HUGH Hughes Communications (MM)

GERMANTOWN, Md., May 5, 2011 /PRNewswire/ -- Hughes Communications, Inc. (NASDAQ: HUGH) ("Hughes"), the global leader in broadband satellite network solutions and services, today announced financial results for the first quarter ended March 31, 2011. Hughes' consolidated operations are classified into five reportable segments: North America Broadband, International Broadband, Telecom Systems, HTS Satellite, and Corporate and Other. The North America Broadband, International Broadband, Telecom Systems, and HTS Satellite segments represent all the operations of Hughes Network Systems, LLC ("HNS"), Hughes' principal operating subsidiary.

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First Quarter 2011 Financial Highlights:

• Consolidated total revenues of $264 million, a 9% increase over the first quarter of 2010. Consolidated services revenues of $216 million, a 15% increase over the first quarter of 2010.
• Consumer business sets new records with impressive growth over first quarter of 2010:
  • Total consumer revenue of $131 million for a growth of 15%.
  • Record subscriber gross adds of 77,000 for a growth of 34%.
  • Record net adds of 35,000 for a growth of 33%.  
  • Consumer ARPU increased to $75 from $72 for the first quarter of 2010.
  • Churn of 2.3% compared to 2.0% in the first quarter of 2010.
  • Ending subscribers of 613,000, an increase of 16% over the subscriber base as of March 31, 2010.
• Enterprise businesses show strong revenue growth of 10% over the first quarter of 2010 led by robust international growth.
• Record Adjusted EBITDA of $58 million, an increase of 36% over the first quarter of 2010.
• New orders of $266 million, an increase of 12% over the first quarter of 2010, with major orders from Sonic, GETN, Jiffy Lube, Murphy Oil and Regal Cinemedia in our North America broadband business; Yahsat, CJSC Synterra, IT Partners, Telefonica, COPEL and HDFC Bank in our International broadband business; and MEXSAT in our Telecom Systems business. Strong non-consumer order backlog of $1.1 billion as of March 31, 2011, a growth of 32% over the backlog as of March 31, 2010.
• Positive net cash from operating activities of $49 million compared to $13 million in the first quarter of 2010.

Set forth below are tables highlighting certain of Hughes' and HNS' results for the three months ended March 31, 2011 and 2010.

*  For the definition of Adjusted EBITDA, see "Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures" below.

Recent Highlights:

• Heartland Automotive Services, America's largest Jiffy Lube franchisee, signed a managed services contract for a full-featured VoIP (Voice over IP) solution with HNS. The high availability, converged voice and data broadband solution will enable Heartland to eliminate expensive POTS lines at its hundreds of retail locations.
• HNS signed an amendment to its existing agreement with Sonic, the nation's largest chain of drive-in restaurants, to upgrade service at over 455 stores to a broadband managed network service in a high availability network configuration, and to extend the existing VSAT service at the remaining 3,083 stores. The amendment is valued at $12.5 million and extends service until 2016.
• Hughes India received orders from HDFC Bank for $2.9 million to provide service to 245 rural branches and 58 off-site ATMs spread across different states in India. This critical network utilizes Hughes' VSAT solution which enables fast roll-out in rural areas and high VPN bandwidth availability.    
• Hughes do Brazil signed a $13 million contract with Telefonica to extend the current service contract for 24 months. Telefonica uses Brazil's VSAT service to provide last mile connectivity to over 1000 corporate sites.
• Hughes do Brazil signed a $4.6 million contract with COPEL to extend its 800 site contract for 36 months. COPEL, a utility in the state of Parana, has been mandated to provide Internet access to all schools in the state. COPEL uses Hughes' network to provide service in areas which do not have terrestrial broadband access.    
• HNS was selected by Vodacom Group, Ltd., a leading African communications company, to provide its market-leading HN and HX broadband satellite solutions to help propel Vodacom's expansion of converged service offerings in South Africa and throughout the continent.
• AmeriPride, a multi-national uniform rental service and linen supply company based in Lincoln, Nebraska selected the Hughes Access Continuity Service over broadband satellite from HNS to protect its service centers across North America from network outages.
• Hughes Communications India Ltd., India's leading provider of broadband satellite networks and services, was recognized as the Best VSAT Operator in India at the Telecom Operator Awards ceremony held in March 2011.

To summarize, Pradman Kaul, president and CEO said, "Our consumer business continued to lead the way in the first quarter of 2011 with record gross and net adds and increased ARPU, which resulted in strong services revenue growth. The enterprise segments also showed healthy revenue growth and our order backlog continues to be strong, all of which made this an outstanding quarter. Development work on our Jupiter satellite continues on-track for a launch in the first half of 2012, and we are making good progress on the regulatory front as it relates to the merger with EchoStar. We are very pleased with our accomplishments in the quarter."

Commenting on Hughes' financial performance, Grant Barber, executive vice president and CFO said, "The strategy of expanding margins through the satellite ownership model continues to play out very well, as evidenced by continued growth in our operating profits and Adjusted EBITDA in the first quarter of 2011. This, combined with strong working capital management, enabled us to fund substantial capital expenditures on Jupiter and maintain our liquidity at a healthy level."  

Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures

The following table reconciles the differences between Hughes' Net Income (Loss) as determined under United States of America Generally Accepted Accounting Principles (GAAP) and Adjusted EBITDA.

The following table reconciles the differences between HNS' Net Income (Loss) as determined under GAAP and Adjusted EBITDA.

The condensed consolidated financial statements of Hughes and HNS for the three months ended March 31, 2011 and 2010 are attached to this press release.

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' 9-1/2% Senior Notes due 2014 issued in 2006 and 2009.

Adjusted EBITDA is not a recognized term under GAAP. This nonGAAP 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 world's leading provider of satellite broadband for home and office, delivering innovative network technologies, managed services, and solutions for enterprises and governments globally. HughesNet® is the #1 high-speed satellite Internet service in the marketplace, with offerings to suit every budget. To date, Hughes has shipped more than 2.5 million systems to customers in over 100 countries, representing over 50 percent market share. Its products employ global standards approved by the TIA, ETSI, and ITU organizations, including IPoS/DVB-S2, RSM-A, and GMR-1.

Headquartered outside Washington, D.C., 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 forwardlooking statements. Although management believes that the expectations reflected in these forwardlooking 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, 2010 filed with the Securities and Exchange Commission on March 7, 2011 and in the other documents Hughes files with the Securities and Exchange Commission from time to time.

©2011 Hughes Communications, Inc. All rights reserved. Hughes, HughesNet, SPACEWAY, and Jupiter are trademarks of Hughes Network Systems, LLC.

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

SOURCE Hughes Communications, Inc.