Okay, thanks. Good afternoon, everybody, and welcome to our earnings conference call for our first quarter fiscal year 2013.

So I'm Mark Dankberg. I'm Chairman and CEO.

And we've got with us Rick Baldridge, our President and Chief Operating Officer; Ron Wangerin, our Vice President and Chief Financial Officer; and Keven Lippert, our General Counsel. And before we start, Keven will provide the 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 the SEC or from our website.

With that said, let me turn it back to Mark.

Okay, thanks. So we'll be referring to slides that are available over the web, and I'll start with highlights and the top-level business overview, and then Ron will discuss the financial results and then I'll give a lot more depth on each of our business segments, and then we'll take some questions.

So there is a lot going on at ViaSat right now. We're growing fast in a bunch of places.

We really hate reporting operating loss, but there's a lot of exciting stuff going on, and we can see a number of campaigns that we've been working on for a long time all starting to come together. We think this quarter is the bottom in terms of operating results, and we'll try to show you what gives us confidence that the earnings will follow the progress that we've been making in orders and in revenues.

We made a lot of good progress in the Exede Internet service area. Installs grew sequentially by around 40% to 66,000 for the quarter.

That was due to operational improvements which occurred more in the back end of the quarter. So we expect to see good growth again this quarter.

ARPU averaged across our entire sub-base was up about 3.5% sequentially. Customer satisfaction remains good.

New customer share from the underserved market actually increased, and churn is improving steadily. We've actually had quite a few more of our users upgrading from the WildBlue service to the Exede service than it first appeared to be.

So churn has actually been lower than it seemed the last quarter. We added 20,000 net subscribers this quarter, and we expect that to grow meaningfully for the next few quarters.

Most importantly, we've got really good visibility into our per-subscriber unit economics for both acquisition and service operations, and those are pretty much right where we'd like them to be and they're trending to be better actually, and we'll give more detail on that in particular later.

Our Government business had a really strong quarter. Sales were up over 20% year-over-year.

We had record orders that were pretty well distributed over a number of areas, and then that yielded record backlog and we had very, very good operational results. We think all that reflects very strong market positions in key areas that we've been working to achieve for quite a while.

We've perceived good growth opportunities throughout this fiscal year, which is driven by the combination of the existing backlog that we built and our market positions. The defense budget is something of a wildcard, but we definitely believe that some of the growth opportunities that we're seeing are actually driven by the budget pressures, which are making more defense organizations more receptive to innovative solutions that are a lot less expensive and can replace troubled programs of record.

Sequestration could hurt us in some areas but from our perspective, some amount of the budget pressures are really a source of opportunities.

Commercial Networks also had a very strong quarter for us. We were continuing to see very good revenue growth from a combination of product sales and projects, and we had year-over-year EBITDA improvement in that area.

We believe we have very strong market positions in several new emerging or rapidly evolving markets that are driven by the bandwidth economics that we've shown with ViaSat-1. And as we've had more market successes, it encourages us to keep making significant investments to consolidate those gains and to grow the markets, and the cost for that shows up mostly in this Commercial Networks segment because that's where the bulk of the engineering work is done.

So that gives you something of an overview. And at this point, I'll introduce Ron, and he'll give the financial overview.

Thanks, Mark. This chart illustrates some key financial metrics for the first quarter compared to last year.

This statement is also in our earnings release. New orders for the year are off to a great start at 333 million for the first quarter, which is a new record for us.

We saw revenue growth in each of our segments year-over-year, lifting total revenues to almost $242 million, a 24% increase over last year, and also a new record for us. Despite revenue growth, adjusted EBITDA contracted somewhat due to the startup effects of our Exede Internet service, which we expected, and we'll discuss in more details of the call.

So let's turn to our segments. The segment information and reconciliation of segment adjusted EBITDA was included in our earnings press release filed earlier on Form 8-K.

For the first quarter in Satellite Services, despite average subscriber count being down 2% year-over-year, revenues are up $2.5 million or 4% year-over-year, principally from a higher mix of retail subscribers for the Exede Internet service and the average revenue per subscriber increasing 3.5% to about $46.44. This was the first full quarter for the Exede Internet service and therefore, we have full quarter depreciation and operating costs associated with the service.

This will help comparability in future periods. But year-over-year, comparably, depreciation increased by $7.6 million, and operating costs have increased by $7.1 million.

In addition, with the growth in subscribers over the quarter, our commissions also increased substantially. Commissions, combined with marketing initiatives employed in the quarter, selling and marketing costs increased by $9.2 million year-over-year.

As Mark will discuss a little later, given our subscriber growth plan, we expect sequential improvement during the fiscal year in these results.

In the Commercial segment, our sales growth is principally from consumer broadband product sales, as well as satellite systems development and satellite payload technology development programs. Although we had a substantial increase in sales, we did incur an operating loss for the quarter reflecting lower margins on certain mobile development programs, higher selling costs associated with a number of international satellite ground infrastructure programs, one of which was the NBN Co program that was awarded early in our fiscal second quarter and higher R&D investments in advanced satellite communication technologies that support our products and services business.

The Government segment rose over $20 million or 23% year-over-year primarily from higher government-managed broadband services, mostly from ISR applications, UHF Satcom upgrades and Blue Force Tracking 2 revenues, which were partly offset by lower information insurance product revenues. Our operating earnings improved for the quarter year-over-year from better program performance, a higher mix of higher-margin sales and lower R&D costs.

As we look at the rest of the P&L, for the first quarter, the other notable items include the research and development expenses being higher over the same period last year, primarily in the advanced satellite communication technologies, and we believe that these investments are worthwhile and will provide opportunities for us and our partners where our networks are deployed around the globe.

First, in the fiscal fourth quarter of 2012, which was about 5 months ago, we issued $275 million of new senior notes. And the other effect is from capitalized interest.

In the first quarter last year, we had lower debt levels, and most of the interest was capitalized on the assets under construction, most notably, ViaSat-1. In fiscal 2013, we expect interest expense to be significantly higher.

First, lower pretax income year-over-year; and secondly, the effects of the federal R&D benefit. Fiscal year 2012 reflects 2 quarters of the federal R&D tax credit benefit, while fiscal 2013 reflects no benefit.

The federal R&D credit benefit expired on December 31, 2011, and has not been renewed. Given the federal R&D status and that we are forecasting a pretax loss for the year on a GAAP basis, our expected effective tax rate is about 40%.

Turning to the balance sheet. Overall, our balance sheet metrics are strong with very good liquidity.

Receivables increased with the higher sales in the quarter. The increase in inventory reflects a greater mix of ship and build sales and additional CPE in the distribution channel.

As we discussed on our last call, a significant focus in the first quarter was the expansion of our distribution and installation capacity, which resulted in more inventory in the channel. The increase in property and equipment is primarily for the capitalized customer premise equipment for the retail Exede subscribers we added and migrated in the quarter.

On the liability side, the reduction in current liability is principally from payments discretionary performance compensation in the quarter. Therefore, on a net basis, the reduction of -- in cash during the quarter was primarily resulted from working capital used in the growth of the business and investments in new subscribers.

This past quarter, we also amended and extended our revolving line of credit. At quarter end, we had about $310 million available under our line of credit.

We believe our balanced capital structure, our cash on hand and availability under our revolver provide significant liquidity and operating flexibility for the company to meet its strategic objectives.

Now, I'll turn it back over to Mark, who'll talk about our business segments in more detail.

Okay. Thanks.

So I'm going to start with consumer broadband, and we'll go into a lot more depth of what's happening there. So we made -- we've got really good operational progress on a number of fronts.

We increased the blended ARPU, and we've continued to tap significantly into the underserved market with good customer satisfaction. We made really good progress late in the quarter on our installation process.

The improvements really only took effect in June. So that means we expect this quarter to be better as a lot of the benefit of a full quarter with better operational effectiveness.

Because our new service is so much better than the prior WildBlue legacy services, we have a lot of users that are upgrading to the Exede branded service.

Our commission structure pays a somewhat smaller amount for an upgraded subscriber compared to a new one, and unfortunately that led to a pretty fair amount of disguising existing subscribers to look like new ones. So during this past quarter, we did a deep dive on installation data, and that showed that existing subscribers migrating to Exede were a lot bigger factor than it first appeared.

That's actually a good thing because it means that churn has actually been lower than at first seems due to fewer people disconnecting.

So this page shows installation data over the past 3 quarters in the top left. And you can see that that's been growing steadily.

And you can see that a pretty significant portion of that, almost 1/3 in the last quarter, were these migrations from the WildBlue service to the new service. This data makes a lot more sense to us.

And you can see in the top right that the churn is actually been lower than it first seemed, and that's as a result of doing this deep dive into the migrations.

So we're upgrading and keeping a lot more subscribers. That creates a little bit of a running-in-the-sand affect on converting all the installs we're doing into net adds for these first few quarters.

So we had almost 20,000 migrations this quarter. We're still a little bit install-constrained, albeit at a significantly higher level that we're at in the first quarter.

And now we're focused on the right metrics, and we expect steady improvement in improving our install process and our capacity throughout this quarter 2. You can see, as we mentioned before, that our blended ARPU is growing steadily, and that largely reflects the higher proportion of retail subscribers that we have.

Then in the bottom right, you can see the net adds chart reflects the effects of the migration and the much more reasonable churn data. We expect net adds to improve both steadily and meaningfully as we go ahead.

So now we've got about 6 months of operational experience, and we've got about 100,000 subscribers today on ViaSat-1. So we've got a pretty good handle on our operational business model, and we believe it's pretty powerful, and it's an attractive model and that we're well on the way to seeing it come to fruition.

So we're going to try to illustrate where we are and where we're going using the charts on this page and the next. The chart on the left-hand side of this page shows where we are as of the end of the first quarter on our operational model.

And what we're going to do is compare it to where we were before we did the network expansion. So the first column, all the way on the left, shows where we were about 2 years ago prior to undertaking the cost growth for network expansion, and we actually were at just maybe a couple of thousand more subscribers as we had at the end of this first quarter of 2013.

Of course back then, they were all WildBlue subscribers. And now, we've got a lot of Exede users.

But the total number of subscribers is pretty close in each case.

Then the next column that shows ViaSat-1/ Exede Launch shows the incremental fixed and variable operations cost, SG&A costs and depreciation and amortization costs that we've incurred that are all due to the satellite launch and the expansion of our ground network and the operational infrastructure. So then what we did is, you can see we've sort of blended those into the fiscal year '13 column, and that shows those incremental costs allocated to the appropriate categories.

So the higher ARPU means that we have a little bit more revenue than we did with slightly fewer subscribers. But the graph also shows that since the revenue line is lower than our total costs including depreciation and amortization, we're incurring an operating loss.

EBITDA is still positive because that's the floor of the depreciation and amortization, but it's lower than it was 2 years ago.

So now on the next chart, we'll show you how we build on this data going forward. But before we do that, we also want to address our subscriber acquisition costs.

You can see that compared to 2 years ago, our SG&A expenses, which includes sales and marketing, are quite a bit higher this quarter than they were 3 years ago. In fact, that predominantly accounts for the operating loss for the whole company.

So on the right, what we've done is we've normalized that by the number of new retail installations we did this quarter. We've been expecting an overall SAC cost -- we're planning for an overall SAC cost in a broad range between say $600 to $800 for each retail subscriber that we acquire.

And in our first quarter, our actuals were just right above -- right over the midpoint of that, well within our operating model. And you can see that, that includes both our marketing and advertising costs and our commissions as well as capitalized premise equipment and installation.

So the point is that even though the absolute cost of subscriber acquisition grew a lot, the unit cost, and those are the ones that drive the business model, are right in line where we expected then to be.

So now we go to the next page. And in this chart, we're going to use the data from the previous one to show what happens when we do a roll forward.

So the left-hand side of this chart is exactly the same as what we showed in the previous chart, and that shows kind of the starting point where we were at the end of the first quarter. But the first new column, which is labeled Variable Costs, shows an extrapolation of our actual variable costs when we add new users.

The contribution margin for each new user from here is significant. It's approaching 70-plus percent of revenue depending on our mix.

So depending on the new subscriber add rate, we expect it to cover depreciation and amortization costs, and have this business on a profitable run-rate basis around a year after service launch or around the last quarter of this fiscal year. And as we continue to scale, the business model becomes profitable.

The point it of 'this chart is not necessarily to project subscriber add rates, but just to illustrate the business model. Our fixed and subscriber acquisition costs in this first quarter led to the operating loss that we incurred, and I believe that -- we believe that performance improves from here beginning with this second quarter that we're in now.

Okay. So now the last thing we'll talk about is our market and how we're addressing the market.

And in this slide, we want to return to the strategic issue where our subscribers are coming from. We think this is really, really important, and actually one of the most exciting aspects of the results we've seen today.

In the first quarter, our survey data showed that just over 30% of our new subscribers came from some other existing terrestrial broadband service. That is, they didn't come from dial-up and they didn't come from another satellite service.

9% of the people in the survey in that quarter said they didn't know where they had -- what they had used before. We thought that the 30% number was really good.

And then we've gotten data on this quarter that said about 40% of our new subscribers came from some other existing terrestrial broadband service. And we're getting corroborating data that supports that from other perspectives as well.

So the growth, we think, is one of the artifacts we were anticipating as a result of reducing our upfront fee to $50.

Our subscriber base is skewing to be more metro, both literally and geographically, as well as in some important demographic terms. Importantly, we have more choices and options in determining who we'd like our customers to be.

We can exercise that choice and those options both by how we define and evolve our service plans and by how we bring them to market. And this is just what we're aiming for.

But we had to have feedback from the market on how customers actually perceive the service before we could act on it. Now we're beginning to act on it.

It also means, of course, that we're addressing a much bigger market than just unserved households. It also means that we can continue to expand our potential market by improving our service.

We've taken a number of steps to get closer to our customers in terms of controlling the marketing and selling process. Unfortunately, that meant a change in our best Sales Only dealer, which took effect in July.

That set us back a little bit for a few weeks. But we've already overcome it, and our recent sales are above where they were in June.

But we've got access to more data, and we're using that to improve efficiencies and costs in our acquisition process.

Finally, I'd say that our retail success in the market is definitely very interesting to both DISH and to DIRECTV. We've been working away on back-office integration with them.

We believe we'll begin to see the results of that this quarter and that, that will also have a positive impact on the rate at which we add new subscribers. Overall, we find this data really encouraging and strongly suggest that we should be able to sustain and improve our growth rate in the quarters and the years to come.

So now I'll switch to our Government Systems business. And it seems like we've been building momentum there for over a year, but we've seen it more in backlog buildup than in revenue and earnings growth.

So this quarter was something of a breakthrough. It seems like that anyway.

We've got 20% growth in revenue, good operational performance and record orders. It's a little ironic that we're finally seeing that kind of growth just when the downward budget pressures are really taking a toll on revenues for most defense companies.

A lot of growth is coming through more unconventional acquisition approaches, things that are more commercial-like than the traditional procurement model. It's a consequence, we think, of both the capabilities we're bringing to market and the budget pressures making organizations much more receptive to cost-effective innovative solutions.

Mobile broadband for us is going very, very strong -- strongly. MIDS, MIDS JTRS and JTRS in general is coming back to a growth mode for us, and has good prospects to surpass even the prior historic highs that we had there.

Satellite products and services are also going strong. One interesting factor is that it's becoming evident that new commercial satellites like ViaSat-1 are not only better than today's government satellites for broadband applications, but they're also better than what DoD will have even for the foreseeable future.

And demand for broadband connectivity is only going up, especially as more organizations see what's already available and in service. We're seeing more of that now in command control and communications in addition to the ISR, or intelligence, surveillance, reconnaissance, applications we've been doing already.

We're really excited about that market and our competitive position there. We pushed tracking’s ramping up and an exciting development government for us was that we won a bandwidth services program not only for the Blue Force Tracking 2 program where we make the hardware, but also for Blue Force Tracking 1 as well.

The defense environment continues to be unpredictable, but we're seeing evidence of how the budget pressures can help us. Sequestration could hurt us, but at this time we anticipate that we'll continue to see good year-over-year growth from our Government business.

We've had really strong year-over-year growth approaching, but not quite at 50% in our Commercial Networks business. Plus it seems pretty clear that we've got the leading market position for Ka-broadband, and we think Ka-broadband is a good growth market.

We're very excited about the National Broadband Network segment win in Australia. It's the single biggest contract award we've ever received.

It's probably the largest commercial Ka-broadband contract that's out there for quite a while, and it's also really exciting to us because NBN shares our vision of what's possible with satellite. They want to deliver an even more fibre-like solution.

Their objectives align well with ours, and we think that network for will be a global showcase for what's possible. The level of government subsidy that NBN brings to the service will accelerate what we think will be possible eventually and unsubsidized free enterprise markets too.

It's really exciting for us, and we think it will be a great thing for the satellite market.

We're making good progress in every one of our related target markets, too. We added $40 million in contract value with JetBlue's LiveTV subsidiary to serve a previously anticipated deal with a major U.S.

airline. It adds over 200 more aircraft and a base amount of service for us for 10 years.

We also received an experimental license for our portable Ka-band terminal in the United States, which is great for broadcasting news gathering. It's already being used by several major networks and broadcast stations, and I bet you’ve probably already seen quite a bit of live high-definition news footage that's come over ViaSat-1 in our fiber network, including the screenshot that we’re showing here that ABC's [indiscernible] in Chicago was kind enough to let us use here, showing live high-def video of the protest around the G8 Meeting in Chicago.

A small side photo shows the portable ViaSat-1 terminal that was being used to capture it.

We've also captured an exciting initial enterprise application. The market successes that we've had are encouraging us to continue to invest in new technologies and applications and that only makes sense to continue doing it.

So this segment is where we're doing work towards our next satellites as well. We have not yet placed an order for ViaSat-2.

We just don't yet have a contract in front of us that we're ready to execute. We've opened the aperture a little bit in terms of the range of options that we're considering.

Things are little bit fluid, but we're hoping we might be able to announce something this quarter. We still anticipate that ViaSat-2 will enable us to continue our trend towards constantly improving a more competitive service offering.

Okay. So now, this slide summarizes things, and gives a framework for considering our outlook.

We expect continued sequential quarterly improvements in subscriber count, revenue, EBITDA and earnings in our Satellite Services segment. The business model information we presented should help investors model how that rolls forward.

We think we'll expand our distribution and that will help maintain or improve momentum, too.

Government business is doing very well. We saw very good year-over-year growth in the first quarter, and we think we've got the backlog and the opportunities to sustain that during the course of this fiscal year.

We're seeing opportunities for cost savings and commercial alternatives in a number of places. We see more of that than we see opportunities for traditional new start programs.

So in some sense, the budget pressures are helping, although sequestration, as I mentioned, might offset that, at least some. We think the market positions we've been creating in broadband satellite are valuable and difficult for others to duplicate because there are very few companies that are strongly integrated into state-of-the-art commercial satellite communications and in defense to the extent that we are.

Our Commercial Networks business is seeing the growth that we've anticipated. The NBN contract win gives us a lot of new multi-year backlog, and also helps propel our market advantage significantly.

We think other countries will be very interested in what Australia shows as possible with satellite. Plus later this year, we'll be bringing other new Ka-band applications to market, including in-flight WiFi, the newsgathering and more defense applications.

But Commercial area carries the burden of a lot of our R&D, though, because that's where the work gets done. So this is definitely going to weigh on the bottom line there, but we think the market success and the benefits in the Services segment make those investments worthwhile.

So that concludes our prepared presentation. And with that, I'd like to open it up for questions that you all may have.

It's actually Elizabeth in for Ron. Just a couple of questions.

One, what were the gross adds by month in the quarter? I mean, how did it change as we progressed through the quarter?

It doesn't really make sense to break it out by month. We have variations month-to-month but I can tell you, like we said, it was very back-weighted towards the end of the quarter because that's when we made improvements that we are aiming for in our install process.

Okay. And then how should we think by segment about the margin progressions throughout the year?

I mean, do you think Government Systems can maintain this 14% through the rest of the year? And how should we think about the other 2 segments as the year progresses?

This is Rick. I think the -- from the Government side, I think that's a very strong performance, so kind of flat to potentially slightly down.

I don't think it's going to go up from there. I don't expect it to change much for this year.

On the Commercial segments we talked about, I think that's where we still expect a loss for the year in that segment due to the R&D investments that we're making. So I'd say that should hold kind of where it is.

It will fluctuate quarter-to-quarter. It should be better at the end of the year but on average, I think Q1 should represent something close to what the year, as a whole.

And then, the -- what we said or what Mark said a minute ago, is that we're going to have quarter-over-quarter improvements in Satellite Services. So if you can't really look at what the margins in each quarter are, it's the incremental margins for the new subs we're adding.

And Mark suggested that it's kind in the 70-plus percent range on incremental sub adds quarter, each quarter-over-quarter going forward from here. So we think we hit the bottom.

And that should -- so really should drive sub adds and kind of the incremental margins for those subs.

You kind of represented the wholesale/retail mix on your chart, but you didn't actually give a number. And I was wondering how we should think about the migrations with respect to wholesale versus retail economics.

Can you give us a sense of how many of those are your old subs that were sort of your retail versus wholesale? And just help us out with how we should think about sort of modeling those from an economic perspective.

Well, I think -- this is Ron. Two things, one is the majority -- more than half of them were retail subs.

And how we're looking at that going forward, I think it's really a reflection of back to Mark's comment on DIRECTV and DISH and their engagement in their distribution programs. As they ramp up and as they engage more, we should see more of their subs directly migrating and we're not that -- won't necessarily show up as additional subscriber acquisition costs for us because that's their cost.

But it could fluctuate. But to-date, it's been more than half of them has been in our retail channel.

And given that, what was your overall sort of retail/wholesale mix on kind of a gross basis?

For -- on the gross adds?

Yes. If you look at gross adds, like what is it between wholesale and retail?

Yes. It was relatively close in the 70-30 range.

70%, retail?

70% retail, 30% wholesale.

Got you, got you. Okay, that's helpful.

And on NBN, very nice order there. Can you give us a sense of how you expect that to be recognized, and how you think the margins will look on that relative to the Government segment as a whole?

Yes. So the first year for that -- for this fiscal year, most of the work that we'll do is really engineering work.

So it won't have a big contribution for us, nor it would have big contribution margins. The -- most of the real work begins kind of next year.

And then it'll go on for about 1.5-year, 3-year period from this time it starts because they ordered their satellites in February, they expect them near the end of '14, '15, '16.

I'm sorry, so when you say most of the work next year, you mean most of the revenue starts really next year?

Yes, yes, it's revenue. When I say work, yes, turn that into revenue and that's really when we start building the gateway infrastructure, teleports, network infrastructure, that's where most of the revenue recognition will come.

So we shouldn't think about it as a linear, it's like 3-year type of recognition. It's going be less this year and then ramping something above a linear run rate in years sort of 2 and 3?

Yes, yes.

Okay, that's quite helpful. And I'm sorry, just back to your wholesale subs, can you give a sense of how many -- what percent of those were DISH versus other wholesale partners?

Yes. DISH is our biggest wholesale partner now, and; it's really DISH dealers that have been doing most of that now because we've been working with DISH itself on the back-office integration.

They make up probably 3/4-ish or a little over that of the wholesale.

Okay, that's helpful. And then I'm guessing you don't want to sort of get into specific growth rates.

But in Government, you did have a very impressive year-over-year growth rate in the first quarter off of really a pretty easy comp though. So even with relatively solid sequential growth, your year-over-year sort of growth would slow down quite a bit.

So just trying to get a sense of how to calibrate the growth of that business per -- on an annual basis, I think we've been looking at something like 10%, which sort of seems reasonable looking at it on a sequential basis. I don't know if you'd be willing to comment on how that revenue might trend either sequentially or year-over-year beyond the first quarter.

10%’s not a bad estimate.

Okay, great. And I'm sorry, Mark, you made a comment in your prepared remarks about changing out your best sales dealer, and I wasn't sure what that was.

You said you'd recovered from that, but I was confused as to what that actually meant when you said you changed out your best dealer or something like that.

Okay. So we have -- that's fine.

I'll clarify that. So we have, in our sales channel, our single biggest channel is what we call Sales Only dealers, I mean, these are call centers.

Basically, when we advertise, or you see -- do searches, generally you'll see an 800 number to call, and that's a call center, and we refer a call to those. We have some that are independent, we have some that we refer calls to.

And those are different -- those call centers are kind of different techniques or good at different things. The one that was our single biggest is the one that we ended up changing out, the single biggest, meaning, the one that accounted for the greatest proportion of our retail subscribers sales that we changed out.

It was really over sort of the degree of visibility and control that we had on market -- marketing data. And so that's what set us back a little because they were very good.

But on the other hand, it also opened up the door for us to be able to get more access, to understand what's going on better. Because one of the points I was trying to make is that given the market that we address now, we really have a lot more choices in how we go to market than we used to when we only serve mostly underserved -- unserved rural customers.

So it turned out that we took a risk there in replacing them. But it's already worked out very well.

I mean, this is what the point was. I think we'll have more data, we'll be able to target more effectively, and will also actually reduce our cost.

But the point I wanted to make is that there's multiple affects and although we had, like for instance, installed capability go up, we had a little bit of a decline at the beginning of July orders which we've said we're covered from.

First question, can you give us a sense of what -- how you're looking at the rest of the year? And what your internal targets are for both growth and net subscriber additions kind of rates?

So -- okay, just in terms of add rates, one of the things we've talked about pretty significant -- steadily over quite a while talking about can we get 30,000 to 40,000 new adds a month or new installs a month, and that's still a good target for us. We see that, that's achievable.

We didn't think we're going to get there in the June quarter. We won't hit it for the whole September quarter, but we might, on a run-rate basis.

I mean, we're getting close. I mean, we'd see that, it's achievable.

We've got, I'd say more iterative things to do or -- as refinement things to do as opposed to fundamental things to do. So in terms of targets, our first target is to be able to hit that consistently on a run-rate basis, so it for a whole quarter, and then we'll see if we can do better than that.

And then a net basis?

Well, net basis, the thing we've got to grow through is one is we have sort of this bubble of migrations, and think of it this way, which is we made a trade-off consciously, which is we knew that if we made the service really, really good, we create this gap, which would create pressure for old subscribers to upgrade because for $50, they can get a 12-megabit service instead of a half a megabit service. Obviously, that creates a lot of motivation for a lot of existing subscribers upgrade.

But that -- you can about as a bubble that we're working our way through. And it'll take a lot to get through that, and that's going to consume a fair amount of our install and dealer capacity for a few quarters.

So our first goal is to show that we can get to the 30,000 to 40,000 installs a quarter -- a month, I mean, a month. And then to work -- as we work through that migration bubble, then we'll turn more and more of those into net adds.

The benefit of defining the service in that way even though it are created this migration bubble, is we address a much bigger market. And we felt like we have a lot more control of our destiny and a more exciting market.

But that's -- it's, I'd say the biggest issue is the migrations. You can see there's churn affects too that'll cut in to our net adds.

But the churn rate is actually, is pretty manageable and it's coming down. I think it's -- it looks once you understand the migration was better, I think the churn rate looks a lot more manageable.

Great. And if I could just -- one for Ron, in terms of D&A the quarter for Satellite Services, it was a little bit lower than I expected.

It seems like you should have had basically $9 million more than prior to ViaSat-1, I guess, about $5 million depreciation in ViaSat-1 and about $4 million on the ground equipment? And then, I guess, one of the CPEs.

By think it's the D&A was only up about $7 million from prior levels. So maybe you could talk about the factors are there.

Sure. A couple, I wouldn't say it's primarily the fact that over the course of last year, the predominant adds that we have were retail, and therefore, I think in -- for the year last year, we made $33 million and CPE investments are $35 million, and CPE investments that's depreciating through.

So we're relatively short period compared to the satellite, and that's your primary netter down.

On ViaSat-2, I'm kind of curious, Mark, what the deliberations are right now, and what the considerations are before you commit to a contract. Is it more around who's going to build it, or is it what they're going to build, or is it the business case for building it?

I'd say it's really -- the main things are primarily I'd say price and terms, and that's what we're negotiating around. I'd say the business case is -- business case is good.

We're -- but the price and terms are always a factor, and that's what we're working on. There are a couple of -- there are always things that are unique to each particular satellite manufacturer, so we have to -- so we're working through those, comparing those as well.

And as you build the business case for ViaSat-2, how important is the enterprise market for that case?

Well, what I would say is we're developing these alternative uses, but we're -- you'd think that the fastest-growing and the most important one is the consumer case. And so that kind of things that we're focused on are making sure that we get the subscriber unit economics that we want, that we get the satellite when we expect, that's a factor, and then also that we have the coverage in the right places in the right proportions.

Those are all things that are mostly driven by consumer. Then there are some things that we can do to improve some of these other applications as well.

Those are second order effects.

Got it. And then I want to make sure I understand the wholesale opportunity here or what you've been doing in the wholesale channel in the quarter because if I read the chart right, it looks like the net additions through wholesale were only about 2,000 subs, but it was 40% of the gross adds or something like that, which means that a lot of the churn or all of the turn is coming in the wholesale channel, is that right?

No. I would say that the -- on the gross adds side, only maybe 30% is coming from the wholesale channel.

And if you look at the one chart, on the wholesale side, there's been net declines beginning in Q3, then a little bit less in Q4, and now they've actually gone net positive for the quarter. So they just assigned that, that channel is ramping up and contributing positively to net adds.

But the churn has been higher than the wholesale channel than in the retail, so the churn is more disproportionate in wholesale, which contributes to the effect that you're noticing.

Yes.

Right, right. And then I just want to understand your expectations now.

You've -- I know you've made this change in the Sales Only deal or I think maybe you've changed -- I know you've changed some issues in your fulfillment network. Would you expect in the September quarter for installations to continue to grow versus where they were in the June quarter?

And would you expect migrations and churn to stay relatively consistent with where they were in the second quarter?

So we expect installs definitely to grow. It's a question of by how much.

And there's -- what we're trying to do is balance the demand with the install capacity, and that -- we don't want to waste a whole bunch of resources by driving orders to a close point that we can fulfill. But the pressure of the orders is what drives the install capacity.

So we're trying to balance that. We think it's going to go up.

I'd say the migrations, I wouldn't be surprised to see migrations hold at around 30-ish percent of installs this quarter. That's not based on science other than -- I mean, we just don't see it changing a lot from where it was in the June quarter.

Right. And then the churn as well, it stayed consistent.

Churn seems to be coming down. And I think that basically, churn is really driven by the legacy business.

And so what's happening is legacy, a lot of the legacy subscribers are migrating up in the churn rate for the new business is really, really good. So I think we'll continue to see the churn rate come down.

What -- so you gave some -- you made some remarks that suggested that when you went back and looked at your migration and churn for the March quarter, things might have been a little bit different than what the way you described it before. Is there an update to those numbers that you can provide us?

Yes. Well, the numbers are what you see.

The numbers that, as we believe them to be now are what's depicted in the slide chart on Page 9.

Yes, okay. So more of just a graphical -- graphic presentation because we have some specific numbers that you presented 3 months ago.

Yes. They were probably 2,000 or 3,000 people that were migrations last time that were probably reported as in the churn on or above that, right Ron?

Yes.

So I think that was cleaned up this time reflected on the prior period.

That's why, I mean, in the last quarter if you recall, I mean, people were over the phone competing about 9% quarterly rate, 3% monthly rate. And as you can see, the quarterly rate for the fourth quarter is now lower than that, that 3% that was discussed last quarter.

So it's a little about 2.6%.

Yes. We expect -- I mean, what we expected was that the churn rate, which is really driven by legacy subscribers, would go down.

That was sort of the thing that was confounding was the direction. And we felt it should go down because subscribers who were dissatisfied would have the option of upgrading their service.

And what we found were people at the same address were disconnecting and then reconnecting with different initials or names or credit cards, and it was confusing our metrics. So when we did a much more thorough review of that, that's what we found.

We found thousands of those. And what it showed was directionally, churn is going down, not up.

Yes, okay. That's helpful clarification.

When you talked about the customers that are coming to you that have been served, I guess, by cable or DSL or the terrestrial-type customers, why do you think they're doing that? And what's your thought on the sustainability for that?

Okay. So the dominant sources for us are people who are using wireless at home, that would be 3G or 4G.

They generally had a mobile wireless plan and they view something like -- they might use a MiFi to turn that into a WiFi for their home or they might just use a wireless downloads with a computer or laptop. So there were those and DSL.

Those categories account for the majority of people who, we consider, underserved that are migrating to our service. And the reason that we get back is ours is a lot faster, it's more reliable and you can -- and it's more responsive.

You can do things that you can't do with those others. And just to be clear, we think it's really significant because up until the point we introduced a new service, what we're seeing was with the flow in the other direction where one of our subscribers or any satellite subscriber would lead if they found 3G or 4G wireless to be available or if even a low speed DSL service became available.

Well yes, so okay, so really kind of almost like data caps where you can get past the low data cap by going with you...

Yes. I don't think -- to be honest, I'll tell you what we think is that data cap -- people do not like data caps.

Let me make sure I put that out there, people don't like data caps. But data caps to people are abstract.

A lot of people aren't quite sure what they use. And I could tell you, our data caps don't affect the majority of subscribers.

But data caps are abstract whereas, see -- when you see the service, the speed and responsiveness are very tangible. When you can look at it and say, "Wow, that's fast," okay?

And so when people are presented with those 2, they tend to like the speed and responsiveness that they get through our service. Then what's really important for us is to measure and monitor customer satisfaction to find out that even when they made that choice, that they're not disappointed later.

And so far, that seems to be the case. It seems to be people are happy with their choice.

So your network latency is low enough that it more than offsets the round trip it sounds like.

Yes. Well you've seen -- I mean, I think you've seen demonstrations of it, a combination of the acceleration and the speed and the lack of congestion that makes it really, really responsive.

And that's what people notice. I mean, they notice it for web browsing and servicing, web shopping, email, things like that, but also if you watch YouTube videos or just videos that come up on websites like ESPN or Disney, it's just way faster, and I think that's the people respond to.

Our -- what's the percentage that -- how was it split between your data rates than if -- or data caps and if the consumer is not particularly sensitive to that?

So right now, where we are, we're selling very high proportion of our $50 plan. I mean and so Exede 12, the 12-megabit service is 90% of our sales, and most of that, I'm going to say in the 80s, mid-80s, high 80s is the $50 plan.

For the first few months, we inform people that we weren't able to accurately measure consumption, and we weren't enforcing the volume caps. But beginning in July, we've been able to measure it, and we started informing people of their usage.

And we'll have a buy more option for people that meaningfully exceed what their caps are and will sort of ease into that. But I'll just say probably for the last month or so, people are becoming more aware of what their usage is.

We -- because I just want to clarify one other thing which is, even though we said we couldn't measure it accurately enough to enforce it, we've been able to measure this pretty well for ever since it started. And we've been able to correlate actual usage with predicted usage, and think of it as a histogram or create a distribution of what the usage is.

It's very, very close our models. It's very consistent with the data that we see from other sources that say a very small fraction of users use a very large fraction of the bandwidth.

Yes. So you don't -- so you expect a meaningful amount of customers that are going to be in a buy more situation or people generally getting it right with the...

We -- our objective is not to make money on buy more. Our real objective is that people buy the plan that's what's best suited for them.

And I think that's what we'll get to. And actually, I think.

Also our objective is that the $50 plan is the dominant plan. We may see the percentage of the higher plans go up some from where it is now when people see what it is, but the $50 plan is intended to be the popular plan.

You'll have people as we roll this out. Michael, it's Rick -- migrate to mid-tier, upper tier plans just because they know you are going to be impacted by the limits in the first part that should be just a normal distribution.

Just filling in for Mike Crawford here. So you mentioned the DIRECTV and DISH relationship seems to be a work in progress.

Just kind of curious on the time frame or what you're expecting for the time frame for when those channels might be fully ramped?

Well, the biggest thing -- so first off, as we mentioned, DISH is, right now, our biggest wholesaler. A lot of it's going through their dealer network.

We've been working really IT integration with DISH, which should be in effect this quarter. I think you'll see them a lot more active.

DISH remains very, very interested in us in broadband, in bundling broadband with their video. DIRECTV also, I mean, DIRECTV, I think we've had really good meetings of them.

I think they're excited about what -- about the results that we've seen in terms of subscriber satisfaction with the broadband. And I think you'll see them more maybe at the end this quarter or in next quarter really paced by IT integration issues.

Okay, great. And then has there been any change maybe to those various meetings on how you're looking at the effect HughesNet for service will have once it comes online in a few months?

I think that there's 2 sort of overarching strategic issues. One is even in the unserved market, I think everybody thinks there's plenty of room for both satellites, and we don't see anything to change that from what we've seen in the first 6 months.

But then when you look at it from the underserved market perspective, that it's -- the market is like twice as big or more. And so that I think on the strategic level, says that I think both of them should do fine.

And I think that probably we expect, over time, that DISH will become more -- will have greater affinity for the EchoStar/Hughes service. That's probably going to be the case.

I'm not quite sure that DISH is going to want to not use our satellite. That's not the indications that they've given us.

And -- so we'll see, but I think we've been aiming for, as you can tell and what we talked about here, is what we're aiming for is to have a service that we can compare the terrestrial alternatives. And the way we're trying to do is to make so that people would prefer to those terrestrial alternatives.

That seems to be the case. And so in that perspective, we're sort of aiming higher, and I think that how we compare and compete with Hughes will really depend a lot on whether on where Hughes aims.

And if they aim like we do, well, maybe we're both going after this bigger market. I think that's more of the strategic issue.

First, just a clarification. I think it was on the Indian contract, when you say next year, is that calendar or fiscal year?

It's fiscal. [indiscernible]

Okay. So when you say next year, you're always talking fiscal?

Yes. Not always.

But we should have been more careful-ish on that point.

It's 1 quarter or 3-month difference, but still. So DIRECTV is not contributing now, and just for accounting purposes, because it's an agency relationship, will that look like when you account for a ViaSat retail customer, or will you still treat it as a wholesaler?

No. That'll be a retail customer.

Okay. ViaSat-2, any potential there for looking at new technologies like the electric propulsion?

I'd say we -- like I mentioned, we are -- we're expanding our aperture a little bit just to make sure we're getting you exactly the right agreement.

Okay. And a clarification on the Government broadband, I don't know -- I didn't see in the presentation that you gave a growth rate for the Government Mobile Broadband area.

I think you had done that in previous quarters, the takeaway, I think, was that it's still growing nicely. And I guess the question is that same story probably in defense news they are looking at data's significant portion of that Liberty aircraft and air fleet and move it into the reserves.

And does that have an impact on the growth of that segment? Or do you still see incremental growth on a go forward?

Okay. So I'll try to answer both parts.

One is I think what we shown in the past is we've shown a chart that shows the percentage of our Government business that's made up of services as opposed to products. And we've shown that the services portion has been increasing steadily, and it did grow a little bit that, again, this past period.

The -- but the other point in there is that, that business segment, on Government Mobile Broadband business segment, is made up of both product sales and product sales. And there's a little bit of a wave cycle effect because we get -- to get service sales after we've gotten product added in to the market.

And actually, we're going through a wave of product sales now, which I think all goes well for continued growth in the service sales. And then also, the other thing I might have mentioned as we're getting -- I've mentioned in the past, we're getting upgrades from Ku-band -- to Ku-band.

So that, we're going through those 2 things. But that business is continuing to grow.

It's the fastest-growing part of our Government business. The -- then on the Liberty aircraft, one of the things we're seeing is assets that had been just focused on Afghanistan and in organization elements that were focused on Afghanistan are now being dispersed to other parts of the world.

And you can imagine what those hotspots are. And that -- what's happened is none of those assets are taken out of service.

They're going to other places, and our customers are asking us to support them and support services in those other places. And some of those prices, there's Ka-band and so that's helping to - that's helping us to get those upgrades.

And I would say that the organizational element that those assets go into doesn't really impact our ability to service them.

I'll add to that, Mark, is that a lot of -- there's growth domestically in terms of quite a bit of training growth.

Yes.

We should expect this year or next year.

Okay. And also dramatically, Ka-band, what's the timing on the first customers or rollouts or antenna certification for the domestic commercial Ka-band service, aviation?

Right around the end of this calendar year.

Okay. And how many aircraft is it in total now?

Well, I think we're over 350.

The total is 375.

For Ka-band, for commercial airlines.

Great. And a clarification just on the profitability of the Satellite Services business in the quarter, if the adds were about as expected and the SAC cost was about as expected, what was the big delta in terms of the lower profitability?

Results were pretty much as expected.

Okay. So we were just -- weed off on the consensus?

Yes. Or we haven't been doing a very good job of providing the visibility people need to anticipate, it's one of those.

Okay. So here's your opportunity.

What would be a good range for EBITDA for this year?

We've done -- I'm going to tell you, the thing we've done, we feel we've done a good job on directionally where things are going. It's hard for us, very hard for us to predict timing.

We just had a hard time on that. And that -- and there's timing elements that are getting impacted.

It's just hard for us to say.

As we aware, as we get more and more quarters, what we've told you guys is that we're going to disclose -- this is Rick -- we're going to disclose better metrics and kind of more guidance around those metrics as we mature in this thing. And I think it will take another couple of quarters to get over the curve.

And then you guys will get a little bit better at looking at it, and we'll probably do a better job of describing it.

Fair enough. I had to try.

Yes. That's one of their first old quarter.

Yes.

Two quick questions. The revenue from the DoD in the quarter, I don't know if I caught that.

Can you like -- can you state that?

I mean, are we talking Government Systems?

Yes. A bit, I wanted specifically from the DoD.

We didn't disclose that.

Can you disclose it approximately?

It will be in our Q.

Okay. And then what has it been historically from the DoD?

It can fluctuate because sometimes we have a very large and significant contracts with some of the larger primes, and some of them were prime ourselves, and I wouldn't say there's a steady consistent trend, just really the ebb and flow of where we are, and sometimes we work through other people's contract vehicles because that's what -- that's the quickest way to get us under contract too.

Can you give us a range on that flow? Was it 30% to 50% of your Government revenue?

Is it 5%? Is it 70%?

Can you give us some numbers?

DoD is probably closer to 80%. I was going to say it probably fluctuates between maybe 60% and 80%.

Perfect. And has there been concerns at your firm with sequestration and how you're going to handle that?

Well, we mentioned that. I mean, it's -- we try to go through and identify those customers and contracts that we think would be affected.

It's a little bit hard. It's hard for us to identify a big impact.

And then the flip side of that is that -- some of our business is coming because of these budget pressures, some business that we wouldn't have otherwise. And so it's just -- it's a little bit different for us and for one of the large prime contractors where there's no upside in it at all.

I just had one just detail question on I’m just making sure that the NBN contract is within the Government Systems and with the new Government business. And then how much of it goes in the backlog?

And then the more difficult question maybe on what DISH's minimum commitments are and if that would still support growth in the wholesale channel even if they weren't particularly motivated.

Okay. First question on NBN, that will be reported in our Commercial Network segment.

So like what we've talked about earlier in the call, right away, the $240 million, which is a firm contract, that'll go into our backlog. We'll work off a fraction of that, much less than 1/3 this year.

Yes, maybe a lot less.

More like 10%, yes, 10% to 15%. Just this first and during this fiscal year because that's really more lead development engineering work.

And test work for them. Exactly 2 years, we'll see bigger growth, and that will be more in the equipment build and deployment.

I think as a reminder, we didn't book that to this quarter.

No. That contract will fall into our second quarter.

So second quarter is going to be another really good quarter, obviously, for us for orders. On the DISH arrangement, basically, what we said in the past is that DISH made a commitment to acquire a certain number of terminals and to turn those into service.

And we have no doubt that they will happily and pretty quickly burned through those. The issue is really whether or not they want to work with us on a sustained longer-term basis.

That we really won't know the answer to that until next calendar year. I'm guessing I'll bet they'll probably work through their terminals this calendar year or shortly afterwards.

But I think even before we get to that point, we'll have some indications that they want to work with us. They have the right to as long as they do a reasonable amount of business with us on a continuing basis.

And so far, they've indicated that they liked to, that they think there's a lot of demand out there, and they'd like to have access to those satellites. And that's really about as much as we know now.

So I think that's all the questions. We really appreciate all the questions.

That's all the questions for today. And I think that concludes our call.

We look forward to speaking again next quarter.