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Hughes Communications, Inc. announced strong third-quarter revenue growth, record adjusted EBITDA of $61 million, impressive growth in the consumer business, record new orders, and renewed growth in the enterprise business.
Snapshot of Third Quarter Financial Results
Consolidated revenues of $266 million for a 6% growth over the third quarter of 2009; a 10% growth if revenues from the discontinued contract with Telematics are excluded.
Consolidated services revenues of $202 million for a growth of 15% over the third quarter of 2009; 18% growth excluding revenues from the discontinued contract with Telematics.
Record Adjusted EBITDA of $61 million, an increase of 38% over the third quarter of 2009.
Operating income of $26 million for a 64% growth over the third quarter of 2009; net income attributable to stockholders of $10.1 million compared to a loss of $2.6 million in the third quarter of 2009; earnings per share (fully diluted) of $0.45 in the third quarter of 2010 compared to a loss per share (fully diluted) of ($0.12) in the third quarter of 2009.
Positive net cash from operating activities of $69 million.New orders of $549 million for a growth of 164% over the third quarter of 2009, with major orders from Barrett Xplore, Rite Aid, Social Security Administration, Dillard’s, TJ Maxx, Buckeye Pipeline, GETN, and ConocoPhillips in the North America Broadband business; JSC Iskra, GTECH Colombia, Camelot, PrimeNet, VIVO, SEDUC, SREI, and Allahabad Bank in our International Broadband business; and Glocom and Harris in our Mobile Satellite business.
Consumer business continued impressive growth trajectory:
Total revenue increased by 14% and services revenue by 19% over the third quarter of 2009.
Strong third-quarter subscriber gross adds of 49,000 and net adds of 13,000.
Consumer ARPU increased to $75 from $71 in the third quarter of 2009.
Churn improved to 2.2% from 2.3% in the third quarter of 2009.
Enterprise business growth resumed both domestically and internationally.
Snapshot of Nine Months Ending September 30, 2010
Consolidated total revenues of $762 million for a 2% growth over the nine months ending September 30, 2009; 5% growth excluding revenues from the discontinued contract with Telematics.
Consolidated services revenues of $583 million for a growth of 14% over the nine months ending September 30, 2009; 18% growth excluding revenues from the discontinued contract with Telematics.
Adjusted EBITDA of $156 million for a growth of 33% over the nine months ending September 30, 2009.
Strong liquidity with cash, cash equivalents, and marketable securities of $222 million as of September 30, 2010.
New orders of $989 million for a growth of 32% over the nine months ending September 30, 2009, resulting in a record non-consumer backlog of $1,038 million, a 26% growth over the backlog at September 30, 2009.
Strong growth in consumer business over the nine months ending September 30, 2009:
Total revenue up 14%; service revenue up 20%.
Subscriber gross adds of 154,000 and net adds of 54,000.
Total subscriber base of 558,000 as of September 30, 2010, for a growth of 14% over the subscriber base as of September 30, 2009.
Congratulations to the two Hughes running teams who participated in the Army Ten-Miler on October 24 in Washington D.C. Over 700 military and civilian teams compete at this annual event for titles such as the Commander’s Cup and the International Cup. Organized by the U.S. Army Military District of Washington, the Army Ten-Miler proceeds support Army Morale, Welfare and Recreation, a comprehensive network of support and leisure services designed to enhance the lives of soldiers and their families.
The race began and ended at the Pentagon and followed a ten-mile course through scenic downtown Washington, passing by historic landmarks such as the Lincoln Memorial, the Washington Monument, and the U.S. Capitol. Kudos to all 13 Hughes runners!
On August 18, Hughes held its fourth annual Engineering Day at the North Bethesda Marriott Conference Center to celebrate and recognize technical achievements at Hughes during the previous year. More than 300 participants attended project sessions during the day and an awards banquet in the evening, when 12 superior engineers were honored with Engineering Excellence Awards for signal processing design, software engineering, advanced technology development, and network systems design. Congratulations to all!
During an emergency, hospital staff, public officials, and first responders must rely on critical communications to do their jobs quickly and effectively. No organization is more acutely aware of that than the Hospital Association of Southern California (HASC), a not-for-profit regional trade association of hospitals and health systems.
Connecting more than 300 hospitals, emergency response organizations, and public health officials throughout 13 California counties, HASC’s ReddiNet® network needed to carry time-sensitive data and communications for both daily operations and crisis situations. But because it was made up of mountaintop-based microwave radios, ReddiNet was sometimes slow and vulnerable to adverse weather, road, and disaster conditions.
Until now, that is. Today, ReddiNet is bringing fast and reliable emergency preparedness communications to hospitals and first responders in California, thanks in part to a new high-speed satellite broadband network from Hughes.
Hughes is upgrading HASC’s ReddiNet emergency medical communications systems at hundreds of sites with a private managed network operating over its award-winning SPACEWAY® 3 satellite system. SPACEWAY 3 is the world’s first commercial satellite with onboard switching and routing, enabling full-mesh, site-to-site broadband connectivity completely independent of terrestrial network infrastructure. The addition of the Hughes satellite network provides essential reliability for everything from tracking a pandemic flu outbreak and managing mass casualty events, to providing secure messaging and monitoring hospital bed availability.
With its new solution, HASC now has significantly greater bandwidth to exchange higher volumes of critical data among a wider network of emergency responders, including the capability to send high-resolution graphics such as diagnostic images and maps. HASC technical staff can also develop more sophisticated applications to run on the new network.
According to Cathy Winans, HASC senior vice president of medical communication systems, the satellite network gives HASC an important competitive advantage over other commercial emergency preparedness vendors—with multiple, varied communication channels supporting the entire system.
“We will have the most extensive network of hospitals in the country utilizing satellite technology as part of a redundant emergency communications system,” Winans said. “And because the network is fully managed by Hughes, my staff can now focus their efforts on enhancing and developing new applications instead of diverting their efforts to terrestrial network problems. Satellite broadband has really come of age for our needs, offering increased reliability, security, and affordability.”
“Reliable communications are critical to the daily operation, emergency preparedness, and disaster response of any healthcare delivery system,” said Peter Pardee, vice president of business development and healthcare solutions for Hughes. “Hughes is pleased to be working with HASC to upgrade ReddiNet’s communication network with the SPACEWAY 3 platform and to provide mission-critical managed broadband services.”
With its new high-speed satellite broadband network, HASC is taking huge strides to ensure that hospital staff, public officials, and first responders in Southern California have the critical communications they need to respond quickly to emergencies and save lives.
Reliable, secure—and timely—communications are essential to support the operations of military organizations around the world. When war fighters need to send full-motion video footage or other critical information about field events back to command and control centers, they cannot afford to waste precious minutes struggling to deploy a complicated communications system. They need to act fast—and they need quick-acting tools that enable them to fulfill their missions.
That’s why it’s good news for both military and non-military organizations that Hughes has received positive results from recent trials of its commercial HX ExpertNMS™ network management system from a unit of the U.S. Army Research, Development, and Engineering Command (RDECOM), a unit of United States Special Operations Command (USSOCOM), and a Coalition country military unit.
The HX System is a commercially successful global broadband satellite platform designed and optimized for smaller and mobile networks, including maritime and airborne applications where the provision of high-quality, high-bandwidth links is paramount. Capable of simultaneous mesh, star, and multi-star configurations, the HX System supports any mix of fixed, at-the-halt, or on-the-move communications—ideal for a wide range of commercial and military applications.
HX ExpertNMS, part of the HX System, is a full-featured network management system that employs an intuitive graphical interface to an advanced set of monitoring and diagnostic features, enabling efficient management and optimization of network performance by users with little or no network expertise, whether in a commercial or military environment. Equipped with an easy-to-use dashboard diagnostics tool that quickly identifies any disruptions on the network, HX ExpertNMS also provides a graphical map to zoom in on status updates and detailed statistics.
Using an installation wizard with step-by-step instructions, users can quickly set up and move from one location to the next. HX ExpertNMS also includes a knowledge base that leverages the vast R&D and operational experience Hughes brings to monitoring, tuning, and managing satellite networks.
“By extracting all the intricate details of the network into an intuitive interface, HX ExpertNMS enables users, including war fighters, to effectively manage the network—with the equivalent of an expert Hughes engineer behind them, 24x7,” said Dan Losada, senior director, Hughes Defense and Intelligence Systems Division.
With HX ExpertNMS, users in the field can quickly and easily deploy the necessary bandwidth to upload files, send full-motion video, and communicate other vital information when and where it’s needed to ensure mission success.
Covering over 4.3 million acres of breathtaking scenery, the Salmon-Challis National Forest in Idaho is home to the Frank Church - River of No Return Wilderness Area, the second largest wilderness area in the continental United States. At Colorado Bend State Park in Bend, Texas, crawling cave tours and waterfalls offer high adventure and exploration at a major bend in the Colorado River. All across the U.S., state and national parks attract more than one billion visitors every year, providing endless opportunities for recreation, activity, and relaxation in the great outdoors.
By their very nature, parks are often located in remote areas of natural beauty such as mountains and forests, and near lakes and rivers. But locations off the beaten path that are ideal for camping, fishing, hiking, swimming, and other outdoor activities often lack even a telephone, let alone any other kind of fixed or wireless communications, raising safety and security concerns for both park staff and visitors.
Enter Hughes satellite broadband, which unlike terrestrial technologies does not rely on towers, cables, or wires—an impossibility in many park locations. All that’s needed for a high-speed Internet connection is a compact satellite modem along with an external dish antenna with a clear view of the southern sky.
The nationwide HughesNet® broadband satellite service solves the problem of staying connected when an emergency strikes at any park location, while also providing Internet access for routine tasks such as email, browsing, file downloads, and streaming video. Hughes satellite broadband solutions enable parks to operate reservation systems for campsites and special activities, as well as handle point-of-sale transactions in concessions and camp stores, hunting and fishing license sales, and boat and equipment rentals.
“Satellite broadband service is a natural in federal, state, and local parks,” said Tony Bardo, assistant vice president for Hughes Government Solutions. “The beauty of satellite is that Internet connectivity is possible regardless of location or terrain. In addition, it can be used in multiple ways—for everyday Internet access, emergency services, and backup for an existing network.”
Colorado State Parks, a division of the State’s Department of Natural Resources, for example, relies on a Hughes broadband solution using its award-winning SPACEWAY® 3 satellite system for primary network connectivity to support operations at 15 remote state park sites. The solution includes high-speed Internet access with voice, video, and data applications, supporting site-to-site and site-to-data center connectivity.
Meanwhile in Texas, Hughes is providing the Parks and Wildlife Department with a backup network to support 90 state park sites, as part of an Indefinite Delivery Indefinite Quantity (IDIQ) contract by the State of Texas. In addition to broadband Internet access and full application support, the Hughes solution provides managed network services utilizing a cost-effective, hubless private network architecture.
At the 2010 National Association of State Park Directors Conference held in September in Santa Fe, New Mexico, Internet access took top spot in a session on the top 10 technologies needed in state parks.
“Internet access—and especially Wi-Fi—create a great draw at campgrounds,” added Ed DiCarlo, senior director of Hughes Government Solutions. “We learned at the conference that when a state park can offer Internet access or Wi-Fi, campers typically stay an average of two days longer, creating an important revenue stream for the parks.”
This finding is especially significant during tough economic periods when families are looking for cost-effective ways to take vacations. According to a study by The Outdoor Foundation, a nonprofit organization in Boulder Colorado, camping increased nearly 16 percent in the U.S. in 2008.
Fortunately, Hughes satellite broadband makes it possible for parks to stay connected to the technological world while offering those campers—and other visitors—the sublime benefits of the natural one.
In less than a decade, broadband Internet access has become a great game changer throughout the world. It is embedded in all aspects of our lives—from social networking and information sharing, to creating new business opportunities for individuals and businesses, to improving the delivery of public services such as healthcare and education. But despite the apparent success of over 1 billion broadband-enabled people on the planet, penetration rates as a percentage of population remain low, with an overall average of only around 25 percent and a wide disparity between so-called developed and developing countries. This digital divide exists even in developed countries because of the last-mile problem associated with terrestrial technologies since it is not financially viable to build out DSL, cable, or fiber in rural and even many ex-urban areas of lower population density.
In the U.S., as documented in a recent report from the Federal Communications Commission, overall penetration rates are over 50 percent. Yet an estimated 14 to 24 million American households and small businesses do not have access to broadband connectivity via land-based services. Hughes recognized the opportunity arising from this disparity years ago when it pioneered the development of affordable high-speed satellite Internet access, and today leads the market with over 550,000 subscribers on its nationwide HughesNet service.
Under the American Recovery and Reinvestment Act of 2009, the U.S. government is providing stimulus funding in the form of investments in broadband projects to bring jobs and economic opportunity to communities nationwide. As part of this initiative, Hughes was awarded $58.7 million of the total $100 million allocated for satellite projects as the only national provider of high-speed satellite Internet service to consumers across the U.S. Administered by the Department of Agriculture’s Rural Utilities Service (RUS), the investments in high-speed Internet infrastructure will help bridge the technological divide in communities that are being left in the 20th century economy and support improvements in healthcare, education, and public safety.
In the area of healthcare, for example, broadband access benefits local clinics by helping to speed the transfer of medical information and enabling access to specialists and telemedicine. Broadband also helps level the educational playing field by providing rural students access to the wealth of reference material available on the Internet, as well as opening the door to distance education. Equally important, broadband is vital to public safety, enabling first responders and public officials to share information and provide a rapid and coordinated response in emergencies.
Hughes is using the Recovery Act award to fund its Broadband NOW (No One Waits) program to expand broadband access in communities across the U.S. on a per-household basis, according to government eligibility guidelines. Under the NOW program, an estimated 106,000 qualified new subscribers living in unserved and underserved areas will receive a $551 subsidy to cover the costs of hardware and installation, and to fund discounted service plans.
"Hughes has made huge investments in our broadband business in the belief that every American, regardless of where they live, should have an opportunity to participate in the digital world," said Pradman Kaul, chief executive officer of Hughes. "Satellite plays an essential role in bridging the technological divide in America, and we are proud to be selected as the primary mover to make our high-speed Internet access available to the millions of underserved consumers and small businesses across the country."
With the help of the Recovery Act and Broadband NOW, Hughes is accelerating its consumer business, delivering the myriad benefits of broadband to households and small businesses across the U.S., and providing long-term economic and social benefits to their communities.
Quality is the hallmark of every Hughes product, service, and technology. Beginning at the top with a corporate Quality Management Council staffed by senior executives, the Hughes commitment to quality filters through every level of the company. From marketing/sales to engineering and manufacturing, to network operations and installation, and including just about every other functional area, all employees are trained in customer-centric thinking, time-tested quality principles, and industry best practices to produce products, services, and technologies at the highest level of excellence.
At the heart of the company’s approach to quality is to understand the customer, the customer problem, and the customer need. But Hughes takes it even further, seeking to understand the psychology, culture, and needs of different industries and geographical regions, and then using that knowledge to develop solutions to meet a range of requirements.
For example, the Hughes Executive Advisory Council is made up of customer CIOs and top-level managers who help Hughes set strategic direction for its enterprise market initiatives. In addition, the Hughes Users Group (HUG) advises the company on how to implement that direction.
Hughes also carefully monitors independent quality surveys and conducts an annual customer survey that measures key aspects of customer engagement and satisfaction in 18 categories of activities across their business.
“The customer is always looking for high value and in the end, the customer is the best judge of the value received,” said Hitendra Ghosh, vice president of quality assurance for Hughes.
The company adheres to the quality standards of the International Organization for Standardization (ISO) on processes such as the engineering, design, development, and manufacture of products and services, and post-delivery processes, including installation, repair, and support.
Over the past 10 years, Hughes has expanded beyond supplying innovative technologies and products to become the world’s leading provider of broadband satellite services and a major managed services provider, often employing a wide range of broadband technologies. Indeed, today 70 percent of Hughes revenue comes from services. As a result, the company is now engaged in transitioning its former quality management system (QMS) to a service quality management system (SQMS). The comprehensive plan includes detailed process mapping to industry best practices to build the three pillars of SQMS and elements of the service lifecycle.
According to Dave Zatloukal, senior vice president of Service Delivery for Hughes, North America, and the executive champion and sponsor of Corporate QA, “This plan is a major transformation in the way we do business and how we think about the customer’s needs and expectations of the value delivered during service transactions.”
Supporting the functional organizations’ quest to match our customer’s perception of quality, Hughes has a highly skilled team of quality professionals whose mission is to ensure that quality initiatives are implemented. This staff is responsible for conducting quality acceptance testing and audits, identifying problems, and developing policies and procedures. Each quality technician is assigned to an internal organization and acts as advisor and consultant to that group.
But quality extends well beyond a small team of quality professionals. An important part of the Hughes philosophy is that everyone in the Hughes family contributes to the value chain. Because quality touches every aspect of Hughes operations, every member plays an important role in the overall quality of what the company produces.
“Quality doesn’t happen by accident,” added Ghosh. “It’s important to have a clear strategy, to set goals, and to understand the concept of variation control. With customer-centric thinking and metrics-based performance management, everything else falls into place as we work with the customer as partner.”
This customer-centric culture continues to open up more and more opportunities in the global marketplace. And a clear focus on quality and excellence continues to lead customers to place their trust and confidence in Hughes for true value in every product, service, technology, and customer relationship.
To meet the growing demand in the world’s largest telecom market, Hughes recently announced the formation of HughesNet China Co. Ltd., a joint venture of Hughes and China UnifiedNet. HughesNet China and its licensed partner, Beijing UnifiedNet (together known as “Hughes China”), will offer a wide range of managed broadband network services to leading telecom carriers and major enterprise customers. Hughes China will also support the government’s initiatives in expanding rural development through access to education and emergency communications across China.
Reflecting the Chinese government’s priority on investments in education for rural development, Hughes China is committed to extending broadband access in all rural areas. Dr. Li Zhimin, director general, Center for Science and Technology Development, Ministry of Education, said, “Satellite broadband access from Hughes China will be an important part of extending education and training to the people residing even in the most remote areas of China, which will play a crucial role in rural development.”
Headquartered in Beijing, Hughes China is expected to begin commercial services in the fourth quarter of this year using the latest Hughes technologies, including HN System Network Operations Centers (NOCs) in Beijing and Chengdu and high-performance HN9200 and HN9400 broadband satellite routers.
Euro Motorcars has an inventory that includes some of the finest new and pre-owned vehicles in the world. Founded in 1976, Euro Motorcars is a leading U.S. dealer of Mercedes-Benz, and also represents Bentley and Rolls Royce.
In the highly competitive luxury auto service business, there is a constant drive to find new methods to market service offerings. Like many other automotive dealers, Euro’s service departments provide a courtesy TV viewing area in the customer lounge. Euro wanted to take advantage of that experience by surrounding the TV content with messaging specific to its service department.
Euro Motorcars realized that customers would value information on how to maintain that “new car” feeling. This represented an opportunity to discuss products and services that the dealership offers and give customers information in a creative and pleasing manner. Euro Motorcars wanted to leverage the highly effective infotainment concept often used in locations where audiences are captive and have to pass time. By integrating upsell product and service messages with other content, the audience is informed and entertained at the same time.
In addition, Euro Motorcars was looking for a solution that would enable frequent and easy changes to its messaging, as well as a way to offer this information without hiring a large communications group to handle this new opportunity. So the automotive company turned to Hughes for an integrated digital signage solution that would enable the combination of TV content with dealer-specific information.
Hughes answered the call with the Hughes MediaSignage solution—a digital signage system that provides Euro Motorcars with a solution that enhances the customer experience within the dealership, offers a targeted messaging tool, and can be easily managed by service managers.
Euro wanted to provide its service managers with the ability to update sidebar messaging using Microsoft® PowerPoint® and to produce a text-based crawler that provided more detailed information supporting the sidebar. Using the Hughes MediaAuthor plug-in for PowerPoint and the Hughes MediaManage service, Euro Motorcars is now able to deliver highly targeted messaging to its customers. The combination of live television content with dealership messaging created a successful communication method for Euro and a viable infotainment solution for customers.
“When we were first introduced to the Hughes solution, we were immediately impressed with their flexibility and willingness to do whatever it took to make us happy,” said Mr. Willard, service manager for Euro Motorcars. “They took the time to understand our goals and objectives and then helped us with a communication solution that met those needs and was also open to future growth and expansion.”
Backed by the new-generation Hughes digital information system, it’s safe to say that Euro Motorcars will continue its leadership in the luxury automobile market, providing its customers with a premier experience befitting the high quality of its vehicles.
Hughes has been honored this year with multiple awards in recognition of its business success and innovation. Here are a few of the most recent corporate honors.
In September, Hughes was recognized by Euroconsult as Broadband Satellite Operator of the Year for its outstanding performance in 2009 and its strong prospects for the future. The award is one in a series for Excellence in Satellite Management, which is based on an objective assessment of specific performance indicators by a jury of experts from SatelliteFinance, Space News, and Euroconsult. In accepting the award at a ceremony in Paris, Hughes president and CEO Pradman Kaul said, “These are exciting times for Hughes, as evidenced by our leadership across the full spectrum of broadband satellite services and technologies. But I can honestly say that with the quality of people we have, the best is yet to come.”
In his keynote speech entitled “Specializing in the Common Need” on September 15 at the Comsys VSAT2010 conference in London, Paul Gaske, executive vice president, North America Division of Hughes, addressed the global spectrum of opportunities and challenges in providing broadband satellite services to all market sectors. The speech drew on the experience Hughes has gained from its market-leading consumer and enterprise managed network services. Arunas Slekys, vice president of Hughes Corporate Marketing and the elected chairman of the Global VSAT Forum, moderated an all-day session on broadband satellite solutions in different enterprise verticals from around the world.
At an Embassy Night event, entitled “Showcasing Global Markets & Business Success,” hosted by The World Trade Center Institute in Bethesda, Maryland on September 23, Vinod Shukla, senior vice president of Hughes, presented a Business Appreciation Certificate to the Indian Embassy. The award was accepted by V.S. Senthil, Joint Secretary to the Government of India, Ministry of Finance, on behalf of India’s Ambassador to the U.S., Meera Shankar. As part of the event, top country and business representatives were honored, and U.S. Assistant Secretary of Commerce Suresh Kumar addressed the audience with a speech on global trade.
Hughes Communications, Inc. took the top spot on the Deloitte 2010 Technology Fast 500™, a ranking of the fastest-growing technology, media, telecommunications, life sciences, and clean technology companies in North America. Rankings are based on the percentage of fiscal year revenue growth from 2005 to 2009, a period during which Hughes grew a whopping 164,079 percent.
Hughes president and CEO, Pradman Kaul, credits the company’s culture of innovation and service quality as the primary drivers of its success. “Hughes has always been about innovation—from pioneering satellite networks in the mid-80s and expanding the enterprise and government markets across the globe, to developing and operating SPACEWAY® 3, the world’s first broadband satellite router-in-the-sky, to delivering high-speed Internet by satellite services to over half a million North American households and small businesses, thereby proving the profitability of the consumer satellite broadband business.”
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