Germantown, Md., November 4, 2009—Hughes Communications, Inc. (NASDAQ: HUGH) (“Hughes”), the global leader in broadband satellite network solutions and services, today announced financial results for the quarter ended September 30, 2009. Hughes’ consolidated operations are classified into four reportable segments: North America Broadband; International Broadband; Telecom Systems; and Corporate and Other. The North America Broadband, International Broadband, and Telecom Systems segments represent all the operations of Hughes Network Systems, LLC (“HNS”), Hughes’ principal operating subsidiary.
Third Quarter 2009 Financial Highlights:
• Consumer business sets new records with impressive growth over the third quarter of 2008:
– Record third quarter subscriber gross adds of 50,000, an increase of 14%.
– Record third quarter subscriber net adds of 17,000 for growth of 49%. – Services revenue increased by 19%.
– Consumer ARPU increased to $71 over $68 in the third quarter of 2008 and $70 in the second quarter of 2009.
Churn improved to 2.3% from 2.6% in the third quarter of 2008.
• Revenue of $251 million compared to $272 million in the third quarter of 2008.
- Total services revenue up 12%, with Broadband services revenue up 16%.
- North America Broadband services revenue up 14%; International Broadband services revenue up 22%, 34% on a constant dollar basis.
- Telecom Systems revenue of $29 million, down 32% primarily due to several major MobileSat development contracts reaching completion and the winding down of the Telematics contract.
• Record third quarter Adjusted EBITDA of $44 million, an increase of 13% over the third quarter of 2008.
• New orders of $208 million, with major orders from GTech, Burger King, Social Security Service, Row 44, Equiva, Yum Brands, LodgeNet, Barrett Xplore, and Rite Aid in North America. Major orders from our international customers included World Bank, Ethiopian Telecom, BP Spain, Martins Brazil, and NIT Nigeria. Strong non-consumer backlog of $822 million at September 30, 2009.
• Positive cash from operations of $74 million compared to $26 million in the third quarter of 2008.
Nine Months Ended September 30, 2009 Financial Highlights
• Revenue of $747 million compared to $775 million in the nine month period ended September 2008, a 1% decline on a constant dollar basis.
• Services revenue up 13% over the nine month period ended September 2008, 16% on a constant dollar basis. Broadband services revenue up 13%, 17% on a constant dollar basis.
• Adjusted EBITDA of $117 million for a growth of 10% over the nine month period ended September 30, 2008.
• Total subscribers of 490,000 at September 30, 2009 reflecting a growth of 16% over the subscriber base at September 30, 2008.
• Positive cash from operations of $111 million compared to $40 million in the nine months ended September 30, 2008.
• HNS and Barrett Xplore Inc., Canada’s largest rural broadband provider, signed an agreement in August 2009 under which Barrett Xplore committed to acquire and operate over 10 Gbps of capacity on Jupiter, Hughes’ next-generation, high-throughput satellite. Jupiter is designed with more than 100 Gbps of capacity, representing a tenfold increase over existing satellites, and is scheduled for launch in 2012. The agreement is valued in excess of U.S. $100 million.
• Avanti Communications Group plc and HNS signed a multi-year framework agreement in October 2009 whereby HNS’ European subsidiary will supply Avanti eight (8) gateways and 50,000 customer premise terminals to operate over HYLAS, Europe’s first dedicated, high-throughput Ka- band broadband satellite to be launched in 2010. The contract value is $24 million assuming full roll- out of the planned network. In addition, Hughes agreed to acquire capacity on the HYLAS satellite to expand its managed services offering to major European corporations.
• The Communications and Transport Ministry of México (SCT) selected HNS to supply its market- leading HN System to support the Mexican government’s connectivity program to expand broadband access to rural areas of the country. The Hughes HN System comprises a Network Operations Center and 5,760 HN7000S satellite terminals that will enable public schools, hospitals, libraries, and government offices to connect to the Web and each other via broadband Internet access.
• HNS and a major Southeast Asian cellular operator signed a contract for the supply of more than 1,000 Hughes HX terminals to support backhaul connectivity for rural GSM picocells. The network supports 3G wireless data and voice services in rural villages without access to cost-effective landline communications. In addition, HX terminals are being installed on maritime vessels to enable GSM cellular services aboard large, long-distance passenger ferry ships.
• HNS was a recipient of the Gazette Politics and Business Exceptional 53 Maryland Business Awards. The awards program acknowledges the top 53 businesses and organizations in Maryland based on criteria that include the recipient company’s annual revenue and employee growth, as well as noteworthy product or service innovations, community service efforts, and how the companies portray themselves as “good places to work.”
To summarize, Pradman Kaul, president and CEO said, “The consumer business continued its strong growth trajectory despite the difficult macro environment. Consistent with our stated strategy, our services revenue also continued to grow across all of our broadband businesses. I am also delighted that we were able to sign important agreements with Barrett Xplore and Avanti. Barrett, currently a major customer for SPACEWAY® 3, will continue that relationship on Jupiter. Their commitment for space segment will enhance cash flow and returns on the Jupiter satellite. In addition, Barrett will be a major customer of NOCs and VSAT terminals for use in Canada. Our agreement with Avanti enables us to lease very competitive Ka-band space segment for our European customers, and also generate significant hardware revenues from sales of NOCs and VSAT terminals to Avanti and their Virtual Network Operators.”
Commenting on Hughes’ financial performance, Grant Barber, executive vice president and CFO said, “Our focus on expense control and working capital management continued in the third quarter of 2009 resulting in a strong liquidity position, with consolidated cash, cash equivalents and marketable securities increasing to $326 million at September 30, 2009.”
Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures
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 Adjusted EBITDA as a supplemental non-GAAP financial measure. Adjusted EBITDA is defined as earnings (loss) before interest, income taxes, depreciation, amortization, equity incentive plan compensation, long-term incentive/retention cash plan and other adjustments permitted by the debt instruments of HNS. We believe this non-GAAP financial measure provides useful information to both management and investors by excluding specific expenses that we believe are not indicative of our core operating results. Internally, we use this non-GAAP measure in our review of the performance of management and in the performance of our business and operations. Management also uses Adjusted EBITDA of HNS for purposes of determining the payments to be made in connection with the long-term cash incentive retention program. Externally, we believe that investors may find this non-GAAP financial information useful in their assessment of our operating performance. In addition, we believe that this non- GAAP financial measure provides information that is useful to investors in understanding period-over-period operating results separate and apart from items that may, or could, have a disproportionately positive or negative impact on results in any particular period. Adjusted EBITDA of HNS is also used in calculating covenant compliance under HNS’ credit agreements and the indenture governing HNS’ 91⁄2% Senior Notes due 2014 issued in 2006 and 2009.
Adjusted EBITDA is not a recognized term under GAAP. This non-GAAP measure does not represent net income or cash flows from operations, as these terms are defined under GAAP and should not be considered as an alternative to net income as an indicator of operating performance or to cash flows as a measure of liquidity. Additionally, this non-GAAP measure is not intended to be a measure of cash flow available to management for discretionary use, as such measure does not consider certain cash requirements such as capital expenditures (including expenditures on VSAT operating lease hardware and capitalized software development costs), tax payments, debt service requirements (including VSAT operating lease hardware), and payments under the long-term cash incentive retention program. Adjusted EBITDA as presented herein is 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 1.9 million systems to customers in over 100 countries.
Headquartered outside Washington, DC, in Germantown, Maryland, USA, Hughes maintains sales and support offices worldwide. For more information, please visit www.hughes.com.
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 December 31, 2008 filed with the Securities and Exchange Commission on March 5, 2009 and in the other documents Hughes files with the Securities and Exchange Commission from time to time.