ViaSat Announces Second Quarter Fiscal Year 2016 Results

- Second quarter revenues reached $353.3 million, pushing ViaSat's fiscal 2016 first half revenues to a record high

- Adjusted EBITDA for the second quarter grew to $86.5 million, a 24% increase after excluding the fiscal 2015 second quarter $39.7 million legal settlement benefit

- Consumer broadband ARPU hit a new high of $56.24

- Growth of ViaSat's commercial in-flight internet service continued, with 419 aircraft in service at quarter end and the launch of ViaSat's high-speed in-flight internet service on select Virgin America aircraft

Nov 09, 2015, 16:05 ET from ViaSat Inc.

CARLSBAD, Calif., Nov. 9, 2015 /PRNewswire/ -- ViaSat Inc. (NASDAQ: VSAT), a global broadband services and technology company, today announced financial results for the fiscal second quarter ended September 30, 2015.

"We made great progress in our second quarter in terms of business accomplishments and financial results that highlight our success in delivering solid earnings growth through higher value service offerings in both consumer and mobile broadband markets," said Mark Dankberg, ViaSat chairman and CEO. "Our strong core Adjusted EBITDA growth for the quarter and year-to-date, have been led by exceptional Satellite Services performance and double digit Government Systems growth despite an extremely challenging macro environment."

"Additionally, our partnership with Virgin America bringing Netflix to air travelers took flight in the quarter, demonstrating that video is the litmus test for in-flight internet service," Dankberg continued. "JetBlue's upcoming video streaming partnership with Amazon will show we can uniquely scale video streaming at a time when airlines are beginning to see the benefits of delighting passengers with high-quality connectivity. With about 1,100 aircraft in total enabled with our in-flight internet service, we have network flexibility and scale to ensure the highest quality streaming experiences at 35,000 feet – with speeds reaching upwards of 20Mbps per device. This experience is proven daily on JetBlue, Virgin America and United Airlines with as many as 148 simultaneous active devices, and many of those using streaming media, on any given flight across our entire network. We've also seen similarly strong results in performance on flight tests for government applications."

Financial Results

(In millions, except per share data)

 

Q2 FY16

 

Q2 FY15

Year-Over-Year
Change

 

First 6
Months
FY16

 

First 6
Months
FY15

Year-Over-Year
Change

Revenues1

$

353.3

$

358.8

(1.5)%

$

697.7

$

678.2

2.9%

Adjusted EBITDA1

$

86.5

$

109.7

(21.1)%

$

164.1

$

169.9

(3.4)%

Net income1,2

$

4.9

$

23.9

(79.4)%

$

7.5

$

18.0

(58.1)%

Diluted per share net income1,2

$

0.10

$

0.50

(80.0)%

$

0.15

$

0.38

(60.5)%

Non-GAAP net income1,2

$

14.9

$

32.4

(54.2)%

$

27.0

$

34.8

(22.6)%

Non-GAAP diluted per share net income1,2

$

0.30

$

0.68

(55.9)%

$

0.55

$

0.73

(24.7)%

Fully diluted weighted average shares


49.1


48.0

2.3%


49.0


47.9

2.3%












New contract awards1

$

386.2

$

498.9

(22.6)%

$

691.7

$

809.0

(14.5)%

Sales backlog3, 1

$

897.8

$

1,024.6

(12.4)%

$

897.8

$

1,024.6

(12.4)%






Segment Results

(In millions)

 

Q2 FY16

 

Q2 FY15

Year-Over-Year
Change

 

First 6
Months
FY16

 

First 6
Months
FY15

Year-Over-Year
Change

Satellite Services











  New contract awards1

$

127.6

$

198.1

(35.6)%

$

247.9

$

320.0

(22.5)%

  Revenues1

$

140.2

$

135.9

3.1%

$

272.6

$

245.7

11.0%

  Adjusted EBITDA1

$

61.9

$

75.1

(17.6)%

$

116.5

$

107.9

8.0%












Commercial Networks











  New contract awards

$

41.8

$

68.3

(38.8)%

$

88.0

$

118.5

(25.7)%

  Revenues

$

66.4

$

86.9

(23.6)%

$

133.1

$

179.1

(25.7)%

  Adjusted EBITDA

$

(9.0)

$

4.6

(292.9)%

$

(15.1)

$

10.2

(248.6)%












Government Systems











  New contract awards

$

216.8

$

232.5

(6.8)%

$

355.8

$

370.5

(4.0)%

  Revenues

$

146.8

$

136.0

8.0%

$

292.0

$

253.5

15.2%

  Adjusted EBITDA

$

33.6

$

30.1

11.8%

$

62.5

$

51.5

21.4%


1 During the second quarter of fiscal year 2015, the Company recorded $40.0 million with respect to amounts realized under a legal settlement agreement associated with certain patents and intellectual property, of which $21.0 million was recognized as product revenues in the Company's Satellite Services segment, $18.7 million was recognized as a reduction to selling, general and administrative expenses, and $0.3 million was recognized as interest income in the condensed consolidated financial statements. During the three and six months ended September 30, 2015, the Company recorded $6.9 million and $13.7, respectively, with respect to the recurring amounts realized under the settlement agreement, of which $6.3 million and $12.5 million were recognized as product revenues in the Company's Satellite Services segment and $0.6 million and $1.3 million were recognized as interest income in the condensed consolidated financial statements, respectively.  Further information on the settlement is contained in ViaSat's Quarterly Report on Form 10-Q for the quarter ended September 30, 2015.


2 Attributable to ViaSat Inc. common stockholders.


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

 

Satellite Services
In the fiscal second quarter, ViaSat's Satellite Services segment achieved record high revenues, and Adjusted EBITDA core operating performance grew strongly (excluding the impact of the Loral settlement), driven by growth in in-flight connectivity and continued gains in consumer residential broadband. ViaSat's emphasis on higher quality, higher value plans continued to generate average revenue per user (ARPU) improvements in residential broadband service. ViaSat's Satellite Services segment fiscal second quarter revenues and Adjusted EBITDA reflected strong gains year-over-year of 22% and 75%, respectively – after excluding the benefit of the impact of $21.0 million in revenue and $39.7 million in segment earnings relating to amounts paid to ViaSat under the Loral settlement agreement in the second quarter of fiscal year 2015. Highlights for the quarter include:

  • ViaSat's consumer broadband subscribers grew 5% year-over-year to approximately 687,000 at the end of the fiscal second quarter. Quarterly gross adds were 56,600 for the second quarter, a 22% sequential increase from the prior quarter.
  • Weighted ARPU increased to $56.24, a new record high.
  • In-flight internet services continued to grow, with commercial aircraft in service as of ViaSat's fiscal second quarter end doubling year-over-year to 419, in addition to the nearly 300 business aviation aircraft and nearly 400 government aircraft with ViaSat-enabled in-flight internet in service from ViaSat's Government Systems segment.
  • ViaSat received its first Supplemental Type Certificate (STC) from the FAA for its in-cabin distribution system. This certification positions ViaSat as a leading in-flight internet service provider and a prime contractor in the in-flight entertainment and connectivity (IFEC) market.
  • ViaSat entered into a new technical agreement with The Boeing Company, which enables airlines to specify installation of the ViaSat in-flight internet connectivity system as a factory option for Boeing aircraft prior to delivery, enabling airplanes to come off the line with ViaSat connectivity ready for immediate service.
  • New airline partner, Virgin America, began to deploy ViaSat's in-flight connectivity service on its new A320 aircraft. Virgin America's partnership with Netflix has raised the bar for in-flight Wi-Fi® – setting new standards for in-flight entertainment and passenger engagement. ViaSat's in-flight internet system gives passengers the freedom to connect to the real internet, with a scalable "at home" video streaming experience at 35,000 feet.
  • ViaSat's airline partner JetBlue passed two major milestones: completion of Fly-Fi® installation on more than 150 Airbus A320 and A321 aircraft, and the inaugural flight of its first Fly-Fi-enabled Embraer E190 regional jet. JetBlue expects to have the first U.S. fleet fully equipped with free Wi-Fi by mid-calendar year 2016. Fly-Fi is JetBlue's brand for Wi-Fi powered by ViaSat's in-flight internet system.

Year-to-date, the Satellite Services segment achieved revenue growth of 11% to $272.6 million and Adjusted EBITDA growth of 8% to $116.5 million compared to the same period last year. Excluding the benefit of $39.7 million, fiscal 2015 second quarter portion of the Loral settlement, Satellite Services segment revenues grew 21% and Adjusted EBITDA grew 71% on a year-to-date basis compared to the same period in fiscal year 2015.

Commercial Networks
ViaSat's Commercial Networks segment experienced decreases in quarterly and year-to-date revenues and Adjusted EBITDA compared to the same periods last year. Highlights for the quarter include:

  • Year-over-year comparisons reflect the wind-down of ViaSat's Australian Ka-band infrastructure project for nbn™, which continued its final construction and integration activities, and lower sales in our large integrated antenna systems programs in the fiscal second quarter of fiscal year 2016. On October 1, 2015, nbn successfully launched its first broadband satellite, Sky Muster, into orbit. The satellite system will play a critical role in providing fast broadband access to approximately 400,000 Australian homes and businesses when service becomes available beginning in mid-calendar year 2016.
  • Results were offset in part by growth in mobile broadband satellite communication systems sales.
  • Lower Adjusted EBITDA for this segment also reflected increased research and development activities in next-generation consumer broadband integrated networking, mobile broadband solutions and next-generation satellite payload technologies.

Government Systems
In the second quarter of fiscal year 2016, ViaSat's Government Systems segment revenues increased 8% and Adjusted EBITDA grew 12% compared to the prior year period. Highlights for the quarter include:

  • Revenue growth reflected an increase in government satellite communication systems products sales, partially offset by lower tactical data link and information assurance products revenues.
  • $216.8 million in awards received during the second fiscal quarter, reflecting a 1.5 to 1 book-to-bill ratio, and yielding record segment backlog of $437.8 million, an 11% increase over the same period last year.
  • ViaSat's acquisition of NetNearU, now known as ViaSat Wireless Services, in the first quarter of fiscal year 2015 continued to increase the Company's managed and fee-for-use Wi-Fi service revenue base, contributing to year-over-year Government Systems segment growth.
  • Higher second quarter segment Adjusted EBITDA, up 12% from the same period last year, reflected the Company's expanded service revenue base as government mobile broadband platforms continue to grow with nearly 400 government aircraft in service.
  • ViaSat received National Security Agency (NSA) certification for its KOV-55 Security-System-on-a-Chip, enabling Link 16 crypto modernization for secure interoperability with legacy and future combat networking waveforms.
  • ViaSat was selected as a finalist in the Fierce Innovation Awards: Energy Edition for its innovative work in a Department of Energy (DOE) grant study to detect cyber-attacks across distributed networks and enable utilities to automatically respond to threats as predetermined by their cybersecurity policies.

On a year-to-date basis, ViaSat's Government Systems segment revenues grew 15% to $292.0 million and Adjusted EBITDA increased 21% to $62.5 million compared to the same period last year.

Conference Call
ViaSat will host a conference call to discuss the second quarter results for fiscal year 2016.  Details follow:

DATE/TIME:

Monday, November 9, 2015 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 Monday, November 9 until midnight Tuesday, November 10 by dialing (855) 859-2056 for U.S. callers and (404) 537-3406 for international callers; conference ID 75244418.

 

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 and growth outlook for fiscal year 2016 and beyond, the JetBlue-Amazon partnership, our ability to scale video streaming, the broadband access and services to be provided by the nbn Sky Muster satellite, and the roll-out and uptake of products and services by, and services offered by, our airline partners and commercial networks 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: 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; our ability to successfully develop, introduce and sell new technologies, products and services; level and timing of or changes in the products and services purchased or offered by our airline partners and commercial networks customers; negative 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 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 © 2015 ViaSat, Inc. All rights reserved. All other product or company names mentioned are used for identification purposes only and may be trademarks of their respective owners. ViaSat is a registered trademark of ViaSat Inc.


 

Condensed Consolidated Statement of Operations

(Unaudited)

(In thousands, except per share data)










Three months ended 


Six months ended


September 30, 2015


October 3, 2014


September 30, 2015


October 3, 2014









Revenues:








Product revenues

$                    163,660


$               193,924


$                      332,008


$                   362,053

Service revenues

189,670


164,834


365,700


316,176

Total revenues

353,330


358,758


697,708


678,229









Operating expenses:








Cost of product revenues

116,179


130,088


242,009


259,082

Cost of service revenues

124,595


111,605


242,204


220,346

Selling, general and administrative

73,351


54,404


144,458


123,500

Independent research and development

20,792


11,547


36,400


21,327

Amortization of acquired intangible assets

4,587


4,658


9,397


8,687

Income from operations

13,826


46,456


23,240


45,287

Interest expense, net

(6,098)


(7,991)


(11,986)


(16,594)

Income before income taxes 

7,728


38,465


11,254


28,693

Provision for income taxes

2,808


14,473


3,815


11,022

Net income

4,920


23,992


7,439


17,671

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

(16)


45


(105)


(332)

Net income attributable to ViaSat Inc. 

$                        4,936


$                 23,947


$                          7,544


$                     18,003









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

$                          0.10


$                     0.50


$                            0.15


$                         0.38

Diluted common equivalent shares

49,125


48,016


48,995


47,899









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 


Six months ended


September 30, 2015


October 3, 2014


September 30, 2015


October 3, 2014









GAAP net income attributable to ViaSat Inc.

$                        4,936


$                 23,947


$                          7,544


$                     18,003

Amortization of acquired intangible assets

4,587


4,658


9,397


8,687

Stock-based compensation expense

11,574


9,058


22,283


17,962

Acquisition related expenses

-


-


-


444

Income tax effect

(6,240)


(5,235)


(12,251)


(10,252)

Non-GAAP net income attributable to ViaSat Inc.

$                      14,857


$                 32,428


$                        26,973


$                     34,844

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

$                          0.30


$                     0.68


$                            0.55


$                         0.73

Diluted common equivalent shares

49,125


48,016


48,995


47,899









AN ITEMIZED RECONCILIATION BETWEEN NET INCOME (LOSS) ATTRIBUTABLE TO VIASAT INC. AND ADJUSTED EBITDA IS AS FOLLOWS:
















Three months ended 


Six months ended


September 30, 2015


October 3, 2014


September 30, 2015


October 3, 2014









GAAP net income attributable to ViaSat Inc.

$                        4,936


$                 23,947


$                          7,544


$                     18,003

Provision for income taxes

2,808


14,473


3,815


11,022

Interest expense, net

6,098


7,991


11,986


16,594

Depreciation and amortization

61,118


54,262


118,429


105,869

Stock-based compensation expense

11,574


9,058


22,283


17,962

Acquisition related expenses

-


-


-


444

Adjusted EBITDA

$                      86,534


$               109,731


$                      164,057


$                   169,894

 

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 September 30, 2015 


Three months ended October 3, 2014



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


$   21,036


$     (22,306)


$      19,683


$   18,413


$  39,351


$       (7,253)


$      19,016


$   51,114

Depreciation *


34,997


5,587


8,207


48,791


31,662


5,811


6,767


44,240

Stock-based compensation expense


2,566


4,698


4,310


11,574


2,028


3,412


3,618


9,058

Other amortization


3,254


3,053


1,433


7,740


2,011


2,679


678


5,368

Acquisition related expenses


-


-


-


-


-


-


-


-

Adjusted EBITDA before other


$   61,853


$       (8,968)


$      33,633


86,518


$  75,052


$        4,649


$      30,079


109,780

Other 








16








(49)

Adjusted EBITDA








$   86,534








$ 109,731




















Six months ended September 30, 2015 


Six months ended October 3, 2014



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


$   38,077


$     (41,039)


$      35,599


$   32,637


$  37,402


$     (13,243)


$      29,815


$   53,974

Depreciation *


67,377


11,285


16,334


94,996


63,010


11,438


12,918


87,366

Stock-based compensation expense


5,034


8,718


8,531


22,283


4,048


6,797


7,117


17,962

Other amortization


6,009


5,950


2,077


14,036


3,415


5,158


1,243


9,816

Acquisition related expenses


-


-


-


-


-


-


444


444

Adjusted EBITDA before other


$ 116,497


$     (15,086)


$      62,541


163,952


$107,875


$      10,150


$      51,537


169,562

Other 








105








332

Adjusted EBITDA








$ 164,057








$ 169,894


* 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

September 30, 2015


April 3, 2015


Liabilities and Equity

September 30, 2015


April 3, 2015










Current assets:





 Current liabilities: 




Cash and cash equivalents

$                   46,406


$         52,263


 Accounts payable 

$                  80,407


$            76,931

Accounts receivable, net

304,517


266,339


 Accrued liabilities 

171,970


191,326

Inventories

123,342


128,367


 Total current liabilities 

252,377


268,257

Deferred income taxes

62,011


57,075


 Senior Notes, net 

582,025


582,657

Prepaid expenses and other current assets

47,842


44,702


 Other long-term debt 

277,071


223,736

Total current assets

584,118


548,746


 Other liabilities 

37,227


39,995






 Total liabilities 

1,148,700


1,114,645

Property, equipment and satellites, net

1,226,710


1,180,243






Other acquired intangible assets, net

40,690


42,340


 Total ViaSat Inc. stockholders' equity 

1,092,053


1,038,582

Goodwill

117,375


117,241


 Noncontrolling interest in subsidiary 

5,046


5,151

Other assets

276,906


269,808


 Total equity 

1,097,099


1,043,733

Total assets

$               2,245,799


$     2,158,378


 Total liabilities and equity 

$             2,245,799


$       2,158,378

 

 

SOURCE ViaSat Inc.



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