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ViaSat Announces Third Quarter Fiscal Year 2014 Results

Companies mentioned in this article: ViaSat Inc.

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(TM) 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 Results(1)


    (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
     loss(2)         ($6.0)      ($20.8)              ($5.9)             ($43.1)
    --------         -----       ------               -----              ------

     Diluted
     per
     share
     net
     loss(2)        ($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
     shares(3)        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.


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

Segment Results


    (In millions)                                 First 9 Mos.  First 9 Mos.
                                                      FY14          FY13

                          Q3 FY14     Q3 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                                                           Total ViaSat Inc.
     acquired                                                            stockholders' equity
     intangible
     assets,
     net                             39,042                 47,170                                                   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.