Mark Dankberg - Chairman and CEO Shawn Duffy - Chief Financial Officer Keven Lippert - General Counsel Rick Baldridge - President and COO

Rich Valera - Needham & Company Matt Robison - Wunderlich Mike Crawford - B. Riley & Company Chris Quilty - Raymond James

Welcome to ViaSat Fiscal Year 2015 Fourth Quarter Earnings Conference Call. Your host for today’s call is Mark Dankberg, Chairman and CEO. You may proceed, Mr. Dankberg.

Thanks. Good afternoon everybody and welcome to our earnings conference call for our fourth quarter of fiscal year 2015. I’m Mark Dankberg, Chairman and CEO. And I have here with us Shawn Duffy, our Chief Financial Officer; and Keven Lippert, General Counsel; and Rick Baldridge, our President and Chief Operating Officer is attending by phone. Before we start, Keven will provide our Safe Harbor disclosure.

Thanks Mark. As you know this discussion contains forward-looking statements. This is 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 SEC or from our website. That’s it. Back to you, Mark.

Okay, thanks. So we will be referring to slides that are available over the web. And I will start with some highlights and a top level business overview. And then Shawn will go over the consolidated and segment financial results. And I’ll give some additional details and color on each of our segments and then I’ll summarize our outlook and we can take questions. So, the headline for the fourth quarter and fiscal year ‘15 as a whole is certainly growth in adjusted EBITDA. That increased 55% and 56% in the fourth quarter and fiscal year year-over-year respectively. And we achieved that on a relatively modest year-over-year revenue growth of 6% in Q4 and 2% for the year. The numbers really reflect our continuing transformation to capture the value of our technologies by bringing services to market. In fiscal ‘15, we had pretty difficult year-over-year comparisons in product sales for two main reasons. We had declines in certain government product sales especially our Blue Force Tracking 2 system and a difficult comparison because of a bulge in product sales last year for our large national broadband network project in Australia. But strong growth in Satellite Services especially consumer but also in enterprise and government overcame those headwinds in revenue and they drove strong growth in adjusted EBITDA. Services made up a growing proportion of our total revenues and through steady operational improvements as well as leveraging the benefits of our bandwidth economics we increased the margins on those services’ businesses too. Shawn will go into more depth later, but for fiscal ‘15 we grew adjusted EBITDA by about 38% year-over-year, even excluding the non-recurring effects of Space settlement regarding the ViaSat-1 intellectual property. By now it should be clear that our growth rate is not so much constrained by aggregate demand for our Satellite Services as it is by availability of bandwidth and transient mismatch in the geographic demand compared to our bandwidth supply. We’re in some form of capacity rationing regime in about half of ViaSat-1’s coverage, while yielding better than projected unit operating results. Our services for commercial airlines and government customers are growing. And since those are mobile services, they are actually helping equalize demand over the whole coverage area. The new service plans we’re introducing and testing in lower demand geographic markets are helping us improve customer satisfaction, improve new bandwidth management efficiency technologies and test market in anticipation of ViaSat-2 satellite. All these factors have helped us enhance our consumer distribution and fulfillment channels, and improve operational alignment with our existing partners. In the past few months, we’ve had some significant accomplishments in both commercial aeronautics and government markets that we expect will drive services growth in both of those. So, until ViaSat-2 launches and enters service, we believe we have something of a high class problem in balancing the bandwidth demands among these customer and distribution bases. But nevertheless, because of the underlying demand driving our services businesses and our government business as a whole, we still have a good opportunity to continue to grow adjusted EBITDA at about our historical 20% compounded annual growth rate, excluding the non-recurring effects of Loral settlement even for the time interval before ViaSat-2 goes into service. And this is also a good time to point out that one of the most important and unique elements of ViaSat-2 is that it’s fundamentally a new system design that significantly improves bandwidth economics, geographic coverage area and it substantially improves our ability to better match bandwidth supply to time varying geographic demands. We think that’s a unique combination in satellite industry and it’s one of the reasons we’re so enthusiastic about the results we’ve achieved this past year. We believe a combination of those ViaSat-2 technologies enable real competitive advantage in each of our target markets. So, I’ll get back in a little while to go into more depth on the businesses and our outlook, but now Shawn will go into more detail on the financials.

Thanks Mark. Slide five shows revenue and adjusted EBITDA performance for the fourth quarter and fiscal year compared to the same period a year earlier. As to our revenue performance, Satellite Services continues to be the clear driver of overall revenue growth, offsetting declines in Government Systems and Commercial Networks for fiscal 2015. Our Satellite Services segment is being fueled from multiple dimensions both in overall sub base, strong increases in revenues earned per sub, as our Q4 ARPU reached over $54 and continued growth in broadband aviation revenues. The wind-down effects of two very large very successful programs drove the year-over-year top line reductions in our government and commercial segments, the BFT program completion last year in the government segment and the NBN Co program in our commercial segment which will continue to scale downward to completion in FY16. An important notable in our government segment was this record award year, pushing government backlog to $382 million, an increase of 36% year-over-year, which is a pretty strong metric, as we look outward to this market sector. Our adjusted EBITDA growth continues to be significant, both in the quarter and for the full year, closing out to $345 million a $123.6 million year-over-year increase. Strong top-line plus margin expansion, as we steadily improve unit profitability on our existing customer base drove the Satellite Services segment performance, as Mark mentioned earlier. Additional margin gains and reduced R&D in our government mobility area, plus contributions from our newly acquired managed Wi-Fi service business, NetNearU all-in contributed to our FY15 earnings growth, setting a new record for adjusted EBITDA performance. We talked about our top line revenue and adjusted EBITDA results on the previous slides. The next slide highlights some of the other major influences on reported net income and earnings per share. Our net interest expense declined $8.5 million from fiscal 2014 primarily due to more capitalized interest on ViaSat-2, partially offset by additional interest expense on our higher outstanding debt balances during the fiscal year. Keep in mind that our capitalized interest will continue to increase year-over-year as our total CIP balances grow with the construction of ViaSat-2 balanced by a decreasing weighted cost of borrowing as draws on our revolver and Ex-Im financing vehicles increase relative to our senior notes. In taxes, we saw a large swing year-over-year from a net benefit of $26 million in FY2014 to an expense of $13.8 million this year, primarily as a result of moving to a profit position. As we have mentioned in prior quarters, our FY15 taxes also include impacts from the retroactive extension of the federal R&D credit legislation. Specifically looking at the year-over-year impacts, our FY14 included only three quarters of tax credit benefits. All-in FY15, our results included four quarters of benefit overall, one from Q4 2014 and three from 2015, up until the legislation expire yet again on December 31, 2014. So all in all, we recorded approximately $0.20 per share benefit this year which will not reoccur in 2016 unless the legislation once again gets extended. Another important note around taxes is the relationship between our GAAP income tax expense and actual cash taxes. Through our acquisition of WildBlue in Fiscal 2010 and other favorable tax selections on our asset base, we have been able to nearly offset, all our current year cash tax obligations which is pretty favorable position to be in as we look outward to the next couple of years. So overall, we saw very strong net income growth, swinging by nearly $50 million from a net loss of $9.4 million in FY 2014 to net income of $40.4 million this year. And our non-GAAP net income performance was even slightly better with $56 million increase from the prior year representing $1.14 per share improvement to $1.58 income per share for fiscal 2015. For reference, on the right side of the chart, we have provided a reconciliation of adjusted EBITDA to net income and net income to non-GAAP net income to reflect the relationship between these metrics and the related components. So, let’s turn to the next slide where we show graphically the change in non-GAAP net income between FY 2014 and FY 2015 which provides some context as we look outward to next year. Given the large increase in FY15 non-GAAP net income, we wanted to provide a walk forward of the major drivers contributing to this increase, and show the relationship between our EBITDA growth and non-GAAP income, taking in account all the below the line elements such as interest and taxes as well as our year-over-year cost mix. Starting at our FY14 non-GAAP income of $20 million then moving to the right we see the $84 million increase in recurring adjusted EBITDA as our overall core business continues to grow, strongly. Continuing to the right, we see the additional $40 million of non-recurring adjusted EBITDA we recognized in the second quarter related to SS/L settlement followed by the unfavorable impact to income of $33 million related to additional depreciation and other amortization commensurate with our growing business. And then sequentially the effects of other non-operating elements, the cap interest benefits of $8.5 million offset by $43 million variant related to our taxes on our core income growth net of the FY15 R&D credit benefit. The key takeaway is we continue to grow with FY16 reflecting good core operating adjusted EBITDA growth which Mark will touch on, a bit more later. However, keeping in mind the significant non-recurring items, the Q2 SS/L non-recurring settlement gains and our R&D credit benefits, plus shifts in our cost mix corresponding to our growing service business such depreciation and amortization is important as we look outward to FY16 earnings on a per share performance basis. So moving to the next slide, we have cash flow, liquidity and leverage information. Our cash flow from operations for the year grew by over 70% or $144 million from fiscal 2014. This pretty closely tracks to the $124 million increases in adjusted EBITDA, plus our year-over-year improvement in working capital positions. Capital expenditures and investments for fiscal 2015 increased by $122 million from last year with two primary parts: First due to our PP&E expansion, namely ViaSat-2; and second associated with the purchase of our managed Wi-Fi business NetNearU in the first quarter. Additionally, we closed on $525 million spending commitment for ViaSat-2 from the U.S. Export-Import Bank in March and have started making our initial draws. To recap, the loan in available to finance up to 85% of the costs under the Boeing contract, SpaceX launch contract and related insurance. This includes amounts previously paid before the Ex-Im loan was closed. Given the overall favorable interest rate environment, we locked in fixed 2.38% recurring rate to the term of the loan. Taking into account upfront exposure fees associated with each draw and commitments fees on undrawn amount, the overall effective cost of loan is approximately 4.4%, based on the expected timing of our drawdown, which is quite favorable to our existing fixed rate stock. This puts us in a very good liquidity position of over $550 million. And I should point out that this is not included in other $200 million of liquidity associated with the overall commitments with Ex-Im Bank which technically becomes available as we make additional milestone payments under the related satellite contracts. So, we closed FY15 with a net leverage position improvement to about 2.2 times our trailing 12 months adjusted EBITDA from the previous quarter, which keeps us in a very comfortable level position and provides us a lot of balance sheet flexibility for other strategic opportunities going forward. So with that I will turn it back to Mark.

Thanks. So, the metrics for our consumer business are consistent with our balancing act for bandwidth supply and demand across our target consumer enterprise and government markets. The top left chart shows Satellite Services quarterly adjusted EBITDA has grown almost fivefold over the past 10 quarters and about 50% increase in consumer subscribers. And note that we haven’t increased our recurring basic service plan unit prices at all over this time period. We understand that to be competitive, unit bandwidth pricing should come down over time. We’ve grown EBITDA to scale effects, operational improvements including subscriber acquisition costs and network operations, churn reduction initiatives and increasing proportion of retail subscribers through value added services like VoIP and higher price but higher value service plans and by growing the enterprise services, especially aeronautical. And then over the past year we’ve made progress on some important aspects of the consumer business like better customer qualification criteria that help produce in voluntary churn, enhanced our retail distribution and fulfillment network, we’ve been testing the service plans in lower demand markets that help us frame the elasticity, demand and customer satisfaction through service plans that deliver more bandwidth in different forms and of course, we’ve continued our operational cost efficiency initiatives. So in general, gross and net add trends reflect seasonality and are moderating as the satellite goes but we’ve continued to grow ARPU and EBITDA at a faster rate while aiming to carefully balance market supply and demand effects with the needs of our end customers and our distribution partners. As I mentioned, we’re in some form of capacity allocation regime in over half the beings of ViaSat-1 and that proportion is likely to increase. Our basic strategy is to continue to balance the long-term interest of each of our stakeholders including investors and users and distribution partners for the time interval to ViaSat-2 into service. But as I mentioned before, this still should offer good opportunities through continued attractive EBITDA growth. This situation really highlights the importance of better balancing the supply of cost effective satellite bandwidth with time varying [ph] geographic demands. ViaSat-1 was a breakthrough in satellite bandwidth unit cost reduction but it actually reduced geographic coverage and didn’t really address for flexibility. ViaSat-2 is a significant advancement for the industry on both fronts. We believe it’s in our best interest to keep our partners engaged in our long-term strategy, so we can have a best opportunity to grow quickly when ViaSat-2 allows us to expand our addressable market to more attractive service plans. And we think our attention to service quality which does constrain growth in the near-term is a good investment in the long run for ViaSat for our end users and for our distribution partners. But in the meantime, we’re also making important progress through mobility applications that inherently have more distributed geographic demand characteristics than those fixed services and could help improve financial results further. So, the lower right chart shows how we’ve been increasing the number of commercial aircraft in the past few quarters. And on the next two charts we’ll talk more about our growth prospects for enterprise and government satellite services. So, we think this fiscal ‘16 can be a very exciting year for our commercial aero Wi-Fi business. We’ve worked really hard to support our advanced customer, JetBlue and their disruptive approach of bringing free Wi-Fi to the commercial airline business. Fundamentally, we believe that’s the best way for an airline to capture the high -- the value of high speed, high bandwidth connectivity as to drive passenger satisfaction by engaging all its passengers instead of just charging the highest possible price to a small fraction of each flight. As JetBlue has rolled out Wi-Fi to more of its fleet, we’re reaching a tipping point where this effect ought to become evident. And a few weeks ago JetBlue’s first quarter calendar ‘15 results included noteworthy gains in passenger revenue per available seat mile or PRASM relative to its industry peers. And we don’t intend to attribute those results to in-flight connectivity beyond the commentary that JetBlue itself has expressed. But when discussing its first quarter results, JetBlue did emphasize both Wi-Fi and its revenue management’s team performance and it also noted that its tiered baggage fees hadn’t yet become effective. And we like to observe that if Wi-Fi were a key factor, then the revenue management team would be the one to capitalize on it and that PRASM is the metric where it would show up. And if that’s sustained, JetBlue’s outperformance in PRASM would dwarf any incident or revenue gain due to charging a small fraction of passengers’ outrageous fees for Wi-Fi. We think great Wi-Fi for all the passengers is going to be a very powerful way to attract customers. Then even add to that, earlier this month JetBlue announced the totally unprecedented partnership enabling its free-Wi-Fi broadband Internet to offer unlimited instant entertainment from Amazon. We anticipate this will create even greater separation between JetBlue and other airlines and enhance the prospects for driving improved financial performance. It can create a win-win-win opportunity to enhance the appeal of JetBlue service, directly engage tens of millions of passengers with Amazon’s catalog of Internet offered on-demand video and music content in both streaming and downloadable form, and vastly increase both penetration and total engagement of in-flight connectivity while reducing the cost of other forms of in-flight entertainment. Needless to say we’re thrilled with the opportunity and we’re working with both JetBlue and Amazon in exploring other ways to leverage these synergies. There is also a pretty interesting footnote to this announcement. So, given everybody’s experience with the limitations of other -- every other in-flight Wi-Fi system, JetBlue and Amazon both wanted to see some form of a test flight that would demonstrate that we really could support dozens of simultaneous streaming users on a single airplane. So one day they sent some testers with 30 smartphones, tablets, and kindles of all kinds on one single flight, the length of the East Coast to stress test the Exede service by having all those devices simultaneously streaming video. Well, obviously it worked. And not only that that’s along with the 300 plus other airplanes that flew that day. So, we’re confident no other in-flight Wi-Fi could do that even years from now without creating a black hole of bandwidth that would cut off dozens or 100s of other aircraft from getting any service at all. When ViaSat-2 enters the picture, we’ll be able to extend this service to JetBlue’s premium markets in the Caribbean, new markets in Mexico and Latin America and serve flights across the Atlantic. We’re excited to see our vision of in-flight connectivity expand into the mainstream media markets and anticipate even more to come later this year. So, our government business had a very good quarter in Q4 with the record revenues and adjusted EBITDA and strong sequential performance relative to Q3. Similar to quarters earlier in the year, the growth areas were information assurance and cyber security tactical radios and data links and government mobile broadband. As expected, those areas more than offset weakened demand in Blue Force Tracking and the other products and services that were associated with ground forces in the Middle East. And the chart shows how revenue and adjusted EBITDA for the fourth quarter of 2015 compared year-over-year and quarter-over-quarter. And $150 million quarterly revenues set a new record and increased 6% year-over-year and 14% from third quarter. Adjusted EBITDA also set a new record and was up 18% year-over-year. The overall expansion in the EBITDA margin is mostly due to the higher service mix as well as improved service margins compared to last year. Fiscal 2015 was also a record year in terms of orders for government systems and that enabled us in the year with a strong overall book to bill ratio of 1.2 to 1. Another key factor in governments systems is that we’re expanding the fleet of government aircraft using our in-flight connectivity solutions for more general communications purposes. And that includes aircraft based in the U.S. which is a pretty meaningful departure compared to our prior applications which were largely outside the continental U.S. So that increases our ability to use and demonstrate the benefits of ViaSat-1 bandwidth economics in real world applications compared to any other existing or planned satellite mobility solution. And those orders we’ve received have been for airborne equipment with subsequent purchase of connectivity services expecting to fall [ph] and that will add to services revenue in the government segment and potentially improve margins on our satellite services segment as proportionate network and bandwidth costs are allocated to the government segment. So switching to the outlook, back when we began with ViaSat-1 project and our transformation from a products to a services driven technology company, we switched our focus to adjusted EBITDA as a single best metric to gauge our earnings progress. And this chart summarizes our annual performance in revenue and adjusted EBITDA with the past 12 fiscal years. While fiscal 2015 included a non-recurring adjusted EBITDA benefit of about $40 million due to the Loral settlement from ViaSat-1 intellectual property, we still grew recurring adjusted EBITDA by 38% on year-over-year basis compared to 14, even excluding that non-recurring effect. Over the past few quarters, we’ve suggested that 20% compounded annual growth rate and adjusted EBITDA also excluding the non-recurring effect of the Loral settlement as a target for FY16. And back at that time that put our FY16 adjusted EBITDA target in the range of around $360 million. While there are many factors that could actual performance of fiscal 2016 to be different and with the right opportunities arise, we might elect to accelerate certain investments to build long-term value, we still believe that range is a reasonable outlook for the year as a whole. In general, we anticipate good growth in consumer satellite services EBITDA due to continued growth in ARPU, improvements in operational efficiency and relatively modest subscriber growth. Fiscal first quarters seasonally are most challenging quarter consumer growth and combined with these other demands for satellite capacity and the geographic supply and demand mismatches we’ve talked, we anticipate kind of little to no growth in net consumer subscribers in the first quarter but continued gains in ARPU and EBITDA. We believe the rest of the year could yield in the range of 10,000 to 15,000 net consumer adds on average per quarter and again with increasing ARPU and associated earnings. Anticipated growth in non-consumer aero and government applications could be a better fit between supply and demand, and that may impinge to some extent down the consumer subscriber counts. Opportunities for renewed government revenue growth year-over-year are good based on the strong fiscal 2015 book to bill ratio. Besides government mobile satellite services, we continue to see good opportunities tactical data links and radios and cyber security. Recent contracts for government mobile broadband, connectivity hardware increases our confidence in follow on service orders. And our fiscal first quarter has historically been a slower one for our government segment. So companywide, we anticipate stronger earnings in the last three quarters of the compared to the first one. As Shawn described earlier that conversions from adjusted EBITDA growth to non-GAAP and GAAP income and earnings per share to be complex. And we really urge investors to model these effects thoughtfully. In the near-term, we see our current growth outlook being bounded more by this mismatch between satellite services geographic demand and available bandwidth supply and less due to the aggregate amount of market demand. So longer term, we’re very enthusiastic about our prospect for enhanced growth with the arrival of VisSat-2. As I mentioned VisSat-2 is a very unique technology solution to that supply and demand issue that brings industry leading improvements and geographic coverage, bandwidth economics and flexibility in matching bandwidth supply to geographic demand. VisSat-2 satellite construction phase will complete this summer and then it will enter integration and testing. Satellite performance and economic satellites remain as we anticipated. But we see continued opportunities to grow our addressable market given better improvements, greater improvement on satellite payload technology, offering through their gains and bandwidth economics, geographic coverage and flexibility. And we see those technology improvements as the key root source of competitive advantage. And our fiscal year ‘16 outlook includes significant increases in R&D brining these VisSat-3 class satellites to fruition. And we’ll update for that over the next couple of quarters. So that’s it for our prepared remarks. At this point, we’ll take questions.

[Operator Instructions]. Our first question comes from Rich Valera of Needham & Company. Your line is now open.

Mark just wanted to get your take on the Gulfstream announcement you made today. How incremental do you think that is to the historical relationship you’ve had with Gulfstream and if you could put any numbers around that if it is incremental? Thanks.

I wouldn’t put any numbers on it. But as we mentioned in the release, we’ve had a good long-term relationship with them and now we’re working with them directly. I think it’s a good endorsement for our technology and I think also it really paves the way for us to introduce Ka-band into that market, which is obviously one of our main objectives given the pending launch of VisSat-2.

And I don’t think you actually addressed it but it looks like churn bumped up a bit quarter over quarter. Can you talk about what maybe drove that bump in churn and how we should think about churn as we look into this fiscal year?

Churn, there was incremental churn in the quarter. And the main thing is we don’t think of churn as a single monolithic thing across all of the subscriber base. It tends to -- it is specific to the different distribution channels and the attributes of its subscriber that come in those channels in different points and time. And in this quarter, we had through one of our channels sort of a big cohort of subscribers that went through kind of a two-year anniversary of their initial subscription plans and had higher churn rate among that cohort than others and that’s what move into overall churn increase for the quarter.

So, when we’re looking for the balance of the year, you think we can be back in the kind of 2.4 to 2.5 level that would been seeing recently?

I think it’s a little over 2.5.

So, a little around 2.5ish?

Yes. It can be little higher than that; I think it’s more like 2.6 to 2.7, somewhere in that range. I think we’re sort of in that range.

I mean you were about 2.7 I think this most recent quarter, I thought quarter before that you were…

2.6.

So that’s 20 bps lower.

Okay, yes.

So, you think more like the most recent quarter or the one before or somewhere in between?

I think between probably a good metric.

And when you gave the guidance for I guess sort of flattish net subs in the first quarter and then 10 to 15 in the balance of the year. I’m just wondering how you think about the gross sub adds as you work through the year. And as you noted you know the sort of capacity issues becoming – we think to some degree a bit of an increasing headwind as time goes on but you seem to feel reasonably comfortable like you can keep adding, I think roughly the same number of gross sub adds. So just wondered, if you could talk through those dynamics a bit; how much of that maybe is using more of the underutilized beams, any comment?

So, there is number of factors involved. Some of it’s using the underutilized beams. And one thing is that we’ve certainly become -- because we’re capacity constrained, we’ve been investing more money and we are call sort harvesting and grooming that is capturing sort of pieces of unused bandwidth by reallocating some of the bandwidth across our fleet. And that frees up some bandwidth that gives us some growth. The other thing is we’ve invested in analytics and metrics. And the way we can drive call volume and how we can covert that call volume into subscribers. So, we’ve talked about over the last few quarters. I think we’re reducing our cost for those who are improving our ability to do that. In some sense that’s a little bit of a balance against the ceilings that we’re running into. I think those are most of the factors and that give us confidence that we’ll be able to get to those levels. I think we’ve done, we feel like we’ve been able to understand and forecast sort of the effects of the different distribution channels. Again, it’s not a monolithic -- there is different characteristics for each of the channels and this represents sort of that balance of what we expect to evolve in the aggregate.

And just one more for Shawn, I just wanted to try to understand the tax situation for fiscal ‘16. So I know at one point you said it is essentially you’re expecting I think a $0.20 hit year-over-year, assuming the R&D tax credit doesn’t get reinstated. Is that the main reason for the higher tax expectations this year and is there a rate you could associate with your kind of a pro forma tax rate you could give us to model?

Probably a good what we’ve kind of talked in the past is looking at the statutory rates, maybe somewhere like 37%, 38% and then that’s probably a good target for next year, just kind of taking out the R&D credit benefits.

And then if you got that obviously whatever time you retroactively apply to whatever for the year so…?

Yes, so we have one credit that would be coming from this quarter; if it comes in the place, it could fall into next year as well.

Our next question comes from Matt Robison of Wunderlich. Your line is now open.

I wanted to talk a little bit about ViaSat-2 and the launch plans there. We’re still talking about late summer ‘16 and using the Falcon Heavy vehicle, is that right?

Yes.

Is there -- I looked at something on the web; I don’t know how current it is. It looks like you guys might be the first flight after the Air Force for Falcon Heavy, is that right because it looks like you got in there in the schedule ahead Inmarsat, right?

So I think we’ll be -- depending on how things go the third or fourth flight of the Falcon Heavy. And that includes an Air Force flight and the Inmarsat flight. I don’t think Inmarsat has a heavy but Inmarsat does.

I guess I was looking at some older information. So when should we get an indication of how that launch vehicle is making headway according to schedule, do you think?

I follow SpaceX’s progress in the news. We are as part of our agreement with SpaceX, we’re allowed to participate in design reviews and status, sort of certification milestones along the way. And so, we have pretty current information and if we believe that that moves materially, we will disclose it as well.

Do you have a plan B in place at this point?

Yes, I would say we’re always figuring out something assuming that that schedule stretches unreasonably long. Right now, we don’t expect that but we’ll have some contingency plan for that.

As far as -- is that really the principal calendar item or is there -- or we should be also be considering the spacecraft manufacturing side of it at this point?

I think that satellite manufacturing has gone pretty well. I did mention the construction is going to be complete this summer; I think that’s pretty predictable. You always go into integration and test. We think that given the visibility we’ve had into the way that subsystems have come together, we don’t anticipate big delays there. It’s possible, there will be some. I think that probably right now people ought to be a little more focused just on the launch schedule.

Okay, so basically you’ll have about -- you’ll have a better part of the year integration and test time and then transport time I guess?

Yes, that’s less than a year, but yes in that range.

And so did you mention that part of your churn was attributed to folks coming off the contracts to your contracts?

Yes, that’s one of the -- for a cohort of subscribers through a particular channel, there was a bulge of that. And the churn rate for those particular subscribers was a little higher and that drove weighted churn for the quarter.

And what drove the ARPU so high?

It’s the same things we’ve been talking about for the last couple of years.

Just qualifying customers better and fine-tuning, and that sort of thing, like intuition?

Well, the big things are -- again it’s greater increase in the proportion of retail subscribers; it’s higher value; higher priced plans; value added services like VoIP. Those are the biggest contributors to ARPU.

So in event that popularity streaming is in a way driving your ARPU as well as stressing the capacity?

One of the things and we’ve talked about this and we think this is a good factor going forward is that clearly especially people who can’t get 12 megabits a second which is where right now, really are interested in streaming. And we’ve brought plans to market that had either virtually on caps usage or much higher caps that certainly drove demand and that’s helped secure our ARPU up.

How big of a component of the growth that freedom plan at this point?

We are not going to break that but I think I would say that that freedom -- this is one of the ways we characterized that a couple of quarters ago is what we’re doing is we’re kind of brining our best plans to our worst markets, so they are very popular and you get a rep [ph] there but those are ours, just smaller spaces to work from. What we really want to do is bring our best plans to biggest markets. And that’s sort of what we’re aiming to do at ViaSat-2. But for now, we get a sense of sort of elasticity demand, how best the price and what the usage will be and how to define the plans to sort of get the best value out of them.

Thank you. And our next question comes from the line of Mike Crawford with B. Riley & Company. Your line is now open.

You talked about further increases in R&D to bring ViaSat-3 class satellites to fruition. So, when you would be looking to choose a ViaSat-3 billed partner or set some kind of a schedule for a ViaSat-3 class satellite?

That’s something we’re really focused on because right now the performance of that class of satellite is really attractive. So what we’re doing, probably over the next couple of quarters is putting more into R&D and trying to come to kind of a decision point as to when we think we could plan for that cost satellite. We would like to see that that would be kind of our next big satellite, our next major satellite acquisition. And we are just not in a point yet to say as part of the reason we’re doing all of this R&D but I think over the next couple of quarters, we will be able to give a better timeline for that.

And is it fair to say that it’s looking like a ViaSat-3 class satellite will likely cost less to build than ViaSat-2 and maybe in the shorter time frame as well?

So ViaSat-2 supply has gone pretty well and about the schedule, I have to put it for the first one. The first, basically there we talked in the past about a couple of things that we’re trying to do. One thing that makes the lead times of satellites difficult especially satellites that as capable as the ones that we’re doing and have these great bandwidth economics and coverage and flexibility characteristics is that they’re really tailored to specific orbital spots and geographic coverage. And one of the ways to break that one thing you’d like to do is break that dependency and that allow you to literally come up with satellites on a much shorter demand time schedule. So, we think that the ViaSat-3 technical approach allows that. That’s not something that you would necessarily see with the first one but you would certainly see with subsequent ones. And some of those same features have helped drive down cost pretty substantially too. I think for the first one, we might see cost that -- cost and schedule that are more like ViaSat-2 but capacity, flexibility that’s a lot greater and bandwidth economics that are lot more attractive.

Just a couple of more, if you don’t mind. You talked about mainstream media market expansion. We also know, you’ve been investing heavily in distribution of content across networks. So, can you just elaborate more on what you might have in mind there?

So, basically the main thing we would like to achieve and I think this is what broadband customers want is they want -- people really like streaming media. And you are seeing that sort of there is a video on demand component which is like Netflix but then there is also a live video on demand, call a live video component which would be like say Sling TV but it’s also been around in the form of Major League Baseball; it’s a live event, that streamed. And there is going to be more streaming. And so what we think is that the distribution things that were doing, good for customers; good for users; and good for the media companies as well. And we would like to see those things be embraced by media partners. And one of the very cool things is that when you got all this people trapped on airlines with their mobile devices and they would like to use rights they already have in airplanes just like they do on the ground, I think that’s a really -- and just being an intriguing market for these media companies. And it requires I’d say some technical interventions which are the kinds of things that we’re doing. So that’s basically what I’m referring to is getting a little bit of the attention of the cooperation of the media companies to help us do that job better to get there faster to do it seamlessly with across a lot of different devices and players and media formats. Those are the kind of things that we need to do and we think that this Amazon one is a fabulous start. And I think we’re optimistic that we’ll see more media companies that want to present their media live to airplane users and that hopefully I think JetBlue and we will be kind of first to do that.

If I am Amazon subscriber, who is to tell me I can’t watch House of Cards on JetBlue. But anyway, the final question relates to terminal. Can you talk about what might be some major differences in your envisioned VisSat-2 residential terminals and how that might affect subscriber acquisition cost?

Not many things; I’d say now one of the things we’re trying to do is make it easier to distribute, install terminals, reduce subscriber acquisition costs, maybe improve the ability of subscribers to do things themselves to install them and adjust them themselves, certainly keep them in better performing conditions. Those things improve subscriber satisfaction. So, we’re looking at a bunch of technologies that can help us do that. And some of them are pretty mundane; some of them are very advanced. I think those can include things lie flat panel antennas and simpler smaller parabolic reflectors and simpler ways to point main things. We’re looking at a range of things. I think it’s one of the areas that we’re investing in; it’s one of things that can help speed the adoption of services on VisSat-2. We’ll make more announcements on that as we get closer to it.

Our next question comes from line of Andrew Pitoli [ph] from Wells Fargo. Your line is now open.

I just had a one question on the guidance. Does the $360 million include the 6.9 quarterly litigation settlement revenue?

Yes, it does.

And then Mark, on the JetBlue deal that you announced with Amazon, it’s obviously highly sensitive but when we’re thinking about modeling this business, you’re obviously going to be delivering a lot more bandwidth to them. How can we think about at a really high level, your revenue per plain; how it increases because of this deal or does it not increase?

So, one thing, I think all of us I think is that more passengers will use the in-flight Wi-Fi, they’ll use it more. And that will drive bandwidth consumption which will drive our revenue. How much that happens and how JetBlue -- and really announcement was between JetBlue and Amazon; we’re involved because it uses our service and we’re the sort of the engine behind it. But how JetBlue and Amazon aimed to sort of support back and how they drive value from it, that’s really between them. And I think that will turn out to be sort of the limiting factor on bandwidth growth, if there is any limit. I think so far what we’ve found is that more engagement has been -- JetBlue has said; I don’t want to speak for JetBlue but they said that think Wi-Fi is a contributor; they like the fact that it’s free; they’re trying to get more passengers engaged. And I think this has happened even though passengers have continued to use more bandwidth. So, it would be a little surprise that the fact that it drivers a lot of people to use a lot of bandwidth is a bad thing but we’ll have to see and it’s hard for us to make projections about what that will mean for us. We’ll have to see as they introduce it and roll it out and promote it.

And the 519 terminals that you reported as hasn’t been shift to date, as my memory recalls, it seems to be more than the combined JetBlue United EL Al that you were expecting. I mean are you shipping to other customers in this number or are there some business jet numbers included here or my recollection incorrect?

You’re right and it includes some numbers and I’d say probably low 10s of terminals that are going on airlines where we are not the service provider. For instance we’ve worked with LiveTV TELUS and they have some agreements where they’re using our network -- using satellites with our network on them and they’re using our satellite terminals. So, we’re not initially a service provider from them. We think at some point they could engage us in that roll but for some, few 10s of terminal we’re not necessarily a service provider.

I guess one last question from me Mark. You made a comment at an investor conference last week that ViaSat might sort of -- particularly in developing markets increasingly integrate with wireless with what you do. And I was wondering if you could expand on that. What sort of wireless technologies are you working on and how could we see you use that in the field?

The U.S market is a great market and Western Europe is kind of the same way and that we’ve got a big addressable market and people have their own broadband service at home and they pay tens of dollars a month for that service. There are lots of emerging markets; you probably don’t have that same ability to pay. And wireless distribution or Wi-Fi distribution is likely a good way to reach out to more people with lower subscriber acquisition costs and that presents both opportunities and challenges. And so that’s one of the reasons that we acquired NetNearU which is a very good, very, very good Wi-Fi distribution company. And they administer literally millions of Wi-Fi hot spots. We provide pay per use Wi-Fi services in a number of locations, not necessarily satellite but that’s fine because that’s great experience and Wi-Fi distribution. And more and more as we can bring these really advanced high capacity wireless services to things like airlines that’s our face to passengers and users is through NetNearU’s that now we’ve renamed as ViaSat Wireless as our face to those devices. Especially again in lot of emerging markets you’re likely to see many more users using mobile devices such as smartphones and tablets compared to PCs like to do in the U.S. So we want to be a leader in that environment. And that’s the dominant mode that we see Wi-Fi; it’s unlicensed; it’s easy to proliferate and there is often interesting business models that we think we can develop around it and that’s what we’re working on.

So maybe satellite backhaul to a Wi-Fi access point I think?

Yes, that’s an example. I mean that’s sort of exactly sort of what you on an airplane and you’ll see in other environments as well.

Thank you very much.

Just to clarify one of Andrew’s questions there, just go back to when we announced the settlement and one of the reasons why we took just to accelerate some of the R&D spending so the issue of the recurring royalty being in our EBITDA, one of the things we said was we’re going to spend a percentage of that on accelerating R&D to try to create value. So, that’s what we think more and [indiscernible] could have been in the future. So I just wanted to clarify that.

Thank you. And our next question comes from the line of Chris Quilty of Raymond James. Your line is now open.

Rick, you just previewed my question which is you did mention increased R&D spending. Can you give us an order of magnitude or percentage ‘16 over ‘15?

This is Shawn and I can probably set that up to you. So if you kind of look at FY14 spend, so we thought as we went into ‘15 it was a little bit less with some of it kind of pushed out into ‘16. So probably looking at FY14, maybe increasing it by 5% to 10%, based on that might be a good range.

Okay, and…

I think it’s hard to say that here is how much that increased because of that because you got other things look for. And so the idea though is that we accelerate this settlement and it would give us the ability to create more value for our shareholders by investing that money in R&D advances to hang on to it right now.

Fair enough. I think just because you called it out I just wanted to make sure I wasn’t -- you were planning a 50% increase or something like that we were modeling correctly. Shawn, do you have the NetNearU revenue contribution from the fourth quarter?

We’re not giving that out separately you guys, but they are doing really well and they definitely made a meaningful mark into the margins for the quarter.

And can you also perhaps give us a little bit of a walk through in terms of your fiscal ‘16 EBITDA projection. Just on a segment by segment basis what should we expect either on a percentage or dollar basis, how the three segments played out, which ones are growing flat or down?

I think I can give you kind of directionally. So Mark talked about and I talked about in the context of the government segment the strong backlog base going into the year. And we also talked about in ‘15 that we had a year-over-year down-take in revenues but had a really good margin improvement due to the service base growing. If you take that in consideration of a growing backlog going into ‘16, and I think that we’ll see the government in the government space grow. From commercial EBITDA, just as Rick and I both, and Mark touched on is that’s the segment that we make the investments in. So as well as add on to that the down take in NBN as we start to wrap that up, we’ll see a little bit I think of year-over-year transition in that segment. And then the Satellite Services is just going to continue to grow strongly.

We also -- let me add to that, it’s Rick again. We’re also increasing our R&D investments in our government segment as well. So I don’t think you’re going to see EBITDA grow quite as fast as revenue in that segment this year.

And where are those investments you set on the aviation side?

I think it’s cyber security, aviation, our global mobile piece of that business, both of those were [indiscernible] investments.

Also on aviation, can you confirm, are you rolling now out in addition to JetBlue and United in those numbers that you provided?

They are not in there yet, because that’s not the point yet but they are in the back log.

And when do you think that program will kick off?

We’ve gone through aircraft type certification which is probably the long pole on the tent. So that could be probably next calendar year before we see that in service somewhere around end of this calendar year to next calendar year.

And EUROSAT in their last conference call mentioned that they’re also seeing some capacity constraints in serving regions. Does that in any way limit your ability to offer an aviation service in Europe? I know here in the U.S. you obviously can make the choice to reserve a certain percentage of your capacity specific for aviation but is it fair to assume that EUROSAT is doing the same for you in Europe?

So, we won’t make commitments to any of our customers that we don’t fill are back stuff by EUROSAT and there were the issues. So, we’re jointly coming up with the phase that we can to airline customers service that they will like and that we can fulfill. And I think EUROSAT is very interesting in growing that market with us, so looks promising.

And final question, a last aviation one. The Gulfstream win is on your sort of legacy Ku-band, the under service. Can you talk about how you see that service fitting in to the holistic global picture as you deploy ViaSat-2 and ViaSat-3 and partner with other satellite operators? Does that become an integral piece of your sort of Ka, Ku strategy or is it dependent upon Yonder or other providers in order to provide that Ku-band back up?

So, the way we look at it is that the bandwidth economics, the way you can project to an end user the capabilities of in-flight Wi-Fi system are really dominated by the economics of the satellite system itself, not the intend or that’s really a very second order issue. When you are increasing bandwidth efficiencies by factor of 10 or 100 on a satellite, the fact that you’re going to make a satellite, maintain a 40% or 80% better isn’t really the driving factor. So basically what we’ve done is come up with a set of antenna products where we have Ku only, antennas, we have Ka only antennas and we have hybrid Ka, Ku. So depending on the antennas that our customers choose, we can provide them a service that’s the best available in any given geographic area using with access to the resources that the antennas can support. So in some cases, though we have agreements to use for instance Inmarsat that Ka-band we’ve been doing work with Inmarsat Wi-Fi in some of the areas were that’s the best available satellite in the areas where we have ViaSat-1, we use that. Areas where we can use EUROSAT, we’ll use that, whatever the best available one is. In general kind of the high end of Kas would be way-way better then the high end of Ku. The high end of Ku maybe a little better than the low end of Ka, depending on the specific satellites and there is some sort of overlap in there. Some cases we’ll draw on Ku; in some cases we’ll draw on Ka. It’s going to really be dependent on the geographies where airplanes or mobile terminals do out where they spend most of their time. And we want to be able to use take advantage of the best available resources. And so far, most satellite operators to the extent their bandwidth available, they are fine with selling us bandwidth to use for our customers in their coverage areas. Does that answer your question?

Yes, it does. And I guess just to clarify, does that mean you would want to own and lease the transponders or situations where it just makes sense to buy a third-party through someone else on a contracted basis.

Yes. So, what we’ve done so far is we try to do a good job of matching our customer demands, what we have demand for with what we will go out and put this in the market. And we don’t feel like we need to go out and speculate and acquire the large amounts of bandwidth the it advance on multiyear contracts to really get the bandwidth price because all the bandwidth pricing that we can get is much, much higher than the pricing we could make in the region that we provide coverage for where our Ka partners are. So that’s really our source of competitive advantage; it’s not really speculating or making long advanced purchases in bandwidth.

Thank you. And that’s our final question. That concludes our call.

Thanks a lot everybody. I appreciate your time and look forward to talking to you next quarter.

Ladies and gentlemen, thank you for participating in today’s conference. That does conclude today’s program. You may now disconnect. Have a great day, everyone.