ViaSat Announces Second Quarter Fiscal Year 2016 Results

Nov. 9, 2015

ViaSat Inc. 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."

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.

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.