Hughes Network Systems, LLC News
Hughes Communications, Inc. Announces First Quarter 2008 Results
"We accomplished a major milestone on
Kaul continued, "Hughes had a strong first quarter in 2008, setting new records for first quarter revenue, Adjusted EBITDA* and new orders. Revenues increased by 6% over the first quarter of 2007 to
Kaul continued, "We booked new orders of
Net income for the first quarter of 2008 was
* Adjusted EBITDA is defined as EBITDA further adjusted to exclude certain adjustments. EBITDA is defined as earnings (losses) before interest, income taxes, depreciation, amortization, and equity incentive compensation. Adjusted Net Income is defined as net income adjusted to exclude equity incentive plan compensation and long-term cash incentive (retention) plan expense. See \"Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures.\"
Set forth below is a table highlighting certain of our results for the three months ended
Hughes Communications, Inc. | Hughes Network Systems, LLC Three Months | Three Months Ended March 31, | Ended March 31, (Dollars in | (Dollars in thousands) 2008 2007 | thousands) 2008 2007 | Revenue | Revenue North America | North America VSAT $156,790 $151,565 | VSAT $156,790 $151,565 International | International VSAT 44,596 43,496 | VSAT 44,596 43,496 Telecom | Telecom Systems 35,634 27,670 | Systems 35,634 27,670 Corporate | Total $237,020 $222,731 and Other 140 151 | Total $237,160 $222,882 | | Operating income (loss) | Operating income North America | North America VSAT $5,022 $8,501 | VSAT $5,022 $8,501 International | International VSAT 433 958 | VSAT 433 958 Telecom | Telecom Systems 4,589 3,541 | Systems 4,589 3,541 Corporate | Total $10,044 $13,000 and Other (738) (1,444)| Total $9,306 $11,556 | | Net income $656 $2,940 | Net income $1,458 $4,308 | Adjusted | net income* $10,247 $3,957 | | EBITDA* $20,922 $24,380 | EBITDA* $21,674 $25,415 | Adjusted EBITDA* $29,442 $25,557 | Adjusted EBITDA* $30,194 $26,592 | New Orders $286,405 $277,360 | New Orders $286,265 $277,209 * For the definitions of Adjusted Net Income, EBITDA, and Adjusted EBITDA, see \"Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures\" below. Selected Highlights — Hughes successfully activated the first HughesNet(R) consumer subscriber for broadband Internet service utilizing its SPACEWAY 3 satellite on April 3, 2008. With this significant milestone, the SPACEWAY 3 satellite has officially commenced carrying revenue-bearing traffic, making Hughes a fully integrated service provider. Launched by Arianespace in August, 2007, SPACEWAY 3 was subsequently placed into geostationary orbit by Boeing in December, 2007, at which time Hughes assumed operational control. Extensive pre-commercial testing has been completed since then and Hughes has now achieved its goal of commencing commercial service in early 2008. — Hughes was awarded a 7-year contract by long-time customer, GTECH Corporation, the world's leading provider of lottery, gaming and transaction processing solutions, to take over management and operations of their private satellite networks, comprising 65,000 remote satellite terminals. The migration of operation services to Hughes facilities in North Las Vegas, NV and Germantown, MD is currently underway and is expected to be completed in the third quarter of 2008. — Hughes signed MicroCorp, Inc. to be a certified reseller of HughesNet broadband satellite business services in the US. Now business customers purchasing telecom solutions from MicroCorp's network of more than 1,500 agents, system integrators, and value-added remarketers will have access to high-speed data services throughout the US, as well as back-up services, using HughesNet broadband satellite services. — Hughes was issued $2.6 million in task orders by the Defense Information Systems Agency and other participating government agencies to provide Digital Compressed Satellite Services (DCSS) for the Government Education and Training Network (GETN). This effort is through the US General Services Administration's SATCOM-II vehicle and is anticipated to be a multi-million dollar effort. — Orion Satellite Systems of Australia purchased and commissioned a state-of-the-art DVB-S2/IPoS with ACM satellite system from Hughes to provide broadband Internet access service to remote areas in Australia. Orion Satellite Systems is one of the registered providers of broadband satellite services under the Australian Broadband Guarantee (ABG) program. — Hughes' Brazilian subsidiary Hughes Telecommunicacoes do Brasil, Ltda signed an agreement with Intelsat, the leading provider of commercial satellite services, to deliver a new managed cellular backhaul solution in Brazil, enabling cellular service providers to cost-effectively extend cell networks to rural areas and sparsely populated regions. — Intelsat selected Hughes' HX broadband satellite platform for a new regional Ku-band broadband maritime service. Intelsat will deliver its new service via a limited number of distributor partners in the Caribbean and Gulf of Mexico regions starting in mid-2008. The Hughes HX System is fully compliant with the world's leading satellite industry standard, IPoS/DVB-S2 with Adaptive Coding and Modulation (ACM). The Hughes implementation of ACM on the downlink, together with Adaptive Inbound Selection (AIS) and signal spreading capability on the uplink, enables the use of small shipboard antennas to deliver high-speed Ku-band maritime services. — Hughes signed All Systems Satellite Distributors to be a distributor of HughesNet satellite broadband Internet service in the Northeast and mid-Atlantic region, where large numbers of consumers are beyond the reach of cable and DSL. Under the terms of the agreement, All Systems will market primarily to retailers in Delaware, Maryland, New England, New Jersey, New York, Pennsylvania, Virginia, and West Virginia. This will create a new income opportunity for the retailers, who will sell and install the HughesNet satellite broadband service. — The Society of Satellite Professionals International (SSPI) presented Hughes with its 2008 Industry Innovators Award for Systems Development and Applications. Hughes was recognized for its technology leadership in developing SPACEWAY 3, the world's first commercial satellite system to employ on-board switching and routing, at the SSPI gala held on February 26, 2008 during the Satellite 2008 industry forum in Washington DC. — Hughes' Crypto Kernel, the cryptographic component of its HN and HX Systems, has earned a Federal Information Processing Standard (FIPS) 140-2 level 1 certificate (Certs. #919 and #915) from the National Institute of Standards and Technology (NIST). FIPS 140-2 validation is a requirement for any cryptographic product, which will be used in a US government agency network.
To summarize, Kaul said, "We are very pleased with our financial growth in first quarter of 2008 over what was already a very strong first quarter in 2007. I am also pleased with our new orders performance in the first quarter which has resulted in a strong non-consumer backlog of over
Commenting on Hughes' financial performance,
Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures
The following table reconciles the differences between Hughes' net income as determined under
Hughes Communications, Inc. Three Months Ended March 31, (Dollars in thousands) 2008 2007 Net income $656 $2,940 Add: Equity incentive plan compensation 1,071 1,017 Long-term cash incentive (retention) plan 8,520 - Adjusted net income $10,247 $3,957 Net income $656 $2,940 Add: Interest expense 9,308 11,438 Income tax expense 640 520 Depreciation and amortization 10,710 11,543 Equity incentive plan compensation 1,071 1,017 Less: Interest income (1,463) (3,078) EBITDA $20,922 $24,380 Add: Long-term cash incentive (retention) plan 8,520 - Restructuring charge - 1,177 Adjusted EBITDA $29,442 $25,557
The following table reconciles the differences between HNS' net income as determined under GAAP, EBITDA, and Adjusted EBITDA:
Hughes Network Systems, LLC Three Months Ended March 31, (Dollars in thousands) 2008 2007 Net income $1,458 $4,308 Add: Interest expense 9,308 11,438 Income tax expense 629 520 Depreciation and amortization 10,710 11,543 Equity incentive plan compensation 925 528 Less: Interest income (1,356) (2,922) EBITDA $21,674 $25,415 Add: Long-term cash incentive (retention) plan 8,520 - Restructuring charge - 1,177 Adjusted EBITDA $30,194 $26,592
The financial statements of Hughes and HNS for the three months ended
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 the following supplemental non-GAAP financial measures: Adjusted Net Income, EBITDA, and Adjusted EBITDA. Adjusted Net Income excludes from GAAP net income the effects of equity incentive plan compensation and the accrual of long-term cash incentive (retention) plan, which was adopted in
Adjusted Net Income, EBITDA, and Adjusted EBITDA are not recognized terms under GAAP. These non-GAAP measures do not represent net income or cash flows from operations, as these terms are defined under GAAP, and should not be considered as alternatives to net income as an indicator of operating performance or to cash flows as a measure of liquidity. Additionally, these non-GAAP measures are not intended to be measures of cash flow available to management for discretionary use, as such measures do not consider certain cash requirements such as capital expenditures (including expenditures on VSAT operating lease hardware and capitalized software development costs), tax payments, and debt service requirements (including VSAT operating lease hardware). Adjusted Net Income, EBITDA and Adjusted EBITDA as presented herein are 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 1.5 million systems to customers in over 100 countries.
Headquartered outside
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 forward-looking statements. Although management believes that the expectations reflected in these forward- looking 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
Hughes, HughesNet, IPoS, and SPACEWAY are trademarks of Hughes Network Systems, LLC. DIRECTV and DIRECWAY are registered trademarks of The DIRECTV Group, Inc.
Attachments Hughes Communications, Inc. Condensed Consolidated Balance Sheets Condensed Consolidated Statements of Operations Condensed Consolidated Statements of Cash Flows Hughes Network Systems, LLC Condensed Consolidated Balance Sheets Condensed Consolidated Statements of Operations Condensed Consolidated Statements of Cash Flows HUGHES COMMUNICATIONS, INC. Condensed Consolidated Balance Sheets (In thousands) (Unaudited) March 31, December 31, 2008 2007 ASSETS Current assets: Cash and cash equivalents $110,136 $134,092 Marketable securities 18,650 17,307 Receivables, net 187,490 209,943 Inventories 76,099 65,754 Prepaid expenses and other 36,215 43,720 Total current assets 428,590 470,816 Property, net 489,949 479,976 Capitalized software costs, net 49,185 47,582 Intangible assets, net 29,543 22,513 Goodwill 1,362 Other assets 115,393 108,950 Total assets $1,114,022 $1,129,837 LIABILITIES AND STOCKHOLDER'S EQUITY Current liabilities: Accounts payable $73,166 $72,440 Short-term debt 12,730 14,795 Accrued liabilities 165,258 177,932 Due to affiliates 1,077 12,621 Total current liabilities 252,231 277,788 Long-term debt 577,431 577,761 Other liabilities 20,692 6,526 Total liabilities 850,354 862,075 Commitments and contingencies Minority interests 5,446 5,401 Stockholders' Equity: Preferred stock, $0.001 par value; 1,000,000 shares authorized and no shares issued and outstanding at March 31, 2008 and December 31, 2007 - - Common stock, $0.001 par value; 64,000,000 shares authorized; 19,185,794 shares and 19,195,972 shares issued and outstanding as of March 31, 2008 and December 31, 2007, respectively 19 19 Additional paid in capital 631,456 631,300 Accumulated deficit (366,212) (366,868) Accumulated other comprehensive loss: Foreign currency translation adjustments 3,492 3,305 Unrealized loss on interest rate swap (10,699) (5,482) Unrealized gains on securities 166 87 Total stockholders' equity 258,222 262,361 Total liabilities and stockholders' equity $1,114,022 $1,129,837 HUGHES COMMUNICATIONS, INC. Condensed Consolidated Statements of Operations (In thousands, except share and per share amounts) (Unaudited) Three Months Ended March 31, 2008 2007 Revenues: Services $148,897 $119,774 Hardware sales 88,263 103,108 Total revenues 237,160 222,882 Operating costs and expenses: Cost of services 94,217 80,234 Cost of hardware products sold 76,798 87,166 Selling, general and administrative 49,155 38,266 Research and development 6,076 4,124 Amortization of intangibles 1,608 1,536 Total operating costs and expenses 227,854 211,326 Operating income 9,306 11,556 Other income (expense): Interest expense (9,308) (11,438) Interest income 1,463 3,078 Other income, net 31 101 Income before income tax expense; minority interests in net losses of subsidiaries; and equity in losses of unconsolidated affiliates 1,492 3,297 Income tax expense (640) (520) Minority interests in net losses of subsidiaries (45) 283 Equity in losses of unconsolidated affiliates (151) (120) Net income $656 $2,940 Earnings per share: Basic $0.03 $0.16 Diluted $0.03 $0.15 Shares used in computation of per share data: Basic 18,867,630 18,843,122 Diluted 19,275,233 19,212,462 HUGHES COMMUNICATIONS, INC. Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited) Three Months Ended March 31, 2008 2007 Cash flows from operating activities: Net income $656 $2,940 Adjustments to reconcile net income to cash flows from operating activities: Depreciation and amortization 11,053 11,467 Equity plan compensation expense 1,071 1,017 Minority interests 45 (283) Equity in losses from unconsolidated affiliates 151 120 Other (3) (250) Change in other operating assets and liabilities, net of acquisitions: Receivables, net 23,857 (2,469) Inventories (10,194) (1,996) Prepaid expenses and other (3,927) (641) Accounts payable 905 (4,470) Accrued liabilities and other (6,197) (3,051) Net cash provided by operating activities 17,417 2,384 Cash flows from investing activities: Change in restricted cash 7 508 Purchases of marketable securities (2,071) (1,742) Proceeds from sales of marketable securities 1,005 15,000 Expenditures for property (22,948) (62,245) Expenditures for capitalized software (3,382) (3,288) Proceeds from sale of property 25 313 Additional investment in Hughes Systique Corporation (1,500) - Acquisition of Helius (10,812) - Long-term loan to Hughes Systique Corporation (500) - Net cash used in investing activities (40,176) (51,454) Cash flows from financing activities: Net increase in notes and loans payable 689 303 Long-term debt borrowings 1,654 115,296 Repayment of long-term debt (4,620) (6,902) Debt issuance costs - (1,987) Net cash (used in) provided by financing activities (2,277) 106,710 Effect of exchange rate changes on cash and cash equivalents 1,080 (384) Net(decrease) increase in cash and cash equivalents (23,956) 57,256 Cash and cash equivalents at beginning of the period 134,092 106,933 Cash and cash equivalents at end of the period $110,136 $164,189 Supplemental cash flow information: Cash paid for interest $2,832 $1,168 Cash paid for income taxes $952 $1,565 HUGHES NETWORK SYSTEMS Condensed Consolidated Balance Sheets (In thousands) (Unaudited) March 31, December 31, 2008 2007 ASSETS (Unaudited) Current assets: Cash and cash equivalents $109,755 $129,227 Marketable securities 11,400 11,224 Receivables, net 187,374 209,731 Inventories 76,099 65,754 Prepaid expenses and other 35,028 42,131 Total current assets 419,656 458,067 Property, net 489,949 479,976 Capitalized software costs, net 49,185 47,582 Intangible assets, net 29,543 22,513 Goodwill 1,362 Other assets 108,465 103,870 Other assets 109,827 103,870 Total assets $1,098,160 $1,112,008 LIABILITIES AND EQUITY Current liabilities: Accounts payable $71,762 $69,497 Short-term debt 12,730 14,795 Accrued liabilities 164,647 177,136 Due to affiliates 1,499 13,473 Total current liabilities 250,638 274,901 Long-term debt 577,431 577,761 Other long-term liabilities 20,692 6,526 Total liabilities 848,761 859,188 Commitments and contingencies Minority interests 5,386 5,350 Equity: Class A membership interests 180,731 180,655 Class B membership interests - - Retained earnings 70,361 68,903 Accumulated other comprehensive loss: Foreign currency translation adjustments 3,492 3,305 Unrealized loss on interest rate swap (10,699) (5,482) Unrealized gains on securities 128 89 Total equity 244,013 247,470 Total liabilities and equity $1,098,160 $1,112,008 HUGHES NETWORK SYSTEMS Condensed Consolidated Statements of Operations (In thousands) (Unaudited) Three Months Ended March 31, 2008 2007 Revenues: Services $148,757 $119,623 Hardware sales 88,263 103,108 Total revenues 237,020 222,731 Operating costs and expenses: Cost of services 94,203 80,206 Cost of hardware products sold 76,798 87,166 Selling, general and administrative 48,291 36,699 Research and development 6,076 4,124 Amortization of intangibles 1,608 1,536 Total operating costs and expenses 226,976 209,731 Operating income 10,044 13,000 Other income (expense): Interest expense (9,308) (11,438) Interest income 1,356 2,922 Other income, net 31 52 Income before income tax expense, minority interests in net (earnings) losses of subsidiaries 2,123 4,536 Income tax expense (629) (520) Minority interests in net (earnings) losses of subsidiaries (36) 292 Net income $1,458 $4,308 HUGHES NETWORK SYSTEMS Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited) Three Months Ended March 31, 2008 2007 Cash flows from operating activities: Net income $1,458 $4,308 Adjustments to reconcile net income to cash flows from operating activities: Depreciation and amortization 11,053 11,467 Equity plan compensation expense 76 80 Minority interests 36 (292) Other (4) (191) Change in other operating assets and liabilities, net of acquisition: Receivables, net 23,761 (2,447) Inventories (10,194) (1,996) Prepaid expenses and other (4,268) (1,617) Accounts payable 2,444 (4,148) Accrued liabilities and other (5,527) (2,746) Net cash provided by operating activities $18,835 $2,418 Cash flows from investing activities: Change in restricted cash 7 (281) Proceeds from sales of marketable securities - 14,795 Expenditures for property (22,948) (62,245) Expenditures for capitalized software (3,382) (3,288) Proceeds from sale of property 25 313 Acquisition of Helius (10,812) - Net cash used in investing activities (37,110) (50,706) Cash flows from financing activities: Net increase in notes and loans payable 689 303 Long-term debt borrowings 1,654 115,296 Repayment of long-term debt (4,620) (6,902) Debt issuance costs - (1,987) Net cash provided by (used in) financing activities (2,277) 106,710 Effect of exchange rate changes on cash and cash equivalents 1,080 (384) Net increase (decrease) in cash and cash equivalents (19,472) 58,038 Cash and cash equivalents at beginning of the period 129,227 99,098 Cash and cash equivalents at end of the period $109,755 $157,136 Supplemental cash flow information: Cash paid for interest $2,832 $1,168 Cash paid for income taxes $930 $1,564
SOURCE Hughes Communications, Inc.
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