Hughes Communications Announces First Quarter 2010 Results

GERMANTOWN, Md., May 5 /PRNewswire-FirstCall/ -- Hughes Communications, Inc. (Nasdaq: HUGH) ("Hughes"), the global leader in broadband satellite network solutions and services, today announced financial results for the first quarter ended March 31, 2010. Hughes' consolidated operations are classified into five reportable segments: North America Broadband, International Broadband, Telecom Systems, HTS Satellite, and Corporate and Other. The North America Broadband, International Broadband, Telecom Systems, and HTS Satellite segments represent all the operations of Hughes Network Systems, LLC ("HNS"), Hughes' principal operating subsidiary.

First Quarter 2010 Financial Highlights:

• Record Adjusted EBITDA of $43 million, an increase of 30% over the first quarter of 2009.
• Consumer business continues impressive growth:
  • Total revenue increased by 15% and services revenue by 22% over the first quarter of 2009.
  • Record first quarter subscriber gross adds of 57,000.
  • Record first quarter net adds of 27,000 for a growth of 19% over the first quarter of 2009.  
  • Consumer ARPU increased to $72 from $68 for the first quarter of 2009.
  • Churn improved to 1.98% from 2.29% for the first quarter of 2009, the first time that churn has gone below 2%.
• Consolidated total revenues of $243 million, a 1% increase over the first quarter of 2009, or a 4% increase excluding revenues from the Telematics group.
• Consolidated services revenues of $188 million, a 16% increase over the first quarter of 2009, or a 21% increase excluding revenues from the Telematics group.
• Operating income of $10.6 million, an increase of 26% over the first quarter of 2009.
• New orders of $238 million, an increase of 10% over the first quarter of 2009, with major orders from Lowes, T.J. Maxx, Conoco Phillips, GTECH, and Denny's in our North America broadband business; Avanti, Telefonica, Bentley Walker, SREI Sahaj, Shanghai Sitico, and a leading Brazilian cellular operator in our International broadband business; and Globalstar and a major utility in our Telecom Systems business. Strong non-consumer order backlog of $812 million as of March 31, 2010.
• Positive net cash from operating activities of $13 million, with cash and marketable securities of $253 million as of March 31, 2010.

Set forth below are tables highlighting certain of Hughes' and HNS' results for the three months ended March 31, 2010 and 2009.

Recent Highlights:

• HNS awarded a contract to Arianespace for the launch of HNS' Jupiter^™ satellite in the first half of 2012. The Ariane 5 heavy launcher will launch the Jupiter satellite into geosynchronous transfer orbit from Europe's Spaceport in Kourou, French Guiana. Jupiter is HNS' next-generation, Ka-band, 100+ Gbps satellite system with 100 times the capacity of conventional Ku-band satellites. Coface, the French Export Credit Agency, has issued a commitment letter to provide financing for up to 85% of the launch contract value.
• Hughes do Brazil, HNS' Brazilian subsidiary, signed a $20 million, 5-year contract with a leading cellular operator in Brazil to provide backhaul services for their cellular network. This order builds on the initial contract of $12 million signed with the same customer in March 2009.
• Hughes Network Systems Ltd., HNS' European subsidiary, signed an $18 million, multi-year agreement to supply Avanti Communications Group, plc with advanced Ka-band networking infrastructure for Avanti's HYLAS 2 satellite, building on the initial $24 million contract to supply Ka-band technology for HYLAS 1 signed last October. Both agreements include acquisition of satellite capacity by Hughes, which will be used to expand its Ka-band broadband services across Europe, the Middle East, and Africa.
• IPNet, one of Russia's leading satellite service providers, purchased advanced Hughes HX and HN broadband satellite terminals, bringing its total network to over 2400 sites serving oil and gas companies, retail chains, and small to medium enterprises.
• HNS was awarded a contract by the Virginia Information Technologies Agency (VITA), enabling Hughes to provide satellite broadband technology to public sector entities throughout the Commonwealth of Virginia.
• HNS announced an agreement with Vizada, the leading independent global distribution partner of Inmarsat's Broadband Global Network (BGAN) service. The agreement expands Hughes Europe's portfolio of Managed Network Services for major European enterprises to include delivery of broadband 'mobile office' applications worldwide.
• HNS' advanced 9350 BGAN mobile satellite terminals are now being delivered to JSAT Mobile Communications of Japan who, in turn, is providing them for the National Police Agency of Japan. The terminals are being used for communications-on-the-move to broadcast real-time videos of emergency situations and natural disasters to police headquarters.
• HNS entered into an amended and restated $50 million senior secured revolving credit facility with J.P. Morgan Chase and Barclays Capital whereby, among other changes, the maturity date was extended to March 16, 2014.

To summarize, Pradman Kaul, president and CEO said, "Our consumer business continued to lead the way in the first quarter of 2010 with record gross adds combined with lower churn and increased ARPU, all of which resulted in strong services revenue growth. Services revenue from the enterprise segments also continued to show strong growth. We were awarded impressive orders from our international enterprise customers and our non-consumer backlog looks solid going into the second quarter. Development work on our Jupiter satellite is on track, we signed the launch contract with Arianespace, and we continue to assess interesting strategic initiatives. We are very pleased with our accomplishments and are positioned well for the rest of 2010 and beyond."

Commenting on Hughes' financial performance, Grant Barber, executive vice president and CFO said, "The strategy of expanding margins through the satellite ownership model is playing out very well, as evidenced by the strong growth in our operating profits and Adjusted EBITDA in the first quarter of 2010. Our liquidity position remains strong with cash and marketable securities of $253 million as of March 31, 2010."

Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures

The following table reconciles the differences between Hughes' Net Income (Loss) as determined under United States of America Generally Accepted Accounting Principles (GAAP) and Adjusted EBITDA.

The following table reconciles the differences between HNS' Net Income (Loss) as determined under GAAP and Adjusted EBITDA.

The condensed consolidated financial statements of Hughes and HNS for the periods ended March 31, 2010 and 2009 are attached to this press release.

Note on Use of Non-GAAP Financial Measures

Hughes provides non-GAAP financial data in addition to providing financial results in accordance with GAAP. This press release includes Adjusted EBITDA as a supplemental non-GAAP financial measure. Adjusted EBITDA is defined as earnings (loss) before interest, income taxes, depreciation, amortization, equity incentive plan compensation, long-term incentive/retention cash plan and other adjustments permitted by the debt instruments of HNS. We believe this non-GAAP financial measure provides useful information to both management and investors by excluding specific expenses that we believe are not indicative of our core operating results. Internally, we use this non-GAAP measure in our review of the performance of management and in the performance of our business and operations. Management also uses Adjusted EBITDA of HNS for purposes of determining the payments to be made in connection with the long-term cash incentive retention program. Externally, we believe that investors may find this non-GAAP financial information useful in their assessment of our operating performance. In addition, we believe that this non-GAAP financial measure provides information that is useful to investors in understanding period-over-period operating results separate and apart from items that may, or could, have a disproportionately positive or negative impact on results in any particular period. Adjusted EBITDA of HNS is also used in calculating covenant compliance under HNS' credit agreements and the indenture governing HNS' 9½% Senior Notes due 2014 issued in 2006 and 2009.

Adjusted EBITDA is not a recognized term under GAAP. This nonGAAP measure does not represent net income or cash flows from operations, as these terms are defined under GAAP and should not be considered as an alternative to net income as an indicator of operating performance or to cash flows as a measure of liquidity. Additionally, this non-GAAP measure is not intended to be a measure of cash flow available to management for discretionary use, as such measure does not consider certain cash requirements such as capital expenditures (including expenditures on VSAT operating lease hardware and capitalized software development costs), tax payments, debt service requirements (including VSAT operating lease hardware), and payments under the long-term cash incentive retention program. Adjusted EBITDA, as presented herein, is not necessarily comparable to similarly titled measures reported by other companies. Any analysis of non-GAAP financial measures should be used only in conjunction with results presented in accordance with GAAP.

About Hughes Communications, Inc.

Hughes Communications, Inc. (Nasdaq: HUGH) is the 100 percent owner of Hughes Network Systems, LLC. Hughes is the global leader in providing broadband satellite networks and services for enterprises, governments, small businesses, and consumers. HughesNet^® encompasses all broadband solutions and managed services from Hughes, bridging the best of satellite and terrestrial technologies. Its broadband satellite products are based on global standards approved by the TIA, ETSI, and ITU standards organizations, including IPoS/DVB-S2, RSM-A, and GMR-1. To date, Hughes has shipped more than 2.2 million systems to customers in over 100 countries.

Headquartered outside Washington, DC, in Germantown, Maryland, USA, Hughes maintains sales and support offices worldwide. For more information, please visit www.hughes.com.

Safe Harbor Statement under the U.S. Private Securities Litigation Reform Act of 1995

This press release may contain statements that are forward looking, as that term is defined by the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, discussions regarding industry outlook and Hughes' expectations regarding the performance of its business, its future liquidity and capital resource needs, its strategic plans, and objectives. These forward-looking statements are based on management's beliefs, as well as assumptions made by, and information currently available to, management. When used in this release, the words "believe," "anticipate," "estimate," "expect," "intend," "project," "plans" and similar expressions and the use of future dates are intended to identify forwardlooking statements. Although management believes that the expectations reflected in these forwardlooking statements are reasonable, it can give no assurance that these expectations will prove to have been correct. You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date made. These statements are subject to certain risks, uncertainties, and assumptions, including, but not limited to, the following: risks related to Hughes' substantial leverage and restrictions contained in its debt agreements, technological developments, its reliance on providers of satellite transponder capacity, changes in demand for Hughes' services and products, competition, industry trends, regulatory changes, foreign currency exchange rate fluctuations, and other risks identified and discussed under the caption "Risk Factors" in Hughes' Annual Report on Form 10-K for the year ended December 31, 2009 filed with the Securities and Exchange Commission on March 3, 2010 and in the other documents Hughes files with the Securities and Exchange Commission from time to time.

Hughes, HughesNet, SPACEWAY and Jupiter are trademarks of Hughes Network Systems, LLC.

SOURCE Hughes Network Systems, LLC