Welcome to the ViaSat's Fiscal Year 2012 Fourth Quarter Earnings Conference Call. Your host for today's call is Mark Dankberg, Chairman and CEO. You may proceed, Mr. Dankberg.

Yes, thanks. Good afternoon, everybody. Welcome to our earnings conference call for our fourth quarter fiscal year 2012, and I'm Mark Dankberg, Chairman and CEO, and I've got with me Rick Baldridge, our President and Chief Operating Officer; Ron Wangerin, our Vice President and Chief Financial Officer; and Keven Lippert, our General Counsel. Before we start, Keven will provide our Safe Harbor disclosure.

Thanks, Mark. As you know, this discussion will contain forward-looking statements. This is simply a reminder that certain factors could cause actual results to differ materially. Additional information concerning these factors is contained in our SEC filings, including our most recent reports on Form 10-K and Form 10-Q. Copies are available from the SEC or from our website. That's it. Back to you, Mark.

Okay. Thanks, Keven. So we'll be referring to slides that are available over the web. And we'll start with highlights and a top-level financial summary for our fourth quarter and for fiscal year 2012 as a whole. And after that, Ron will discuss financial results in more detail, then I'll provide an update on our business segments, and finally, I'll update our outlook for the next fiscal year, and we'll summarize things, and then we'll take questions. So the main event for us in our fourth quarter was the launch of the Exede 12, 12-megabit per second consumer broadband service over ViaSat-1, and the Exede 5, 5-megabit version over our legacy satellites. Our objective is to not only grow our consumer broadband subscriber base and an excellent return on the ViaSat-1 satellite, but also show that with the right combination of space and ground technology, we can compete effectively in the broader market for high-speed Internet services. We believe that's a foundation for a long-term growth franchise. And while it's still early in the game, so far the data seems to support our strategic view. And we feel we're making steady progress towards our targets and growing this consumer subscriber base too. Our Commercial Networks business achieved strong revenue growth, up about 50% year-over-year in the fourth quarter and about 37% for the fiscal year as a whole. That resulted from a good combination of significant new projects and growth in product sales, especially with network deployments at Ka-band and in mobile broadband. We earned an important new international Ka-band broadband project in Saudi Arabia in the fourth quarter as well. Adjusted EBITDA in the segment increased for the fourth quarter and the fiscal year as a whole, although operating earnings there were negative in this segment on investments and product development and SG&A costs, including significant new business proposal costs. The Government segment showed incremental year-over-year revenue growth for the fourth quarter and the fiscal year as a whole despite a very challenging macro environment. That's leading to revenue contraction in most of the principal competitors in our defense communications markets. The segment was very solidly profitable for both the fourth quarter and the fiscal year as a whole. We still perceive good growth opportunities going forward, even if order timing remains difficult to anticipate. This next chart shows some key financial metrics for the fourth quarter and the fiscal year compared to last year. This data was also in our earnings release. New orders for the year were really strong at just over $1 billion, a little over 16% higher than revenue was for the year. Company-wide revenue for the year grew by about 7.7%, even though sales in the Satellite Services segment contracted by about 5% due to the ViaSat-1 launch delay. For the fourth quarter, year-over-year revenue grew by just over 11%, even though Satellite Services revenue shrunk by about 8%. Adjusted EBITDA company-wide contracted largely due to launch delay impacts that we've discussed in prior calls. In a few minutes, Ron will give more detail on revenue, earnings and adjusted EBITDA by segment for the quarter and the year. On the, whole we feel that absent the launch delay effects, the business is doing pretty well. In particular, we think even the incremental revenue growth in our Defense business is a good sign given the macro environment. I'll talk more about the landscape for each of our areas after Ron goes into more detail on the financials.

Thanks, Mark. We'll start with segments, then go into further discussions on the P&L, the balance sheet and then cash flows. The reconciliation per segment adjusted EBITDA was included in our earnings press release filed earlier on Form 8-K. In Satellite Services, revenues are down for the quarter and year, year-over-year, principally from lower wholesale subscriber revenues, partly offset by higher sales of our mobile broadband service. The lower wholesale subscriber revenues due to the ViaSat-1 launch delay and our distribution channels reducing their sales and marketings of the existing service in anticipation of our Exede Internet service launch. These results were consistent with our communications on our last several calls. Also consistent with our prior communications, year-over-year, we've incurred significant costs related to fiber backhaul, gateway side costs and our data center that were tied to the original launch date. This contributed to lower earnings and adjusted EBITDA. And since we began the Exede service this past quarter, depreciation from the satellite and gateways and the incremental selling costs outpaced the incremental revenue from new subscribers. Given our subscriber growth plan, we expect this to turn later this calendar year. In the Commercial segment, our sales growth is principally from antenna systems and consumer broadband sales, as well as satellite systems development and satellite payload technology development programs. Our operating loss and adjusted EBITDA for the quarter and year-to-date reflect the production startup cost effects of the consumer terminals, lower margin development programs, higher selling costs related to a number of larger international opportunities we're pursuing, as well as continued investments in advanced satellite communications and antenna technologies, which not only benefit the Commercial segment, but the Government and Satellite Services segment. Government segment revenues were up slightly year-over-year, primarily from higher government broadband mostly from the ISR applications and our Blue Force Tracking 2 revenues, which were partially offset by lower tactical data link and information assurance product revenues. Given the U.S. government budget timing and amounts, our product revenues have been pretty lumpy, increasing, decreasing with the amount and timing of certain awards. As we look ahead, we expect our Service revenues to continue to grow. Our operating earnings improved for the quarter and year-over-year from better program performance, a greater mix of higher-margin sales and lower R&D costs. As we look at the rest of the P&L, for the fourth quarter and fiscal year, the other notable items, include -- including in selling, general and administrative expenses for the fourth quarter and fiscal year 2012 are litigation expenses. Year-over-year, litigation expenses increased by about $1.8 million, of which the Loral case represented about $1.1 million. Regarding the Loral litigation, given the nature of the case, the amount and timing of costs we expect to incur will vary based on in-term rulings and the pace and amount of discovery. So this could cause these costs to be lumpy from quarter-to-quarter. Research and development expenses are down reflecting a shift in our engineering resources to more funded development projects over the same period last year. The difference in other income is due to the capitalized interest effects year-over-year and the issuance of our new senior notes in the fiscal fourth quarter of 2012. As discussed in the last call, ViaSat-1 and associated ground equipment were placed in service this past quarter, and we therefore stopped capitalizing interest related to these assets. In addition, our total interest expense increased with the issuance of the senior notes, which yields a higher interest rate than our revolving line of credit. The combination of these 2 items drives the year-over-year increase. In fiscal 2013, we expect the interest expense to be significantly higher. The significant difference in income taxes year-over-year is due to 2 reasons: Lower pre-tax income year-over-year; and secondly, the effects of the federal R&D tax benefit. Fiscal year 2011 reflects 5 quarters of federal R&D tax benefit, while fiscal year 2012 reflects only 3 quarters of benefit. The federal R&D tax credit benefit expired on December 31, 2011, and has not renewed. Turning to the balance sheet, overall, our balance sheet metrics are strong with very good liquidity, and following the new senior notes issuance in the fourth quarter, a better balance of matching long-term revenue-generating assets with long-term debt. We continue to make good progress in receivables and days sales outstanding continue to be in their record lows. Inventory increases in Europe primarily related to seeding consumer terminals in Europe and North America in support of the KA-SAT and ViaSat-1 service rollouts this past year. The increase in property and equipment and other long-term assets is principally related to the ground equipment and other costs associated with our Exede Internet service. On the liability side, the growth in current liabilities is principally from customer advances reflecting better payment terms. In the fourth quarter, we issued $275 million of senior notes due 2020, net of debt issuance costs at a rate of 6 7/8%. We used some of the proceeds to repay amounts outstanding in our line of credit. In the quarter end, we had approximately $313 million in availability under our line of credit. We believe our cash on hand and availability under our revolver provide a significant operating flexibility. Turning to cash flows, cash flows from operations for the fourth quarter were very strong, mostly from working capital improvements and helped us get back in line with our expectations for the fiscal year. For cash used in investing activities, we continue to invest in customer premise equipment for our retail satellite service and are completing various back-office initiatives in support of the Exede Internet service. Also to support our growing global mobility broadband business, we are investing in additional network infrastructure and equipment. Since the ViaSat-1 satellite and related costs are largely behind us, cash flows for the next couple of quarters will be primarily influenced by the ramp of our Exede service launch, the retail wholesale subscriber mix and the timing of when we start construction of our next satellite. Cash flows from financing activities primarily reflects the issuance of our new $275 million senior notes and the repayment of the outstanding balance on our line of credit. We believe the issuance of these notes, combined with the announcement earlier this week of the amendment to our line of credit, which improved our credit terms, provide significant liquidity and flexibility options for the company to meet its strategic objectives. I'll turn it over to Mark now. He'll talk about our business segments in more detail.

Okay. Thanks, Ron. So we're finally underway on the Exede consumer service, and this is a good time to review our strategic objectives since that's the context for all our tactics, priorities and the data we'll present. Probably the single most important strategic objective is to market-prove that a good satellite broadband service can be preferable for consumers and less expensive to deliver than some terrestrial alternatives. Our Exede service is probably overkill for the unserved-only market, but by attracting underserved customers, our addressable market in the U.S. becomes much larger than it was. And importantly, that market looks bigger as we continue to improve the product and the value we can deliver, plus our international market opportunity could be multiples of the domestic market. Just as important, we believe that almost all our go-to market tools and tactics really depend on who our target market is. So the biggest change we've made compared to the legacy WildBlue business has been the definition of the services. WildBlue had a wholesale and retail ecosystem that was built around 3 tiers of service that were differentiated by speeds. We just thought it'd offer Exede 12 under ViaSat-1 coverage areas and Exede 5 under the legacy satellites, each with much higher speeds than the fastest legacy WildBlue plan and then offer varying amounts of gigabytes per month modeled on a 4G wireless plan. So that's had important implications on our distribution arrangements, our fulfillment systems, retail sales channels and brand management. It's too thin to be certain, but we'll show you data we've compiled so far, and it supports the market expansion view. We believe that's because users do value the speed and responsiveness of the network. The effects of this strategy on the WildBlue ecosystem made a number of things harder, and therefore, direct comparisons with WildBlue's last satellite launch on WildBlue-1 are a little less meaningful. But we also think that the broader market makes for a much better business opportunity, and that we're on a good path to capitalize on that. So this chart shows that we installed a total of about 49,000 new user terminals across the satellite fleet in the March quarter. And that's just about double the number of installs we did in the prior quarter before the launch of the Exede service. Exede service wasn't available everywhere in the country until the last month of the quarter, and so the mix of service sales over that fourth quarter -- over the fourth quarter is not really meaningful. But on a run rate basis, over 75% of our new installs are for the Exede 12 on ViaSat-1, and somewhere in the range of around 7% are Exede 5 on the legacy satellites. And we're running around 15-plus percent in our legacy services, which are largely under the RUS stimulus program. New orders were actually significantly higher than the number of that we installed. But for this partial quarter of service introduction, installations were the bottleneck on growth. Some of those new installations that we did were migrations of legacy users who could be either wholesale or retail onto the Exede branded services, and therefore those didn't yield net new subscribers. And disconnects, which are almost entirely from the legacy services, also affected net subscriber additions. The rate of legacy disconnects in the fourth quarter was pretty similar to that in the third quarter. This page shows some key metrics around those new installations. In the fourth quarter, about 7,100 of the new installs or about 15% were for subscribers migrating from a legacy service to the new Exede version. Since Exede was only available for a portion of the fourth quarter, we'd expect both the absolute number and the percentage -- proportion of migrations to go up in our first quarter of fiscal year '13. Overall, we expect that the number of migrations may probably subside in subsequent quarters. About 63% of the installs in the fourth quarter were for retail subscribers. We think this is likely to continue, and as long as we could achieve our overall user installed rate goals, that retail wholesale split's fine for us. The blended ARPU for the installs in the fourth quarter increased markedly in the range of about 15% compared to the legacy WildBlue history. That reflects several factors, including a greater retail proportion, higher pricing for the wholesale plans reflecting the much higher bandwidth recurring content per subscriber and materially higher prices for the premium versions of the wholesale and retail plans, which also reflects the much greater value of those offered to subscribers. Obviously, the higher ARPU relative to past history and financial models is a really important benefit, and allows us to achieve comparable revenue targets with lower absolute new subscribers. Even so, the absolute ARPU is still in the competitive range of terrestrial services. And we feel we're often delivering higher consumer value than land-based alternatives. That's supported by survey results from a sampling of our new retail Exede customers, while about 58% of those customers would be described as coming from the unserved market, and that is they either didn't have home internet at all or they only had dial-up or they only had a competing satellite service. About -- over 30% of the new Exede retail customers said that they previously used the terrestrial broadband service at that same address. Most of those were from 3G or 4G wireless or DSL, but actually a meaningful number also came from cable modem or other systems. And about 9% of the survey respondents didn't know what they had used previously. Overall, we believe this data paints an encouraging initial strategic picture for the Exede service and makes it worthwhile to pursue the strategic path we're on. So one really important component of the strategic view is customer satisfaction. We felt that customer satisfaction data for the WildBlue legacy services indicated that if we could boost the speed and reliability of the service, and therefore the relative value especially in megabit per second per dollar of subscription cost terms, we could really boost our customer satisfaction rankings into territory that's occupied by high-speed terrestrial alternatives. This chart shows data that was collected from new Exede retail subscribers by CFI Group, using the American Customer Satisfaction Index methodology in samplings over the last 3 months. This initial data is consistent with what we would have expected and targeted from a strategic perspective. We think the results place us kind of in the middle of the pack or better for all broadband services including terrestrial, and we have plans that we think can further improve our customer satisfaction from here. Since it's still pretty early, we're going to monitor this closely. But the initial data supports that the network is working pretty well, and we've been measuring network loading with respect to our traffic and network quality models. We're aiming to sustain the service quality levels that we've started with as we add subscribers through a notional 1 million basic unit subscriber level in our out years of service. Initial results are consistent with our expectations, which is also important and a very positive metric. In summary then, we believe the data we've collected to date supports that we can address a substantially larger market for satellite broadband than has been previously shown. Their plans are attractive consumers -- to consumers, including at least some with terrestrial alternatives, that their initial customer satisfaction is within the range of those terrestrial alternatives, that we've got the satellite capacity to sustain our performance as we scale the subscriber count, and that we've got an opportunity to earn a higher blended ARPU by introducing new features and services. But we still got a bunch of work to do. We're focused on growing our installs and the subscriber count. We doubled the install rate in the first quarter of operation, and are aiming to double it again over probably the next 2 to 3 quarters. If we could do that, that would get us to the range of 100,000 new installs a quarter or better than 30,000 a month. Obviously, we'll have challenges to do that, including the launch of U-satellite later this summer. But based on what we know now, we think that's an achievable target. So far, we have viewed very limited promotions. We wanted to use promotions that are consistent with our target market, and we believe we've got data now that'll help us do that. The WildBlue brand is quite well-known, and it's trusted in the context of rural unserved markets. But well known is not really exactly the same as well regarded in terms of the more metro underserved markets. We've -- that's where we want to position Exede, but that brand is completely new in the more traditional satellite market, that initially accounts for most of the growth. So it's a tricky balancing act, and we're working to improve there. We believe we've got data that suggests we're making progress, but it's a long-term project to establish a new brand and wean off the old. Again, we believe strategically it makes sense to do that. Also, as a result of redefining the service and economics, we're assembling a more retail-centric installation and fulfillment network. It's more aligned with our strategic view and will give us more control of fulfillment and logistics. But we hit install bottlenecks fairly quickly in the fourth quarter, and that demand surged faster than install capacity. It's good that the demand was there, but it's disappointing that we couldn't capitalize on it to the greatest extent. So we're instituting some changes in our fulfillment metrics and compensation, we believe, will better match capacity with demand. We reached a new Exede distribution agreement with DIRECTV that adds to our existing DISH Network and NRTC agreements and is an important milestone for us. We believe DIRECTV is a natural partner and that the performance and customer satisfaction associated with Exede complements DIRECTV's premium video offerings. We have recast the distribution relationship into an agency format, so those DIRECTV subscribers will be retail for us. We're working with DIRECTV on a referral basis pretty much immediately and will integrate the bundled offering later this calendar year. Finally, all the data we've obtained to date are very encouraging in the context of our ViaSat-2 plans. Our primary objective with ViaSat-2 is to improve service economics and then to fill in and expand coverage areas. We believe we have a plan to do that. We've been targeting the middle of this calendar year to get the satellite started, and are making progress towards that goal. Our mission with Viasat-1 was to open a path to an enduring business model with a sustainable competitive advantage. We think ViaSat-2 will bring that picture into even sharper focus. So now, I'll turn to our Commercial segment. The number of commercial satellites using Ka-band is steadily increasing, and we believe we're the leader in Ka-band network technology. We're investing significantly in new technology to make the benefits of high-speed, low-cost Ka-band more accessible to a broad range of markets. While some of these applications overlap to some extent with terrestrial alternatives, a number of them compete only with more conventional satellite solutions. With ViaSat-1 in service and Exede showing what's possible, we're getting more and more interest in Ka-band for a range of applications. This past quarter, we won a significant contract with the Saudi Arabian National Science Center for the network infrastructure for the Ka-band portion of Arabsat-5C. One of the key factors in winning the program was the breadth and depth of capabilities we have including for home, enterprise, defense and mobility applications. The program's an excellent opportunity to showcase the enhanced capabilities that high-capacity Ka-band offers compared to more conventional fixed satellite services satellites and to jointly develop new technologies too. Revenue in this segment grew significantly as we increased user terminal shipments and continue to make progress on key projects, including the MEXSAT ground-based beam-forming program with Boeing and the Iridium Ka-band payload modules for Thales. We continue to invest significantly in new Ka-band technology for consumer, in-flight WiFi, maritime, LAN mobile applications, such as news gatherings and defense. Most of the R&D expense is recognized in this segment. A fair amount of the benefits of that technology are realized through our satellite services and government segments though. We're aiming for the first test flights on Ka-band Wi-Fi this fall with JetBlue, with commercial service probably commencing early next year. We're already doing initial trials of Ka-band newsgathering capabilities, and then this segment's also leading our investments in subsequent generations of high-capacity satellites involving both base and ground technologies. We're enthusiastic about the potential to increase both the capabilities and the economics of satellite broadband. The early subscriber data for Exede is encouraging in terms of market opportunities, and we're aiming for the next app of ViaSat-2 procurement contracts. So obviously the defense contract environment is challenging. We were actually able to squeak out a little growth for the year, and believe that definitely puts us in the minority. We also return to more historical margins in this segment, which was an important objective when we entered the year. We had a couple of awards, like our MIDS JTRS production orders slip out of our fiscal year or the results would have been even better. Our government mobile broadband services area continues to grow fast on a quarter-over-quarter basis as you can see from the chart. We believe we continue to gain momentum in airborne, satellite, intel, surveillance, reconnaissance and command-and-control applications. We're continuing to add new airborne platforms, new missions, new user organizations, greater geographic coverage, and we now have Ka-band services under contract too. In the fourth quarter, we flight demonstrated what we believe is the first ultra small aperture Ka-band ISR in command-and-control to a number of user organizations with functional capabilities significantly greater than that available at Ku-band. And there's already significant demand for that. We made the initial Blue Force Tracking 2 deployments this quarter and started deployments into a second military operations theater. Our Small Tactical Terminal achieved recognition by the JTRS community and has been selected for platform testing as a possible alternative to the small form factor AMF for airborne and maritime form factor version of JTRS. Finally our MIDS JTRS received go ahead for full rate production and just subsequent to the end of the quarter, we were awarded the first production contract initially aimed at the F/A-18 platform. We're happy to see the investments we've made in JTRS network radio begin to turn into real production programs. So we've got a site update to our overall outlook slide. In general, the trends we've been discussing remain consistent. We've added fiscal year '14 to this slide and have reflected the benefits created by the high incremental margins has exceed scales beginning in the back end of fiscal '13 and then in fiscal '14. Our solid core government and networking products business helped reduce downside risk. Given that we only have about one quarter of experience with ViaSat-1, it's still hard to accurately forecast all the factors associated with growing our consumer retail business such as the specific nature and timing of subscriber acquisition and fulfillment costs and the net ramp rate of subscribers due to the mix of migrations of new customers. At this point none of those factors is really outside the range of expectations, but it's still early. We're aiming to get more of a steady-state understanding by the second or third quarter of this fiscal year. Okay. So in summary, the main event is our satellite broadband segment subscriber growth. It's been over 4 years in the making, and we believe many of the elements of our strategic view are being validated by Market Data. We've achieved a lot, we led up 20 teleport gateways, launched a new brand, created a disrupted service, achieved substantial improvements in initial customer satisfaction, widened our market reach meaningfully in underserved territory and engaged more retail centric fulfillment network, but we still have a lot more to do. The addition of DIRECTV to our existing distribution system will help us achieve the growth rates we're targeting. This quarter, we reported what we believe to be key metrics that can help create models for the financial performance of the Satellite Services segment, and we'll update those throughout the year. We've got some pretty exciting stuff lined up for the rest of this year, including the launch of our in-flight Wi-Fi service with JetBlue and then United Airlines, Ka-band airborne defense applications, Ka-band newsgathering, new host platforms for our Joint Tactical Radio System products, international Ka-band opportunities and terminal shipments will ramp as our partners grow their subscriber base. Our Commercial Networks business has seen the growth we've anticipated. We feel like we have a good opportunity to achieve double-digit growth in our government segment this year, but of course timing's difficult and the environment is challenging. So that's it for the prepared remarks and we'd open up to any questions you all could ask.

[Operator Instructions] Our first questioner in queue is Ronald Epstein with Bank of America Merrill Lynch.

This is actually Kristine Liwag calling in for Ron. My first question is regarding ViaSat-1, I think you touched base on this a little bit earlier. How many growth in net subscriptions did you add in the quarter?

We did 50,000 installs okay, about 49,000 installs. Some of you would say about 7,100 of those were migrations or you could call gross adds, 49,000 less that. And that led to around 8 or -- 8,000 net when you subtract out the migrations and just churn the disconnects.

I see. And how many do you expect to add for the next fiscal year -- or I guess for fiscal year '13?

We don't -- I mean, we clearly -- clearly we can is a good answer. Right now, like we said, our sort of our bottleneck was fulfillments and logistics. And so that's what we're working to increase capacity on. And that's -- we're making some tweaks to that. It's going to grow. I mean the rate of installs is going to grow. We think, like we said, we'd like to double that rate of installs over the next couple of quarters. And then if -- we'll just have to see what the migrations are and disconnects are going to come down, we think, ultimately because the services on the old satellites are actually getting a little bit better in that basis is shrinking, and there's not much churn on the new base at all.

Next questioner in queue comes from the line of Mike Crawford with B. Riley & Co.

I'm hoping you can walk through the model a little bit. If you hit this target of 100,000 adds in the quarter with a 65% or so retail mix, it sounds to me like that can be $45 million subscriber acquisition costs in the quarter assuming around $700 a subscriber. Is that a good way to think about it or...

It's fair, yes.

So at what point -- if you're running at that point, at what -- at that rate, then what is the approximate timing you expected to slip in, in cash generation versus building up this long-tailed recurring revenue stream at a higher ARPU?

A lot of it have to do also with the ramp early on and gaining that base throughout the year, because the ones that we're adding in Q1 will help offset some of that later in the fiscal year. But from a cash flow basis, it could conceivably run negative throughout the fiscal year and probably term beginning early next fiscal year.

Okay. And then with that ARPU chart, I mean it looked like there was about $48 a month. Is that the...

Yes, the incremental.

The incremental, okay, is $48. And then just jumping gears a little bit on ViaSat-2. So it sounds like you haven't awarded the procurement contract yet, but you're close and is that a satellite that you're still targeting for the North American market or was that something you might consider putting internationally where you said you see the opportunity being multiple times larger?

That next one is primarily North American.

Our next questioner in queue is Tim Quillin with Stephens.

Can you help me kind of reconcile the 8,000 net subscriber additions and why the satellite services revenue went down quarter-over-quarter?

It's primarily related to the timing. I mean we had greater reductions earlier in the quarter. As the service was being rolled out, it was public. When we went public with the rollout in the middle of January, there was -- before we had the entire coverage, which occurred in late February, early March, you have that bulk of the quarter where people knew about the new service, but may or may not have been able to get it. So there was this interim period where the disconnects were greater than the adds, and therefore that led -- even though we had a greater number of retail subscriber adds, which has a higher ARPU, and therefore revenue, then the wholesale side, it would just really had to do with the timing of when the disconnects occurred relative to when the adds occurred.

Okay. And how many -- what was the order intake in the quarter?

I'm not going to -- it was quite a bit higher. It's a little bit hard to -- I'd say it's meaningfully higher than that. And it was good, I mean we'd say is, the demand was high.

And can you give us a sense of what April looked like, either in terms of orders or installs?

I think we're going to wait until next quarter, and we'll talk about the quarter as a whole.

Right. Right. And then on the Satellite Services business, cash costs looked like they were up about $8 million quarter-over-quarter. Is that about normal or were there any unusual start-up costs in the quarter?

It was almost all related to the sack. If you go back, I don't recall specifically what the number was in Q3, but it went up like $10 million or $11 million just the sack alone in Q4.

Okay. Now, that's helpful. And just a couple of other modeling questions, Ron, but if you could help us out with expected tax rate for fiscal '13, expected interest cost for fiscal '13 and expected depreciation and amortization costs, that would be helpful.

Sure, so I guess we'll start first with taxes. Taxes are going to be interesting because in the fourth quarter, we had a pretax loss and if you look at the segment breakdown for the year on a quarterly basis, our government segment we expect to be profitable. On the commercial side, we don't expect segment to be profitable on a quarterly basis until the fourth quarter. And then in Satellite Services, we expect losses in the first half of the year with profitability in the back half. So what it all means is, at a company level is that we expect pretax losses in the first half of the year and profitability in the second half with profitability overall for the year. And without the federal R&D credit, we think the rate, the tax rate will be in the 35% range. And with the federal R&D credit in place, likely in the upper 20s. And so that gives us taxes on depreciation. And we provided some guidance last quarter on the ground equipment. It was roughly $120 million over 7.5 years. For the incremental and the satellite disclosed in the slide here that we have a 17-year life, and the value that we're depreciating is $363 million. So we can do the math on what each of those equals. And then the third component was interest. So we would expect the balance to be quite a bit higher next year, just looking at the combined interest on the 2 bonds that's quite significant and dependent upon the timing of our next satellite procurement and what those terms are. It's going to depend on -- it's going to influence how much capitalized interest we have and without knowing what those variables are, I don't want to provide a specific dollar amount, but just being -- given what our interest expense was this quarter, it should be significantly higher in Q1, just from lack of new capital assets and the run rate for the 2 bonds that are outstanding.

Our next questioner in queue is Matt Rob (sic) [Matt Robison] with Wunderlich.

Can you just give us what the starting subscribers were?

About -- it's about 377,000, somewhere in that range.

EMA subscribers were about 385,000.

Yes, so you -- and you had about 33,900 disconnects if I did the right...

That's right.

Migrations.

Yes. That -- without the migrations.

I guess the other meaningful metric on that is when you look at the retail-wholesale split now, retail we've got a little over 207,000 subscribers and on the wholesale side, it's a little over 178,000.

Okay. And so I know it's probably an unfair number to mark you on because of the timing issue, but it does look like you have about 4.5% monthly churn based on the numbers you gave.

That's about 9%.

Around 9% on -- for the quarter?

That's about 3%.

3% per month. And that's about what it was -- that's what -- it's about what it's been running for the last few quarters.

Okay. So that's -- and if you figure that with better timing this quarter, you might see that go down a bit?

Yes. I mean, it's going to trend down because the churn on the subscribers is really, really low. And it's the churn, really -- it's coming from the legacy subscribers and some of those are migrating over, and some will continue to leave.

And the service should get better on the legacy system. So we should see an improvement there too.

Because you have more people on the 5?

We'll have more people moved over to the satellite.

And dialing up of the service on...

Which will need more bandwidth, not contention on the old services.

Okay. And so -- in your Slide data you had $14.8 million for CPE -- retail CPE, is that the amount that you capitalized?

Yes.

Okay, and so how much of that -- so I guess how much do you expect that to go up this quarter?

Well, it'll really be dependent on the gross adds and we didn't really talk about what the gross adds, were, and then the retail wholesale mix has been fairly steady with what it was in the quarter -- last quarter.

And just a reminder we would kind of encourage you guys to think about this ramp as a ramp, not as a convex curve. So just want to make sure when you land [ph] you're thinking about it that way.

Our next questioner in queue is Ken Herbert with Wedbush.

Just first question, for the -- in the slide, the unserved versus underserved mix, with Exede, how do you -- again can you remind us how you see that evolving and the preferences obviously for the 5 or 12 within the various markets whether the underserved and unserved?

Okay. So the 5 and 12 megabit versions really are based on geography and satellite coverage. So on your ViaSat-1 which is really where most of the people and most of the demand is that all the 12 megabit version and then 5 megabit version is mostly in the Mountain State areas. What we're aiming to do is to go out with a consistent message and service throughout the country. And what we think is that, if it's -- no, sorry, one way to put it is -- we feel like a lot of times people who get satellite service in the past have felt like it's the last resort and they're paying very high prices for low performance. And so we wanted to put out a service that people would feel was good and fair. And that one of the ways to show that is that people who do have a choice buy it also. And that sort of this underserved market. And the attraction into the underserved market, what we think would pull people to the Exede service is, it's just really fast. And it's very responsive. And most of the time people say, "Well, it's better than what I have -- had at home," especially if it's DSL or wireless. And so we're aiming sort of to promote those aspects of it. And then the mix of subscribers will be what it will be, and we're just -- what we wanted to be sure was that people who were underserved would perceive the value proposition that once they got it that they'd be happy, and we feel that's what we're achieving so far. So we don't really know what that mix is honestly. I'd say getting close to 1/3 of our customers from underserved is probably a little more than we would have thought we'd get. We thought we'd have made the point with less than that, but we think that's a good thing. It just creates -- it just means we have a bigger market. Does that answer your question at all?

Yes. No, no that's helpful. And I guess if I just take a step back when you look at the launch so far, just obviously a few months into it, would it be fair to say that you've been relatively happy obviously with the subscriber ramp and how that's -- and the marketing side, but the execution and the fulfillment is clearly where you've got significant room for improvement. Would that be a fair statement?

They're interrelated, yes. And what I would say is -- and all this stuff is going to vary depending on the market conditions and competitive environment. But what I would say is, the demand that we saw upon service introduction was really good. It ramped, it sort of ramped fairly fast, and the fulfillment approach was sort of based on a projected ramp rate, and the demand was higher. And we couldn't keep up and that had some feedback effect on demand, and so we're trying to get that back into balance, is the way I'd put it.

So what -- are there any specifics you can identify from a fulfillment standpoint that you're doing to obviously address this?

Yes, mostly it just has to do with the capacity. The ability to schedule, install appointments upon orders. And we created some different metrics that our fulfillment channels will be using to get compensated and to earn incentives. We couldn't do that instantly, and it took a little while to sort of figure out a good formula that we felt would work and would work for them, and we think we're there. And it will take a little while for that to take effect. But I think it will be -- I think it will do what's intended.

Our next questioner in queue is Yair Reiner with Oppenheimer.

So first, can you give us a sense of how the wholesale channel is reacting to the new service? I guess both DISH on the Real telecoms and also what was behind DIRECTV's decision to BNH [ph] rather than buy it wholesale from you?

Okay. I would say I think that wholesale channel is -- people -- I'd say people seem to be enthusiastic about the service. I think that DISH has been the largest volume wholesaler for us. And our perception and our perception from DISH dealers is that they're pretty excited about it. I think DISH also has this pending new service. And so it's a little bit tricky to see -- to know exactly what they're thinking, but I'd say they're selling. And they seem to be pretty happy with the service quality. I think it's a good fit for them. I think they're promoting it reasonably well. NRTC is also pretty engaged. We've met with them. I'd say on the electric utility side, there's no conflict, and they're really interested at the phone company, guys are pretty impressed with the service, and they're wrestling with what do they do with their physical plant. Those are sort of the views. For DIRECTV, virtually all, every broadband product they sold, except for WildBlue, was on an agency relationship. And what they told us was they just felt that, that was more appropriate way to go. So we said fine, that works for us too.

And then maybe you can give us a little bit of color on the decision to depreciate ViaSat-1 over a 17 year period rather than I think what's more traditional than 10 to 15 years. And also just to clarify, are you now looking at your total capacity with the 3 satellites at 1 million, I think previously it was a number a little bit north of that.

Okay, I'll do the second one first. What we've talked about is in the out years, we'd like to have 1 million-ish and that's not 15 years out, but it's like 3, 4, or 5 years out subscribers, we'd like to have 1 million-ish subscribers on ViaSat-1 at a good service quality, and that's what I was referring to there, it's just for ViaSat-1. The other Satellites will have ramps, but incremental capacity beyond that and Ron you want to talk about the...

I think the question to Mark was that, times we've said amend -- to amend our subscribers on ViaSat-1. You're not changing that out. The issue is we've been, for some time now, guiding people towards 1 million subscribers in their models.

That's sort of the plan that we were using. One of the things that we said is if things were to go the way they are now to stay that way would quite a bit more than 1 million we're forecasting -- we're trying to estimate what the demand will be and what it will take to provide a good service quality as that demand grows. Those are predictions in the future. And right now, as we've said in the past, things seem to indicate we've been reasonably conservative.

And then just one for you, Ron, if I may, I just want to make sure I'm understanding Slide 17 correctly in terms of the non-GAAP net income for 2013 as a whole. You said you expect EPS to be either down or negative in the first half. I guess for it to be positive, but on a whole it implies a fairly large ramp in terms of earnings in the second half.

Correct. So the answer, I would say is yes on that because of just the timing of the non-GAAP net income fees that -- going to adjust for the depreciation, some of the interest and those types of things that are pretty significant without the associated revenue benefit. But as we ramp up the number of subscribers, we turn the corner in the back half of the year. And as you know, more of that falls to the bottom. And therefore you're able to overcome it a lot quicker because you have that many more subscribers. Regarding the 17-year life on the satellite, yes, it has to do with a variety of factors, including the fuel line, as well as the electronics, the design, the expected cash flows. And we did a lot of research and analysis. And we're not an outlier there either. We also did a very comprehensive public company search. And there's some out as much as 22 years. So it's not necessarily an outlier. I think depending upon what the design is and what the trade-offs were relative to capacity and the hardware i.e. weight versus how much you're reserving for fuel is going to dictate that balance. And that could change with future satellite, but with ViaSat when it's in its orbital slot, the calculated life was north of 17. And we feel comfortable with that.

We have time for one final question. Our final question comes from Chris Quilty with Raymond James.

A specific question on the commercial network segment where you had some monster revenue growth there. Is that sustainable or did the quarter benefit from some discrete project activity?

No, there's nothing really discrete on the project, it was a lot to do with the terminal rollout. But now that we've got in addition to Europe with Ka-Sat we've got a fair amount going on in Canada to bear it there -- or excuse me -- explore net there and then just our wholesale channel in the U.S.

So it probably reflects a little bit of channel fill then?

No, not -- because there's not a lot of lead time ahead of these things for us, but also there's been good growth in our -- we're doing this Ka-band payload stuff. We've got really good opportunities for additional growth in that business area. We're doing next-generation GBBF, MEXSAT with the guys at the COMSAT labs. We've got good antenna system, new order flow and good backlog in there, so it's fairly well distributed.

And there wasn't much that came in from the new Saudi program either. So that's must -- that really starts to ramp up in the first quarter.

Okay. A couple of Ron questions, looks like you're providing a little bit more detailed segment breakout with both product and service by the 3 segments. Is that something you're going to continue to do on a go-forward basis?

Yes, we started it in Q2, and we plan on continuing it going forward.

Okay. And orders and backlog by segment? I didn't see it in the...

Yes, so what we did differently in the press release this time is a breakout of orders by segment to give that all upfront. And -- would we do backlog by segment? Probably not. If it's a meaningful metric, we'll consider it. But heretofore -- we've always thought people have been able to do a roll on that relative to our other elements. As you know, our backlog is more important to our government and our satellite -- excuse me, in our commercial networks business, less important to the Satellite Services because it's really just a roll-on sales each quarter.

It's all 0 in Satellite Services.

I see the table now. I just missed it. And share count was down about $1.4 million sequentially. Was there a buyback in there?

No, it had to do with the anti-dilutive effect because we had a net loss in the quarter. You don't include the incremental options from the treasury stock method because it would be anti-dilutive.

That's right, you only give the fully diluted, not the basic share, right?

Right.

And final question on SG&A, it was up about 10% sequentially, which I'm assuming reflects the 1 quarter of Exede rollout. Fair to assume that SG&A will go up again sequentially in Q1?

Yes, that's fair, and the rollout continues.

Same sort of order of magnitude?

Not necessarily, no.

And with that, that did close our time for questions. I'd like to turn the call back over to Mr. Dankberg for any additional or closing remarks.

Okay, well that pretty much concludes what we had to say for this quarter. Look forward to talking to you all next quarter 2. Thanks.

Thank you, sir. Ladies and gentlemen, this does conclude today's program. Thank you for your participation, and have a wonderful day. Attendees, you may disconnect at this time.