Good day, ladies and gentlemen, and welcome to ViaSat's Fiscal Year 2013 First Quarter Earnings Conference Call. This conference is being recorded. And 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 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…

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…

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…

[Operator Instructions] Our first question comes from Ron Epstein.

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.

Our next question comes from Rich Valera with Needham & Company.

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.

Our next question comes from Yair Reiner with Oppenheimer & Co.

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.

Our next question comes from Tim Quinlan with Stephens Inc.

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.

Our next question comes from Matt Robison with Wunderlich.

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.

Our next question is from Chris Segala [ph] with B. Riley.

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.

Our next question comes from Chris Quilty with Raymond James.

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.

Our next question comes from Brian Ruttenbur of CRT Capital.

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.

Our last question comes from Tim Quillin with Stephens.

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.

Thank you, ladies and gentlemen. That does conclude the conference. You may all disconnect at this time. Everyone, have a great day. Thank you.