Mark Dankberg - Chairman & CEO Shawn Duffy - CFO Keven Lippert - General Counsel Bruce Dirks - Treasurer Rick Baldridge - COO

Rich Valera - Needham & Company Andrew DeGasperie - Macquarie Mike Crawford - B. Riley Chris Quilty - Raymond James Andrew Spinola - Wells Fargo Michael French - Drexel Hamilton Matt Robison - Wunderlich

Welcome to ViaSat's Fiscal Year 2016 Fourth Quarter Earnings Conference Call. Your host for today's call is Mark Dankberg, Chairman and CEO. You may proceed, Mr. Dankberg.

Okay. Thanks. Good afternoon, everybody and welcome to our earnings call for our fourth quarter and full-year fiscal year 2016. So I'm Mark Dankberg, Chairman and CEO. And I've got with me here today, Shawn Duffy, our CFO; Keven Lippert, our General Counsel, Bruce Dirks, our Treasurer; and Rick Baldridge, our COO; who is traveling. And 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 and copies are available from the SEC or from our website. With that said, back to you, Mark.

Okay. Thanks Keven. So we'll be referring to slides that are available over the web. I'll start with some highlights and the top level business overview, and after that Shawn, will discuss the consolidated and segment level financial results. And then I'll give some additional details and color on our business segments, and then finally I’ll summarize our outlook and we will take questions. So we think it’s most helpful to think of our fourth quarter and fiscal year 2016 results in three pieces. First, we focus on the revenue and earnings growth in the satellite services and government systems segments. We expect those segments will drive most of our growth in the next few years, and those segments results very effectively show the competitive advantage of our highly productive satellites and vertical integration as well as our overall business strategies. Those segments had record revenues in the fourth quarter and for the year. In Q4, satellite services was up 12% year-over-year and government up 9% year-over-year on revenues. For fiscal-year 2016, satellite services had 17% year-over-year recovery revenue growth, and government systems had 13%. For fiscal 2016, we had record revenues company-wide also. Adjusted EBITDA growth was even stronger in those two segments with both segments reaching record levels. Satellite services was up 21% in the fourth quarter and up in recurring adjusted EBITDA for the full-year by 45% on a year-over-year basis. Government systems was up 22% in the fourth quarter and 20% for fiscal year 2016 in adjusted EBITDA. Second, we think we have an attractive growth outlook. In government, we booked a record $241 million in orders in the fourth quarter and $164 million in revenues, and we had a very strong book-to-bill ratio of 1.2 to 1 for the year. Satellite services ARPU grew 7% year-over-year in the fourth quarter and 3% sequentially over the third quarter. And commercial aircraft and service and revenue per plane are also up significantly, all positive leading indicators for fiscal 2017 despite being close to capacity on the existing satellites. We also set company-wide records for new orders in fiscal 2016. Third, we can see that our bandwidth productivity competitive position is resonating in all of our target markets, including some that we haven’t even entered yet. ViaSat-2 is making good progress and our launch window starts in less than seven months. Starting construction on the ViaSat-3 constellation spurred even more interest especially with customers with very large bandwidth needs and/or are in new geographic markets for us. We see a big opportunity to accelerate our growth while creating formidable competitive advantages. So we are investing to bring that to market. Since we are building the ViaSat-3 payloads in-house, we are incurring R&D expenses that would otherwise be capital investments in a more conventional satellite procurement. We will go into more detail on those investments later on in the call. We’re also having a big impact on the commercial implied connectivity market and that’s leading to higher incremental R&D investments, especially for STCs or what’s called Supplemental Type Certificates on new aircraft on a success basis. Total discretionary R&D investments increased by about 65% year-over-year in fiscal 2016 to a total of about $77 million with the large majority of that reported in our commercial segment. The next chart is our revenue and earnings growth in the government and satellite services segment, combined with growing market interest in our technology is motivating us to invest to get this productivity gains and geographic coverage of ViaSat-3 class satellites as fast as we reasonably can. We believe there’s a Moore’s Law type learning curve effect we can leverage to gain even more separations from other satellite systems and operators, and with the launch of ViaSat-2 now approaching, we’re seeing a smooth headway from optimizing the applications of ViaSat bandwidth to a rapid growth driven by leveraging our superior bandwidth economics across a footprint that will triple the total bandwidth inventory and substantially greater geographic coverage. So with that as a top level overview, Shawn will go into more depth on our financial results for the fourth quarter and year-end.

Thanks Mark. I’ll spend a brief moment on Slide 5, which shows revenue and adjusted EBITDA performance for the fourth quarter. Then I will move to our annual results. As Mark mentioned, the government systems and satellite services segment drove our revenue and adjusted EBITDA growth more than offsetting declines in commercial network. Specifically, revenues were up 12% and 9% in the period for satellite services and government systems, while adjusted EBITDA was up 21% and 22% respectively. These were record revenues in both segments. In satellite services, our adjusted EBITDA margin is 44%, up four percentage points from last year, and our government segment had an incredibly strong earnings quarter as well hitting a new record for adjusted EBITDA of $43.5 million, driven by our fastest growing area, government mobility, and our legacy stronghold tactical data link. So we’re happy with how we’re doing in both top-line growth and operating margins in these areas. In commercial networks, our Q4 reflected the large program wind down we saw throughout this year in antenna systems and on our NBN Co. project plus lower consumer terminal sales to distributors. In Q4 FY 2016, these large programs are very near complete. So, our commercial networks business have pretty much stabilized from an operating perspective, and our adjusted EBITDA results mostly reflect our scaling R&D investments for highest upgrades as well as expanding commercial air business which I’ll hit on a bit more as we look to FY 2016 as a whole on the next slide. Fiscal 2016 was very strong year for us both financially and strategically. We achieved record top-line performance with consolidated revenues, up $1.4 billion, driven by strong gains in government systems and satellite services. Our government systems revenue grew by $72 million, a 13% year-over-year gain led by government mobile broadband growing over 25% this year, plus strong growth in tactical data link and ViaSat wireless services. These results highlight the company’s calculated focus on the growth market of broadband and mobility where we began investing on the government side two to three years ago, and which are now a driving force for our EBITDA growth trends. In satellite services, our fiscal 2016 revenues also grew strongly, up $59 million or 12%, and we have success on multiple fronts. Our ARPU continued to grow as we ended our retail plan offerings and value added services. We also grew our residential subscribers as a whole resulting in a higher mix of retail subs compared to the prior period, and commercial air revenues are up sharply, and again we are seeing the fruits of the investments we began making just a few years back and we’re close to continue that growth into next year right alongside our preparation for ViaSat-2’s launch. In commercial networks, our FY 2016 revenues reflected lower consumer terminal sales and the larger program wind-downs I discussed before. So in total, we grew consolidated revenues at over 2.5% compared to last year and over 4% when you exclude the non-recurring impact of the SSL settlement in Q2 fiscal 2015. Now looking at adjusted EBITDA, our annual performance does the same strong trend. Government and satellite services were both up for the fiscal year as a result of our higher revenues plus improving operating margins. For the year, adjusted EBITDA increased 20% and 17% in government systems and satellite services respectively both of which were new records. As you exclude the $40 million one-time gain associated with the SSL settlement last year, our satellite services adjusted EBITDA grew by 45%. Within commercial networks, our adjusted EBITDA reflected the revenue impact plus $34 million year-over-year increase in R&D investments. As I mentioned on the prior slides, we believe the current quarter reflects an operational low point for us in this segment. In fiscal 2017, we look at ViaSat-3 and commercial air R&D investment grow steeply resulting in total R&D growth of approximately 50% compared to this year and a meaningful portion of this increase is success based R&D related to our expanding IFC business. However at the segment level, this impact should be mitigated by growing consumer terminal sales associated with NBN service launch in April and the expanding commercial mobility opportunities. So we expect to be at or slightly above these quarterly segment levels throughout fiscal 2017. So to summarize, our fiscal 2016 was a great year financially. Our business contribution grew strongly evidenced in our year-over-year revenue growth and conversion through adjusted EBITDA of nearly 50% after we takeout last year’s Q2 SSL non-recurring income. So as we turn to the next slide, we see both our quarter and full-year operating income results, reflecting our higher depreciation and amortization expense year-over-year on slightly lower Q4 and full-year adjusted EBITDA. Non-GAAP income for Q4 and full-year was down $3.1 million and $15 million respectively as a result of the Q2 FY 2015 SSL non-recurring amount in last year and our earnings per share figures follow the same relationship. However it’s worth summarizing that the non-recurring impact of the Loral settlement in fiscal 2015 represented a benefit of $0.49 per share. So excluding that our non-GAAP diluted EPS increased about 14% year-over-year. From the cash flow statement, you see that we generated approximately $300 million in cash from operations in fiscal 2016 which reflected another strong year. Our cooperation funded all our recurring maintenance CapEx activities and CPE pool replenishment. $45 million in network and back office expansions in preparation for ViaSat-2, $40 million to secure land for our Carlsbad campus extension plus contributed to our three satellites under construction. Our year-over-year investing activities also reflected last year’s acquisition of NetNearU for $56 million in Q1 FY15. So we ended the quarter with $180 million outstanding on our revolver and $197 million outstanding on our current $387 million at some loan commitments. Our net leverage increased slightly to 2.8 times showing 12-months adjusted EBITDA due to our higher debt balances, yet our Q4 liquidity position remains very strong. And an additional point regarding our liquidity, I wanted to note that today we finalized the significant amendment to our existing revolving credit facility, working very closely with our strategic Link partners, we were able to increase the size of the facility by 60% from $500 million to $800 million and reset the maturities to approximately five years. We also add a flexibility to expand our global footprint, while maintaining our favorable existing pricing. So overall this is a significant step in improving our overall financial flexibility and solidifying our long-term growth plans. On the next slide, our satellite service metric. Adjusted EBITDA leveled out a bit on a sequential basis. But this is primarily due to higher sat cost associated with a 15% increase in gross adds compared to third quarter which you can see in the chart on the top right. As we see when we are filling out Via top-line and we expect to see when ViaSat-2 goes into service, EBITDA is negatively impacted by the expensing of success based commissions and advertising expenses, both of which are continuing to stock. So with our higher gross adds and a slight decrease in churn, we posted 9,500 net subscriber additions. And as we talked about earlier, we are continuing to see a great trend in ARPU now at $58.46 as a result of our improving bandwidth and sales ancillary services as deployed and the Boost plan and a higher percentage of retail subscriber. Overall our satellite services conversion of revenue to adjusted EBITDA for the quarter was exceptional at 74% compared to the same period last year which really illustrates the continuing gains of operating leverage in this business. On the in-flight connectivity front, we added another 30 commercial aircraft during the quarter, ending the year with 476 commercial aircrafts on our fleet network. Revenues in this area continued to increase at a strong rate with ongoing growth in our total count and higher overall service adoption by passengers. And keep in mind this chart doesn’t show the number of business jet and government aircraft on the Exede and on their global network. So in summary we’re seeing strong growth in this area and in FY 2017 we expect this to continue with more planes coming online coupled with more revenues per plane as this service continues to change the gain for consumer and airlines. So now I’ll turn it back over to you Mark.

Okay thanks Shawn. So with that financial background of mine, it’s helpful to take a broader view of our strategic approach through satellite services and government system segments. In general, we’d like to find business strategies that are disruptive in the sense that they change the dimensions of competition and the underlying business models in our target markets and that means bringing value propositions to market that are fundamentally different than those that currently exist. Not just same thing with lower price or even same price for incremental performance improvements. When we can bring through abundance where incumbents have dependent on scarcity in markets that create bandwidth exactly going to be a good bet. Incumbents with substantial assets built on the scarcity model generally find our approach typical to defend and we can leverage powerful macro market forces, nothing is most obvious in our high capacity satellite services but there is similar effects in tactical data links and information security. Finally each of these markets already involve significant barriers and we believe that the technologies we inject into those markets can create variable competitive advantages and yield attractive returns. So we got good success with ViaSat-1 in using disruptive bandwidth economics in these up markets in satellite services. We’ve been constantly refining our marketing approach and in fiscal year 2016 with very little bandwidth to work with and therefore very modest subscriber account growth, we grew revenue by 17% and adjusted EBITDA 45% excluding the non-recurring portion of the SSL front. We achieved this by making our service plans more attractive by increasing bandwidth availability and peak speed. We anticipate continued solid growth built around that strategy and we see great potential in expanding the ViaSat-2 with double the bandwidth economics gives us much more speed in bandwidth to work with and our uniquely flexible satellite design enables us to better match bandwidth supply to geographic demand. Our bandwidth competitive advantage is gaining great traction in the commercial in-flight connectivity market. Our partnership with JetBlue is reframing the entire industry away from a scarcity model and single digit percentages of passengers paying very high prices for needed bandwidth and turning that into planes for passengers using the whole Internet including video streaming but still early days for our commercial in-flight connectivity business that’s seeing strong growth in connected aircraft, passenger engagement per plane and bandwidth usage per passenger. Our satellite assets in partnerships along with scale from our defense business place us uniquely suited to serve the bandwidth abundance model and we anticipate continued strong growth there. And we are having striking success in the government market by delivering unprecedented amounts of bandwidth, very competitive cost to hundreds of previously underserved airborne platforms and by investing and making the powerful situational awareness data embedded in Link 16 available to thousands and open to tens of thousands more participants who are accomplishing similar effects in digital terrestrial networks. Our fiscal year 2016 defense business results were strong with double-digit growth in revenue and EBITDA in a macro environment with pretty much every other significant competitor shrinking translate to our approach. Our 1.2 to 1 book-to-bill for the year sets the stage for continued growth in fiscal 2017. Tapping into long-term growth markets like these with good returns and ensuring competitive advantage is a relatively rare opportunity and we’re very encouraged by our success today. So that’s why we’re investing in ViaSat-3, the chart in the lower right is indicative of the competitive advantages we can do. So I will add a little more color on each of these areas. We’re really proud of our progress in the in-flight connectivity market in fiscal 2016, we’re pretty unanimously recognize this having by far the best Wi-Fi services in the industry and pretty much every competitor is reframing their go to market strategy around either imitating or denying the existence of our competitive advantages. We have almost 500 planes in service, our service quality is still excellent, we established ourselves to prime contract with Virgin America, we received our first supplemental type certificate from our Global Ku/Ka system on an A320, we got other SECs underway and we signed an MoU with Qantas, our first commercial airline in the Pacific Ocean region. We’re engaged in in-depth negotiations with multiple airlines around the world and anticipate exciting growth again in fiscal 2017. The abundance versus scarcity framework is really helpful in understanding our strategy. The lower left corner chart is a simple S curve to illustrate the relative value of bringing incremental bandwidth to airline passengers. Think of the X axis as total bandwidth delivered in terms of connected passengers, times the amount of bandwidth used per passenger. Y axis is indicative of value delivered to the passengers and by extension to the airlines. Systems at the lower left corner exhibit class underpowered as per behavior with so little bandwidth that even when improving them by factors of two or three or more is essentially no discernable impact. To think about an air to ground system that doubles or triples its bandwidth efficiency but still doesn’t meaningfully improve the customer experience or results in higher take rates or conventional Ku-band service where the service provider has multiple additional satellite transponders and still doesn’t move the needle on apparent performance. In contrast, our ViaSat-1 based system is universally recognized as the first one to really distinguish itself in speed and bandwidth even supporting streaming video from Netflix and Amazon at scale. We think our current performance is really just at the inflection point of the S curve and we can deliver even greater impact in value to airlines and their passengers by substantially improving the service with ViaSat-2 and 3. While Ku-band spot beam satellites should be better than existing broadcast and the test ones, we also know the economics and capacity density of those satellites are much worse than ViaSat-1 is delivering now. Scarce bandwidth ultimately has limited utility and can’t move beyond existing business and portals and charging high prices to small percentages of passengers all delivering limited and often disappointing user experience. In fact the in-flight entertainment business models that some competitors are built around managing scarce bandwidth to make those economics work for them and their airline customers. We think that type of model is not sustainable once we move up that S curve. Abundant bandwidth allows airlines and their passengers to leverage macro market forces delivering virtually unlimited choice of premium high resolution live and on-demand video and music entertainment directly to passengers personal devices using right to passengers already have. We’re helping airlines that embrace the abundance model to attract more passengers to earn more revenue, avoid expenses in-flight entertainment business models and attract value creating partnerships with leading Internet and media brands like Amazon, Netflix, Spotify and others. So ultimately the success for our business model depends on passengers expressing their preference for connectivity similar what they get on the ground today and we’re encouraged by progress today. So we’ve already covered the financial highlights for government systems and usually we emphasize our success in government mobile broadband satellites that’s still the fastest growing part of our government segment but this year we’ve had really strong growth in Tactical Data Links including very strong new orders. From a strategic perspective our Tactical Data Links business has two different portions. On the upper right corner of the graphic we show a progression of radio form factors starting with those called the MIDS low volume terminal or LVT amending with our newest product the BATS-D. The first three are shown in grey and those are the current programs of record where we basically compete inarguably with Data Link solutions. Remember the MIDS joint Tactical radio system I guess didn’t start out of the programs record but it’s turned into really the only ongoing joint Tactical radio system production radio. So the last two boxes shown in blue are ViaSat discretionary products that extend the capabilities of Link 16 to hundreds and if successful ultimately tens of thousands of participants that otherwise would not have had access to that valuable real time situational awareness. We got very good success in fiscal 2016 with discretionary small Tactical terminal through the Apache helicopter and the initial testing of BATS-D handheld. These investments substantially in those products over the past several years and we’re really pleased to see them contribute to our strong growth in the government systems segment. We are doing similar things with information security products and we anticipate growth there in our fiscal 2017. Almost all our considerable success in the government in-flight broadband market has come from identifying and uniquely serving those bottoms up growth markets that are being addressed by government program record. Our strong book-to-bill in fiscal 2016 gives us confidence going into fiscal 2017 but we also see several of our initiatives on a path to ultimately being adaptive programs of record in significant growth markets addressing real gaps and capabilities. So we continue to think we’ve got strong growth opportunities in our government segment leveraging core fundamental technologies with very high entry hurdles even for substantially larger players. But also it’s important to keep in mind the significance of the approaching launch of ViaSat-2. In many ways ViaSat-1 began creating important impacts even before it was launched and we are seeing the same sorts of effects now with ViaSat-2. The launch is scheduled for window beginning seven months from now. We are continuing to make good progress. Payload module functional testing has been completed and the entire spacecraft is almost fully integrated. We’re close to completing insurance coverage at favorable rates, integration planning with Arianespace is proceeding well, and all of our testing to-date is consistent with achieving our design targets for capacity and performance. From our go to market perspective, some of the most salient points are the geographic coverage, improved capacity density in attractive markets, higher peak day rates, substantially improved bandwidth economics, and geographic allocation flexibility. Coverage wise, the bridge to Europe especially for aeronautical services that Caribbean and Gulf of Mexico coverage for aero, maritime, and oil and gas and our ability to serve Mexico and Central American down to Venezuela and Colombia are all valuable capabilities. We think the skills we’ve been refining on ViaSat-1 will serve us very well with the bandwidth abundance of ViaSat-2. We expect to be on the grower addressable consumer markets by offering clients with even higher speeds and virtually unlimited bandwidth with our hard usage cap. We’re also aiming for more growth in in-flight connectivity, enterprise services government, and to begin to grow in new markets including Wi-Fi, maritime, oil and gas and KA band general aviation. So this slide on maximizing bandwidth productivity is mostly just to recap the investment thesis behind ViaSat-3 constellation. Fundamentally, we think that maximizing the productivity of expensive satellite assets in terms of delivering most gigabits per second focused on the high demand geographic regions per unit capital cost invested these are really powerful sources of competitive advantages. While ViaSat-2 is already the most productive satellite broadband asset underway, we see big opportunities in driving even greater productivity. KA is not only to distinguish ourselves from other space based competitors but to substantially grow our addressable through rest of the markets on a global scale. We believe that it’s extremely difficult to attack the technology we needed to reach this kind of productivity without the level of vertical integration we have achieved. It requires close coupling of multiple technology in business domains in ways that are not practiced by incumbent satellite operators, satellite manufacturers, or other members of the existing business ecosystems. We started this journey years ago and we had a systematic approach to burning down technical and systems release. We just recently opened our new Arizona facility that includes a Clean Room and High Bay for assembling two concurrent ViaSat-3 payloads. Initial market reactions to the ViaSat-3 Constellation have been very encouraging. We continue to make progress with multiple potential partners as well as users of the system. We are also making good progress on the system space-based technology, space craft integration, and regulatory funds and we are winding up additional capital resources including the expansion of our revolving credit line that Shawn mentioned. Okay. So finally I will give a little bit of color on our growth outlook. Overall we do see good opportunities for revenue and adjusted EBITDA growth company-wide driven by very strong government systems, performance, good satellite services growth, and relatively flattish operational results in the commercial network segment relative to our current run rate. We got $1.5 billion in new contract awards in fiscal 2016 provides a good foundation for high single-digit total revenue growth for the company in fiscal 2017. Growth in mobile broadband and continued improvements in consumer broadband are anticipated to help improve our operational adjusted EBITDA margins by as much as several percentage points relative to fiscal year 2016. But overall adjusted EBITDA growth will be constrained by the growing incremental R&D expenses for the ViaSat-3 payload program and also as Shawn mentioned via success R&D expenses in commercial aero primarily to support our type certificates for new airlines and aircraft configurations. On ViaSat-3, if we’re just buying a complete satellite from a manufacturer, we wouldn’t be incurring these incremental R&D expenses. While the actual payload flight hardware builds would be capitalized investments the pre-flight hardware builds and test will be expensed. So pre-flight hardware expenses are by definition frontloaded in the overall ViaSat-3 program. So we will be encouraging a large portion of them in fiscal 2017. Shawn mentioned an estimated 50% total increase in R&D expenses for fiscal 2017 relative to fiscal 2016. For the fiscal 2017 total close to $100 million of that is estimated for ViaSat-3 specific R&D and success based commercial airline R&D investments. On the aero side, we do even better than anticipated on winning new airlines and aircraft types that might increase that short-term R&D hit, but obviously would be very, very good in the long-term. And of course we get significant long-term benefits by designing and building our own payloads both in terms of capital cost savings on future satellites and in creating a sustaining long-term competitive advantage to entry notes. We’ll start to address fiscal 2018 on our next call. That year will be exciting because of the launch of ViaSat-2 and while rapid growth in subscribers of good should compensate to EBITDA calculations. So that’s it for our prepared remarks. At this point, we’ll be happy to take questions.

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

Thank you. Good evening. Just wanted to circle back to the EBITDA guidance you’ve given for fiscal 2017 last quarter, I think it was around $380 million to $390 million? Can you just refresh that where we expect to be relative to that number?

I think, so the big thing would be the go -- I think go through the methodology that I just described in that outlook slide, think about sort of our -- what our revenues would be like, single-digit, high-single-digits, and basically ballpark we’ve given the 13.5 range and we had 25-ish percent operational -- 25% operational EBITDA, debt-to-EBITDA in fiscal 2016. So think about it by improving by a few percentage points and that would get you to sort of what our adjusted EBTIDA would be, but then the main difference relative to last quarter is we’ve got more inside on the rate of the ViaSat-3, primarily those ViaSat-3 R&D expenses, and you back out that about close $100 billion from there to get to adjusted EBITDA for fiscal 2017.

Got it. And so just to revisit the fourth quarter, so you came I guess in around $15 million shy of what you sort of expected a quarter ago, was that just the rate of Via-3 expenditures and was there also some incremental STC work in there that drove that?

Sure. So Rich this is Shawn. I think a couple of things as we did have some acceleration of ViaSat-3 activities in the quarter and have started to sort on some of the STC work as well. The other part of it, we had a fantastic award quarter in the government, Mark mentioned that in the script. However, some of those work came literally in the last week, so there is some timing differences on some of the shipments and fulfillment of some of those orders, but very strong performance overall.

Great. And then just with respect to the STC work, you mentioned, I think Mark success based several times which would seem to suggest that you have won some business, and I guess you have disclosed Qantas, but does that suggest that you have actually won business that has yet to be disclosed, this work you’re doing on STCs at this point?

Yes, so we have some cases, we have ongoing program for additional STCs, for instance with EL AL Airlines, that’s one. And then we also have some early authorizations that precede actual contract awards.

Okay. Is there anything you can say just about your pipeline of in-flight wins, the potential there, or any sort of more color on your recent activities there?

It’s really hard to say until we actually have a contract signed, but we’re -- the think I mentioned is we’re in multiple detailed negotiations with several airlines. So we’re optimistic, but we don’t have anything to report right now.

Got it. And the Eutelsat JV, I guess it’s expected to close I think within this current quarter, and I’m assuming that’s not contemplated in your -- the sort of guidance you laid out for fiscal 2017; is that correct?

Just the Eutelsat JV?

So the timing of it, we definitely have that based into our outlook and [indiscernible] at closing. We’re in that kind of final phases as some of the closing conditions, and I think we’re estimating that coming in the next few months.

So is that baked into the outlook that you put forth?

It is.

And can you say how much incrementally that’s expected to contribute from an EBITDA perspective or revenue perspective?

Yes, I would say it’s probably a little bit early to shape that. I think that couple of things you will see when we definitely include a little bit of additional SAT investments into next year for some adds as we start to launch the retail service. But it’s probably pretty early to say, I don’t think it’s going to be a significant next year impact though.

Great and sorry just one final one from me, Markjust the BATS [ph], the Link 16 seems like it’s a pretty significant new form factor I would say for Link 16 clearly, and with potential for I think much higher volumes, anything you could say in terms of the potential sort of longer-term production value of that program?

It’s not really dependent on how lively adapted it is, and I think we will learn a lot more over the course of fiscal 2017 to be a little early to speculate. But we’ve invested in it and our customers have invested in it as well because we think it would be big and impactful, but it would be good to wait a couple of quarters before we speculate on the total value.

Our next question comes from the line of Andrew DeGasperie with Macquarie. Your line is now open.

Thanks for taking my questions. First could you may be expand on the subscriber trends as well as your ARPU jump it certainly seems like you added 10,000 net adds even though your satellite beam just filled up, I’m just trying to figure out what drove that. And secondly on the Eutelsat joint venture, could you may be comment if you could use that satellite or that joint venture for potential expanding your Ka-band connectivity, seems like connectivity market there. Thanks.

Yes on the consumer service basically we’ve been kind of describing over the last year a number of things we’re doing sort of to optimize the performance and some of that involves on the ARPU side is higher value plans and also the additional services. So for instance we recently introduced this Boost 25 which allows us subscribers to pay an additional monthly fee and get PK rates in the 25 megabits per second range, we’re close to the 12 megs that we advertise otherwise. That’s a relatively new promotion that’s been pretty popular. So that helps accounts for the ARPU. On the subscriber side especially as we become more predictable and systematic about how we can acquire subscribers, we’ve been doing investing more and more things to sort of groom or refine the satellite capacity to create more subscriber spots in markets where we can do that partly by moving either making some changes to the operational timers on the satellite or upgrading some of the infrastructure or regenerating some of how we allocate bandwidth. That’s what created the opportunity for us to grow in net adds. We don’t really expect we don’t expect that, nobody should expect that type of net add growth to continue each quarter. I think from here we’ll probably fluctuate in low thousands; it could be up or down over the next probably of course over the next fiscal year. On the Eutelsat JV and Ka-band mobile, yes we actually have already announced roaming agreements with Eutelsat where we each can have platforms will roam on the other satellite networks, until that does already in the work even before the JV.

Got it. And secondly can you may be walk us through the milestones that are left on ViaSat-2 regarding testing or manufacturing. I mean manufacturing seems to be almost done but may be just let us know what the calendar looks like from now on to sort of seven months before launch?

Yes just few months basically final integration which is pretty close to done from then there will be main environmental testing which is vibration testing, terminal testing, that consumer testing which is really the main thing that are left before launch.

Our next question comes from the line of Mike Crawford with B. Riley. Your line is now open.

Thank you. Mark, last week you used Chicago airhub as an example capacity and bandwidth availability. And I was wondering if you could walk us through that and I think you said, you had about 1 gigabit per second bandwidth over Chicago Maryland, what do you think would be your effective bandwidth capacity over there once ViaSat-2 is fully operational?

Okay, so yes so what Mike is referring to fair values? One big issues that we see in the in-flight connectivity market we have been doing with the airlines is that when you think about things like what the total data rate per aircraft, you have to think about how those airplanes for one or more carriers will converge on hub market in Chicago is important as an example because it’s has multiple airlines. So as an example somebody, example I described in that situation was if you had 100 airplanes coming into a single airport you’re advertising 70 megabits per second per airline that’s going to require hundreds or gigabits of capacity of all those airplanes were using that and with bandwidth all of this in time. So and the point we want to make that’s really reflects on the concept of capacity against which is how much capacity can you bring into an individual market. And so the big thing about Ku-bands not being satellites in particular especially going ahead is that we have relatively small beams for those small beams allow us to discriminate and have the beam that covers Chicago is different than the beam that covers Dallas or Atlanta or New York or Boston and that’s not true for either broadband conventional satellites or these Ku-band spot beam satellites or even the Global Express Ku-band satellite that has very large beams only five or six covering the whole country. So, what we said is we already have about a gigabit or more capacity in the Chicago area and with ViaSat-2 we would see probably close to tripling that I believe pull that particular area similar things you can say about Dallas or Atlanta and that’s really that thing we’re trying to get at is capacity against which allows you to deliver lot of bandwidth per plane, lot of planes conversions.

Okay, thank you. Also your own 476 in strong commercial aircraft now that does not include your yonder network more the -- just sounds endeavor where you’re putting on great terminals on high value government aircraft. Can you put any numbers on how many of those other business aviation and government aircraft you’re serving?

Yes, I mean we’re well over a 1,000 in combined aircraft and that’s been -- and that’s growing pretty well.

Over 1,000 combined including the 476.

Yes, that’s correct, yes; we’re well over into the 1,000. I’m not go into much more detail beyond that it’s well over 1,000.

Okay. And then back to the tactical radios, is the ASP is high as $25,000 per radio like that or is that something that would come down if you are talking tens of thousands of units of volumes versus may be just something for just more expeditionary and special forces?

Yes that’s I would say we will figure that out as we get into production that’s probably not going to be that high, we are not making tens of thousands it will be lower than that. It’s still a big aggregate market.

Our next question comes from the line of Chris Quilty with Raymond James. Your line is now open.

Thanks. Shawn I just wanted to get a clarification for adjusted EBITDA, your definition of it does that include or exclude the R&D spending for ViaSat-3?

Our reported numbers include the spend.

Okay. And I think Mark said $100 million next year which is both ViaSat-3 and some of the STC work or is that just ViaSat-3?

No that’s ViaSat-3 plus it’s actually R&D work for commercial aero. But as you noted, it could have some acceleration that it could grow.

Got it. And so is that STC work they get part of the delta from last quarter, I think you said ViaSat-3 R&D spending would be up $40 million in 2017 and now it’s $100 million, so it’s a pretty big jump?

Yes I would say that that -- I wouldn’t say it’s necessarily the largest part, I would say there are some acceleration of the ViaSat-3 and as Mark mentioned that is kind of heavier year into next year and then there is some incremental, I would say probably the other portion is STC may be two-thirds, one-thirds.

Got it. And not that anybody cares about quarterly earnings but could you share any kind of progression of what that R&D spend looks like throughout the year?

Yes it’s probably going to be starting to already ramp into Q1 and be pretty consistent for the year may be slightly above in Q4. But it’s really going to be based on some of those timing items but we get on pretty consistent throughout the year.

Okay. And does obviously that all falls in the critical networks, does that STC work also fall in that segment?

Yes, it does.

Okay. On the aviation business can you give us an idea of what the backlog of aircraft you currently have and tied into that, what’s your current ability to install aircraft and how has that been mostly improving over time?

Okay. So right now the lot of the aircraft that we are installing on is more and more than getting to be new deliveries as opposed to retrofits. Some of the rate at which we’re installing is really a function of what those aircraft deliveries are but it’s going to be airlines. Airlines are providing -- not airlines, the individual aircraft to be upgraded. But more and more we’re seeing them the new deliveries, the ability to install aircraft it is going up a lot mostly because of the success we’re having we have a lot of interest amongst MROs who are eager to do that work. And so we would have more installation facilities available then we’re employed sort of at the peak than we’re doing both United and JetBlue aircrafts.

Sorry.

Okay, Chris.

No other things. So you don’t do any of the installs yourselves that’s either done by the OEM or it’s done at the MRO level; is that true on your government side also?

Since we’re in the government side, we don’t really -- we don’t use commercial MROs unless we tend to use integrators L-3 is a good example. We do a lot of work with L-3 as far as the integration and installation of the equipment.

Got it. And I wouldn’t bring it up like you brought it up first fiscal 2018 since 2016 is in the books you got to have a couple of years of forecast out there. Two questions regarding how we should model the consumer sub growth. Number one should we expect that as you increase the data speeds and data caps associated with ViaSat-2 that ViaSat-1 will see some subscriber attrition or was the -- you’re previously stated capacity of 900,000 subs on ViaSat-1. Did that incorporate expected step-ups in the service plans?

Okay. So just on the ViaSat-1 thing basically what we expect to do, when we have ViaSat-2 satellite is to offer planned in-services that allocate more bandwidth per subscriber than we currently do. And so those plans will also be made available to ViaSat-1 subscribers who might choose to adapt to those plans. And so we’d expect that the number -- the absolute number of subscribers on ViaSat-1 will probably go down and that the yield on ViaSat-1 will go down a little bit as well. So think about yield being sort of absolute revenue per satellite. But the combined of the two ViaSat-1 and ViaSat-2 is going to grow pretty meaningfully. We have lot of that will be determined by the specific plans that we offered will give more guidance on that. So you’ll get sort of one of the ways to think about it the effect is when we talk about our total satellite services revenue now, we talk about like over 90% of it is on ViaSat-1 compared to any WildBlue-1. But actually ViaSat-2 has more than 90% of bandwidth so that means that the older satellites are really some sense over producing in terms of their relative contribution to bandwidth and we expect to see some of that with ViaSat-1 to especially at the beginning. So those are the factors that enter in, we’re not really going to give more explicit guidance yet until we start coming up with more definition of what the service plan to be.

Got it. But it wouldn’t be unreasonable to think that even accounting for a churn on ViaSat-1, the high growth on ViaSat-2, could allow you to get back to sort of 50,000 net adds a quarter that you peaked that on ViaSat-1 when it was run in lean?

Yes, we actually did, I think we did 100,000 installs a quarter peak on ViaSat-1. And I think we’ll do -- at least that low or better at the peak of ViaSat-2. So we see very good growth rates ahead and that will get to grow the total number of subscribers pretty significantly and ultimately what you’d expect would be that there is sort of an equalization of the revenue yield on a per unit basis. If you think about okay we allocate X number of kilobits per second or megabits per second per subscriber, we’d end up with comparable types of allocations on both satellites, not it will I think as we gotten more and more refined as geographical nuances we offer different plans in different places and those had different yields but if you think about ultimately the yield of each satellite in terms of dollars per megabit would converge overtime but because ViaSat-2 is twice the megabit it would have twice the revenue of ViaSat-1 and ultimately that‘s really the source of competitive advantage and improvement.

Make sense. One final question or may be request is I know you’ve given your forecast leverage of getting up to about 3.5 times. And regardless of how I try to model I can’t see to get that leverage up that high I’m off by about a turn, which either means my denominator is not big enough or my numerator is too big and with the R&D spend, it looks like the numerator will come down. But would it be possible with the guidance you’ve given for the ViaSat-3 spend perhaps give it a more granular breakdown of what you’re going to be spending on the satellite, the gateway infrastructure, the launch and insurance piece of that and the capitalized interest just to make sure we get the total CapEx spend size correctly?

I think we’ll consider that, we don’t have detail on that. I would say one thing, we gave in terms of total investment, cash investment, we gave a breakdown of that last quarter, so one thing I would say it hasn’t really changed very much, what’s happened -- the thing that’s happened is that we’re still working on especially the accounting treatment of what’s R&D and what’s capitalized. And like I said the things that tend to be R&D expense are things -- the things that aren’t flight hardware. So that line we’re refining and those tend to be expenses that are earlier in the program and that’s why we’ve seen increase -- in fact increase in R&D for FY 2017 over 2016 it’s not really total cost of the program that’s grown, it’s really has to do with the timing of the R&D expense and the classification of the expense. Do you want to clarity that a little bit Shawn?

Yes. sure and I can just kind of just switch back to one of the questions that was asked earlier, just to clarify last quarter we talked about the incremental R&D going up about $40 million to next year. When Mark and we were talking about the total investments of $100 million, that’s the total amount not the incremental but just wanted to clarify that.

Got it. And I think just certainly you could say that a big portion of that was the STC and success-based wins.

The big part of that was the ViaSat-3 R&D expense. So we had 77-ish million dollars in R&D expenses this year that goes up by around 50% for next year in the 115-ish range and little less than 100 of that or basically devoting our R&D budget primarily to ViaSat-3, so that’s big part -- very big part of that is ViaSat-3 expenses, R&D expenses for pre-buy activities and then there is within that close to 100 there is also just sort of variable estimates, so what we will do for success-based arrow.

Our next question comes from the line of Andrew Spinola with Wells Fargo. Your line is now open.

Hey thank you. I think that last little bit clarified the guidance for the most part for me but I wanted to just ask one more specific question on SG&A it was up a lot this year, it bounced around the prior year. Can you give us any color, can we expect a smaller increase this year because I think that might be consistent with the guidance you are giving, so may be that would help clarify things a little?

Yes so couple of things to keep in mind for this year. One is last year in FY 2015 we called it percent, a percent of the Q2 Loral settlement about $17 million went to contract SG&A, so that kind of gives you a year-over-year performance. And then I think if you look out to next year, I mean we’re going to -- we will see some normalized growth in growth in our business and some of that growth can also be time based on the timing of [indiscernible] closure as well.

Okay. And just to clarify because the questions just keeps coming back to us, are you reiterating the guidance that you gave for fiscal 2017 EBITDA or are you just sort of stepping away from that to giving us more a general guidance, I mean how should we think about that?

So we’re trying not to be too explicit on the guidance pretty clearly. I think actually if you were to sort of reconstruct it both ways, I think what you will find is things haven’t really changed very much except for the amounts. So thing that has really changed is the amount of R&D associated with ViaSat-3 that’s the main thing if you were to attack it from sort of what did we describe last quarter, and then, our outlook looks like the incremental ViaSat-3 specific R&D expense you should get the ballpark pretty close to the same places.

Perfect thank you and on a higher level Mark that the FSS industry is come under a quite bit of stress in a last six to nine months probably not to your surprise but you’re about to pour a lot of CapEx into ViaSat-3 to sort of go after this very industry. And I’m just wondering when you look at everything that’s going on does that anything that happen change your view of the opportunity specific to you or do you think it’s specific to the industry. And as sort of corollary to that are you at all surprised by what seems to be a lack of last two city of demand here I mean the pricing seems to be going down and always see a revenue decline does that surprising to you at all.

Okay, so I mean that sort of whole investment pieces here is that we’re not doing incremental things we’re doing order of magnitude things. So the part I would say is not super surprising people go from one or two gigabit per second satellite to 7 or 10 or 15 and don’t find a lot of growth because satellite bandwidth pricing has been so high, the so long that there is a lot of catching up so we went to 140 gigabits of ViaSat-1 and we’re going to double that for ViaSat-2 and triple for ViaSat-3 so that means is the amount of bandwidth we can give relative to others is like the factor of 10 to a 100 different. And we think that’s what sort of setting expectations in the market what bandwidth pricing are to be that the way I describe it if you go back a little bit. I’d say people in the industry sort of cap ViaSat-1 as an outlier based on in the U.S. it’s only for consumer broadband, it doesn’t really reflect what’s going to happen in the rest of the world. And then so ViaSat-2 expand that coverage with ViaSat-3 we should be everywhere and we -- I mean we are seeing a lot of interest for bandwidth price at the levels that we can with those satellites. So there is notion that there is no elasticity demand or not much I think it’s really just a question of what if that price how sensitive people are to price and that’s where it’s gone back to the S curve being if you go back to somebody that’s supplying on an airplane and say hey the cost of bandwidth went down by 65%. I’m going to make your inside Wi-Fi 65% better they probably not going to very excited about that so, it’s so far away from what’s needed. But when you said okay, I’m going to give you streaming video at approximate price, definitively get peoples interest and that’s just reflects the big difference in bandwidth productivity that’s been our investment, this is all along. We certainly we feel like it’s playing out the way we thought. Does that answer your question or is that.

Yes, it does exactly and I wanted to ask does that extend to the government market I mean traditionally the government market has been a little different than the other data markets almost exclusively Ku-band. How do you -- do you think that market is an opportunity for you and will it take a lot longer because the DoD moves slower or how do you think about that market?

So, one it is happening in the government market and what happened in the government market is we thought out had on the Ku-band side where we were basically replacing Ku-band on mobile -- Ku-band sort instead of L-based band, so a lot of UI cap or nothing and so that give him a big lift one of the things, we start talking about is almost two years ago when we starting doing the Ka/Ku demonstration was well when you start putting Ka-band instead of Ku-band another whole level and so who that’s a big part of what’s driving government results now. But we think we’re really only in the early stages at that places where we are getting the most traction are the places where it’s been most difficult to get connectivity at all, that’s in the mobile market. We see really good growth ahead there and I would say we’re seeing indications of that success we’ve had in airborne markets to extend [indiscernible] markets. So we’re really bullish on that. It’s absolutely happened in the government business as well.

One last question from me are you any closer to either securing or identifying additional capacity for the Eutelsat JV in Europe? Thanks.

There is nothing in terms of closing the JV and we are working very -- working closely with our Eutelsat partners substantially that custom vertical end up with a joint statement on what our plans for there once we reach closer on the agreement.

Our next question comes from the line of Michael French with Drexel Hamilton. Your line is now open.

Good afternoon. I have quick one to start with onto the STC for the A320, does that also apply to the A321, the reason I ask it’s pretty much the same plane that applies more passengers on particularly on popular business routes like New York to Chicago?

You got me on that one, I would guess it doesn’t but I’m not going to answer that one.

Okay. And Rick is traveling, he’s probably on A321 is big.

It’s pretty much.

Okay. And I can move on, you mentioned the take rates that your competitors are seeing on the Ku side with on the play and I agree it’s not very competitive 15 box there is not a lot you can do but they’ve been specific as you know they are in the single-digits six, seven seats a plane. Can you give us more detail on the take rates you’re seeing?

Yes so I think we definitely see variance in take rates depending on the rationale that applies to city tiers time and again. The thing that we’re really excited about or airline partners are really excited about are on really valuable competitive routes especially cross-country routes, we are seeing on some aircrafts, you see more mobile devices and passengers. So that’s indicative of the level, there is over 100% penetration relative to the passengers and that’s I think some of our airline customers are seeing that’s a really good way to differentiate their price. And so one thing we’re doing is we’re working with them to help promote awareness of it and to get remove friction and get more people on especially like for JetBlue where the service is and I think JetBlue is in the past commented that they see take rates close to 40% I think fleet wide. So that would be -- that would average out over the shorter types and the longer types in different times of day but those are numbers that are -- we don’t look at them as a endpoint, we look at them as and I think JetBlue gives the same way as that’s really a good starting point for us to grow, so it’s a pretty striking difference on the take rates on other in-flight Wi-Fi systems.

Right, right. That is great. Okay. And then shifting onto the defense side on the BATS-D, what would you think in terms of the timing of that, if it’s going to become a program of record what should we think about in terms of the timing and I think it goes in that direction would there necessarily be a competitor involved or could that be something where you are sole sourced?

I think it goes into production; it will be up as a sole source since we developed the product using our technology. And what we said, we’re aiming for is that first production program by the end of this year. And I don’t, we’re not going to see end of 1000 to start with but I think we’re aiming for and our customers are aiming for to put us in the hands of people make sure that provides the desired capability operationally within a fewer to extrapolate that out that’s where the markets could really be.

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

Hi thanks for taking my question. Mark do you think on the business and government aircraft, do you think that can keep pace with the commercial in terms of numbers?

No, we -- I think the commercial market is probably bigger I mean we’re looking at tens of thousands of commercial airplanes in the global fleet that are tens versus thousands of government per aircraft. If we get into the Rotary wing and others then it becomes interesting but I think that’s kind of an order magnitude difference in the total addressable market between the two. But the government market demands are really high and the service level agreements are very -- they are very demanding. And so the value of the government aircraft is generally quite a bit higher than that for commercial aircraft on a per plane basis.

Yes, I was asking about government plus business but I forget I get the point it seems like right now the value is quite comparable between commercial and the rest.

Government, I say right now our government mobile broadband business shows up in our government segment. And the commercial shows up in the satellite services segment but the government business on a per aircraft basis is probably more valuable.

Yes everything about the business because there is still pretty good chunk of revenue away from consumer broadband and commercial that’s coming into that satellite services business it seems.

Yes, that’s under the general aviation portion.

Yes, Shawn what do you expect to have for tax rate in 2017?

So, probably the best way to think about it with the R&D credit extension is just may be around $8 million or so of potential R&D credits and then just take the income at the statutory rate.

And you call it 35% for the statutory rate?

It’s probably little closer to 40.

I’m showing no further questions in queue at this time. I’d like to turn the call back to Mark Dankberg for closing remarks.

Okay, good. Thanks and appreciate everybody’s attendance on today’s call and look forward to speaking again next quarter.

Ladies and gentlemen thank you for your participation in today’s conference. This concludes the program and you may now disconnect. Everyone have a great day.