Mark D. Dankberg - Co-Founder, Chairman of The Board, 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 Bruce Dirks - Chief Financial Officer and Vice President

Richard Valera - Needham & Company, LLC, Research Division Yair Reiner - Oppenheimer & Co. Inc., Research Division Timothy J. Quillin - Stephens Inc., Research Division Michael Crawford - B. Riley Caris, Research Division Matthew S. Robison - Wunderlich Securities Inc., Research Division Chris Quilty - Raymond James & Associates, Inc., Research Division Amy Yong - Macquarie Research

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the ViaSat's Fiscal Year 2014 Second Quarter Earnings Conference Call. Your host for today's call is Mr. Mark Dankberg, CEO. You may now begin, Mr. Dankberg. Mark D. Dankberg: Okay, thanks. Good afternoon, everybody, and welcome to our earnings call. I'm Mark Dankberg, I'm Chairman and CEO, and I've got with me Rick Baldridge, our President and Chief Operating Officer; Bruce Dirks, our Chief Financial Officer; Shawn Duffy, our Chief Accounting Officer; and Keven Lippert, our General Counsel. Before we start, Keven will provide our Safe Harbor disclosure. Keven K. Lippert: Thanks, Mark. This discussion contains forward-looking statements. And as a reminder, the 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. Back to you, Mark. Mark D. Dankberg: Okay. Thanks, Keven. So as usual, we'll be referring to the slides that are available over the web, and I'll start with some highlights and a top level business overview. And after that, Shawn will discuss our financial results and then I'll give a little more depth on each of our business segments. And then finally, I'll summarize our outlook and we'll take questions. So once again, we're pretty happy with our quarterly results, which were good across all of our reporting segments. We set a record for revenues again at $354 million. That's up 25% year-over-year for the second quarter, and we're up 29% year-over-year on a year-to-date basis. Adjusted EBITDA also set a new record for us at $54 million, and that's up 22% from the same time last year and up 44% year-to-date. New orders for the quarter were also very good at $391 million. Our Exede consumer broadband service achieved 92,000 gross adds, and that's up 68% compared to last year. Net adds were a little over 41,000 and we ended the quarter with about 591,000 subscribers, with about 430,000 of those on ViaSat-1. ARPU increased about 6% year-over-year, primarily as a result of our higher retail mix, but we're also beginning to see some positive contribution from the VoIP service we introduced last quarter. Our Commercial and Government segments also did well, with good results across a broad range of products and projects. In Commercial Networks, we grew in consumer terminals, in-flight broadband terminals and the Ka-band satellite payload project. That segment also had strong new orders. Our Government Systems segment revenue is still growing, which is pretty remarkable in this incredibly stressful budget environment. New orders growth in Government Systems was also very strong, more than doubling from last quarter, and illustrating again how lumpy things are in that segment. As we noted last quarter, we're increasing investments in new technology, network expansions and in litigation expenses to protect and our -- and extend our technology competitive positions. So with that overview, Shawn will give a description of the financials, and then I'll come back with more detailed highlights in each of the business segments.

Thanks, Mark. Our fiscal 2014 second quarter results were very strong at the top line, down to our core operating performance. Revenues grew by 25% year-over-year and 10% sequentially, with both our Satellite Services and Commercial Network segments achieving new revenue records. Q2 adjusted EBITDA grew 22% year-over-year to $54 million as our consumer subscriber base continues to expand, and we drive growth across multiple markets within our other segments. If we look to the quarter-over-quarter results, we can also see the strength of our operating leverage pushing through, generating sequential adjusted EBITDA growth despite heavier upfront stock expenses associated with this quarter's strong retail gross adds and increased discretionary investments and litigation expense focused on protecting and extending our technology advantages. Turning to our year-to-date results, the financial backdrop's pretty consistent with our Q2 performance. Revenues were up 29% and adjusted EBITDA growth accelerated to $107 million, up 44% for the 6-month period. Margins improved on a year-to-date basis despite increased discretionary investments, driven by the broad top line growth we're seeing across our business segments. Moving to our P&L as a whole and looking into our revenue mix, both product and service revenues grew about 25%. Our product revenue growth occurred within both our government and commercial segments, while the service revenue growth was delivered from our scaling sub base within Satellite Services. We expect this mix of growth to continue throughout FY '14 as we progress in our large scale infrastructure projects, such as NBN in Australia, and recent integrated ground station wins in our Antenna Systems group. As we see in our Q2 results, our expanding service revenues drove improved contribution margins as cost of revenues decreased by 2.6 percentage points year-over-year. This improvement was offset by increases in SG&A and R&D. As we have seen before, SG&A growth occurs in successful high sub add quarters due to the impact of subscriber acquisition costs. We have also mentioned on prior calls that our R&D investments would be growing as we expand high-capacity satellite capabilities, and we see that again in this quarter. Our Q2 net interest expense is down $1.6 million from the prior period due to reduced borrowing rates obtained in the late FY '13 note refinancing, as well as increased interest capitalization related to our ViaSat-2 investments. We will continue to see decreases in interest expense, as more interest is capitalized commensurate with the ViaSat-2 construction activities. Turning to taxes. Our second quarter income tax benefit reflects the effective rate method along with the inclusion of federal R&D tax credits, which were not booked in the corresponding period last year due to the expired legislation in effect at that time. Additionally, we recorded a onetime $3.7 million reduction in certain state deferred tax asset valuation allowances. So overall, we are generating pro forma net income in the second quarter of 2014 of $9.3 million, which is up $11.2 million from last year, a great milestone achieved through the execution of our satellite service strategies, coupled with solid earnings performance in our other product lines. Our year-to-date cash flow from operations was $102.8 million, which increased dramatically year-over-year, generating an additional $61 million income -- in cash compared to this time last year. Strong adjusted EBITDA growth is certainly the driving force, but we are also seeing the benefits of strong working capital management. Moving to investing activities, our capital expenditures during the first 6 months grew by nearly $98 million from the same period last year. As you can see, our ViaSat-2 payments are beginning to dominate our cash usage as we ramp up construction of our newest high-capacity satellite, outpacing our Q2 CPE investments in support of our retail subscriber base growth. So as we close out our second quarter of fiscal 2014, our liquidity remains strong, with $67 million in cash on hand and only $35 million drawn on our existing $325 million revolving credit facility. Mark is going to share some more details around each the segments in a few minutes, but first, I wanted to provide a summary of our Q2 segment level results. As I mentioned earlier, revenues were up significantly in each segment compared to the same period last year. The takeaway here is that our traditional product businesses continue to thrive alongside the successes we are having with our high-capacity satellite service offerings on ViaSat-1. We had very impressive adjusted EBITDA in our Satellite Services and Commercial Networks segments. We did see a slight dip in government segment adjusted EBITDA, reflecting near-term increases in R&D activities and mobile network expansion spending. However, on a sequential quarter basis, our Government Systems segment grew adjusted EBITDA by 12%, which reflects the strength of the core operations. So with that, I'll turn it back over to Mark, who will provide some more color on each of our primary segments. Mark D. Dankberg: Okay. Thanks, Shawn. So we'll start with the Satellite Services segment. And overall, we're pretty happy with the performance of this segment. Revenue growth is still good; it's up 49% from the same period last year. And we're seeing some of the benefits of scale as adjusted EBITDA more than doubled over the same timeframe. Gross adds were good at 92,000, with just over 100,000 installations. And migrations seem to be tapering. As we've discussed in the past, growth in our retail gross adds results in a onetime SAC expense, which cuts into adjusted EBITDA growth in those periods. Those current period SAC expenses, along with higher legal expenses, is what's caused the flattening you see in sequential quarter-over-quarter EBITDA for this particular quarter in the chart on the lower left-hand corner. ARPU is continuing to increase on a year-over-year and a sequential basis. We're aiming to achieve that through higher value service plans and adjacent offerings, such as VoIP, as opposed to retail price increases. Unit economics are still pretty much in line with expectations. With a growing subscriber base and increasing ARPU, we've crossed the $100 million mark in Satellite Services for the quarter. Churn for this quarter was higher than where we'd like it to be in the long term, and I'll give some insight into the causes and approaches to that on our next slide. Overall, we can expect to see variations in subscriber acquisition and retention dynamics as we test and measure different approaches to the market. We introduced our VoIP service last quarter on a limited basis as a bundled offering through our direct sales channel. We're not yet marketing it broadly, and we're still working on scaling fulfillment. But the initial attachment rates and subscriber response are encouraging, and we're aiming to scale it in a methodical way. Over time, we expect it to have a meaningful impact on our financial metrics. We also recently introduced a new service package called Exede Evolution, and that's aimed at removing the usage caps for services other than media consumption, and it's just a first step towards offering our subscribers options beyond fixed usage caps. It's available only in very limited markets so far and provides a framework for testing and measuring some interesting value propositions. The initial results seem promising, and we'll move on to a second set of markets soon. We think of the Evolution's plans as an initial step towards creating, measuring and analyzing new higher-bandwidth service plans that will really benefit from new technologies that we still have under development. We think these new plans and developments, coupled with the big gain in bandwidth economics targeted for ViaSat-2, can create competitive advantage and increase our addressable markets significantly. And that's a good lead into the next slide. So here, one of our objectives with ViaSat-1 was to expand our market beyond merely unserved customers into the underserved market. Underserved refers to customers with access to DSL, some type of wireless or low-speed cable. Before ViaSat-1, we found that people preferred almost any technology compared to satellite. With the Exede plans, though, we took a big jump from 512 kilobits for $50 a month up to 12 megabits at the same price. So our Exede subscribers get high speeds very reliably and they're able to consume more bandwidth too. 12 megabits is faster than the average broadband speed in the U.S., and $50 is an attractive price. Our analysis of the competitive options available to our existing Exede subscriber base shows we penetrated the underserved market, and we continue to analyze the correlation between the strength of our service offering and our ability to successfully appeal to and serve broader market segments. As we do this, we're gaining confidence that we can use speed and bandwidth to effectively compete in a much larger market. For now, although our service is the best choice for our targeted segments of the market, we recognize our offer has been attracting customers that aren't good fits because they have fiber-based alternatives. So what this slide is intended to show is that churn on Exede is not monolithic across the market segments. It's sensitive to the interplay between our plans and customers' alternatives. Churn for the unserved and our good fit subscribers in the underserved remains in a healthy range. But in those customer acquisition channels where we're attracting subscribers that are not a good fit because their usage expectations are greater than what our plans deliver, we need to manage subscriber acquisition more closely by improving the market -- our market segmentation skills and working with our distribution channel to better implement qualification measures. So we're taking steps that help us more accurately predict which subs would be good matches, better informing those subscribers about the trade-offs involved, and that eventually will let us tailor plans to be a good choice for even more people. Simply, we're testing the edges of the envelope. Ironically, we could probably reduce our churn if we raised our prices and/or lowered speeds and made our offer unattractive to those in the under and more fully served markets. That might be okay in the short term, but we think it would inhibit our growth in the long run. We're developing skills that we think will be increasingly valuable as we improve our technology and grow our addressable market. Still, overall, our financial results are good. Our unit economics are in line, and even though subscribers in fully served markets are still profitable for us, we believe over time we can reduce churn by culling our distribution channels that are intrinsically poor and by working closely with those whose long-term interests are aligned with ours. In the near term, churn average over the entire base might persist at these levels for a little while, but we believe the steps we and our distribution partners are taking will reduce it over the next few quarters. Our Commercial Networks segment posted revenues of $110 million for this quarter. That's a 27% increase year-over-year and another record for this segment. Consumer broadband terminals, in-flight broadband, international Ka-band infrastructure projects and Ka-band satellite payload contract contributed to the gains. Higher overall sales, along with improved product and service margins, enabled operating income and adjusted EBITDA to also increase year-over-year. As we mentioned in the last quarter, though, we're increasing R&D investments in next generation technology and that tempered the gains a little bit. One of the main thrusts in this segment is getting our commercial Ka-band, in-flight WiFi and commercial service with JetBlue as the launch partner. We've achieved both FCC and FAA approvals and have been doing pretty extensive test flights with JetBlue. The actual in-service date is up to JetBlue, but we believe it's getting pretty close. We think the service quality and economics will be very impactful and ultimately significantly influence the in-flight WiFi market and create pretty exciting opportunities for us. We're also seeing significant potential interest from international partners attracted to the bandwidth economics, geographic coverage and operational flexibility of ViaSat-2. Obviously, those are large complex opportunities and they're subject to a number of factors and variables, but the benefits of ViaSat-2 technology compared to other broadband satellites seem pretty compelling. We'll provide updates on these opportunities as the business prospects warrant. Our Government Systems segment continues to grow, which is very unique and pretty remarkable in this incredibly stressful defense budget macro environment. Revenues were up 11% year-over-year, driven mostly by a fairly broad-based gain in product revenues this quarter. Blue Force Tracking, Information Assurance and tactical satellite radio products contributed to the revenue gain. As we discussed last quarter, adjusted EBITDA declined somewhat compared to the prior period, primarily due to higher R&D investments and mobile broadband network expansion expenses. But sequentially, adjusted EBITDA was up by $3 million, about 12% quarter-over-quarter. Orders in the second quarter were very strong, again, highlighting the lumpiness in this segment. The awards were pretty broadly based and include mobile broadband, Link 16 tactical data links and Information Assurance. They also include development of new products and/or capabilities that create further production growth opportunities in the future. As we've gone longer and deeper into the stressed budget environment, we're becoming more confident that we're seeing more opportunities because of the tight funding than we had before. Business as usual seems harder to do for the government, and innovative, lower-cost solutions are getting greater consideration, which, overall, is good for us. The flip side, though, is that there are a lot of systemic stresses being induced by the combination of reduction in urgent needs, procurement activities, declining procurement budgets, sequestration, another year of continuing resolutions. It's just a very uncertain and unpredictable macro environment. So while we're gaining confidence that we can continue to grow over the next several years, forecasting on a quarterly basis is challenging. So that brings us to a summary on our business outlook. Overall, we don't think things have really changed very much from our last conference call. Our Satellite Service business is growing pretty steadily in an overall market landscape that we think is pretty favorable for our sector. There can certainly be quarterly competitive fluctuations in the market, but we don't really anticipate near-term market force changes. We believe our investments in new technology can help expand in the market and improve our competitive position in the longer run, and that those investments are worthwhile. Our Commercial Networks business is executing our backlog, it's delivering current generation products and it's investing in new technologies. We see attractive, though pretty lumpy, opportunities there to grow. Our Government business is seeing the proverbial double-edged sword. All the factors I just mentioned on the last slide that make for a tight budget environment increase the attractiveness of our technologies and innovative approaches. But they also make for a very uncertain and unpredictable macro environment. Things are [ph] changing from multiple directions because of the changing procurement priorities, the realtime evolving global events, the government shutdowns, budget re-plans, continuing budget -- continuing resolution budget impacts, and you name it. We believe the overall trend for us is still up, but you need some tolerance for uncertainty on a quarterly basis. We do think the investments we're making are still warranted and worthwhile. So overall, we think our business has performed at a good high level through the first half of this fiscal year, with good top line growth across the segments and improving margins despite the investments we're making in our future. We believe the strategic investments that we've made over the last several years are having the effects we intended. We have a sense our market opportunities are expanding, our competitive position is stronger. And if we can continue to perform, that our most exciting growth opportunities are still ahead of us. So that's it for our prepared remarks. And at this point, we'd be happy to take questions.

[Operator Instructions] And it looks like our first question on the phone will come from Rich Valera with Needham & Company. Richard Valera - Needham & Company, LLC, Research Division: First, I just wanted to see if you could give us the migrations number. I think you mentioned it was trending down, but if you could give us a feel for what that number was. Mark D. Dankberg: I think this quarter, it was around 9,000 ballpark. Richard Valera - Needham & Company, LLC, Research Division: Okay. And then just sort of relatedly, the churn number, wondered how sort of when you started to see the higher churn and if you've already started tuning your plans as we speak and should we -- it sounds like you said it may stay higher, but should we assume that the subs that you're adding today presumably have a more sticky profile than the ones that, maybe you added a couple of quarters ago, that resulted in a higher churn, so you're already, in essence, addressing that higher churn as we speak? Mark D. Dankberg: Yes, the -- so the churn is, as I said in the presentation, it's -- it varies a lot depending on basically where we pull our subscribers from and what alternatives that they have. People that use a lot of bandwidth -- or were using a lot of bandwidth already, especially if they came from like a good cable network or even a fiber network, those are the ones that are most likely to churn. So what we've been doing is, one is analyzing that. And there are a couple of other factors that we can use as well to predict it. So we've analyzed it, sort of have a sense of [ph] confirming it. Now, going back and implementing it across our acquisition channels is a little bit complicated and involves multiple factors. And not all of those fixes take hold the very first time we try them. So that's kind of -- where we are now is we're implementing them, some of them our partners are implementing. We think it could take another quarter before we really see the changes that we're making now take effect in the segments that we're most trying to address. Richard Valera - Needham & Company, LLC, Research Division: Okay, that's helpful. And then your gross adds actually jumped quite nicely sequentially, which was, frankly, a bit surprising given that this was the first quarter you were essentially sharing the DIRECTV channel with Hughes. So just wondered if you could talk about your overall sort of gross -- your installations and how we should think about that number going forward? And if there's any color you can provide on DIRECTV, which, again, doesn't seem like there was much of a blip there. Mark D. Dankberg: We don't want to -- I think, for competitive reasons, we're not going to go into too much detail. There's -- there are a number of different factors involved, which it's -- one of them being that there's a fairly predictable amount of capacity available on our satellite and the Hughes satellite, which is very, very similar to ours. And so the fact that there's a finite amount of capacity and there seems to be good demand has an impact on how it's playing out. And I don't think things are going to change a whole lot. I mean, I think the biggest factors will just be sort of the rate at which different beams fill up and how we all manage through that. But I think that overall dynamics aren't going to change that much. And I think both DIRECTV and DISH are realizing that satellite broadband is a good companion to satellite TV, and they're both pretty interested in having that work well across both suppliers. Richard Valera - Needham & Company, LLC, Research Division: Great. And one final one on ARPU, if I could. ARPU, as you noted, was sort of a pleasant surprise and seeing some lift you mentioned from VoIP. I know you don't want to give specific guidance, but how -- if you had to think about ARPU, a few quarters from now or 1 year from now, would you assume that it likely keeps going up as you, perhaps, get better attach rates on VoIP or the mix improves towards some sort of higher end product? I mean, how do you think about ARPU looking out a few quarters or a year? Mark D. Dankberg: Yes, I think that we have opportunities to steadily improve ARPU, not super dramatically. It'll depend on the introduction of these new services. And that's really our main objective is to sort of introduce more value than price, in some sense, going forward. We're trying to do that through the VoIP, through the Evolution plans that we talked about. And I think we have a couple of other ways to go. And I think that for the -- relative to the speeds that we're offering, I think we have a pretty attractive price and there's opportunities to increase our ARPU and still deliver good value, which is -- that's the effect we're trying to achieve.

Our next phone question will come from Yair Reiner with Oppenheimer. Yair Reiner - Oppenheimer & Co. Inc., Research Division: So if you could help me with the math on the Satellite Services, you have about 41,000 subs more on average in the quarter. It seems that, that should provide a quarter-on-quarter growth of about $6 million or $7 million, but you obviously reported growth significantly higher than that. What is the delta there that gets us to that $15 million of quarter-on-quarter growth?

So are you -- you're talking from the top line revenue growth? Yair Reiner - Oppenheimer & Co. Inc., Research Division: Yes, in Satellite Services.

Yes, so I think it's predicated just on the mix of the subs. And we're continuing to see the retail subs drive upward, which is driving the ARPU. So that, with the weighted average sub [ph] growth, that's the -- that's the biggest drivers. Richard A. Baldridge: I'd say -- Yair, this is Rick. I'd that it's more dependent on where we ended the last quarter than where we ended the current quarter. I mean, it has some of that in there, but...

Timing impact. Richard A. Baldridge: Yes, so it's a combination of both of those. So you can't really just look at the current quarter adds and get there. Yair Reiner - Oppenheimer & Co. Inc., Research Division: Got it. So I guess that implies that the June quarter was probably back-half loaded? Is that fair? Richard A. Baldridge: I don't think so. No, it's not. You just have to integrate it. It's -- you have to integrate the...

A full quarter of the prior quarter subs. Richard A. Baldridge: A full quarter of the prior quarter subs plus -- I mean, if you said it was even, roughly 50%, of the current quarter, an average of 50% of the current quarter subs and blended between retail and wholesale. So it's not -- you can't just take the net adds in the current quarter and get to the revenue growth. Yair Reiner - Oppenheimer & Co. Inc., Research Division: Understood. And then can you give us a sense of the wholesale retail mix in the quarter and how that's trending? Mark D. Dankberg: No, we're not going to break it out explicitly. We're still mostly retail, and it varies from quarter-to-quarter, depending on a bunch of factors, a lot of which are under the control of the satellite TV companies themselves. Yair Reiner - Oppenheimer & Co. Inc., Research Division: Okay. And then just one last one for me for now. Legal costs, I know you've called those out the last couple of quarters. I know that maybe before you go into litigation, you probably don't want to give us an exact number. But can you give us a sense maybe for the year of what you're looking at towards [ph] this legal expense just so we can have a baseline going into 2015?

Yes, I think what we've talked about and we kind of mentioned last quarter is that the impacts to this year are going to be more significant clearly than they were last year. Q2 was kind of a ramp-up in the activities as we started working through the discovery part of the case and closing that out in this quarter. So I think what we're going to -- we're going to continue to see a lift in those impacts in each of the quarters and definitely higher for the year. This quarter was a little -- definitely a higher quarter than the sequential quarter, and it's really going to be based on the timing of the actual case, whether it happens at the end of this year or into the beginning of next year.

Our next phone question will come from Tim Quillin with Stephens. Timothy J. Quillin - Stephens Inc., Research Division: With regards to churn, is there -- are we seeing any difference between the churn rates in the wholesale channel versus the retail channel? As I recall in a couple of quarters in fiscal '13, you'd had some issues around the timing of the reported deletions from your wholesale partners. Is there any difference right now between churn in the channels? Mark D. Dankberg: No, I would attribute different -- I would attribute churn more towards the market segments themselves. And it's really the factor that I described, which is sort of our plans relative to the alternatives that the subscribers have. And it's because of the headline number, which is 12 megabits a second for $50 is attractive. And so we're trying to make sure that subscribers understand what the volume limitations are. That's primarily the biggest issue. Now, between the 2 satellite TV companies, DISH tends to skew more rural than DIRECTV, and so that would have implications about what their choices are. But I would say that it's really -- that the issues really have to do with subscriber alternatives as opposed to the TV channel itself. Timothy J. Quillin - Stephens Inc., Research Division: Right. And it -- but it sounds like some of your -- either your retail partners or your call centers are not communicating the caps well to potential consumers. Is there any differences in how you do that internally versus how you think external partners might, might be communicating those caps? Mark D. Dankberg: Yes, when you go -- and one thing is, we've been going into the call centers. And I can tell you that some of the distribution partners that we've had accounted for a way disproportionate amount of churn. And we terminated several of them because we didn't feel that they were taking steps to really deal with the issue. The ones that we have now, we believe that they are, some of them are -- they can be implementation issues. Some can have to do with the way information is presented to the call agents themselves. So it's actually, I would say, a fairly detailed process, and we're going through it in great depth. And I think that's actually one of the things we've come to admire and respect is the depth to which the best ones do that. And so we're adopting those things, but not everything can be changed overnight. And I think we're -- we and the distribution partners that we have that are engaged are -- we're doing a good job, and we'll get there, but it's probably not going to be turned around in a quarter. And also, we're going to -- we're trying different things because we don't want -- we want to present what we have in a favorable light, but just make sure that people understand what the trade offs are. Timothy J. Quillin - Stephens Inc., Research Division: Right, and the answer is that yes, there's the fine print. Richard A. Baldridge: Even some of the worst channels, though, are -- they're profitable and they still can be positive, and so this isn't a horrible problem [ph], this is still and we're learning how people take our service. So it's not -- it's something we're working on improving, but it's not a bad thing. Mark D. Dankberg: Yes, I want to give -- there's one other point I want to make, which is, the flip side to this thing is one of the things that we're learning is, you put out a good headline offering and lots of people are interested as opposed to the notion of, how are you ever going to sell satellite to people that have a choice? Well, we're finding sort of the flip side, which is, you present a good economic offer, and it's really more an issue of making sure that people understand the trade-offs and where it's a good fit. So we're not anxious to sort of solve the problem in a crude way that diminishes that effect. What we're trying to do is understand sort of what the edges are so that when we make improvements in our service, we know how to go back and get the corresponding interest from potential subscribers and how to deal with that, and that's a little bit why we're dealing with it the way we are. And I think to Rick's point, it's worse than what we're targeting, but the results are still good overall. So it's not like a -- we don't regard it as a crisis. We're just trying to improve it. Timothy J. Quillin - Stephens Inc., Research Division: Great. And just one last question on -- migrations were good, I guess, year-over-year, but up a little bit quarter-over-quarter. You're down to about 160,000 subs or a little over that on the old WildBlue satellite. How many of those subs are in areas where they would not be able to be served by ViaSat-1? So in other words, where is the floor in that business? Mark D. Dankberg: Yes, we're getting -- and that's a good point. We're getting fairly close to it -- to the floor. Actually, I think that the number of subscribers that we end up with from the legacy satellites is actually going to be influenced a fair amount by some of these alternative uses that we're coming up with, like in-flight Wi-Fi or some of the live events or media-type things that we're doing. But we're getting pretty close to the floor, and the migrations, we think, it's going to continue to taper away.

Our next phone question will come from Mike Crawford with B. Riley & Co. Michael Crawford - B. Riley Caris, Research Division: On the Commercial Networks side, you talked about development progress on Ka-band satellite payload. Is that NBN? And where do you stand with NBN, both in terms of kind of percent complete on what's already been booked, plus any status of any discussions to extend what you might be able to do for them? Mark D. Dankberg: Okay. No, the Ka-band payload project is not NBN. It's a contract that we have with Thales on the Iridium NEXT program, where we're doing the Ka-band feed links and cross-links, which is a very good project for us. On NBN, do you want to take that? Richard A. Baldridge: Yes, there we're in the 30% to 40% complete range. We're through most of the development effort. We're beginning to deploy antennas. The first gateway will go in and be -- begin installed on January 6. It's being shipped early today, I think, or yesterday. It's -- right now, it's being shipped over. Second one's right behind that. So gateway deployment going on. We've moved -- a whole network test facility is installed over in Australia. We have a duplicate one here, so we're going through all the base-end selloff test. So we're right in the middle of integration, a bunch of testing and beginning hardware deployment. Mark D. Dankberg: And then in terms of the macro picture with NBN, they've had a change in government in the last couple of months. They've -- the new government has expressed a desire to use more of their existing telco infrastructure, do more fiber-to-the-node and a little less fiber-to-the-home on their existing market base, on the existing homes in Australia. Overall, I think that makes for a little bit more unpredictable deployment environment for terrestrial. And the sense is that for satellite, it can create more opportunity. That's predicated on people having a good understanding of the quality of the satellite service, which, as we've seen here, is a little hard to appreciate until you can see it for yourself. But I think overall, it creates a more favorable environment for us long term. Michael Crawford - B. Riley Caris, Research Division: Okay. And then you've also in the past talked about some other big NBN-sized or actually bigger-than-NBN opportunities. Can you elaborate on either what any of these might be or what any potential timing could be related to these opportunities? Mark D. Dankberg: No, we're not going to go -- I don't think it'd be a good idea for us to go into them by name. The basic idea is that once we've put out sort of the overall objective that we're setting out to achieve with ViaSat-2, there are people that -- who have been looking at other satellite broadband satellites that go, "Wow. If you can really do that, that's pretty impressive." So that's kind of the basis of the discussions that we've had, and we've been really happy in working with Boeing. I think one of the typical things people -- we've had people going to visit Boeing and saying, "Will it really do this? Can that really be done?" And so we think that's sort of a necessary step to get people to be comfortable with what the capabilities are. It's an expensive satellite, but the functional capability is we think the best available and for a few big opportunities where people are looking at that scale, that's -- those are the kind of things that we're engaged in. We just don't know what the timing would be and whether or not they'll come to fruition, but we're happy that we're having these types of engagements for the right reasons. I think that's what's encouraging at this point. Richard A. Baldridge: And Boeing has done a good job from a team standpoint of representing ViaSat and Boeing as a team in pursuing these. Michael Crawford - B. Riley Caris, Research Division: And kind of -- and I guess, adjacent to that, you've talked about a desire to perhaps obtain capacity on new Ka-band systems, preferably using the ViaSat-2 architecture sold by you and Boeing. Is there -- is that something that still remains quite a ways off before we could see any news on that front, or is that kind of coming up closer on the horizon? Mark D. Dankberg: We look at -- the opportunities that we're looking at are that they would start before ViaSat-2 is launched in some time. Maybe some of them could start within a year. It's just, it's a little bit hard to tell. Depends on what -- depends on catalysts and budgets with each of the opportunities we're looking at, but there are 2 or 3 of them in play, so that's a good number at this point. Michael Crawford - B. Riley Caris, Research Division: Okay. Final question, related -- regarding in-flight broadband. Have you had any talks with carriers that already have a mobile broadband offering, but who might want to offer a materially improved service? Mark D. Dankberg: Yes, yes. I mean, usually the context for that is in fleet expansion or adding to their fleet or swapping out their fleet. And I think that when that happens, they're definitely interested in what's available at the time. And so I think that gives us entrées into pretty much all the carriers. I think a lot of it's going to be influenced by the first deployments that we'll see with JetBlue and then United. I think those will have a pretty big influence when people can fly around and actually see how it works. So we're getting close there, but we're not -- it's hard to expect things to move too fast before that happens. We have one thing that is kind of cool is, because there is an airplane flying around that's equipped, people from the airlines have flown on that airplane just to see how it works, and that's been encouraging. So I think that people are getting a sense of what's possible.

Our next phone question will come from Matt Robison with Wunderlich. Matthew S. Robison - Wunderlich Securities Inc., Research Division: Can you maybe talk -- well first of all, congratulations on the government bookings. That was pretty stunning. And are we -- do we just kind of not really know how the pipeline develops from here and just sort of take it as it comes? Or do you think we can have further sort of catch-up on the bookings in the current quarter? Mark D. Dankberg: So as far as the bookings go, things are not -- they're not just appearing that we're not expecting. The thing that's happening is we're working on opportunities with specific customers or to extend opportunities with existing customers. And there's just a lot of uncertainty in when they'll have budget available, what the authorities are for using that budget given the continuing resolution, the sort of the wind-down in some of these urgent needs spending authorities. So things are moving around. And it just makes it hard for them to be able to predict when things are going to actually close. And that's a big part of what accounts for the lumpiness. The part that's good that we're trying to convey is that we've had opportunities for things. I'll give -- one example would be like things that were Joint Tactical Radio System applications where it becomes more evident that either the program of record isn't going to be able to deliver, won't be able to deliver in the time frame, or that the target price points don't fit the budget for the application. And people are coming back and saying, "Well, I understand you've got this. And how can that be made to work?" And so we're seeing more of those kinds of opportunities, and that's what gives us some sense of confidence that things will grow. But it's really hard to predict what the trajectory of the funding will be for them. There's quite of few things in the works, and we're not trying to convey a change in our view of what it is. We're just trying to convey the uncertainty in the timing. Matthew S. Robison - Wunderlich Securities Inc., Research Division: Well, yes, I mean, it sounds like that's your kind of -- core to your value proposition, things like that. So on the Commercial Networks, since you're so far along with NBN and with some pretty major milestones, it sounds like, coming in the next few weeks or next couple of quarters, should we kind of assume that you're going to have another couple more strong quarters like this in the near term? Richard A. Baldridge: Can you -- did you understand?

I think I got your question. I think what you're going to see is, what we've talked about before is NBN was going to kind of scale kind of as we were building throughout FY '14, and then we may see kind of some curtailing of that as we enter into '15. So I think that we're going to see some continued strong trends. We also have, though, we've had some good successes in some of our terminal revenues as well, stemming out of the surfing, as well as some of our younger products. So those can be lumpy as well and kind of push 1 quarter one way or another.

I think it's pretty hard to predict. Matthew S. Robison - Wunderlich Securities Inc., Research Division: [indiscernible] what we should be thinking about for taxes [indiscernible] of these benefits?

Sure. Yes, I can walk through that a little bit. So overall, what we discussed is that the current quarter had a onetime effect of this discrete item on the valuation allowance for state taxes. But overall, if you look kind of out to the rest of the year, which is kind of in line to what we've disclosed before, taking into consideration the R&D credits, we expect the rate's probably going to be around 80%. It can move based on different dynamics of the R&D credit to the income, but -- and the effect of the discrete items, but if you look out to the year, it's around there. Matthew S. Robison - Wunderlich Securities Inc., Research Division: You said 80%?

Yes, as you're closing on them. And that's just on [ph] from the effective rate perspective, but again it's very -- it's conditioned with the effects of the discrete items. Matthew S. Robison - Wunderlich Securities Inc., Research Division: Well, 80%, you mean -- so 80% of 35% or 40%, is that what you mean?

Yes, so to go back to kind of the elements that we've talked about before, you just need to look to the statutory rates. And then because the R&D tax credit is effective through the end of December, and we're using an effective rate method, those benefits are formulated within the rest of the year results. Matthew S. Robison - Wunderlich Securities Inc., Research Division: Okay. Rich, maybe this one's for you. How do you see the pace of LiveTV with United versus JetBlue, and how do you expect the split to go between Gogo and Exede for United? Richard A. Baldridge: United's not using Gogo except for on a few [ph] PES [ph] aircraft. They chose Panasonic and a Ku option for the United deal, the old United aircraft side of the fleet. And they chose a LiveTV, ViaSat Ka-band on the continental, the old continental side of the fleet. And then there are some aircraft in the middle that are up for grabs that's a dark aircraft that hasn't has been selected yet. And we hope that once they start flying the United airplanes that we'll get those. Matthew S. Robison - Wunderlich Securities Inc., Research Division: So you don't see that Gogo will get any incremental traction with their GTO offering at United. Richard A. Baldridge: No, I don't -- I'm not forecasting Gogo. I'm obviously horrible at forecasting Gogo's offering but... Matthew S. Robison - Wunderlich Securities Inc., Research Division: So that when United's advertising their satellite service they're offering now, they're talking about at the current moment Panasonic, it sounds like. Richard A. Baldridge: Panasonic, yes. Ku-band satellite. Matthew S. Robison - Wunderlich Securities Inc., Research Division: Yes, sure. And then last question for me is, what quarter are we, is our current thinking for the ViaSat-2 launch? Mark D. Dankberg: Well, so the satellite construction schedule should be first half of 2016. Sort of in early or middle first half-ish of 2016 according to the current schedule. The launch would probably be hopefully right around the middle of the year.

Our next question will come from the line of Chris Quilty with Raymond James. Chris Quilty - Raymond James & Associates, Inc., Research Division: Just a thought on that last question, have you announced the launch provider yet? Mark D. Dankberg: No, we have not. Chris Quilty - Raymond James & Associates, Inc., Research Division: Okay, and you have quite a bit of time before you have to make that decision, contingent on getting the right launch slot. Mark D. Dankberg: Yes. Chris Quilty - Raymond James & Associates, Inc., Research Division: So a question on churn. If I ran the numbers right here, it looks like WildBlue was down about 30,000 subs, which means net of migrations, you were down about 20 on the -- or 20,000 churn on the ViaSat-1 satellite. And I guess my question is twofold. Number one, are those numbers right? But since the satellite's been in service for less than 2 years and generally, people are signing a 2-year lease contract, how does that work in terms of recapturing equipment? Are you able to do that? And how does that impact the accounting of those particular customers? And the second part of the question is with your reseller partners, was there something -- some kind of provision written into the contract, whereby there was a hook on the back end. So they might get a commission if they sign up somebody, but if the guy doesn't stay for his 2 years, you get a claw back? Mark D. Dankberg: Okay. So there's a bunch of good things in there. So one is when we look at churn, we think about this issue that we described, which is sort of, for whatever reason, a mismatch in expectations from people who are coming from, say, a cable- or fiber-based solution to satellite. That manifests itself pretty soon. And people that find themselves in that situation are pretty much terminating well ahead of the 2-year schedule. So there is a termination fee associated with that, and we have the right to recover the equipment. We don't recover 100% of it. We look at our actuals on the recovery, and we do true-up our costs and our recovery -- we true-up our recovery costs and expense the stuff that we can recover as it happens. And that -- I think we've done a pretty good job on that. Things move around a little bit, but I think we account for that the way we should. The biggest issue on that churn, on that front on churn, and this is the issue we talked about, is really that upfront sort of qualification process of trying to match our service to subscribers that would be a good match. When we sell wholesale, the retailers really bear that risk; when we sell retail through the agents or other distribution partners, we bear that risk. In general, what we find is that the best of the distribution channels don't like the churn any more than we do, and they work with us to bring it down. We do have provisions or retention provisions in our agency agreements that are intended to cover this. And we may change those or introduce different incentives from time to time to help deal with the issue. But we think that the #1 issue is really the whole step-by-step process by which we attract, qualify and enroll subscribers. So we're looking at it holistically. Does that answer your question there? Chris Quilty - Raymond James & Associates, Inc., Research Division: It does. I'm just thinking back to the early days. I was really impressed that, at the time you were pulling in, 40% or so of your subs, when you pulled them were coming from terrestrial subscribers and clearly some of those guys weren't good catches, but, I guess, if you were able to tool the marketing and the sign-up process, do you still think the business model and the plans that you've devised would support bringing in a significant number, I don't know if it's 40%, of your subscribers as terrestrial flips rather than saying, "Wait a second, maybe we need to retool this entire thought process and maybe go after more the really unserved or super unserved customers"? Mark D. Dankberg: Look, in general, one of the things that we've found is, over time, that the fraction of subscribers we're getting that do have terrestrial alternatives has gone up from that 40%. It's significantly higher. And when we look at that increase and where those subscribers are coming from, we are able to pretty much deduce what the issues are and where we're deploying them from. And that's sort of the root of the approach we're taking to manage that problem, the problem being that people who are high-bandwidth users who come from good choices tend to churn more quickly. So, we're -- as I mentioned, we're going through this qualification process to deal with that. What we think is, as opposed to retreating away, we find this encouraging, and what we're trying to do is use some new technologies and the increase in bandwidth that we are expecting to get with ViaSat-2 to actually cast a wider net, not a narrower one. That's -- I think that's our long-term plan. We're trying to do it methodically. In some sense, what we're doing is we're facing this market segmentation issue head on: How do we find subscribers that are good fits for us that are substantially beyond just this unserved segment? Richard A. Baldridge: That's it. If ViaSat-1 was a project, we probably wouldn't do it this way. And since it's the first in a series, then this approach is really important. Chris Quilty - Raymond James & Associates, Inc., Research Division: So a learning process? Mark D. Dankberg: Yes. Chris Quilty - Raymond James & Associates, Inc., Research Division: And just to clarify, are these mainly in terms of retargeting who you're going after, these are mainly soft costs? Or are there some kind of implications for a higher SAC in order to get the targeted customers? Mark D. Dankberg: No, no, we won't [indiscernible]. Richard A. Baldridge: I think we said they've improved. Chris Quilty - Raymond James & Associates, Inc., Research Division: Okay. I know you don't provide guidance, but just to clarify -- sorry, not Q4. The December quarter is traditionally up sequentially in terms of net adds? Richard A. Baldridge: Yes, last year was a really good quarter for us. Chris Quilty - Raymond James & Associates, Inc., Research Division: Okay, and Shawn, can you give us perhaps target CapEx spending for the full fiscal year?

Yes, I think what we've talked about is the milestones on ViaSat-2 are going to be a big driver. I think what you're seeing in the Q2 results is that the CPE spend was a little bit down to Q1, even with the gross adds. And we talked about those dynamics a little bit before with the redeployment of some of our CPE as we get new subscribers. So I think if you kind of look at where we were Q2 and consider those dynamics continuing to happen in a slightly progressive rate a little bit. And then probably for ViaSat-2, looking at what we did for Q2, we're going to see those things happen for Q3, Q4 as well. But again, it's going to be based on milestones and they're significant, so we can have some fall into next year. Chris Quilty - Raymond James & Associates, Inc., Research Division: So not a range?

Yes, I think, specifically, I think it can move a lot. So probably -- yes, I think it's probably better sense to look at our Q2 trends and kind of look at that out to Q3, Q4. Chris Quilty - Raymond James & Associates, Inc., Research Division: Okay, and final question on the Government Systems, it looks like the service-related business was down about 20% sequentially, 15% year-over-year. You had a pretty huge step up in the service revenues over the preceding year, 1.5 years. And I know you had talked about some revenue risk as we withdraw out of Afghanistan. Is this probably the floor on where you would expect those service revenues to trend, or is there more downside as we continue to withdraw? Mark D. Dankberg: No, we had -- so we have different business areas that contribute to our overall services. One of the things that we talked about last year was we provided bandwidth on an interim basis on Blue Force Tracking 2. And that's pretty much ended I think as a result of that data procurement competition to do that on a sort of under their program of record basis instead of going through us. We might get that again in the future. There'll be opportunities for us to compete for it, but I think that's one of them, if not the major, reason that you're seeing the decline year-over-year. Chris Quilty - Raymond James & Associates, Inc., Research Division: So the actual Command & Control business remains relatively steady? Mark D. Dankberg: Yes. Well, if you look at the ISR business that we've had in the Command & Control portions of the mobile broadband, the trends have been pretty good in terms of getting more platforms and more users. One of the issues that definitely will come into play is going to be the drawdown from Afghanistan. On the other hand, one of the things that's encouraging is that the users have found the capability to be really valuable. And there's not a shortage of places in the world that need this kind of a capability. And so part of what's happening is those assets and the corresponding service are looking like they're going to be redeployed in other places.

Our next phone question will come from Amy Yong with Macquarie. Amy Yong - Macquarie Research: I have 2 follow-up questions. Number one, what was your end subscriber number on your legacy satellite for the September quarter? And secondly, on in-flight, what maintenance check would install the equipment on the JetBlue and United aircraft? Is it the B or the C Check? Mark D. Dankberg: Okay. On the first one, we -- well, what we've said we have about 591,000 subscribers at quarter end and about 430,000 of them were on ViaSat-1. So that would be about 160-ish thousand between WildBlue-1 and Anik F2. On the second point, Rick, you can correct me if I'm wrong, but basically, in order to achieve the install tempo that they want, that is to get the WiFi deployed in the fleet, so they're going to do special installations and that they won't be under -- not all of the aircraft will get them on under the normal maintenance cycle. Amy Yong - Macquarie Research: I see. So these would be in addition to the regular maintenance cycles checks that they have? Richard A. Baldridge: Yes, they may reschedule. They may integrate some of the normal maintenance stuff. They might may do some early, for instance because they've got the aircraft out of line. But they're -- that's up to the airline. So we're following their lead on scheduling those, but Mark's right. That tempo and the rate they want to install these things, it doesn't line up with normal maintenance cycles perfectly.

[Operator Instructions] Richard A. Baldridge: I think we're going to shut it off at this point.

Okay, sir. Well at this time, I don't show any additional questions in the queue. I'll turn the program back over to you for any additional or closing remarks. Mark D. Dankberg: Well, that covers what we had to say for this quarter. Thanks a lot, everybody, for joining our conference, and we look forward to speaking again next quarter.

Thank you, presenters, and thank you, ladies and gentlemen. Again, this does conclude today's conference. Thank you for your participation, and have a wonderful day. Attendees, you may now all disconnect.