter and year-over-year basis. New contract awards were 29% higher for the fourth quarter of fiscal year 2018 compared to the prior year period primarily due to demand for IFC equipment and new contract wins for next-generation broadband capabilities. Highlights for the quarter include:

• The ViaSat-2 satellite was awarded the prestigious Aviation Week Network Laureate award in the 'Space, Platforms' category, highlighting the satellite's technical capabilities as its ability to reduce the cost of space-based connectivity to make satellite broadband more competitive with other terrestrial internet services.
• Viasat and Boeing proceeded with full construction, integration and testing of the first two ViaSat-3 class satellites during fiscal year 2018, leading to decreased R&D expense for the second consecutive quarter.
• Viasat announced new programs:
• Viasat's phased array antenna was selected by SES Networks for the O3b mPOWER network.
• Cobham SATCOM and Viasat introduced a maritime antenna system for broadband connectivity.

In fiscal year 2018, Commercial Networks segment operating loss was higher and Adjusted EBITDA was lower compared to the same period last year, reflecting R&D investments in the Company's ultra-high capacity ViaSat-3 class satellite constellation, as well as upfront costs due to ramping demand for Viasat's IFC terminal systems. Fiscal year 2018 segment revenues were down 5% compared to fiscal year 2017, primarily as a result of lower fixed terminal sales for Australia's nbn™ satellite broadband service, partially offset by an increase in delivery of next-generation IFC systems. Commercial Networks segment fiscal year 2018 awards were 17% higher than the prior fiscal year, generating a positive book-to-bill ratio and year-over-year increase in backlog by 8% which does not include the anticipated purchase orders and requests for installations under the Company's existing IFC contracts.

Government Systems
Viasat's Government Systems segment revenues for the fourth quarter of fiscal year 2018 were a record of $218.6 million, an increase of 11% year-over-year. This growth was led by the Company's market-leading next-generation small form factor tactical data link products, including the world's first handheld Link 16 radio. Operating profit increased by 59% to a record of $40.6 million and Adjusted EBITDA increased 30% to a record of $58.4 million for the quarter, compared to the prior year period. Revenue and operating profit growth were driven primarily by record shipment levels of Viasat's Non-Developmental Item (NDI) datalink products initiated under Company funded R&D programs in prior periods. Highlights for the quarter include:

• Fiscal year 2018 segment new contract awards equaled $822.4 million, reflecting a 1.1 to 1 book-to-bill ratio, driving segment backlog and total company backlog as of March 31, 2018 to $671.2 million and $1.1 billion, respectively.
• Viasat launched ViaSat-2 service for government, defense and military applications. The service is expected to dramatically improve operational capabilities for military missions and offer significant performance advantages over any other commercial or Department of Defense (DoD) satellite system.

Viasat's Government Systems segment delivered another year of record performance in fiscal year 2018, with record revenue of $772.1 million, an increase of 13% year-over-year. Operating profit increased 42% year-over-year to a record of $137.1 million which generated record Adjusted EBITDA of $206.9 million, a 27% increase year-over-year.

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

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; the service plans to be offered on the ViaSat-2 satellite and the expected customer demand; 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; the realization of IFC investments and the number of IFC systems expected to be installed under existing contracts with commercial airlines; the impacts of new contracts entered into with, and the roll-out, ramp-up and uptake of products and services by, and services to be offered by, our airline partners and other customers. Readers are cautioned that actual results could differ materially and adversely 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; 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 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 is a global communications company that believes everyone and everything in the world can be connected. For more than 30 years, Viasat has helped shape how consumers, businesses, governments and militaries around the world communicate. Today, the Company is developing the ultimate global communications network to power high-quality, secure, affordable, fast connections to impact people's lives anywhere they are—on the ground, in the air or at sea. To learn more about Viasat, visit: www.viasat.com, go to Viasat's Corporate Blog, or follow the Company on social media at: Facebook, Instagram, LinkedIn, Twitter 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 © 2018 Viasat, Inc. All rights reserved. Viasat is a registered trademark of Viasat, Inc. The Viasat logo is a 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.

SOURCE Viasat, Inc.