Welcome to ViaSat fiscal year 2009 first quarter earnings conference call. Today's conference is being recorded. Your host for today call is Mark Dankberg, Chairman and CEO. You may proceed, Mr. Dankberg.

Good morning everyone and welcome to ViaSat's earnings conference call for our first quarter of fiscal year 2009. I'm Mark Dankberg, Chairman and CEO, and I've got with me, Richard Baldridge, our President and Chief Operating Officer; Ronald Wangerin, Vice President and Chief Financial Officer, and Keven Lippert, our General Counsel. Before we start, Keven will provide our Safe Harbor disclosure.

Thanks Mark. As you know, during the course of the discussion today, we will be making forward-looking statements including those relating to anticipated benefits of strategic relationships, expected future business, projections of financial performance, growth and trends in our business or key markets, the anticipated performance of products or services, and plans, objectives, and strategies for future operations. We would like to caution you that actual results could differ materially from those contemplated by our forward-looking statements. We refer you to those risk factors contained in our SEC filings available at the SEC's website including our annual reports on Form 10-K and our quarterly reports on Form 10-Q. We would like to caution you not to place undue reliance on any forward-looking statements which speak only as of the date on which they are made and we undertake no obligation to update any forward-looking statements.

Okay. Thanks Keven. We will be referring to slides that are available over the Web, and we'll start with our fiscal year '09 first quarter financial results and our business overview perspective and some business highlights and discussion. And then after that, Ron Wangerin will discuss financial results in detail and update our outlook for the fiscal year and then we'll take questions. As you can see, our first quarter results were very good, showing strong growth over last year which was itself overall a record year for us. We had record new orders of about $206 million and we'll discuss some of the more significant ones shortly. Our revenues reached a new record at $153 million, up 19% year-over-year. We earned $0.29 per share on a non-GAAP diluted basis, up 38% compared to $0.21 last year, and GAAP net earnings per share was $0.20, which is 54% higher than last year's $0.13. Income before tax was up 66% over the same period last year, which we think is very good and reflects that we improved margins significantly. You can also see that our effective tax rate this year is at about 35% compared to about 27% last year and this reflects the fact that there is not yet in legislation renewing the Federal R&D tax credit for calendar year 2008. The higher tax rate reduced our earnings by several cents a share this quarter. Let's take a quick overview and put those top-level first quarter financial results in context. In summarizing the key financial points for 2001, we had a very good quarter for new contract orders. Some of the highlights there included a very good share of MIDS low volume terminal LVT Lot 9 production order, and additional funding on the joint tactical radio system or JTRS version…

Thanks Mark. We will start with the P&L and segment results, then cover the balance sheet and cash flows. As Mark mentioned, operating results for the first quarter were very good. Revenues were $153 million, a new record, and a 19% increase over the first quarter of last year. The cost of revenue percentage reductions reflected improved margin performance particularly in our government product areas. Selling, general, and administrative expenses were higher year-over-year mostly due to higher selling and support costs from increased business activity, as well as legal and other costs associated with our Ka-band satellite initiatives. R&D was up significantly in the first quarter year-over-year due to the development of next generation tactical data link, information assurance, unmanned aerial vehicle, and broadband technologies. This reflects the market demand the company sees in these future products and its desire to increase the phase of investments in these key technologies. Quarterly amortization of intangibles was slightly lower for the first quarter year-over-year due to the completed amortization of certain intangibles partially offset by the amortization of new intangibles from our JAST acquisition in the second quarter last year. Income from operations for the first quarter of fiscal year 2009 includes non-cash stock based compensation expenses of $2.2 million and it was $1.8 million for fiscal year 2008 first quarter. Despite similar year-over-year average invested cash balances, other income decreased due to lower interest income earned from lower interest rates year-over-year. Our income tax provision for the first quarter reflects a quarterly tax rate of about 35% versus 27% in the first quarter of last year. The fiscal year 2009 effective tax rate does not include any benefit related to the federal R&D tax credit, whereas the fiscal year 2008 rate did. Without the federal R&D tax credit, we expect the…

Okay. Thanks, Ron. At this point, I will give a quick update on our outlook for the rest of the fiscal year. Our outlook for the year as a whole remains pretty consistent with our estimates last quarter. At this point, based on awards timing, we might want to narrow the revenue range a little bit, consistent with where we see a reasonable midpoint of revenue in the mid $600 million. We are still aiming at the same range of GAAP and non-GAAP earnings per share. Our estimates for both of those are based on a tax rate that's consistent with the federal R&D tax credit being extended and retroactive to the beginning of calendar year 2008. Our estimate for timing has a little higher percentage of the total fiscal year earnings in the second half of the year that is indicated by the current consensus of analyst estimates. Much of the difference is due to the timing of the R&D tax credit. We expect earnings in the second quarter to be sequentially higher than the first quarter and have stronger earnings growth in the second half. The growth rate on the AcceleNet WAAS Mobile is a little bit of a wildcard. To date, we have had good ramp rate, but on very small numbers. Based on that and the very favorable industry reviews and feedback we are getting, it makes complete sense for us to continue to support that at the level we have been, even though at this point, it's likely to impact earnings in the second quarter by a couple of cents a share or so. We expect to know a lot more about the growth trends next quarter. There are several factors that effect the higher second half outlook including the shift that Ron mentioned earlier…

Thank you, sir. (Operators instructions) And for our first question, we go to Rich Valera with Needham & Company. Richard Valera – Needham & Company: Thank you. Good morning. Rick, I was wondering if you could remind us what your cash flow from operations target for fiscal '09 is.

We're looking in the north of $50 million range. Richard Valera – Needham & Company: Great. And just to triangulate on your expectations for expenditures for ViaSat-1, you'd talk about $135 million of costs associated with that in fiscal ‘09. Can you say how much of that you've actually done year-to-date? And is it safe to say at this point that given the uncertainty of the timing of your strategic discussions that you are going to put to debt capacity in placed to be able to support that $135 million buy yourself at this point?

I guess a couple of responses on that. Regarding the debt capacity, yes, we are expanding our line to a level that we think is appropriate, given our expected expenditures. Regarding the expected level for this year, we're basically spending at a level that we anticipated maybe a week or two slower, but I think that's fairly consistent with our plans. Some of it depends on the timing of some of the milestones that we hit relative to whether it's a launch contract or a satellite contract that could slide a quarter or slide out of a quarter that could influence the total for a year, but we don't see anything that's inconsistent with our original spend plans at this time, Rich. Richard Valera – Needham & Company: Okay. Mark, in your prepared remarks, you made reference to a project that you are a partner with Lockheed Martin on that you said could be quite significant if they won. Could you just go over that project again with maybe a little more color?

It's called TSAT, and TSAT has been in the work for quite a while. It's about a $15 billion multi-satellite, multi-year development aims for deployment coming at 2016-ish time frame. And we have a pretty big role in the Lockheed team, big meaning more than $100 million of involvement, somewhere in that range. The program has been sort of unclear whether or not it would proceed, but just in past quarter, DoD pretty much firmly decided to make a down select and an award to either – it's between Lockheed and Boeing – pretty much make a down select this year. Richard Valera – Needham & Company: Great, that's helpful. In terms of the second quarter, should we be thinking about pretty much a full tax rate again for the second quarter since the – it doesn't look like we will get the R&D tax credit in time for that quarter?

Yes, you can judge yourself as well as we can based on what's going on in Congress. I'd say it's probably safer to assume that it probably won't be implemented before the end of the quarter. But it might. Richard Valera – Needham & Company: Great. That's helpful. Thanks very much guys.

We'll go next to Tom Watts with SG Cowen. Thomas Watts – SG Cowen: Congratulations on a solid quarter. Just to clarify, when you say you're focusing on strategic relationships rather than financial, is that going to be primarily distribution, selling to provide distribution and should we think of – if you're going to do that, would that suggest that they're less likely to provide an investment?

I would say, we would use strategic as meaning someone who has an interest in the industry and the industry would be a satellite partner or someone who's a broadband partner. And that broadband, such partners could either end up helping with distribution or facilitating distribution, that's kind of the way we define strategic. And I wouldn't say that because of that, that would mean that they're less likely to make an investment. I'd say that depending on the strategic partner, that still could make sense. Thomas Watts – SG Cowen: And then also just, could you give us a little bit more color on two-way and how we should think about the take-off of the European market? I know that they've been – they're still putting distributors in place. Are we really waiting for the Ka-band satellite launch in 2010 for the takeoff? And in terms of shipment rates for them, is it still going to 100 per month at this point?

Basically with two-way, the idea is to kind of understand the European market and to, I'd say, test it. And the idea is, in theory, is to kind of make strategic relationships that would be, let's say, blossom with the case of that satellite. And the total market for two-way prior to the launch of KA-SAT is in the tens of thousands as we have talked about before, and I mean it's like 40,000 and 50,000-ish. They may augment that a little bit Ku-band. But it would be in that tens of thousands range and so you could sort of figure between now and then. Now it means thousands per month. That would be kind of between now and two years from now, be it 24 months and tens of thousands of terminals. I'll give you some idea of what that would mean. That would be pretty – I mean I think that would be a really nice start and would help sort to pave the way so you could get a running start when KA-SAT is launched. Thomas Watts – SG Cowen: And then just finally, you talked about how commercial VSAT was developing very nicely and you are expecting to close some additional orders. Is there something specific happening in that market and is that primarily US based, and are you stealing share or is the market having a little bit of pickup in growth?

I guess the main thing that I'd say is we were just so absorbed in the Ka-band stuff that I'd say we probably neglected the conventional VSAT business a little more – a little bit for a time period. And so, over the last few quarters, we've made it more of a focused area, and I would say that whereas things have been sort of declining for us even when the market itself was growing a little bit, we've reversed that I've say it. So I think we're more holding our own and I think we have a good shot of getting back at least to where we were, and that – we're doing that through a combination of things. I'd say we've announced several product improvements, we've reallocated resources, we've cut costs and we're doing a variety of things that are improving that business but a more, let's say, execution oriented and market oriented. Thomas Watts – SG Cowen: Thanks.

And for our next question, we go to Steve Ferranti with Stephens, Incorporated. Steve Ferranti – Stevens, Inc.: Thanks guys. A quick follow-up on the KA-SAT opportunity with two-way, can you – over the next two years, can you sort of characterize for us how you expect the ramp for the infrastructure piece in it to role out and then when over that two year period you might expect those unit volumes to ramp up to what you described in the previous question?

Okay. It's a little bit hard but I'd say a good way to look at it is sort of compare it to WildBlue in the United States. The WildBlue between their two satellites was about a 10 gigabytes capacity. Ka-Sat in Europe is about 70 gigabytes, so it's like seven times bigger. With WildBlue prior to launch, we did tens of millions of dollars in infrastructure, that being 20-ish million kind of infrastructure. So for Ka-Sat, because it's a lot bigger, you could expect the infrastructure to be bigger. I wouldn't – it's not only bigger by the ratios because of scale we've improved the economics, so the cost – the capital infrastructure cost per subscriber will be probably better than it was, but still you will have kind of like seven times bigger. So that's a factor. And the infrastructure stuff you would expect would be deployed between now and satellite launch in about two years. If you look of what we did with WildBlue in the first – WildBlue and Ka-Sat [ph] combined in the first two or three years, you're looking at a couple of hundred-ish million in terminal sales. So we think we – that's not going to – the uptake rates is going to depend on the distribution, but their capacity is certainly there. It has similar types of results. Does that give you an answer to some of the things you're looking for? Steve Ferranti – Stephens, Inc.: Yes, absolutely, that was very helpful. And then in terms of the ground infrastructure that you assess, looking at putting in place versus what WildBlue put in place sort of prior to their ramp, is it similar infrastructure wise in terms of number of gateways?

Yes, it is similar. The main thing is – so you can surely look at the ratios of capacity and then what you want to do is they will – you'd expect and we want to deliver efficiencies in capital cost per subscriber. So those two things will balance a little bit but we think the infrastructure opportunity is definitely bigger on Ka-Sat because of the capacity so much higher. And the number of gateways is comparable. Steve Ferranti – Stephens, Inc.: Okay, great.

We are really – just to be clear. If we are talking about the amount of infrastructure – network hub infrastructure equipment that goes at each gateway. Steve Ferranti – Stephens, Inc.: Understand, okay. And are there any technology milestone that you've either hit or expect to hit in the near future on either I guess ViaSat-1 or Ka-Sat that would give you an increased confidence level in terms of your ability to hit the capacity targets that you're looking at?

That's a good question. I mean basically a lot of it is, in terms of the capacity, the satellite [ph] that's based on engineering analysis and then that gets turned into specifications for the satellite payload and when we talk about technical progress on the satellite construction contract, we'd go through a series of designer views for the satellite payload and that puts a lot more specificity and the actual hardware implementation of the design. And so we've been having pretty good progress on that. We've been through a preliminary designer view, kind of next milestone around the end of this year would be a critical designer view on the satellite payload itself. And that really is design of the satellite has to be implemented. So that will be the next big milestone; that'd be this year. On the ground segment side, one of the big milestones has to do with things like placement of infrastructure. Kind of the exact placements of infrastructure and then going through the calculations of how that influences the economics and capacity. And that's the other big area that we've been making good progress on. Steve Ferranti – Stephens, Inc.: Okay, great, very helpful. Last one from me is I guess in terms of the discussions that you've been having to date with strategic partners, can you characterize – are they more skewed towards the consumer broadband distribution under the spectrum or maybe perhaps towards the more traditional video distribution model? Any color you can give us there?

I'd say consumer broadband is one area and just to reiterate we real like that area because it's so well understood and proven in the U.S. and we believe under way in Europe as well. But some of the other ones do involve kind of some of these additional uses, and I would say more traditional video is not, I think that's a good application. And that's not one of the areas that we've been working on these strategic partnerships; it's really more things like wireless backlog – 3G, 4G wireless backlogs is obviously a really good one. There's a lot more sensitivity to coverage areas of 3G now in the world just months ago that's still a hard problem. Some of the kind of more media-centric aspects of Internet also have some good promise for us. Those are kind of more the initial areas. Steve Ferranti – Stephens, Inc.: Okay, and I assume obviously your guys are – part of the challenge there would be sort of optimizing the highest and best use of the asset at this point.

Yes, I would say what we're trading asset [ph]. One of things you look at is the yield in satellite services from each of these applications and they have different characteristics, so I'll just give an example like consumer broadband. It has a pretty good yield, a pretty high yield. Most of the distribution agreements would likely be sort of on the lines of what exists now which are sort of best efforts distribution. So you may not have very high commitments but you have good yield and good underlying market dynamics. Some of the other applications might have a lower yield, but we might get more substantial commitments faster. And so then, we will sort of make some tradeoff in that area and what we are looking for is to have choices. Steve Ferranti – Stephens, Inc.: Absolutely, very helpful, thanks guys.

For our next question, we go to James McIlree with Collins Stewart. James McIlree – Collins Stewart: Thanks, good morning. Mark, I think you talked about some Enerdyne design wins. Can you elaborate on that at all?

Yes. I don't want to be too specific but there are, in this tactical UAV world, some common tactical unmanned aerial systems, there's been a lot of activity and some new platforms and some new competitions and basically – and these could involve, for instance, payload upgrades to existing vehicles or they could involve new vehicles. We've basically been working with the vehicle manufacturers to provide video, primarily video data links and some associated other features which would be including things like metadata or fusing both data and video links together, and basically we've been pretty encouraged because what we're finding is that the Enerdyne products Interlinks products fills a void in the market. I think some of those – before I name names, I think we'd like to coordinate with these platform operators and just get their approval on them. But they are kind of – if you just looked at who the manufacturers of that class of UAV would be, it would be all the ones that you'd find in that class. That's what we are finding so far. James McIlree – Collins Stewart: Okay, so you're not necessarily depending upon the UAV manufacturer to win some RFP or displace an incumbent for Enerdyne products, to get the proposals [ph]?

No, it's not really proposals. These are more vehicles that are already in works. It has some upgrades on. Now there certainly can be uncertainties in the volume of production for each of these manufacturers and how (inaudible) market is, but I think by getting the design wins that we are getting, we are going to get growth over time. James McIlree – Collins Stewart: Okay. And the satellite services operating income or operating lose of about $2 million, is that a relatively steady state given the investments that you're making in ViaSat-1 or is that set to become an even bigger loss in the upcoming quarters?

I think that overall that there could be quarters where we have negative fluctuation but as we build critical mass in there, that's an area where you've got to have X – you have fix costs and you have to have X. We are growing revenue opportunities are primarily on the mobile area in near term.

But there aren't necessarily a lot of operating losses associated with the new satellite on the quarter to quarter basis. There's nothing in there – this particular period, I'd say we had a higher than normal expense rate for legal and support costs.

Yes. James McIlree – Collins Stewart: Okay. Maybe that's a better way of what I was trying to ask, is that the expense rate that you have for the ViaSat-1 project is fully reflected in the quarter and you are probably not going to built it up going forward. Is that fair enough?

That's fair. I mean we will have continued support costs for it, but we do think this quarter was particularly high. James McIlree – Collins Stewart: Okay, good. And lastly on the Blue Force Tracking, Mark, I think you said that it went through a testing and then it was ready for the next stage. Could you outline what the next stage and the stage after that would be?

The purpose of – what we had from about a year and a half ago was a prototype contract and the purpose of the prototype was to demonstrate some technical advances to the customer. That was really important and that's the part has gone well. We feel prototype testing that we've done has gone pretty well and that includes lab testing and then now there is some – right about now there is some kind of field demonstrations. So given that, that's kind of what the government was looking for. We're trying to figure out how we get from here to a production program and that will probably involve next contract which would be a relatively small amount of kind of building more of the prototype level product and then a productization phase. Kind of the government is looking to have to be able to declare the thing in production in some form kind of next year-ish, kind of end of 2009, so that gives you some idea of time scale. I think for the next year or so, we probably wouldn't expect to see orders that are much different than we saw on the prototype phase, but then beyond that things would grow assuming that things continue to go well. James McIlree – Collins Stewart: Yes, that's perfect, great. Thank you very much.

Why don't we take one more question?

And that question comes from Chris Quilty with Raymond James & Associates. Chris Quilty – Raymond James & Associates: Thanks, gentlemen. Just to clarify, Mark, you were seeming to, on the guidance side, mentioned something about a narrowing of the revenue guidance and then you never followed through with actual number. Where you making any kind of a change or narrowing to the prior guidance you had given?

I think that's so. We gave a range of 630 to 670. I think the 670 is a little lower than the top of range before, but the middle of that range is kind of right in the middle of where we'd be aiming for. Chris Quilty – Raymond James & Associates: Okay, so is that in the slides?

That's 630 to 670. Yes, that's in the slide. Chris Quilty – Raymond James & Associates: Okay, I was having some problems there, so I didn't see it. Also on WildBlue, I think last quarter you gave us some volumes there, but I think you said we're moving up more towards 30,000 a quarter. Is it fair we assume with what you've said that the volume should had north of there through the back half the year?

Yes. Chris Quilty – Raymond James & Associates: Okay. And with the change in the segment revenues here, I'm having a little problem figuring it out. What did you have as the organic growth rate in the quarter ex the acquisitions?

The acquisition didn't contribute anything meaningful to the results. Yes, I mean these are all organic growth. Chris Quilty – Raymond James & Associates: Okay. And I guess a question for you, Ron, on the service revenues and the new way it's broken out. Just to be clear, you had an existing aero service in there of about 100 aircraft I think. You just picked up the KVH Maritime and eventually down the road you're going to pick up ViaSat-1. Is there anything else that's in that bucket?

Maybe a little context around that with regards to – we've had some exciting Maritime already and what Mark talked about with the expanding KVH agreement for additional infrastructure and lighting up additional regions around the world that provides certainly an opportunity to grow that piece of it. And with that, there are revenue sharing arrangements and roaming arrangements that go with it. We also see some additional aviation opportunities that would close through there, under similar types of revenue sharing arrangements, and then our exciting VSAT satellite services business is also in there, in the U.S. Chris Quilty – Raymond James & Associates: Okay. And when you look at the year-over-year increase, we're still talking real small numbers here, but is it fair to assume that a good portion of that was related to the KVH Maritime or did the revenue sharing not kick in until post the announcement?

That won't kick in for a couple of more quarters. Chris Quilty – Raymond James & Associates: Okay.

It is really a combination of both Maritime and the general aviation. Chris Quilty – Raymond James & Associates: Right. And of course, when the KVH actually purchase the gateway hardware, that does not go into the service piece, it gets dropped into the commercial networks.

That's correct. Chris Quilty – Raymond James & Associates: Right. And Delta had an announcement today that they are I guess the first major airline rolling forward with aero cell [ph] using a ground to air type of arrangement, obviously only good for domestic travel, but your thoughts on that?

There are a number of different technologies that people are talking about for aviation. I think the ground-based air-to-ground stuff is – the attraction of that is kind of pretty low, initial cost. The main issue with it is just going to be what happens when you have a bunch of airplanes converging in a hub area like Dallas? It's for you, Dallas, Fort Worth or Atlanta. It's going to really stress the performance in those types of regions. I think satellite has got some definite benefits in terms of speed and capacity, and we're just (inaudible) high up in the market. I mean, I think it's going to take a lot for people to really understand the benefits of each and so we're factoring that into our longer term outlook. Chris Quilty – Raymond James & Associates: Okay. And I guess final question here, just a follow-up on the Blue Force tracking timing. Is the guidance that you gave of production volumes end of ‘09, is that not a big pushback from what you've said previously of hoping to be in production by the end of this calendar year?

No, as a matter fact, it's exactly that I have been saying all long, is that this kind of – what we've said is first contract was a prototype one. That was a ten-ish million dollar contract. Next phase, we said would be kind of a very low rate initial production and production readiness kind of in the same ballpark in aggregate. And then after that would be production. And that's basically what we are seeing now, is consistent with what we've said all along. Chris Quilty – Raymond James & Associates: Okay. And the army seems to be moving the ball in terms of the technology and bandwidth that they're looking for everyday, of course, always wanting more and there were some recent articles in defense news and what not about how they're trying to look at that future combat systems variant. Anything in those discussions that leaves you perhaps wanting in your technology solution or do you think you have a good migration pass towards whatever they would think they want for FCS?

Yes. There have been articles on kind of let's say, look at a migration path from what they call FBCB2 which is battle force management program that Blue Force Tracking is integrated into an FCS which is Future Combat Systems and basically the articles only reinforce that what they want is more bandwidth to do more things and if you look at what it is that our Blue Force tracking upgrade provides relative to the Blue Force Tracking 1 system that's out there, it's higher bandwidth and more capacity. So we think all it does is just reinforces why they are doing it in the first place and why we would think it's reasonably likely that they will follow through with us on what they said they were going to do because that's the dimension that we are aiming to improve. I mean I think that – if you look at FCS, think of FCS is really not hardware in the time frame nor satellite capacity in the time frame that goes along with FCS; that's (inaudible) anything better than what our Blue Force Tracking 2 version will do. Chris Quilty – Raymond James & Associates: Okay. Great. Thank you, gentlemen.

Thank you, Chris. That concludes our Q&A section and our call for this quarter. So thanks a lot everybody for your participation and we look forward to talking to again next quarter.

And again, ladies and gentlemen, this does conclude ViaSat's fiscal year 2009 first quarter earnings conference call. We do appreciate your participation and you may disconnect at this time.