Welcome to Globalstar Incorporated Third Quarter 2018 Earnings Conference Call. My name is Adrian, and I’ll be your operator for today’s conference. At this time, all participants are in a listen-only mode. Later, we’ll conduct a question and answer session. [Operator Instructions] Please note this conference is being recorded. I’ll now turn the call over to Jay Monroe. Jay Monroe, you may begin.

Thank you everyone for joining today’s call. This is the first quarter where Dave Kagan joins us in his new role as Globalstar’s CEO. In his short time at the helm, Dave has brought a tremendous amount of energy to the satellite business and will all benefit from the company’s growth under his stewardship. We have structured the responsibilities such that I will continue to lead the spectrum and financing efforts, while Dave will focus entirely upon operating and expanding the core satellite business. In future earnings calls, I expect to provide an update on the efforts under my direct control. Dave will provide an operational update on the satellite business and Rebecca will go through our financial performance in detail. Pleased not that today’s earnings call contains forward-looking statements intended to fall within the safe harbor provided under the securities laws. Factors that could cause the results to differ materially are described in the forward-looking statement section of Globalstar’s SEC filings, and in today’s press release. I would like to begin today’s call by talking about the litigation filed a few weeks ago by Mudrick Capital and Warlander. Simply and clearly stated, the allegations in the complaint are patently false. There were different opinions from the start about whether the merger was the right solution for Globalstar’s financial and strategic path or not. A debate, which we were happy to have. In fact, we did have many thoughtful discussions with investors, some of them are on the call today, about whether the merger was the right decision for the company? The question of the risks, the costs, the opportunities presented by this merger, compared to the risks, costs, and opportunities of a stand-alone case is legitimate to debate. We believe it was the right decision and others did not…

Thank you, Jay, and good afternoon. I’m very excited to assume the position of CEO and I want to start out by saying that we’re proud of our revenue and EBITDA performance through the third quarter of 2018. At our current run rate, we are on track to surpass last year's revenue by approximately 20% and reach $40 million of adjusted EBITDA, nearly double that of just two years ago. My key role at Globalstar is managing a very motivated and dedicated team that has driven to realize the true value of Globalstar's assets. This mission is not going to be easy or fast, but over the next two to three years we mean to deliver on this promise. The company is focused on both its satellites and terrestrial assets and although much of the financial market focuses primarily on the value of our spectrum assets. At Globalstar, we fully believe that the MSS business has significant untapped value and we’re working to make that a reality. In order to be successful in this portal, we believe the leadership has to get into the trenches, which is exactly what the senior management team is doing. This is why we have been able to launch three new products in 2018, and we’re on track to launch another three in 2019. In 2018, much of the company’s focus has been on launching those three new products. SmartOne Solar was launched with great success in April. The product is a commercial grade solar powered IoT product used for tracking assets and inventory. SmartOne Solar is supported by a robust back office management system option, enabling geofencing and alerts, while tracking assets and inventory. We have achieved ATEX, an intrinsically safe certifications for Solar enabling it to be deployed in the fastest environments. So…

Thank you, Dave, and good afternoon everyone. We have reported another quarter of meaningful growth in our core MSS business as we expanded our total subscriber base to roughly 750,000 and generated higher ARPU across all major product lines. These improvements drove a 17% increase in total revenue when compared to the third quarter of 2017. Focusing on recurring service revenue, which represented 84% of our total revenue last quarter, Duplex and SPOT were each up 15%, propelled by significant increases in ARPU. Adjustments to our service pricing have continued to play an important role in driving our ARPU growth. For several quarters, we have seen year-over-year growth from price increases rolled out to our legacy base. While we expect this to end in the short-term, we do expect continued ARPU growth from new subscribers, particularly related to SPOT customers, as our current rate plans are generally higher than our historic blended ARPU rate. Another factor contributing to higher ARPU for our Duplex customers is a change in the timing of revenue recognized for our prepaid usage-based plans. With the assumption of the new revenue recognition standard at the beginning of 2018, prepaid usage base revenue is recognized as different times over the 12-month contract period compared to previous GAAP, which allowed any breakage to be recognized upon expiration of the contract. While this new accounting treatment resulted in an increase to revenue on a quarter to date basis, there was minimal impact on ARPU when comparing the year-to-date period. Regarding our total subscriber growth, voice customers continue to decline as growth activations were below the typical churn rate. However, SPOT and Simplex subscribers were up meaningfully from the prior year as both new and legacy device sales remain strong and churn was lower on an LTM basis. On the…

Thank you. [Operator Instructions] And our first question comes from Simon Flannery from Morgan Stanley. Your line is open.

Hi, it’s Spence for Simon. Thanks for taking the questions. Just a couple. Can you remind us what the next steps are or timeline is for 3GPP? And then on the litigation, absent the settlement talk about what your expectations are for timing? Thanks.

Sure. Spencer, the 3GPP process is one where quarterly there is a final meeting, in this case December. And in December, it is possible that we could have the final approval. It’s also quite possible that just because of any number of remaining process steps, which are predominantly administrative at this point that if it doesn't get approved in December. The next time it would be approved is in March. So, we're hopeful for December, but it could be a little bit longer than that. And as I alluded, most of the steps at this point are administrative in nature and a lot of box checking and so forth, but the work that was necessary to get to this point, which involved a lot of co-existence work and other has been completed over the last nine months successfully with I think the agreement now in 3GPP of all of the participants.

Okay, thank you. And then on litigation timing?

Well, the litigation is pretty much standard litigation that’s carried on in situations like this and so it really depends upon a question pretty fundamentally of whether there is a settlement or not? If there is a settlement that can happen almost at any time. Clearly, it’s in our best interest and I believe the interest of the other parties to find a settlement because current situation is overhanging the stock so much. If it goes through a full-on litigation and doesn't get settled soon, of course it can drive on for months or even years. That would be very unusual in a situation like this one and we certainly hope it’s not the case here, but we’re of course prepared for that if that is a process. It clearly won’t be good for the stock if it goes that way.

Thank you.

Sure thing.

And our next question comes from Lance Vitanza from Cowen. Please go ahead.

Hi, thanks for taking the questions. I guess, just a follow-up on the last question, could you, what are the plaintiffs speaking here? I mean, are they looking for monitoring damages or can you sort of just summarize what they are asking for?

Yes. Lance, I would steer you towards reading the complaint. They are asking for a lot of things in the complaint, but from the perspective of Globalstar proper, they are seeking repayment of legal expenses for the most part. They have separate claims, which are directly to have the board certain employees of Globalstar, and Thermo and me, but the claims that are directed at the company are relatively modest.

So, that is good, right. I mean, so, then it should be pretty easy to make it go away, I would think. Is that sort of why you expect that there are, I don't want to put words in your mouth, did you say you – are you hopeful that there will be settlement or are you just, you know, is there a reason for you to be hopeful about that or what’s your sense there?

As we understand these processes, they are, again fairly common and there is a set of timing and points within the process where you try to negotiate the claims away. It is important to the company that that happen. Certainly, for the reasons that I said in my prepared remarks, it is important for individuals as well, but you can’t really settle the company litigation without settling all of the litigation. And that's, I think, the way – that’s the way it will go.

Okay. Let me just focus back on the business. Two questions there, if I can. The first is, is it – is there – should we be looking also at sequential trends? In other words – and again, this may be oversimplifying it, but your growth rate in EBITDA seems to have slowed into Q3. I'm wondering, if – number one, if there is something behind that, or if that's just not really the right way to be thinking about it? And number two, I guess, more broadly, is sort of $48 million the right run rate to use sort of for EBITDA? Do we think that there's potential for a lot more growth with the existing network, or is it that we want to grow, because we need to make additional investments whether it be new network, new satellites, or what have you?

Yes. Thanks, Lance. This is Rebecca. I'll cover your first couple of questions, and then maybe Dave can address from a network perspective. But for EBITDA, there's a seasonality component. So, you definitely shouldn't just take third quarter and multiply by four when you more look at the run rate for the year. We had significant growth over the past few quarters related to our pricing changes and it was much more material at the beginning as we kind of rolled that changes in our legacy base. And now since a lot of that has already baked in, that kind of incremental increases aren't as meaningful when you look at that sequential growth. So that, I think, that supports what you were saying is this slow and EBITDA appears to be the trend of late. I do expect there to continue to be increases, but we've definitely guided that the sequential growth will slow down as those price increases are fully baked. And from now, it'll be more from a subscriber growth perspective as we have – we recently launched products in the market. And next year, we’ll have a full 12 months of profitability for the products. From a network side, I think, Jay has covered a lot as far as what the opportunities are there and what he’s focused on for initiatives for the coming quarters, but you can expand maybe.

Sure. Yes, I mean, the – there’s certainly plenty of headroom in the network to handle a lot of growth in the future. And, of course, we're designing the appropriate products that we feel will, of course, help fill that capacity and drive significant EBITDA to the company. So that's certainly the primary focus of what we're doing every day and how we go about our business.

And I'm not asking for a specific guidance. But if we just sort of think generally about over the next few years, should we be thinking of CapEx as sort of on an upward trend, downward trend, or kind of the stable here?

I think of, it’s kind of flat. I mean, first of all we have a financial covenant that limits our CapEx annually to $15 million, and I think that's more than enough to accomplish what we need to do over the coming years.

Just to be clear, yes, I’m – I guess, I'm thinking about assuming that the covenant were not a constrained. I mean, I wouldn't want you to – I mean, so you're saying that even if you did have a covenant that should be enough headroom?

That's right.

Thank you. Thanks very much, guys. I appreciate it.

Thank you.

And the next question comes from [indiscernible]. Please go ahead.

Good afternoon, everybody. Can you go ahead and give a little bit of insight on the discussions surrounding additional financing – refinancing in light of the upcoming amortization payment as the company been approached by interested investors. What types of different structures are being closed?

Sure. Sorry, it’s a great question. So yes, to answer your question, we have been approached by some strategic investors, [indiscernible] capital and into the company and we're engaging in those discussions. We're also evaluating other options with support of our financial advisors and, of course, our lenders are involved in those discussions as well to look at options related to subordinated debt, which might not be able to be accomplished at this stage in the game with the December raise because of the inner part of our agreements that would be necessary for – to support such a – such capital. So, it's likely more looking like equity. And so, whether that's a fully marketed deal like we did in October for a right offering. We're just not sure, but we’re evaluating our options for the company and we’ll select whatever is most optimal.

And there was a fair amount of discussions at the beginning of last year regarding international approvals. Can you just give us some commentary on kind of what the anticipation was for a to get them for year-end [ph] are we still on track with that, or is the lion share going to happen now in 2019?

We have three approvals in hand now. I anticipate that before the year is out, we will have two or three more. And then we are hopeful that in 2019, there are a substantial list of additional approvals coming through. So, David, I think, it's safe to say that we probably were – are six months behind where we hoped we would be. At this point, we would have predicted a couple of more by this time. But I think, we're finally in a spot, where we have the attention of a lot of international regulators. I feel strongly that the work we're doing in the United States right now to include the strategic work we're doing with the third-party that I mentioned are going to give us platforms to go back to a lot of these countries who have asked the question, “Where can I see this operating? That – it’s an odd question, of course, because people may be operating in all of these countries and spectrum, which abuts us clearly their operating Wi-Fi immediately adjacent to us. And clearly, in a lot of places in the world, they're operating at 2.5 right above us. But nonetheless, I think having equipment in the band and facilities stood up and operating, will mean a lot in many of these jurisdictions. So that's the process that we're on at this moment and we'll continue to press forward with as quickly as we possibly can and we're in every continent on the planet [save Antarctica].

Okay. Can you reveal the identity of the two additional countries?

Not at this time.

Okay.

I appreciate it not at this time. We’ll – I think we'll do something more complete when we have – when we do our fourth quarter call. I think, then what we're doing and how we're doing it along with hopefully the conclusion of 3GPP and roll out that we're doing now with this other party, we can have a holistic discussion of what all of those components mean. And I think then it'll be a lot more helpful discussion than just going country-by-country. I mean, the total pops that we're talking about in the countries that are approved right now is $16 million. So, you can judge by that, that they're not all the largest countries in the world.

Understood. And just one last question regarding the litigation settlement. Has the company been in contact with the plaintiffs and have discussions happened, or has there been no communication just the court filings?

Yes. I think, David, I won't go any further than what I said already. I hope I addressed those questions in a fairly complete fashion in the prepared remarks. But I think, that's as far as I feel comfortable going at this moment.

Okay. Thank you.

Sure. Thanks.

Thank you, David.

[Operator Instructions]

Thanks for everybody asking your questions today. We appreciate it and for spending the last 45 minutes with us. Dave is being a little bit modest about what he thinks he can do in the business over the next year or two. There are a lot of initiatives and new products – he mentioned two of them that are going out the door much more rapidly than anything we've ever experienced before. And we have two products in development now that have extraordinary potential behind them. They are very inexpensive, utilize our network in unique ways that it has not been used previously and addressed a whole series of new opportunities that are – that frankly we hadn't thought about until some new people came to work at Globalstar and identified these opportunities in the last six or eight months. So, we're super optimistic about what the future brings for us, both on the satellite business and, of course, on the spectrum. So, we appreciate everybody joining the call today.

Thank you, ladies and gentlemen. This concludes today's conference call. Thank you for your participation, and you may now disconnect.