ViaSat Announces First Quarter Fiscal Year 2017 Results

Satellite Services

In the fiscal first quarter of 2017, ViaSat's Satellite Services segment achieved record high revenues for the fourth consecutive quarter, up 15% year-over-year, with continued growth in the residential broadband and in-flight connectivity businesses. Operating profit increased 81% year-over-year to $30.9 million, generating Adjusted EBITDA of $71.9 million, a 32% increase over the same period last year. Adjusted EBITDA margin increased to 47%. Highlights for the quarter include:

• ViaSat served 696,000 residential subscribers at the close of the fiscal first quarter of 2017, up 2% compared to the fiscal first quarter of 2016.
• Average revenue per user (ARPU) in the residential internet business grew by 8% year-over-year to $60.00, a new record high, reflecting higher bandwidth, higher value plans and growth in value added services.
• The in-flight connectivity business continued to scale, with ViaSat's in-flight internet service deployed on 509 commercial aircraft as of the end of the first fiscal quarter of 2017.
• American Airlines selected ViaSat's high-speed in-flight internet service for its new Boeing 737 MAX fleet, with service availability planned for September 2017.
• ViaSat, along with partner Eutelsat, introduced in-flight internet service in Europe with EL AL Israel Airlines. The service, currently in customer trials, is expected to enter full retail service before the end of this calendar year.

Commercial Networks

ViaSat's Commercial Networks segment revenues were slightly lower compared with the prior year period following completion of the initial infrastructure portion of the large Australian nbn™ project, and up on a sequential quarter basis. Revenue for the fiscal first quarter reflected certain mobile broadband satellite communications systems programs and larger antenna systems programs nearing completion, partially offset by revenue increases from broadband terminal orders under the nbn project. The segment reported a higher operating loss and lower Adjusted EBITDA for the fiscal first quarter of 2017, as compared to the same period last year due to continued planned investments in the ViaSat-3 broadband communications platform and additional Supplemental Type Certificate (STC) efforts for in-flight internet wins. These investments contributed to significant increases in research and development (R&D) expenses in the fiscal first quarter of 2017, as compared to the same period last year, and also represented the primary drivers for the year-over-year Adjusted EBITDA decrease. Highlights for the quarter include:

• The ViaSat-2 satellite communications platform successfully passed critical program milestones, including completion of assembly, completion of functional performance testing and completion of the first phase of environmental testing in preparation for a launch window beginning at the end of calendar 2016.
• Significant progress was made by ViaSat and Boeing Satellite Systems International (BSSI) on the ViaSat-3 program, as the two organizations continued to collaborate on integrating ViaSat's highly-innovative communications payload with Boeing's upgraded platform. Subsequent to the end of the fiscal first quarter, ViaSat and BSSI finalized the two separate agreements for the delivery of the first two ViaSat-3 class satellites, including payload integration.
• Subsequent to the fiscal first quarter end, ViaSat received a series of new STC approvals from the Federal Aviation Administration (FAA). The new STC approvals cover ViaSat's hybrid Ku-/Ka-band satellite antenna for Airbus A320 type aircraft primarily deployed on Virgin America, and installation and activation of the ViaSat in-flight connectivity system on Boeing 737-800 and 900 series type aircraft for deployment across the EL AL Israel Airlines fleet.

Government Systems

In the first quarter of fiscal year 2017, ViaSat's Government Systems segment revenues were flat, compared to the prior year period while operating profit and Adjusted EBITDA grew significantly, each up 13% to $18.0 million and $32.8 million, respectively. Operating profit and Adjusted EBITDA expansion were driven by strong growth in services revenues and a decrease in Government Systems segment R&D spending. Highlights for the quarter include:

• The government mobile broadband business continued to expand. ViaSat was awarded a sole-source contract to provide global in-flight connectivity service to Air Force One and other U.S. government senior leader aircraft. This specific award covered support for VC-25s, C-17s, C-32s, C-37s, C-40s and the complete range of VIP and special air mission aircraft. ViaSat has now deployed its government mobile broadband internet service on more than 400 government aircraft.
• Managed Wi-Fi revenues increased, as ViaSat continued to execute on its contract with NEXCOM (Navy Exchange Service Command) to deliver Managed Wi-Fi internet and voice services to an increasing number of sailors and their families at Navy facilities worldwide.
• ViaSat delivered its 500^th production KOR-24A Small Tactical Terminal (STT), which is the only small form factor Link 16 terminal in sustained production in the world today.
• The ViaSat KOR-24A STT was selected for use on the CP-140 Aurora aircraft used by the Royal Canadian Air Force.
• ViaSat secured NSA certification for two of its information assurance encryption devices, as well as continued to expand its 'edge to cloud' network encryption portfolio with a first-to-market 100 Gbps Type 1 Ethernet encryptor.