Welcome to ViaSat's Fiscal Year 2013 Third Quarter Earnings Conference Call. Your host for today's call is Mark Dankberg, Chairman and CEO. You may proceed, Mr. Dankberg.

Okay, thanks. Good afternoon, everybody, and welcome to our earnings conference call. So I'm Mark Dankberg, Chairman and CEO and I've got with me this afternoon, Rick Baldridge, our President and Chief Operating Officer; Shawn Duffy, our Chief Accounting Officer and Interim CFO; and Keven Lippert, our General Counsel. And before we start, Keven will provide our safe harbor disclosure.

Thanks, Mark. As you know, this discussion contains forward-looking statements. This is a reminder that factors could cause actual results to differ materially. Additional information concerning these factors is contained in our SEC filings, including our most recent reports on Form 10-K and Form 10-Q. Copies are available from the SEC or from the website. That's it, back to you Mark.

Okay. Thanks, Keven. So we'll be referring to slides that are available on the web and I'll start with some highlights and a top-level overview and then after that, Shawn will discuss our financial results. And then I'll go into more depth on each of the businesses and we'll take questions. So our third quarter was good across all the segments and we're pretty happy with what we've seen as the underlying reasons. We had record gross and net adds in our Domestic Broadband business and we ended the quarter with just about 467,000 subscribers, up from about 429,000 last quarter and from a year ago when we were at about 377,000. About 216,000 of the subscribers are on the ViaSat-1 satellite. It was a good quarter, we continue to learn a lot about our value proposition and how best to protect it, and we're continuing to build confidence in our strategic view of the market opportunity. Revenues, company-wide, were up 40% year-over-year with the fastest growth in our Government and Satellite Services segments. Adjusted EBITDA company-wide was up 31% year-over-year and it was up 9% sequentially. As we'll discuss later, strong subscriber growth in our Exede business somewhat tempered the sequential growth due to the fact that we have expense certain other subscriber acquisition costs. Finally, total new orders of $266 million allowed us to maintain a very good backlog of just about $1 billion. So now we can take a quick look at the highlights in each of our business segments. In Satellite Services, we had an excellent quarter with steady gains in installations, gross adds and net adds. Most of the increase was through retail, with wholesale gross adds pretty flat compared to last quarter. As we expected, ARPU continues to trend up due to the wholesale…

Thanks, Mark. While Q3 was marked by another quarter of strong financial progress and growth, our new order flow was good, coming in at $266 million, and with 40% revenue growth year-over-year, we achieved a new record for quarterly revenues at $286 million. Adjusted EBITDA also grew year-over-year and sequentially to $48 million in the third quarter. Considering the impact new subscriber acquisition costs can have on our results, as our gross add ramp rate accelerate, we were pleased with our continued growth and adjusted EBITDA momentum. So let's turn to our results here today. Our third quarter was marked by another big milestone as we pushed over 1 billion in new orders year to date. We have experienced strong order flow into both our commercial and government segments, including a $52 million follow-on broadband airborne satcom service contract award for a U.S. government customer in the third quarter. Overall, our 1.1 billion in new orders has helped drive our revenues up 30% year-over-year to $811 million. So we are closing out our third quarter with $939 million of backlog, which provides a good position as we head into the fourth quarter and the continuing uncertain DoD budgetary environment. Our year-to-date adjusted EBITDA also saw a nice increase of 9%, which reflects another quarter of strong performance from our government segment, as well as quarter-over-quarter growth in our satellite service segment as our Exede customer base grows. Moving to the P&L as a whole, our third quarter reflects a few notable events financially. We grew revenue to $286 million, fueled by increases in both products and service revenues, which grew by 35% and 47%, respectively. So overall, we are making strong strides in top line growth as our Exede subscriber gross adds drive upward and our subscriber revenue base, as…

Okay, thanks, Shawn. So I'll go into more depth on what's going on in each segment, starting with Satellite Services, and the theme there is -- continues to be steady progress. We had another quarter of sequential improvement in installs, gross adds and net adds. The unit economics are still in the right ballpark and we're still growing adjusted EBITDA on a quarter-over-quarter basis. The upper left-hand corner shows that our revenues were up, as Shawn mentioned, about 29% year-over-year. But the year-over-year earnings are still down because of the fixed cost of the ViaSat network -- ViaSat-1 network startup and our new subscriber acquisition costs. But the chart at the bottom shows how our subscriber base and our adjusted EBITDA have trended over the last 7 quarters. We anticipate that this is going to be the last quarter where we've got negative year-over-year comparisons. We're quite happy with the trend. ARPU also continues to trend up, mostly due to a higher retail mix. Our wholesale adds for the quarter were pretty steady compared to the second quarter, which is pretty much what we were expecting as DISH began ramping up its DISH Net branded service. We continue to have a good relationship with DISH, but it's not yet clear how much longer we'll continue to add new DISH Net subscribers. From a retail perspective, we're after what we call a Goldilocks strategy of market segmentation. If we're just addressing the unserved market, we could probably raise our prices and still capture many of the same customers that have no other choice. But as we've said, we see an opportunity for a much bigger market where we can attract targeted subscribers with access to slower speed DSL or mobile wireless or low-end cable networks. So we're pretty systematically refining our…

[Operator Instructions] Our first question comes from Mike Crawford of B. Riley & Co. Michael Crawford - B. Riley & Co., LLC, Research Division: First, could you just go into some additional detail on the level of DIRECTV engagement, including what, if anything, they're telling you about their own experience of churn for a DIRECTV-Exede bundle, the subscribers?

We're not -- I think we're trying to be respectful of both DIRECTV companies that we're working with and not go into too much depth on either one of them. I say -- the main thing I'd say is, just sort of reiterate what we said is, I think we're really happy with the engagement with DIRECTV. Obviously, they can be pretty effective and -- but I think the more important thing is we've got really good engagement on sort of our strategic approach to what we're trying to do. The only -- the other thing I'll tell you is every time we work with sort of a new retail channel, we learn things about what subscribers that channel attracts and sort of how to refine the way we attract customers so they could fit our service well. So we're working through that with DIRECTV as well. But I think it's -- overall, as I mentioned, things are fitting within our overall unit economics, and we're encouraged. Michael Crawford - B. Riley & Co., LLC, Research Division: Okay. And then on ViaSat-2, what is it that's keeping you from being ready to announce a ViaSat-2 construction contract? And secondarily to that, is there anything else you can share about what parameters you are considering for that satellite?

So we have ambitious objectives for what we're trying to do with it. I think we've got 2 good candidates for how we could -- for acquiring one. There are -- there's some just specific details that you have to get pretty much exactly right for it to do what we intend, and so we're just working -- we're working through those details and, also, I think there's some pretty interesting, strategic opportunities associated with the satellite procurement that have presented themselves. So we're working through those as well. But it's nothing really more than that. We're about as anxious as anybody else to get it started. But we just got to make sure we get everything right. Michael Crawford - B. Riley & Co., LLC, Research Division: Okay. And then one final question is I noticed you've applied for a grant, California Advanced Services Fund grant for broadband via satellite for California. Is there any expectation on timing, of decision, of when you might receive that funding request or not?

It's not imminent. It's actually -- it's a really good thing because it was sort of triggered by the quality of service we have relative to the quality that people who would, otherwise, get broadband through those grants might otherwise get. I'd say that is kind of -- they were really interested in having satellite be in that mix. One of the issues is that the process just wasn't designed to include satellite. And so that meant working through some new stuff, which has been happening. And as a result of that, sort of the scope of what we're doing has gotten bigger and more interesting, but it's sort of extended the time period. And that's kind of where we are right now.

Our next question comes from Rich Valera of Needham & Company. Richard Valera - Needham & Company, LLC, Research Division: Mark, I think you said in your prepared remarks that wholesale gross adds where about flat in the quarter. Is that correct?

Yes, that's what I said. Richard Valera - Needham & Company, LLC, Research Division: And then just with respect to your DISH partnership, I was wondering if there is anymore color you can give -- you said something in your prepared remarks to the effect of you weren't sure if you'd continue to be adding new subscribers from them. Is that a change from how you previously understood that? Is there anything new there with respect to DISH?

No, the -- I think one is we don't know, we don't -- they haven't reported yet. So we're not quite sure what's going on with their system with Hughes. Clearly, they're going to have a preference for Hughes. We suspect that DISH did really well and that Hughes got a lot more than we did. I think that for us, it looks like that market's pretty big. I mean these are pretty much things that we've talked about before, that if DISH looks at it the way they have in the past, which is that there's a finite amount of capacity available and they've got a lot of demand, then they may extend their commitments to us. If not, then they won't or maybe they'll just have a preference for Hughes. We don't know it. It's more of an internal issue. But I don't think really anything's changed from over the last quarter or so. We're just getting closer to the end of the commitments that they've made so far. Richard Valera - Needham & Company, LLC, Research Division: Can you say what the timing is on those, the timing of those commitments?

No, it'll depend on how it plays out. But, I mean, it will be -- we'll know more in months, I'd say, that kind of timeframe. Richard Valera - Needham & Company, LLC, Research Division: Okay, fair enough. Now you did see a nice increase in overall gross adds, and I'm assuming that had something to do with DIRECTV. I don't know if you could, in any way, put more color on the contribution DIRECTV made quarter-over-quarter, to your gross adds and then just -- do think that -- how do you think about the gross add level from where you were in 3Q? Do you think we should think about that as sort of flat, up or down from these levels as we go forward?

Okay, so we were seeing trends upward already in the first 2 quarters and we saw them again in the third quarter. Certainly, DIRECTV is a nice plus for us. But remember we're doing 2 things, we began bundling DIRECTV with our Exede service and DIRECTV bundled Exede to some of their customers as well, and they both sort of benefit from the same effect, which is that people like bundles. So that's a good thing. But I would say that going ahead, we kind of feel like we've got positive momentum because DIRECTV only participated about half of the last quarter, but then what we've got is the fact that the fourth -- the December quarter is generally a stronger quarter than the March quarter or the June quarter. So we have to factor those in. Overall, I think we're going to continue to grow. I don't think that the third quarter was the high point. We sort of said that in the past. But it's like every quarter we're learning something and we're trying something different. Sometimes it means expanding on things that we did, sometimes it means sort of trying to close down on some of the things that we did. And there's puts and takes there. Overall, I think we're going to continue to grow, that's kind of what we think. I don't really have a huge sense of urgency, because I think we're on track given what we're doing, that we're going to get better and bigger, both. That's sort of how I would describe it. Richard Valera - Needham & Company, LLC, Research Division: That's helpful. And just on churn, obviously, you saw some very nice improvement there and it sounded like some of that was sort of a bit better than expected wholesale churn and you said that might kind of reverse a little bit next quarter, but should we still think about sort of a 2-ish percent churn as roughly the right level of churn going forward? Do you think at this point?

Yes, I'd describe that as an intermediate target for us. I think that to the extent that we get customers with a good fit, we can do better than that. We see that in some of the ways at which we acquire subscribers. And those are -- so what we're trying to do is make sure we understand those things and apply them on a broader base. We're working through what I've been calling a bubble of legacy disconnects. And so as the legacy base gets smaller, that factor gets smaller. Clearly, we should do a lot better on the retail side. On the wholesale side, the churn is kind of a number that's reported to us by our wholesalers. So that one looked -- there's a little bit of a discontinuity there. So we think that there will probably be a little bit higher churn in the wholesale part in the next quarter or 2, somehow that make up for that. That's what we would guess. But on the retail side, we understand that and that's trending down sort of the way we'd expect.

Our next question comes from Yair Reiner of Oppenheimer. Yair Reiner - Oppenheimer & Co. Inc., Research Division: So can you give us a flavor of how the subscriber additions have been going in the context of having competition now from Hughes and how that has changed, if at all, the way you go to market?

So, okay, first of all -- actually, believe it or not, we don't really think it's changed the way we go to market at all. With the sort of the way we've tried to frame the market, which goes into this underserved, the underserved market is a lot bigger. It's a lot bigger than the unserved was and the unserved was big enough for both of us. So kind of the way we look at it is we can add roughly a million people and we've got a lot of stuff we're trying to learn as we do that million. And most of it has to do with how we appeal to subscribers and how we get the right ones. The thing that I would -- I think is an important thing to get is that 12 megabits for $50 is actually a pretty attractive deal in the market, especially in an environment when most companies are raising their broadband prices in one way or another. So what I would say is when people become aware of that and is presented in a good context, it's pretty appealing. What we're trying to do is when people buy it and find that it's faster than what they used to have, they're pretty happy as long as they don't -- the things we try to say, if you're a really big streaming video customer, this probably isn't for you. If your gaming online isn't really important to you, this isn't a good service. But for a lot of people that had slower speeds, $50 for 12 megabits is a really good service. So we've sort of felt like the issue isn't sort of like -- it's not like there's not enough subscribers. The real issue for us is targeting the right ones that are good for it. And that honesty is that's what we've been focused on for the last year, and it still is what we're focused on. Yair Reiner - Oppenheimer & Co. Inc., Research Division: And to that point, can you give us a sense of where you're drawing your customers from, where they were previously. You'd done that in recent quarters, but I don't see that in the slide deck.

I'd say there's really not a material change to that. I would say, if anything, when DIRECTV enters the mix, it really sort of accentuates that same -- sort of that same dynamic, which is ability to penetrate into the underserved, and DISH, I'm sure, it's the same way. That when people look for bundles, that bundling with direct on TV sort of makes it easier to penetrate into that underserved market. And so it just makes it important that we do that targeting correctly. Yair Reiner - Oppenheimer & Co. Inc., Research Division: Great, and then just one quick modeling question then I'll cede the line. In terms of taxes, I guess you'll get a catch up for R&D tax credit here in the March quarter. Can you help us figure how to model that and then any help you can give us in terms of modeling taxes going forward would be great.

Sure. So, I think there's a couple of things you need to look at as we've talked about in prior quarters. Our annual effective rate for fiscal year '13 without the benefits of the R&D tax credit was about 40%, and with the legislation going into effect and being retroactively restated, we're basically going to get about 3 quarters of this year and 1 quarter of last year flowing into the Q4, which we said was about an $8 million benefit. So, it's probably looking at our effective rate and then giving on the additional benefit for the R&D tax credit legislation cum effect probably get you pretty close for FY '13. Yair Reiner - Oppenheimer & Co. Inc., Research Division: And then for '14?

You know, looking out to '14, there's kind of some different things that can play out. Probably looking at it historically where we were in fiscal year '11 and '12 when R&D credit was in place. It's probably a good mark to look at looking forward.

Our next question comes from Tim Quillin of Stephens Inc.

Mark, in terms of the wholesale disconnects that I guess were unreported or underreported, is that the way to look at it? And how would you gauge that underreporting of disconnects?

All right, Tim. I mean, basically, it's not -- they sort of classify things in different ways. But the number of disconnects was lower. So that's what we have. And I think that's really up to our -- the people that we wholesale to. And I'm sure they have good reasons for it and they have to do with, where people are on the cycle, their retention programs, there are a variety of reasons for it. It would be really up to them to say what was going on there.

So it wasn't necessarily underreported, it was just a good -- kind of an unusually good number?

Yes, it was -- I would say -- we trend all these things and we look at it and we go, okay, this is sort of what we expect. It was less than what we expect. And they're telling us they've got changes in their system or they've got retention programs and so it's not like there's no communication. But they interpret -- the proper interpretation of it really goes with them not with us.

Got it, got it. And then the contribution margins on -- the quarter-to-quarter contribution margins in the Satellite Services business have been in the 50% to 55% range over the past 2 quarters. Is that a level that you can sustain even with your increased advertising and marketing costs?

Well, I mean that's the thing that we said is going to bounce around a little bit. It's going to depend on a bunch of things, what promotions we do? Where we do them? What we're trying to do? And then also depending a little bit on sort of this Goldilocks effects, which is sort of refers to the thing I was talking about before, which is it's not super hard to attract people who aren't a good fit. So that can enter into it as well. So what we're trying to do is figure out how we can get the right customer -- people are a good fit. That's what our strategy is. And it's going to bounce around a little bit but it's not going to veer off markedly in one direction or another. It's in the right range. I just don't -- it's just not a hard number that's -- you're going to see every quarter again.

And then just lastly, so the government business has been, I mean, probably the strongest government business in the U.S. today. And so how should we think about it going forward? I mean, first of all, kind of what revenue growth expectation should we have for fiscal '13 and then how should we think about fiscal '14?

Okay, so thanks. We think we're doing really well, but as I said, you're seeing a bunch of effects in there and it's hard to sort of tease them all out and figure out what it means. One is, basically, what we think is we've been so -- really focused on trying to find those sort of market niches that are going to keep going growing. And it's just not hard to imagine that in-flight airborne connectivity is really, really valuable, whether it's for imagery, communications, whatever, and there's just not many ways to do that in the broadband basis. And I mean we've got really big market share there and a really big head start. So that part's good. And we think that part has got growth potential but you've got all the budget cut effects, you've got the end of the conflict effects, which create new budget acquisition processes for some people, I think people are going to -- the underlying demand for what we're doing is good, so I think people will work through that. It's just really hard to predict quarter-to-quarter. Year-over-year and then in the outyears, we think it's a good growth business for us. We just can't say what's going to happen in the short term there. And there's a few thing -- what we've got is a combination of, we've talked about this before, sort of specific private networks for specific customers, and then a fairly extensive public network that -- so our commercial and government customers roam through. And so we're making investments in some of those networks as a result of the growth that we've had and that's going to be a little bit of a factor going ahead. And then also we're finding that more platforms want access and they want access in different ways and that the Ka-band stuff's becoming really attractive. So we're going to make investments in there. Overall, we think we're in a unique price and that we're going to keep growing. It's just hard to say, okay, this is what's going to happen next quarter and the quarter after. And the other thing we've said is we have gone through periods where things we thought were going to happen were delayed, and now we're going through with periods where, wow, all those things are happening at once, I kind of describe it like the one man giveth, and the one man taketh away. So we're benefiting from that lumpy stuff now.

Our next question comes from Brian Ruttenbur of CRT Capital Group.

Going back just quickly to the tax rate, just so that I understand, there was an $8 million tax benefit in the third quarter, I'm just summarizing here, that was to make up for the first 3 quarters. Is that correct of your fiscal year? Or was that just for the third quarter?

Let me clarify that a little bit. So what actually happened was the legislation actually came into law, actually, a couple of days after our quarter end. So our third quarter did not affect any benefit in from the R&D credit legislation. The fourth quarter will have that effect in it, and on looking back at what that impact will be approximately, it's about $8 million, that will occur in Q4.

Okay, so you'll have a tax benefit of about $8 million in the fourth quarter that makes up for the whole year, basically, the whole fiscal year?

That is the effect of the R&D tax credit. And then you need to look at our 40% effective rate on the normal base of earnings. So it's 40% effective rate and then pro forma and another approximately $8 million for the cumulative effect of the legislation change.

Perfect, that's very helpful. And then going forward, you said look back at 2011 and 2012 for an effective tax rate. It's kind of all over the place for those 2 years. Could you give us a percent maybe for us to help with modeling?

Well I think if you -- I think you're right, it does. We have some of the impacts of legislation expiring in the past. I think if you look at 2011, 2012 on a weighted-average basis, you get to about what the normalized effects of that would be. So...

Wouldn't it be, Shawn, wouldn't it be kind of a normal tax rate for the year and then something approaching probably a little less than $8 million, because $8 million turns out to be for 5 quarters rather than 4. Some are little bit less than that and adds back to that [indiscernible] like the effective tax rates?

That's probably, I think, pretty close.

Okay, thank you. And then going on the follow-up with the last question was the government growth. I don't know if you addressed this, I was listening for your comments on sequestration budget cuts, I'm trying to understand how you're getting such strong growth. Is that into a specific service, special ops or is it the Green Army, is it the Navy? Or is the growth coming from that is so strong for you guys?

Sort of the single biggest thing we've been doing that's growing the fastest and you can sort of see this when we talked about our year-over-year results is in the in-flight mobile broadband services. It's a pretty unique capability that's not available other ways. And so lots of customers are figuring out how to get it. And they acquire it through a variety of means, some of them are through sort of the war effort results. But then we've also had customers who have acquired it that way and then have been able to get their programs -- identify it as a program of record. So they show up through the normal budget process, and that's become a big -- so that's become a way of it happening. There's high demand there. And so that's -- it sort of manifests itself in different ways depending on the circumstances for the customers. But the other thing that's going on is we do have programs of record that either have significant backlog or were planned for growth, that's sort of what we aim for. And so you're seeing that in things like Blue Force tracking in other areas like MIDS or MIDS-JTRS, we've been saying for 2 or 3 years, we're in a development phase, low-volume terminals are phasing down, MIDS-JTRS hasn't phased up. Well, some of those things are starting to change a little bit. And the other thing that we've been anticipating, it's been sort of long-delayed, but it's happening, are the upgrades to the low-volume terminals and the MIDS-JTRS to add new capabilities. The fundamental driver is that you need the situational awareness. You just got to have those Link 16 capability on those platforms. So the way I'd put it is, they sort of find a way. All that said, it looks increasingly likely that there's going to be either sequestration or something equivalent to it. So our people are sort of burrowing through their programs trying to understand will that hit us, how might it hit us and it's hard -- actually, it's hard for us to see exactly how it will, but we're trying to posture ourself, so that if it does, which seems somehow there will be some effects of it that we can accommodate them without overspending in some area or being over-resourced. That's the trade up we're trying to make.

Brian, this is Rick. What we have said is that we said Q2 from, an earnings standpoint, was somewhat of an anomaly because of some catch-up things and Q3 was similarly an anomaly. So I wouldn't launch off that point of forecasting forward. I'd kind of draw a straight line from Q1 to Q4, up a little bit to where we are, but I wouldn't launch out the Q3 ending.

Yes. Things are lumpy. I mean, if you were to sort of go back over 2 or 3 years and draw a straight lines through our growth, I mean, I think those kinds of growth we can sustain, we just don't know exactly how it's going to manifest itself on a quarter-to-quarter basis.

Okay, that's helpful. And then last question, on the ARPU, you had a nice sequential increase. Where do you see that increase going? Can you see it sustained at this rate, where you have that almost, what, $8, $9 jump in ARPU quarter to quarter? Or are we going to see stability here?

No, we're not quite there yet. We've got basic plan, our most basic retail plan is $50. And then we have a $10 modem lease fee that a lot of our customers end up choosing. So you could see it sort of getting into the low 50s. I think that's sort of what we thought. It will get there. And that's like we've said before, it's quite a bit higher than what we originally modeled. So that's a good number for us.

But then it probably stabilizes in that area?

It should asymptotically approach that. Now, we're talking about introducing new services and they'll have some uptake rate. But from where we are now, for sort of a plan mix that we have and the distribution that we have now, kind of low 50s, approaching that asymptotically is probably a good target.

Our next question comes from Amy Yong of Macquarie Capital.

This is Andrew for Amy. I wanted to ask about the exogenous competition from AT&T, the new super DSL comments they made and about the Verizon Home Fusion. Are you seeing any change as far as that's concerned?

I would say we don't see specific market effects that we would attribute to either of those. There's a lot of people -- I mean there's a lot of people out there that don't have broadband or have -- or if they do have broadband, have it in the low megabits and I think that you're going to see a number of ways that people can get those. But we think there's a lot of the market that we address with a 12 megabit service. Believe me, I think when we look at what's out there, we don't see DSL getting a lot better. I think you can convert some amount of telco infrastructure to fiber-to-the-node infrastructure, so that's an example, something that creates a step up. That's a fairly bounded geographic market. Wireless, we think wireless could get better. And so we're very sensitive to that. We think we can get better too. So we're looking out for it. But we don't -- we don't look out and say, wow, this particular technology is eating into our growth plans. We just haven't seen that yet.

And lastly, a question on the data caps that, for example, Hughes Gen4 has versus your free nights. Are you seeing a lot of people taking advantage of that or are you seeing many people going over their data allowances?

So the data caps -- they're a factor, for sure. We think people really like the unlimited nighttime thing. I mean it's a little bit anecdotal, but we think people really like that. We think that the caps themselves sort of -- you can imagine this from your own use. I think when people see the caps, a lot of people will alter their behavior instead of getting the cap. So whether or not people hit the cap, we know it's a factor. So we're looking to somehow make them feel less threatening, less scary. There's a lot of people out there who don't hit the caps at all. But they can be a little intimidating. So these are the kinds of things that we're trying to learn on a quarter-to-quarter basis, how to either extend them, make them less threatening, make people less wary of them. But we're not trying to drag money out of people -- from them. That's basically the way I'd put it.

Our next question comes from Elizabeth Grenfell of Bank of America.

I think you originally talked about Satellite Services being profitable in the fourth quarter and, otherwise, you've spoken some of the reasons why it might not be. But when can we expect that segment to turn the corner and to actually be profitable?

I think what we talked about was it hitting cash flow kind of breakeven at the March -- at the end of this quarter, first of next quarter and we're still on that trajectory.

For next -- somewhere in your fiscal '14?

That was right at the end of this quarter. I mean, and it can move 3 or 4 months, but it's -- we're still pretty close to that. And like Shawn said earlier, at the current run rate if we stopped fueling growth, which is where we hit the expense side, we'd be profitable right now. So we'll be above that right now. But it's really the expense occurring with the gross adds that's keeping it below that. But we still expect to crossover here within the next few months.

All right. So it depends a lot on what the growth rate is each period and...

Yes. If growth rates slows, earnings get a lot better. Growth rate keeps up, it pushes things off a little bit.

I mean, just in terms of for the rest of this year, how should we think about how [indiscernible] in the year?

I think what we've done is give you guys what we think the unit economics are and then really it's, I think, one of the things that we're not going to do is provide kind of growth forecast that someone turns around and hammers us for being a couple of thousand short. So our real issue is coming up with growth forecasts, applying unit economics to them. And so one of the things we've said is we expect migrations to come down, both the absolute value and as a percent. We expect churn to continue to come down into the threshold numbers we've set, we've talked about. And we expect gross adds to continue to go up, certainly in this next quarter. I think Mark did say that the December quarter turns out to be a really good quarter usually for these types of services. And so the June quarter tends to be a low quarter for that. We still don't what -- how that's going to affect us yet.

We have a follow-up question from Tim Quillin of Stephens Inc.

Rick, you kind of alluded to this, but what -- how were you saying about migrations, not just in the March quarter but at what point do you get past that issue?

Well as long as we have -- as long as there are people on the old satellites in the new coverage area who are paying $50 a month for 1 megabit or 1.5 megabits, at some point, you'd think they'd be a good candidate for being migrated. And so it's going to be a while before it goes to 0. But I think that there's just going to be a steady decline in that number of people from where we are. And you probably could do as well as we are -- we could in extrapolating that.

What we're trying to do there, Tim, is when that happens, we get enough people migrate then we'll step into those areas an upgrade to a newer technology that helps us get people better speeds, better service and, actually, apply it to some of the other markets we're addressing. But it is declining, and I think this is -- it's about where we had indicated, we felt would happen. We thought this would start in the December quarter and continue. We expect it to continue to come down.

And can you say how many of the legacy subscribers now, which I could think down to something like 217,000, how many of those are in areas where they have beam coverage from ViaSat-1?

I think it's more than half still.

Okay. And then just lastly, how should we think about growth in commercial networks with the ramp up of NBN Co.?

That's going to be really dependent on new wins in there. This year is really about execution on the NBN Co. and tax [ph] in Saudi Arabia and terminal deliveries and some of the other technology stuff. And we are taking new things. You have to -- you kind of have to win quite a bit of new things right now to stay even. So talking about lumpy, this is an area that you could have some big wins or you could have a little bit of a draw. We've got a really good backlog going in. So our outlook for the year looks pretty good. Yes, I mean backlog being driven by Saudi Arabia, NBN, the deployment of the in-flight Wi-Fi stuff. So, that gives us a good base to work from and we're also expect add-ons on some of those programs as well. So I think that's all the questions for this time. So thanks a lot, everybody, for your time and attention and all the questions and look forward to talking to you next quarter.

Thank you, sir, and thank you, ladies and gentlemen, for your participation. That does conclude your program. You may disconnect your lines at this time. Have a great day.