Mark D. Dankberg - Co-Founder, Chairman, Chief Executive Officer and Member of Banking/Finance Committee Keven K. Lippert - Vice President, Secretary and General Counsel Shawn Lynn Duffy - Chief Accounting Officer, Vice President and Corporate Controller Richard A. Baldridge - President and Chief Operating Officer

Michael Crawford - B. Riley Caris, Research Division Timothy J. Quillin - Stephens Inc., Research Division Richard Valera - Needham & Company, LLC, Research Division William Lee - Oppenheimer & Co. Inc., Research Division Andrew DeGasperi - Macquarie Research Elizabeth Grenfell - BofA Merrill Lynch, Research Division Chris Quilty - Raymond James & Associates, Inc., Research Division

Good day, ladies and gentlemen, and welcome to ViaSat's FY 2013 Fourth Quarter Earnings Conference Call. Your host for today's call is Mark Dankberg, Chairman and CEO. You may proceed, Mr. Dankberg. Mark D. Dankberg: Okay. Thanks. Good afternoon, and welcome, everybody, to our earnings conference call for our fourth quarter of our fiscal year 2013. I'm Mark Dankberg. I'm Chairman and CEO. And I've got with me here today, Rick Baldridge, who's our President and Chief Operating Officer; Shawn Duffy, who's our Chief Accounting Officer; and Keven Lippert, our General Counsel. And we're also happy to welcome, Bruce Dirks, our new CFO. Before we start, Keven will provide our Safe Harbor disclosure. Keven K. Lippert: Thanks, Mark. As you know, this discussion will contain forward-looking statements. This is simply a reminder that 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. So that's it. Back to you, Mark. Mark D. Dankberg: Okay. Thanks, Keven. So we'll be referring to slides that are available over the web. And I'll start with some highlights and a top-level business overview. After that, Shawn Duffy will discuss our financial results, and then I'll give a little more depth on each of the businesses segments. We've got a lot of really interesting stuff to cover, including information on our contract with Boeing for our ViaSat-2 satellite. And finally, I'll summarize our outlook, and then we'll take questions. So our fourth quarter was very good across all our business segments, and we're really happy with the fundamentals of each of them. Overall, we achieved record orders for the year of $1.4 billion, a 36% increase over fiscal year '12 and 61% higher than fiscal 2011. We achieved almost 100,000 consumer installations in the fourth quarter, with over 90% of that being new Exede subscribers. This resulted in net adds of 46,000, and that's a 21% sequential increase from our third fiscal quarter. We ended the fiscal year with 512,000 subscribers, and that's up 33% from the same time last year. We achieved record revenues of over $1.1 billion for the year, a 30% increase from fiscal year '12. Q4 of our fiscal '13 was also our fifth consecutive quarter of record revenues. Adjusted EBITDA company-wide was up 10% year-over-year for both the quarter and the entire year, even though earnings were somewhat attenuated due to sales and marketing expenses associated with our strong subscriber growth. Overall, it was a strong quarter and a good year in our progress on a number of fronts, as well as our financial results continue to build confidence in our view of the long-term market opportunity to compete in a broad range of broadband market segments where we can lead in delivering value driven by our space systems technology. We feel we're seeing market validation of this strategy in principle as demonstrated by ViaSat-1, and that it's worth investing in our winners. So now Shawn will give an overview on the financials, and then I'll come back with some highlights in each business segment and more on ViaSat-2 and our plans going forward.

Thanks, Mark. Well, as Mark mentioned, our fiscal 2013 has been a very strong year for us. And the charts on this page speak for themselves. Our Q4 revenues further demonstrate our progress, coming in at $309 million, which was an increase of $68 million year-over-year. As we will discuss more later, our service offerings have been the largest driving factor to our growth. We are closing out the year with revenue surpassing the $1 billion-mark, coming in at $1.1 billion for fiscal 2013, which reflects a $256 million increase over the prior year. Q4 adjusted EBITDA has also grown by 10% from Q4 FY '12 to $41 million, despite the current period impact of even higher subscriber acquisition costs than last quarter as our gross adds approached 90,000. So we are closing fiscal '13 with $163 million in adjusted EBITDA, 512,000 consumer subscribers on our satellite network and good growth momentum. So let's turn to the P&L as a whole, and look at the results a bit deeper. Starting with our fourth quarter, our mix of revenues reflected $125 million directly derived from our service offerings, which is now over 40% of the total revenue base. We also grew our product revenues by 22% to $184 million, fueled by growth in both our government and commercial segments. Our fourth quarter operational performance in the core business was very good. However, investments in Q4 subscriber acquisition costs, reflected in the growth in SG&A, resulted in a quarterly loss of $7 million. Conversely, the reenactment of the federal R&D credit legislation we discussed last quarter provided an additional $8 million benefit in Q4. So on a whole, non-GAAP net income rose $9.3 million to $8.8 million or $0.19 per share. For fiscal 2013, product revenues grew to $664 million from $542 million and service revenues grew to $455 million from $322 million last year, representing year-over-year growth of 23% and 42%, respectively. With respect to our fiscal 2013 earnings, clearly, the ViaSat-1 start-up effects felt in the early quarters of this year, coupled with our fourth consecutive quarter of gross add growth dictated this year's earnings. One way to frame this up, at a quick glance, is to first look at the growth in SG&A, which is up $59 million this year from FY '12. However, more than 60% of this increase was driven by our investments in subscriber acquisition cost. So it's pretty clear to see that when you adjust for just those upfront SAC investments, our current ending sub base is already generating returns on the ViaSat-1 network. Couple that with our strong government results, and overall, we drive pretty strong metrics in our core business performance. In this growth trend, it is critical that we keep the long-term in sight, so we continue to make investments in research and development activities, focused in a few key strategic areas such as next-generation satellites, mobility solutions, as well as pushing boundaries on the integrated Government Satcom platform. Fiscal 2013 results also included additional interest expense due to the capitalized interest effect of completing ViaSat-1 in Q4 of 2012. And in Q3, we recorded a debt extinguishment charge of $27 million after we completed the refi of $275 million in debt obligations. So overall, we're closing out fiscal 2013 at a GAAP loss of $41 million or a $0.94 per share loss, with corresponding non-GAAP net income of $0.9 million and solid adjusted EBITDA of $163 million, with the quarterly trends all going in the right direction. That backdrop starts to shape our FY '13 cash flows and closing balance sheet. So let's take a look at the details. Overall, our cash flows from operations have continued to build through the second half of FY '13. Despite the $20 million in cash payments we made in Q3 to call our prior 8 7/8% senior notes and the growth in new subscriber SAC cost. In the fourth quarter, we generated approximately $43 million from operations, which nearly mirrored the amount generated during our first 9 months. So we closed out fiscal 2013 generating $92 million in cash from operations. In fiscal 2012, our cash flow from operations were $141 million. So we have not yet returned to the historical level as we push to drive our net adds upward. However, the growing sub base is starting to provide funding for the next sub add. Moving to investing activities. FY '13 was dominated by cash usage to fund CPEs for our consumer satellite service customers, accounting for over 50% of CapEx spend. As our success in the retail market continues, our investments in CPE will persist until we derive a sustainable pool of equipment to support our sub base, at which time, quarter-over-quarter spend in this area will slow a bit. Correspondingly, we continue to build our mobility network and service support environment to drive our adjacent market opportunities. Our liquidity remains at nearly $400 million, which enables us to fuel our future growth, including ViaSat-2 and other strategic investments. Mark is going to talk about each of the segments in much more depth. However, let's take a summary look at the segment results for the year. Our fiscal Q4 segment results reflected another quarter of across-the-board revenue increases throughout the segments year-over-year. Again, these charts speak for themselves, with the trends in each area consistent with our expectations. Our Satellite Service segment revenues increased both in the quarter and year-over-year results, reflecting our ViaSat-1 and related Exede service launch success. As we have previously discussed, growing the subscriber base can have a near-term impact to earnings. However, as our total subscriber base has grown, these impacts are declining on a relative basis. Our Commercial Network segment also grew in Q4. Adjusted EBITDA for the period was down due to R&D activities for our next-generation Ka-band network ramp. However, our success in global Ka-band solutions and follow-on consumer terminal orders helped to offset those effects in the full fiscal year. Within our government segment, we experienced growth of 40% year-over-year, driving revenues for the quarter to $146 million, up from the prior year amount of $105 million. Our fiscal year reflects the same success with total government revenues coming in at $528 million, up 36%. While we don't expect this type of growth to continue, our service offerings have been a big part of this success, doubling year-over-year to a record $164 million, pushing government segment adjusted EBITDA up to $116 million from $78 million. We are ending our fiscal 2013 with $355 million in government segment backlog, which is up 25% from the end of fiscal 2012. So that provides a nice start going into fiscal 2014. So I'll turn it back over to Mark to provide a more in-depth look into our segments and some related market updates. Mark D. Dankberg: Okay. Thanks, Shawn. And this is also my chance to say how much we've really appreciated Shawn's work over the last 3 quarters, in both filling the Chief Accounting Officer and Chief Financial Officer role, and in helping transitioning our new CFO, Bruce Dirks. So Shawn's done a great job, and she's going to continue to participate in our conference calls and investor communications going forward. So now, I'll talk about each of our segments starting with Government Systems. And as Shawn just described, we finished a really strong year with another really strong quarter. Annual revenues grew 30% year-over-year, and annual EBITDA grew 48% year-over-year, and backlog also grew 25% year-over-year, all that in a very tough budget environment. We wouldn't have predicted that kind of growth at the beginning of the year even though we've been working hard to achieve the market positions that made it possible. We believe it's good evidence that we really have positioned ourselves as being able to help our customers do more for less money compared to alternative technology solutions. While mobile broadband services led the way, we also achieved growth in orders and/or revenues in all of our major government business areas including our MIDS Joint Tactical Radio System, information security and satellite products. Also, a pretty extraordinary accomplishment in this macro environment. The government mobile satellite broadband area has sustained exceptional growth in market share. We continue to add more user organizations, platform types, geographic coverage areas and bandwidth usage every quarter. We're also gradually introducing the benefits of Ka-band to our existing customer base, which we anticipate will -- so that they'll really appreciate the benefits of our ViaSat-2 compared to other mobility systems, and we just talked about that. But we don't have a short-term crystal ball that can predict the effects of sequestration in particular or an increasingly stressed budget environment in general on a quarterly basis. Our order backlog, our growing installed base of mobile broadband networking terminals and our funnel of new proposals gives us some comfort in assessing our outlook on an annual basis. We anticipate sustained revenue growth in fiscal year '14 and beyond on an annual basis, even with estimated adjustment factors we've made for sequestration effects. We're making investments in broadband mobility technology and services in response to existing and anticipated government users. We believe those investments are strong offensive moves that will consolidate and expand our market success. But depending on the timing and success rate associated with new business relative to those planned investments, we're planning that earnings in this segment might actually contract a little bit in the short to midterm for fiscal year '14. We're going to manage the business in a way that increases the chances that we can enjoy outsized growth again in the near future. The ViaSat-2 contract that we're going to discuss in a few minutes is going to give some context to the activities in our commercial segment. Think of our Commercial Network segment as including a blend of closely integrated functions. On the one hand, we sell products and technologies that are increasingly tied to our Ka-band broadband service capabilities. That includes network infrastructure and user terminals for Ka-band networks with Eutelsat, Xplornet, KACST in Saudi Arabia and NBN Co in Australia, all major customers that together account for the vast majority of third-party Ka-band capacity in the world. We also have a growing business opportunity in providing mobile broadband for commercial customers such as JetBlue and United in in-flight connectivity. Long-term trends in this segment are favorable, with revenue up 25% on an annual basis compared to fiscal '12. Contract values are relatively high. And the market has so far been relatively limited. But it seems to be growing, and we've got a very high market share among those early adopters. We believe our first-mover advantage with ViaSat-1 has been a pretty decisive competitive advantage in that ViaSat-2 has the potential to confer similar advantages again. This business segment also bears the R&D costs associated with our new payload technology, our new ground networking technology and new applications development. Consequently, earnings in this segment are somewhat suppressed by those R&D investments, which are executed and managed within this segment, but which benefit the company as a whole. That effect is going to intensify in fiscal year '14 as we ramp up investments in the third generation of Ka-band ground network associated with ViaSat-2, our next-generation payload technologies beyond ViaSat-2 and in prosecuting our litigation to defend the intellectual property and other proprietary information that we developed with ViaSat-1. We think these are really good offensive as opposed to defensive investments, and that we'll be able to still achieve good earnings growth company-wide while we're making this. In Satellite Services, we're continuing to learn and improve our execution in pretty much each aspect of our broadband services business. We had another quarter of sequential improvement in installations, gross adds and net adds despite the March quarter being traditionally somewhat challenging on a historical basis. The June quarter numbers actually historically even more challenging though. Even though our unit economics remain pretty steady, sequentially, our adjusted EBITDA dipped slightly due to the high level of subscriber growth. We had over 40% more gross adds this quarter than we did last quarter. During periods of high growth, the current period portion of our SAC expenses inhibits earnings. Of course, we gain the benefits of the larger subscriber base going forward. Gross adds benefited not only from a full quarter of DIRECTV as a distribution partner, but also from growth in our other channels as well. Wholesale gross adds for the quarter remained pretty steady compared to the third quarter. ARPU is maintaining its upward trend primarily due to our increasing proportion of retail subscribers, and we continue to test targeting different consumer profile types, additional sales channels and refining our product positioning. So this chart gives some additional top-level blended data on subscriber metrics. As previously mentioned, we did nearly 100,000 installations in the fourth quarter, with close to 90% being new subscribers as migrations continue to taper off. Net adds increased significantly. Blended churn appeared significantly higher this quarter than it did last quarter, but it would have been essentially flat with the past 3 or 4 quarters except for a significant number of wholesale disconnects that were held in suspense at the close of the prior quarter and were then classified as disconnects in the fourth quarter. So that is, we think that the average of the third and fourth quarter is really a better representation of churn in each of those quarters. Blended churn continues to be disproportionately driven by legacy WildBlue disconnects. We're investing a lot of time and effort into segmenting and analyzing our existing and potential subscriber base across a number of dimensions, including geographically, demographically, by distribution channel, by marketing approach, by availability of alternative services and a number of other dimensions. And we're constantly testing and analyzing different combinations. So the next slide gives a little more insight into our thought process. In the past, we've talked about the importance we place on understanding the unit economics of the consumer service business. We think of those unit economics in a multidimensional space, with significant interdependencies among the variables. That is, we're not aiming for a single point solution of SAC, gross add rate, churn, net subscribers, et cetera. All those factors are correlated. So the basic idea we've been testing is that by making the service better, we could address a bigger market, attract more effective distribution channels, grow at a faster rate, achieve a higher cumulative subscriber base and ultimately earn high returns on the investments. So when we increase our addressable market, we're intentionally capturing more subscribers, who have more terrestrial choices, who will likely churn at a higher rate than those subscribers who are otherwise unserved. Our testing and analysis is giving us valuable insights into how all the different variables I mentioned interrelate, especially among that very large and attractive base of subscribers with other alternatives. So like as a trivial example, we'd expect the churn rate for customers that are otherwise unserved to be lower than the churn rate for our customers that are in underserved category, which should be lower than customers who are classified as fully served. The churn rate for legacy WildBlue subscribers, even in the unserved market, should be worse than the churn rate for Exede 5, and that should be worse than the churn rate for Exede 12. And in fact, that's exactly what we're seeing. The upshot is that we think we're building a portfolio of distribution approaches, each with good unit economics, but those economics consist of distinct combinations of the attributes in the diagram, tailored to a specific target market, channel, product combination. When we cast a wider net, we often find initial churn rates that are pretty high in that approach, but that we've been able to successfully manage down that churn rate by more disciplined targeting techniques each period. For competitive reasons, I'm not going to go into more depth in that now, but one wouldn't really get useful insights into our economics by just thinking of churn as a single point variable. So now, this slide gives you a little bit of a sense of the places we're investing to create those better services that enable us to address bigger markets and compete effectively against other technologies, or to improve the unit economics in the core unserved markets. It's really critical to understand that while the context so far has been the consumer service, that essentially the same way of thinking applies virtually across all of our broadband markets. We're working on including in-flight Wi-Fi, newsgathering, live events, enterprise and government. We think the most impactful by far element of the value proposition is the bandwidth economics in space, and that's the satellite. ViaSat-1 has shown this pretty convincingly. But you have to combine that with other elements, such as the distribution channel, the definition of the product offering, the underlying network technology, and analyzing all the data to really optimize the intrinsic value of that bandwidth. Remember, for ViaSat-1, we made important breakthroughs in ground networking. We completely changed the way satellite broadband services were defined for our subscribers. We reengineered our fulfillment system, and we developed new analytics and distribution methods. We're still working on all those elements, and in particular, are doing so anticipating the next step change in bandwidth economics that we're going to get with ViaSat-2. Another way to think about it is that we're not getting the striking sequential improvements we've achieved over the last year simply by doing the exact same thing each quarter just more effectively. Instead, we're adding or refining new elements to our approach each quarter that are then layering on to create these cumulative effects. We still have a number of new dimensions to introduce and refinements to make. Our own view is that further gains in the rate of growth or in unit economics will be more likely due to those innovations than to merely doing the exact same thing. And in the long run, we believe the single most impactful competitive advantage is going to come from our series of satellites. So we feel like we've made a lot of progress, and we're really proud of what we've accomplished. In February, the FCC's Measuring Broadband America report rated Exede #1 in terms of delivering its advertised speed, even in the busiest hours for all of the broadband services in they measured. We earned a Guinness World Record for highest capacity satellite, and we received a Bronze Edison Award for innovation in information technology. The root source of the success is the technology that made ViaSat-1 possible. Obviously, we're still disappointed that technology was wrongfully used, disclosed and marketed in a way that damaged us, and we're pursuing legal remedies for that. So back in 2008, we said that wouldn't have undertaken ViaSat-1 if it was just a onetime event that we had a longer-term strategy to constantly improve our space systems technology, and we believe we've earned a lot of credibility in being able to turn our technology vision into economic value. And so today, we're really excited to be able to talk about that next step, and that's ViaSat-2. So we're really happy to announce, we've got a contract for ViaSat-2 with Boeing. ViaSat-2 is not just more of ViaSat-1 technology. It's a fundamentally more powerful satellite architecture that builds on the networking foundation of ViaSat-1. We and Boeing believe it to be unlike anything else in the satellite industry. It advances the broadband state-of-the-art. We're leveraging the very powerful Boeing 702HP platform and a number of unique Boeing payload technologies, but the payload architecture, design and systems approach are ViaSat's. The performance and operational benefits are compelling. We'll about double the bandwidth economics of ViaSat-1, while simultaneously increasing the coverage footprint by over sevenfold. Those performance gains will substantially improve our competitive position in all the broadband markets we're developing, including residential, in-flight connectivity, maritime, LAN mobile, enterprise and especially government. Plus, we gain very valuable operational flexibility, performance and capital investment benefits. The satellite schedule calls for a mid-2016 launch. We think the total systems package, the unprecedented bandwidth capacity and geographic coverage and the considerable operational flexibility will be very attractive for international markets, especially where demand distributions are unknown, regulatory environments are uncertain and business cases depend on a blend of different applications, geographic coverage and application market segments. So we've executed a strategic agreement with Boeing to jointly market satellites using this technology. We already have a good history with Boeing. We work together to market space and ground systems for commercial mobile satellite systems. We're also already working with Boeing on integrated space and ground systems on several current and planned defense systems, including applicability of commercial broadband satellite technology for protected satellite networks. The figure on this page shows the ViaSat-2 coverage area. It covers virtually all of North America, Central America, a little part of the Northern South America, all of the Gulf of Mexico and the Caribbean, as well as the primary aero and maritime routes between North America and Europe. We're not going to go into detail on the technical approach other than that we're going to say, this is not a steerable antenna spot beam that can only illuminate a relatively small portion of the footprint at any given point in time. We think of steerable beams as offering an anywhere value proposition. We would describe our capability as an everywhere offering. That distinction is very important to many customers, including virtually all commercial mobility and most government mobility users. We'll have the ability to deliver gigabits anywhere on a very dynamic basis. We believe the improvement relative to any other satellite mobility system is in order of magnitude, and the footprint is large enough to make a significant dent in the market. Also, we'll have the flexibility to deal with economic or regulatory uncertainties in the international markets we cover. We won't have stranded capacity anywhere, and we can opportunistically serve highly disparate bandwidth demand simultaneously across the coverage area in a manner that is proportional to that demand. So this gives us the confidence to cover those international fixed markets and the ocean service areas that have high potential, but may develop more slowly than our current core markets. In our core U.S. residential markets, we'll have the capability to improve our offered speeds by multiples of the current Exede 12 service as warranted by market. We believe this will have a very significant and very beneficial impact on our ability to address increasingly larger markets, offer greater value to powerful distribution partners and help us manage churn in a more competitive terrestrial marketplace compared with not only DSL, but fiber-to-the-node and more advanced wireless offerings. We also gain some very important operational efficiencies, infrastructure deployment and efficacy. We're very excited to have ViaSat-2 finally under contract. We're pleased with our partnership agreement with Boeing and enthusiastic about continuing to build on the competitive dynamics and financial results we realized with ViaSat-1. Okay. So now I'll integrate our outlook for the company as a whole, building on what we've discussed for each segment. Satellite Services are doing well. Unit economics have been in line, and we believe trends are favorable, especially in the growth segments. We overachieved somewhat this quarter in gross adds and that caused EBITDA to be essentially flat for the quarter, but that's an artifact of the step gain in new adds. While churn for the quarter looked high, we believe that's a consequence of it looking low in the third quarter. Total blended churn has been running around 2.5% a month. It's disproportionately driven by legacy WildBlue subscribers and is more favorable for Exede 12 customers, especially as we feed back analytical data into our distribution channels. We believe longer-term trends on churn are favorable, especially in the context of a growing addressable market. We see potentials for further gains in subscriber growth rate, but those gains will likely be linked to specific marketing indoor product activities and/or seasonable -- seasonal macro market effects. But even the current rate of subscriber growth yield attractive cumulative economics as the subscriber base continues to build, and we pass cumulative net subscriber inflection milestones. We're planning for more modest revenue growth in the government business, reflecting our wariness about the effects of sequestration and DoD budget planning cycles on new order timing. Given our investments in winning technologies, especially mobile broadband, we're planning that earnings in the government segment might actually contract a little bit in the short to midterm in fiscal year '14. Success in some specific opportunities could improve that, and we'll gain insight based on the timing and results of those specific opportunities. Our commercial segment has a fair amount of lumpiness associated with large Ka-band programs and applications. Our existing business space provides a comforting level of backlog and a number of important expansion opportunities. The realization of our ViaSat-2 plans through our contract with Boeing is a big step in creating and capturing more opportunities with a substantial amount of competitive differentiation because of the compelling functional and performance benefits of the new generation of satellites. Our strategic agreement with Boeing gives us more comfort that we'll capture more of the economic benefits of the advance in space technology. In the ViaSat-1 generation, new orders and revenue on the technology side were realized even before the satellite was in service. We see the same opportunities with ViaSat-2. But we also anticipate a higher level of investments in commercial segment than we've had in the recent past. That includes R&D for the next-generation of ground networks, next-generation payload R&D beyond ViaSat-2 and litigation expenses associated with our ViaSat-1 complaint versus Space Systems/Loral. We believe that company-wide, we've got good potential to achieve attractive and sustained annual gains in revenue, EBITDA and earnings per share in FY '14 and beyond. So that concludes our prepared remarks. And at this point, we'd be happy to take questions.

[Operator Instructions] Our first question comes from Mike Crawford with B. Riley. Michael Crawford - B. Riley Caris, Research Division: Given the expected doubling of bandwidth economics with ViaSat-2, does that imply that this is going to be somewhere around a 300 gigabit per second capacity? And what is the total cost that you expect to incur to build, launch and and insure the satellite? Mark D. Dankberg: Okay. So describing the capacity is a little bit complicated because the way this satellite works is not the same way that ViaSat-1 works. When we gave the capacity numbers, they were -- those were -- think of them as benchmarks. They're like gas mileage numbers, and they're only meaningful in a specific context. So the trick that ViaSat-2 can do sort of makes those comparisons a little bit different in just giving a number like that. But I'll give you another way to look at it. When we did ViaSat-1, one of the things that we said was we thought we can get about 1 million subscribers with a given level of service, and that level of service is our Exede 12. So that means, in order to get doubling of the bandwidth benefits, we ought to be -- if the satellite costs were the same, we ought to be available to do 2 million at exactly that same level of service. And if the satellite cost or the system cost is higher, we need to do even more than 2 million for that to be true. And that right now, that's a good way to look at it. Michael Crawford - B. Riley Caris, Research Division: And so you don't want to say what the system cost is? Mark D. Dankberg: System cost, okay. On the system cost side, we'll do a disclosure subsequent to the call that will give the number on the satellite. But think of it, the satellite itself is probably about 40-ish plus percent higher than the ViaSat-1 satellite. The total system cost doesn't grow nearly as fast when you consider ground system launch and insurance. So when we started the ViaSat-1 project, our budget for all those things together was about $500 million. The budget for this is about 25% higher. So when you think about that, in order for us to get double the bandwidth productivity, that means that we need about 2.5x the equivalent subscribers. And so it definitely does that. Michael Crawford - B. Riley Caris, Research Division: Okay. Are there satellites in operation today that Ka-band -- that provide Ka-band connectivity without spot beams or steerable spot beams or was this going to be a completely new way to provide Ka-band service? Mark D. Dankberg: It's new. It is -- it's a new architecture. Michael Crawford - B. Riley Caris, Research Division: Okay. And then one last question for me. Regarding the litigation with Space Systems/Loral, which I believe is headed for a jury trial next February, where you're seeking, among other things, an injunction. What would happen if there is another satellite scheduled to be launched that might have some of that technology, appropriated technology on it? How would you address a situation like that? Keven K. Lippert: Mike, this is Keven. I think at this point, litigation is complex. We've obviously sought different types of damages, and an injunction is clearly one of those, but we'll just have to see how that plays out.

Our next question comes from Tim Quillin with Stephens. Timothy J. Quillin - Stephens Inc., Research Division: Mark, when you talked about 2.5 million subscribers, is that assuming that they're at fiber-to-the-node speeds? Mark D. Dankberg: No. To do an apples-to-apples comparison, one way to do it would be to say, how many subscribers could we do at the same service level? I think it's more likely that what we're going to do is improve the service level and have the number of subscribers be more of like what it was on ViaSat-1. So think about that as sort of the same number of subscribers at 2.5x the bandwidth. That would be the flip side of that. That 2.5x of bandwidth though can, if we do it that way can be manifested in multiple ways. It could be higher speed. It could be more usage, with a lot of ways we could implement that. And that we will decide based on what the market is closer to the time that we're go into service with it. Timothy J. Quillin - Stephens Inc., Research Division: Great. And so 98,000, first of all, in terms of installations, is that a sustainable number? And what are you seeing from DISH in terms of wholesale contribution and how sustainable is that? Mark D. Dankberg: Okay. So one is -- boy, I wish I could predict the future. What I can tell you is, we did in -- the March quarter is typically a seasonably -- seasonally more difficult quarter. So that gives us some upside going forward. But like I said, I think when you think about improvements that we're going to make, I wouldn't think of us just doing the same thing over and over but better. We have things that we intend to do, which includes adding different product variants and introducing new channels. There's some headwinds that we have as well, which is, DIRECTV has said that they intend to add Hughes to their services as well. So far, what we've seen has been pretty consistent and pretty much what we said at the beginning, which is, the demand seems to exceed the supply and DISH continues to work with us and DIRECTV will probably work with Hughes because both of them would like to get as many of the limited number of subscribers as they each can, and that makes complete sense. I think I can't tell you what's going to happen exactly, but I don't think that we've reached a ceiling of what's possible. It will just depend on how those different trends play out. Timothy J. Quillin - Stephens Inc., Research Division: And then... Richard A. Baldridge: Just to remind you, Mark did say earlier -- this is Rick. Mark did say earlier that the June quarter tends to be the more seasonally depressed quarter. I don't think we should look any different than somebody else. Timothy J. Quillin - Stephens Inc., Research Division: Right, right. And then what are you seeing from DISH right now? Mark D. Dankberg: We said that our wholesale adds for the fourth quarter were pretty much steady with our third quarter. Timothy J. Quillin - Stephens Inc., Research Division: Okay. And then lastly, just what percent of subscribers are on Exede? Mark D. Dankberg: Oh, we're over 50% Exede now on a total basis, pretty well over that, in the mid-to-high 50s, I think, ballpark? Richard A. Baldridge: Yes.

Yes, 58%, 58%. Mark D. Dankberg: 58%. Timothy J. Quillin - Stephens Inc., Research Division: 58%

Our next question comes from Rich Valera with Needham & Company. Richard Valera - Needham & Company, LLC, Research Division: First, just a question on the ViaSat-2 architecture, which certainly sounds pretty intriguing. Correct me if I'm wrong, but it sounds like the bandwidth on the satellite is actually dynamically configurable across geographies and spot beams, is that correct? Richard A. Baldridge: Yes, dynamically configurable across geographies. Richard Valera - Needham & Company, LLC, Research Division: I'm just curious, is a satellite like this, essentially a spot beam satellite with dynamically configurable capacity been built before or is this kind of the first of its kind? Richard A. Baldridge: As I said, it's the first of its kind anywhere near this combination of geographic coverage and total capacity. It's just never been done before. Richard Valera - Needham & Company, LLC, Research Division: Right, right. Very interesting. Look forward to seeing that in action. And then on the -- with the success I guess of the consumer program recently, you haven't talked too much about the in-flight, which we think should have imminent launch here coming up with JetBlue. Can you, one, talk about what your best guess as to the timing of the JetBlue launch? And then, can you give us any color on how your business model works for the in-flight broadband market? Are you kind of getting paid per megabyte basis per subscriber? Any sense of what your business model you expect to look like in that in-flight category would be helpful. Mark D. Dankberg: Okay. In-flight, we expect should be operational this summer. That's kind of -- I think we talked a little bit last time about LiveTV, which is doing the installs for JetBlue, had kind of radome issue to deal with the FAA. I think they have a resolution for that, and so things are proceeding from there for the summer. The business model, like we said before, we're trying -- we think we can change the business model in the in-flight space. Right now, the business model is high prices, low penetration, laptop-centric because of the high prices. JetBlue and us are looking to create an environment where basically penetration could be very high. Think of kind of everybody with a mobile device would use it and that we can take advantage of our bandwidth effectiveness to drive the cost down to the point where it can be free to the subscribers. And so JetBlue has said that, that's what they want to try. I mean, that's a different model. I think it could be -- we think it's exciting and could be extraordinarily successful. And so that's what we'll be trying, and that -- our -- we would essentially be paid on some form of bandwidth consumption basis by the airline, by JetBlue, who would give it away free. And the idea is, if the cost is low enough -- their description, the catchphrase they always used was, Coke and a bag of peanuts. If it costs the same to give people in-flight connectivity as it costs to give them a Coke and a bag of peanuts, that's a great way to drive customer satisfaction. And we think that if you get high penetration, that's a really good model for us. So that's what we'll be trying with them. Richard Valera - Needham & Company, LLC, Research Division: Okay, that's very helpful. And then just on the service -- the Satellite Service revenue line, it's a little higher than I would have modeled. Was there any kind of nonrecurring lump in that service number or is that kind of the baseline number we should use going forward as you add subs?

Yes. I wouldn't say that there's anything unusual in there that needed to be considered. I think it just reflects kind of our continuing growing ARPU. Richard Valera - Needham & Company, LLC, Research Division: Great, that's very helpful. And then just one more if I could on the SAC. Obviously, SAC was higher because you had a lot more subs than you expected, but was your per subscriber SAC sort of in line with your expectations? Mark D. Dankberg: Yes. I think we have different channels that have different costs, and when you blend them all together, it's pretty much right where we need it to be.

Our next question comes from Yair Reiner with Oppenheimer. William Lee - Oppenheimer & Co. Inc., Research Division: This is William Lee for Yair. Can you maybe give us a sense of how the data caps are working out for your subs. Are you seeing a lot of them hitting the caps? And if so, are they trading up or changing their behavior? Mark D. Dankberg: The data caps are -- the fact is, one of the reasons we'd like to be able to apply more bandwidth at the same price. We have a number ways to work on it. Well, I would say, our objective is not to try to extract money from our subscribers. We set that the data caps because we thought that there were a lot of subscribers who would not hit their caps. That's what we're seeing. What we're also seeing though is that subscribers will modify their behavior in an effort to fit within the caps. And actually, believe it or not, that's sort of what -- what we'd like to do is make it so that they don't have to modify their behavior and still fit within the caps. And those are the kinds of things that we intend to do going forward as we improve our service. But the short answer is, we're not modeling trying to drive more revenue out of subscribers, and we're trying to help them be even happier within whatever the caps are that we offer. William Lee - Oppenheimer & Co. Inc., Research Division: Right, right. And then I guess in terms of the ViaSat-2 that you just announced, how do you expect the capacity to be used, say, among the home broadband, Wi-Fi, defense, in-flight Wi-Fi, and any other commercial applications, how you segment the different buckets? Mark D. Dankberg: Okay, that's a little hard to predict at this point. One of the things that we've said, and I think it'll help you get some insight into that is, what we said is, by around the time that we launch ViaSat-2, we'd be pretty happy if we were generating in the range of 10% of our Satellite Services revenue from all of these adjacent businesses, and that includes the news gathering, live events, government and satellite, Wi-Fi connectivity. So that would, let's say, if we're at that point at around 2016 when we launch, I think that the capabilities of ViaSat-2, especially the transatlantic, maritime, Caribbean coverage will put us in a position to grow that percentage from there, at a faster rate than what it grew before. But right now, that's probably all we'd say. William Lee - Oppenheimer & Co. Inc., Research Division: Great, great. And one more if I may. In terms of depreciation, it looked like it was roughly -- it was somewhat flattish quarter-to-quarter. Any reason for that as opposed to maybe ramping up quarter-to-quarter?

Depreciation has a lot of different dynamics to it. We had some of our original legacy network that was coming off from a depreciation perspective, towards the end of its life. But there's kind of some different elements with various assets coming off and on, but nothing that was dynamically unusual. Richard A. Baldridge: In other words, a normal course, we'd expect it to grow as we add more subscribers for a while, but...

Overall. William Lee - Oppenheimer & Co. Inc., Research Division: And I guess, how should we think about depreciation into next year? Should it be, as you say, grow or should it be roughly running at fourth quarter's run rate?

No, definitely it's going to grow. I mean, we're going to see effects of both the CPE subscriber asset base growth, as well as just general growth as we grow up in mobility and other support metrics. So you definitely should see it growing quarter-over-quarter.

Our next question comes from Amy Yong with Macquarie Capital. Andrew DeGasperi - Macquarie Research: This is Andrew for Amy. I just had a -- first a question on the LonoCloud acquisition. What was the rationale behind that? Mark D. Dankberg: Okay. So the LonoCloud, what that -- what they have, think of it as a cloud operating system where most cloud services are sort of service provider-specific. So when you think of buying a certain cloud thing, you probably have to tailor your cloud integration or cloud usage, say, to Amazon or to somebody else, okay? What LonoCloud does is, think of it as a layer of abstraction or an operating system. That let's you say, hey, I want to buy transcoding services in the cloud or I want to buy video streaming support in the cloud. And then, just like you would talk to the printer or a disk drive. In the same way, you'd say, hey, get me these services and get them for me with this -- with these sorts of policy statements like, hey, here's my security approach, here's my pricing approach. And then LonoCloud lets you manage that dynamically. Helps you deal with the load balancing, failures, better pricing, all those things. We -- when we add all these services, we have a lot of cloud activities going on, and we basically acquired it because we wanted to use the software. We were already using the software, and we he had the opportunity to acquire it. Andrew DeGasperi - Macquarie Research: Great. And also on the -- I just want to -- sort of a clarification, I think -- did you say that pretty much -- you were hoping for a 10% of revenue on the satellites should be outside of the Satellite Services? In other words, about 90% of capacity should be the consumer business? And then secondly, what are your funding plans ahead of the launch of ViaSat-2? Mark D. Dankberg: Okay. So to answer the first question, if you look at the revenue that we would report in our Satellite Services business segment, let's say in 2016, that what we're sort of aiming for is about 90% of that being consumer and 10% being other. And other includes in-flight Wi-Fi, LAN mobile, government, things like that, okay? That answer that question? Andrew DeGasperi - Macquarie Research: Yes. Mark D. Dankberg: Okay. Then on the funding, basically the funding for ViaSat-2 comes out of cash flow from operations and basically, the usage of our existing credit lines.

Our next question comes from Ron Epstein with Bank of America. Elizabeth Grenfell - BofA Merrill Lynch, Research Division: This is Elizabeth in for Ron today. I just had 2 questions. One, the 88,000 monthly add you had, where does that lie versus where you expected the adds to be at this point when you launched the satellite? I think you had talked about getting to 100,000 and presumably that would have happened before now, I think, given how you talked about it before, just how are you expecting that to continue to grow? Mark D. Dankberg: Okay. So what we talked about, the 88,000 was for the quarter, not monthly. Elizabeth Grenfell - BofA Merrill Lynch, Research Division: I'm sorry. That's right. Mark D. Dankberg: And we had this discussion a few quarters ago, where we said, we thought 90,000 to 100,000 installs a quarter would be a good target. And in this quarter, we did 98,000. We don't think we've necessarily hit the ceiling, taking into account all the puts and takes, I've already said before, which is headwinds, due to, let's say, DIRECTV dividing up its distribution, seasonal adjustments, good growth due to other factors. We don't think we've hit it, hit that. In the past, we've had discussions about, are we hitting specific numbers or not? What we said is, you have to look at multiple factors. One of them being that our ARPU is a substantially higher than what we projected by like 25%. What we said was, ultimately, we thought we'd get to the target that we thought and that the combination of that plus the higher ARPU was going to get us the returns we wanted. So we've expressed this before. We're pretty happy with where we are. We think we'll earn the return that we aimed for when we started the project. But the combination of parameters is going to be a little bit different than the exact ones that we thought. And that's kind of what happens across all of our businesses. We aim sort of for the end result, and we don't always get there exactly the way we thought. Elizabeth Grenfell - BofA Merrill Lynch, Research Division: Okay. And then just one other question for you. The FCC report that you mentioned in your release I think also talked about how the latency issues on ViaSat-1 are about 20x the terrestrial average. And I'm just curious what you're doing to address that and if that will also be the case on ViaSat-2? Mark D. Dankberg: Yes. So the -- what they --the one thing they report is a metric called ping time, and that's a measure of latency. Satellite, because of the round trip delay to the satellite, that is pretty much -- that's the bugaboo of satellite is the ping time. Our ping times I think are in the 600-ish millisecond time range, and what you might see is more in the 20 to 30 millisecond time from terrestrial. The one thing that people used to think that will be manifested in is slower responsiveness, for instance for web pages. But what the FCC measured, there was another chart in there that showed that the average page load time in Exede 12, even in the busiest hours was something like about 1.5 seconds to 2 seconds off of the best fiber systems. And actually, significantly faster than most DSL systems. So the ping time issue, primarily the main manifestation of that is in what you'd call fast-twitch multiplayer games, shoot-them-up games. One of the things that we do when we try to attract new subscribers is to let those subscribers know that if that's important to them, this isn't a good choice for them. That's one of the things -- and as we get better at that, we sort of pre-filter our subscribers. It's one of the ways that we manage churn when we introduce new channels. But that fast-twitch game is probably the only real manifestation of that ping time. Does that answer that question? Elizabeth Grenfell - BofA Merrill Lynch, Research Division: Yes.

The next question comes from Chris Quilty with Raymond James. Chris Quilty - Raymond James & Associates, Inc., Research Division: I had a question. Can you help walk me through -- I'm looking at the Satellite Services business. You had a good quarter in terms of net adds, revenues up 9% sequentially, but your EBITDA kind of reversed path from its historic trend and was actually down 8% sequentially. And I'm assuming that reflects a higher SAC cost. Can you help explain that?

Yes, totally. I mean, one of the things that we talked a little bit last quarter was that quarter-over-quarter as our gross adds grow on an incremental percentage higher rate, the impact to the current quarter's EBITDA is going to grow as well. So while the sub base and the higher revenues definitely are driving higher contribution, the high percent of gross adds will actually have near-term impact, and then they start to have their recovery in the following period. Chris Quilty - Raymond James & Associates, Inc., Research Division: Okay. Now does the actual SAC per customer you've talked about being between $600 to $800 sort of range, if I'm running the numbers right, you've moved up significantly towards the higher end of the range in the quarter? Richard A. Baldridge: We've been up there, and we talked about that a little back. We were a little over $700, and then we brought DIRECTV on. Mark talked about different channels, and we've got a lower channel. We've brought on -- we're expanding in our new direct channel, and that's lowering -- so it's a blend, and it's going to depend on who in the quarter. But we're still in that range. I think you've got to look at all the adds in the period, and we had a huge increase quarter-over-quarter in gross subs versus the prior quarter which drove that. And you're just not going to overcome that when we're in this kind of a ramp. Chris Quilty - Raymond James & Associates, Inc., Research Division: Okay. It sounds like the net adds are going to go down seasonally in Q2. And it would probably be fair to assume we'll see the SG&A tick back also?

Yes. Go ahead. Mark D. Dankberg: The component of that due to the gross add rate, that contribution will go down if the gross adds go down. Richard A. Baldridge: The best way to generate really good earnings growth right now is to slow our subscriber growth in the near term. Mark D. Dankberg: But that's not what we want to do. Chris Quilty - Raymond James & Associates, Inc., Research Division: Exactly. Shawn, can you give us the actual number of subs on ViaSat-1 at the end of the quarter?

Yes, sure. It was about -- it's in about 295,000, 297,000 right around there. Chris Quilty - Raymond James & Associates, Inc., Research Division: Okay. And a question on the ViaSat-2. Is the technology on ViaSat-2 and 1, it sounds like there's some clear differentiation. Is it fair to assume everything is backward and forward compatible between the 2 systems or are they going to be discrete modems that don't interact? Mark D. Dankberg: It will be like what we did with -- when we did ViaSat-1, when we moved from WildBlue-1 and Anik F2, is that if you want to take advantage of the features of the new satellite, you'll need new networking equipment. And networking equipment will be backwards compatible. But the old equipment won't deliver the new features on the new satellite. Now because we've been planning for this, we'll have the ability to introduce new equipment even before we have the new satellite. So the new CPE will work on old network, yes. Chris Quilty - Raymond James & Associates, Inc., Research Division: Okay. So I mean it brings up a question on the aeronautical portion. First of all, has -- have you gotten that antenna and the radome certified with the FAA yet? Richard A. Baldridge: The terminal, I think we're done. I think the real issue is the radome with the FAA, which LiveTV is doing. And I think that, I think that they have a resolution for that. You'd have to ask them. But I think that's resolved. That's why I think we'll go into service in this summer. Chris Quilty - Raymond James & Associates, Inc., Research Division: Okay. So I guess the question is, right now you've got an aviation solution where on the East and West Coast you've got a lot of capacity on ViaSat-1, but in the center of the country, you're dependent upon WildBlue, which obviously doesn't have nearly the throughput or capacity. And it sounds like ViaSat-2 isn't going to provide you an ability to seamlessly backfill the center of the country because it's going to be a different modem technology. Is that correct? Mark D. Dankberg: Yes. But I wouldn't look at it that way. The thing that the new satellite really will do for us is the ocean coverage. So as an example, I think we talked about in the press release is that, let's take JetBlue. JetBlue has a bunch of flights that either go up and down the East Coast, say, from New York or Boston and Florida. They actually fly out over the ocean as part of that, or they may go to the Caribbean. So there's an area where we just don't have coverage on any satellites. So that provides a pretty compelling reason to do an upgrade to those terminals. And that upgrade, I think, in the context of functional capability is going to be pretty attractive. Chris Quilty - Raymond James & Associates, Inc., Research Division: Okay. Clearly, a much better opportunity than the geographical coverage you have today, but the big question is, aircraft being mobile, not everybody is going to stay on an Atlantic route and be one to invest in equipment if it's going to be limited to those areas. Does it make sense to? And is there something on the planning map to come up with a dual band Ka, Ku-type of solution? Is that doable? Mark D. Dankberg: Yes. Number one is, that's doable. I think as a matter of fact I think you'll see that from us. Now whether or not that makes -- that will make a lot of sense for a lot of our government customers, whether or not that makes sense for commercial customers, we'll see. But I think that more significantly, what we're trying to show is, there have been assertions in the past that you can't have really high-capacity and really big coverage. And what we're trying sell is, hey, if you have the right technology, you can. And we're not going to cover the whole world instantly, but what we are going to do is cover increasing parts of it, plus we can blend together the service areas of our partners like Eutelsat as an example or Arabsat. So I think what you'll see is more and more of the globe, especially the interesting parts of the globe, being covered by sort of this seamless coverage. That's how we think it will play out. Chris Quilty - Raymond James & Associates, Inc., Research Division: Okay. And did I understand you correctly that you are going to market basically with Boeing to sell the 702 satellite proprietary design you have to other customers or were you just talking about infrastructure and modems to third parties? Mark D. Dankberg: What we said is, we have an agreement with Boeing, and think of it as, unlike in the past, Boeing is not going to go off and say, hey, we got this satellite, do you want to go buy it? It's going to be a cooperative agreement between us and Boeing. What we think is that the combinations of coverage, capacity and flexibility will be pretty attractive to anybody looking for a Ka-band broadband satellite, and that we'll do that together. Now what that exactly means in terms of how people ultimately contract for pieces of the system, we'll deal with on a case-by-case basis. But the basic idea is that it will be a system sale. Chris Quilty - Raymond James & Associates, Inc., Research Division: And expected mass of this satellite or are you going to be kind of locked into Ariane 5 or Proton as your option? Mark D. Dankberg: No. Actually, the launch mass of the satellite and the launch candidates for the satellite are going to be very, very similar to ViaSat-1. Chris Quilty - Raymond James & Associates, Inc., Research Division: Okay. And final question here, the subscribers, oh, crap I got that one, sorry about that. Oh, you mentioned on the government business that you're likely to see a little bit of a profit decline this year. Can you just give us sort of order of magnitude, is that modestly down 10% or 20% down? Mark D. Dankberg: I'd say it's more modest, in there. Chris Quilty - Raymond James & Associates, Inc., Research Division: Okay. Modest it is.

Thank you. This concludes our question-and-answer session. I'll turn it back to management for closing remarks. Mark D. Dankberg: That pretty much concludes all the stuff that we had to say. We really thank everybody for their time and attention and look forward to talking to you again next quarter.

Ladies and gentlemen, thanks for participating in today's program. This concludes the program. You may all disconnect.