CARLSBAD, Calif., Aug. 9, 2018 /PRNewswire/ -- Viasat Inc. (NASDAQ: VSAT), a global communications company, today announced financial results for the fiscal first quarter ended June 30, 2018.
"Our first quarter results signal a promising start toward driving meaningful growth in fiscal year 2019, by capitalizing on the service launch of ViaSat-2 and leveraging prior year research and development (R&D) and infrastructure investments," said Mark Dankberg, chairman and CEO of Viasat. "All segments contributed to 15% year-over-year revenue growth and even stronger 29% year-over-year new contract awards growth, which together build confidence in sustained or accelerating growth for the fiscal year as a whole. Prior investments in network and business infrastructure create the opportunity for significant margin expansion as we accumulate the benefits of growing revenues in residential, IFC, government, Wi-Fi and enterprise broadband services over the course of the fiscal year."
Expansion of the American Airlines contract
Subsequent to the end of the first quarter of fiscal year 2019, Viasat expanded its relationship with American Airlines and was selected to outfit 100 new American Airlines Airbus A321neo aircraft with its IFC and Wi-Fi entertainment systems. Viasat will also provide logistics support and network monitoring for its systems on these aircraft. Delivery of these airplanes is expected to begin in early 2019.
Adoption of revenue recognition accounting standards codification (ASC) 606, Revenue from Contracts with Customers
Viasat adopted Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (commonly referred to as ASC 606) during the first quarter of fiscal year 2019. This update established ASC 606, Revenue from Contracts with Customers and ASC 340-40, Other Assets and Deferred Costs – Contracts with Customers. The largest impact of the ASC 606 adoption resulted in the recognition of a "day one" $38.3 million asset related to commission costs which were previously expensed primarily in the Company's Satellite Services segment. This asset will be amortized over the remaining estimated contract lives of the Company's fixed broadband subscribers. Additional details related to the Company's adoption of ASC 606 and the impacts to the Company's financial statements for the first quarter of fiscal year 2019 and comparable periods, can be found in the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2018 filed with the Securities and Exchange Commission.
Near the end of the first quarter of fiscal year 2019, Viasat expanded the geographic areas offering its fastest fixed broadband plans. First quarter of fiscal year 2019 segment revenues of $153.6 million increased year-over-year and sequentially. The anticipated substantial ramp in IFC system installations planned for fiscal year 2019 showed a solid start, with a 33% year-over-year increase in commercial aircraft in service as of June 30, 2018. Year-over-year segment operating margin and Adjusted EBITDA performance reflected higher fixed operating expenses associated with the ViaSat-2 service launch and IFC ramp, as well as sales and marketing costs as the Company expanded its highest-speed ViaSat-2 broadband service offerings into new vertical and geographic markets. Highlights for the quarter include:
- Fixed broadband services
- Residential ARPU in the U.S. grew sequentially and by 9% year-over-year to $72.38, reflecting a higher mix of new and existing subscribers choosing Viasat's highest speed plans, as well as a slightly higher proportion of retail subscribers. At the close of the first quarter of fiscal year 2019, subscribers totaled approximately 577,000, up slightly on a sequential quarter basis.
- The Satellite Services segment continued to diversify its portfolio. Viasat launched new enterprise service offerings and signed agreements with new master agents to sell enterprise plans nationwide. In addition, the Company officially launched its Community Wi-Fi hotspot business in Mexico and significantly increased its coverage and usage.
- Mobility services
- At the close of the first quarter of fiscal year 2019, 757 commercial aircraft were in service using Viasat's IFC systems, an increase of 122 commercial planes as compared to the end of fiscal year 2018. The Company also expects to install its IFC systems on an additional 854 commercial aircraft under existing contracts – which does not include additional orders obtained subsequent to the close of the first quarter.
- Viasat's best-in-class in-flight Wi-Fi service continued to see increased market demand with airline partners gaining in scale and reach. Viasat's in-flight Wi-Fi service reached new milestones: usage expanded to more than 3,000 commercial flights per day, and personal electronic device internet sessions approached 5 million per quarter.
- SAS became the first Nordic airline to launch high-speed, high-quality in-flight Wi-Fi using Viasat's IFC systems.
- Viasat began testing service on the ViaSat-2 mobility network and successfully completed flights through the Caribbean to the coast of South America and across the Atlantic Ocean.
Viasat's Commercial Networks segment revenues grew significantly in the first quarter of fiscal year 2019, with strong sequential and year-over-year increases of 25% and 110%, respectively. The Company's scaling IFC equipment business was the primary driver. Segment revenues also benefitted from next-generation broadband contract wins. The strong revenue growth combined with segment operating cost decreases led to narrowed segment operating loss, and Adjusted EBITDA improvement on both a sequential quarter and year-over-year basis. R&D expenses declined sequentially and year-over-year by $3.7 million and $12.4 million, respectively, as the Company's ViaSat-3 payload program continued to progress into the capital portion of the project. Highlights for the quarter include:
- In the first quarter of fiscal year 2019, Viasat delivered double the volume of its next-generation IFC systems for commercial aircraft as compared to the fourth quarter of fiscal year 2018, which brought total next-generation IFC system installations to around 200 aircraft across eight commercial airlines.
- New contract awards rose 170% versus the same period last year, generating a segment book-to-bill ratio of 1.2 and a backlog which is at a three-year record high.
- Embraer became the first original equipment manufacturer to select Viasat's next-generation business aviation IFC solution for its Legacy 450 and Legacy 500 executive jets. This agreement marked the first Ka-band IFC line-fit selection for a medium cabin business jet.
- ViaSat-3 continued to make strong progress marked by another quarter of reduced development expenses as capital build activities continued.
Viasat's Government Systems segment revenues for the first quarter of fiscal year 2019 were $190.2 million, an increase of 4% year-over-year. Operating profit decreased by 24% to $24.9 million and Adjusted EBITDA decreased by 12% to $43.5 million for the quarter, compared to the prior year period. Lower operating profit and Adjusted EBITDA reflected higher investments in bid and proposal activities, R&D targeted at additional growth opportunities, and the specific product and service mix during the period. Highlights for the quarter include:
- New contract awards rose 22% year-over-year, with a book-to-bill ratio of 1.6.
- Next-generation tactical datalink solutions continued to scale, with the first quarter fiscal year 2019 marking record levels of Small Tactical Terminal shipments, including delivery of its 1000th unit.
- Viasat received an Indefinite Delivery/Indefinite Quantity contract worth up to $42 million from the U.S Air Force for units, maintenance and support services for Viasat's AN/USQ-140(V) Multifunctional Information Distribution Systems Low Volume Terminals.
- Viasat enhanced its defense presence in the UK with the acquisition of Horsebridge Defence and Security, a company focused on design, system integration and support of deployable secure networks.
- Viasat conducted its first international defense-focused ViaSat-2 system demonstration in Canada, showing cloud-based applications and services delivered over Viasat's secure, resilient, high-capacity satellite system.
Viasat will host a conference call to discuss the first quarter of fiscal year 2019 results. Details follow:
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 2019 and beyond; satellite construction and launch activities; 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.
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.
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