Good day, ladies and gentlemen, and welcome to the Iridium Second Quarter 2013 Earnings Conference Call. [Operator Instructions] As a reminder, today's conference call is being recorded. I'd now like to turn the conference over to your host, Mr. Steve Kunszabo, Head of Investor Relations. Please go ahead.

Good morning, and thanks for joining us. I'd like to welcome you to our second quarter 2013 earnings call. On the call with me this morning are CEO, Matt Desch; and our CFO, Tom Fitzpatrick. Today's call will begin with a discussion of our second quarter results followed by Q&A. I trust you've had an opportunity to review this morning's earnings release, which is available on the Investor Relations section of Iridium's website. Before I turn things over to Matt, I'd like to caution all participants that our call this morning may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that are not historical fact and include statements about our future expectations, plans and prospects. Such forward-looking statements are based upon our current beliefs and expectations and are subject to risks, which could cause actual result to differ from the forward-looking statements. Such risks are more fully discussed on our filings with the Securities and Exchange Commission. Our remarks today should be considered in light of such risks. Any forward-looking statements represent our views only as of today, and while we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our expectations or views change. During the call, we'll also be referring to certain non-GAAP financial measures. These non-GAAP financial measures are not prepared in accordance with Generally Accepted Accounting Principles. Please refer to today's earnings release in the Investor Relations section of our website for a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures. With that, let me turn it over to Matt.

Thanks, Steve. Good morning, everyone. Thanks for joining us. So let me jump right into it. As you saw in this morning's press release, this was a tough quarter. Recent developments, primarily in our commercial business, led us to reconsider our view for the rest of the year. This reassessment of our growth plan has translated into us lowering our 2013 financial outlook today, while also revising some important elements of our long-range guidance. Taking all of this together, this was certainly a disappointing reporting period for us. Tom will give you a more detailed readout of our financial results and outlook, and I'll spend my time today on what's changed in our commercial business and what we're doing about it. But before I do that, I want to emphasize my confidence in our long-term prospects. We made meaningful progress during the quarter, with our Aireon business having significantly derisked one of the most critical elements of our funding profile for Iridium NEXT. Similarly, when you consider the excellent ongoing performance of our current network and the fact that our Iridium NEXT build remains on budget and on schedule, there's more positive news here. There's also positive news in the M2M sector, where we continue to deliver robust subscriber and revenue growth rates and have a good deal pipeline. And I'm hoping we'll be able to soon announce the successful renewal of our government services contract. So now, that I've laid out an outline for what you'll hear from us this morning. Let me share the details. I'll start with our commercial service revenue, which is growing slower than our target in a few areas. First, we haven't executed as well as we could in our maritime business. We first introduced our Iridium OpenPort service back in 2008, and as…

Thanks, Matt, and good morning, everyone. While our second quarter 2013 results did not materially miss expectations, we're clearly dissatisfied with having to take down our outlook, in part due to a product issue in the maritime business. Like Matt, I continue to believe that our long-term path to value creation is intact when you considered the development of our Iridium NEXT program and Aireon joint venture, but our short-term expectations have certainly taken a hit until we see improvement in some areas and recover from these operating challenges. I'll first outline our results and then wrap up by taking you through our revised 2013 and long-range financial outlook. Iridium recorded second quarter total revenue of $94.7 million, representing a 3% decline from last year's comparable period, driven largely by a reduction in equipment revenue on lower overall sales volumes. I'll discuss our full year projections for equipment margin later in my remarks. Operational EBITDA came in at $51.1 million, a decline of 2% from the prior year quarter. Our operational EBITDA margin was 54% for the second quarter, which was an expansion from 53% in the year-ago period. From an operating viewpoint, we reported commercial service revenue of $57 million in the second quarter representing 8% growth over last year. We added 26,000 net commercial customers during the quarter, contributing to a 13% year-over-year increase in subscribers. Approximately 15,000 of these net additions were in the M2M business and 11,000 came from the voice market. Commercial M2M data subscribers now represent 42% of billable commercial subscribers, an increase from 38% during the year-ago period. Of note, the second and third quarters are typically our seasonally strongest periods of the year and the second quarter, in fact, was a good pickup in subscribers and service revenue over the last couple…

[Operator Instructions] Our first question comes from James Breen of William Blair. James D. Breen - William Blair & Company L.L.C., Research Division: Just a couple of questions. One, can you talk about the new partnership with CalAmp? Can you just give us a little bit of color there, maybe in terms of scale. And then, on the equipment side, can you just talk a little bit about how you're mitigating that and then how that looks going forward?

Yes, the first question, CalAmp. We did announce that early this week. We've been working with them for a while. They've actually been a supplier through others in the past but they've kind of come to become a direct partner here recently and focused on one of our largest new customers. I think you saw that they're the ones putting the solution together for Caterpillar that we talked about earlier this year. We think that they're -- first of all, of they're a sizable company with great resources and capabilities and love to see them focusing on Iridium in the satellite world. And I think that's going to be valuable as we focus on the rest of the OEM market, which all has taken notice of our success with Cap. So it's great news to get CalAmp into the fold of our more than 300 partners. So the second question was ... James D. Breen - William Blair & Company L.L.C., Research Division: Just on the OpenPort products, you talked about just the some of the issues on the equipment side. How do you address that? And then, does that basically give you some stability there once it's addressed?

Yes, no, I said it's disappointing we've had this issue. It's an issue around one component, really, in our product that has caused more failures in the field than we expected. But we have fixed it. We've spent a lot of time on it and have uncovered the problem and solved it. And in fact it's going into production right now and it's going to be shipping to customers this month. And in fact, all-new customers and refurbishments and repairs and that sort of thing will be done with all the improvements made to the product. Our partners are telling us as soon as we get that done, in fact they've slowed down in the last quarter until waiting for that, that they are really interested in the product, really interested in selling it to their customers. And I really think starting strictly in 2014 and '15, you're going to start seeing us recover that equipment business and service revenues in that business to a lot closer to traditional levels, in growth. James D. Breen - William Blair & Company L.L.C., Research Division: And then just lastly. You talked about an order for a large vessel fleet. Can you just talk in general terms about, are there are a lot of these types of deals out there? Is it things that -- is it something you could see every few months, as more and more of these companies realize that services like you offer are a positive for them in terms of their operating?

Yes, it's a wide variety of opportunities in the maritime market, going from single vessels and small groups of vessels up to large fleets. 200 ship orders isn't very up. It doesn't happen necessarily every quarter but it's a -- that's not an unusual order. We've had even larger groups of vessels come in the past. That one's particularly positive for me, particularly given the troubles we've had in the last quarter or 2. I think it demonstrates that some of the largest companies in the world still are very interested in our value proposition and believe in us, want us and are going to work through us and, of course, want our new units out there. So it's a confidence builder that we will get back to recovery. But it's a regular. I wouldn't say we have pure visibility all the time to these. Sometimes it's the special kind of situations where we'll work with a partner and know the fleet they're going after. And we'll work with them on making sure that we can support them there. Sometimes they win things without us knowing and they just sort of happen and we find out about it a little bit sort of, if you will, after-the-fact. But in this case, it was an important one and timely.

Our next question comes from Jim McCleary [ph] of Chartering Capital [ph].

I think, Matt, you referred to greater competition in the North American market. Is part of that possibly related to LightSquared? I'm guessing that they were originally kind of deemphasizing the North American market with their plans to do their other business, and then maybe have come back into the North American market possibly with SkyBitz as well. Is there -- is part of that what you were referring to in terms of the North American business?

No, not really. We don't really see LightSquared coming back, to be honest with you. We have a little bit of visibility over there. They're really still not growing or doing anything significantly in their area. Their product is North American-based only and kind of limited to certain market segments. And they're still a spectrum company more than anything else and that's, I think, the way the market sees them. So they're a marginal player at best. And even to the extent that they supply to our transponder space to the M2M market like you mentioned, really frankly, most of those players are also moving off of them, even if they look like they'll be around a little longer. No one's very certain about their future from what I can tell. I'm more referring to what would look like more around Globalstar and Inmarsat sort of going after customers at the low end there. As I said it, we don't see a lot of effect from it. It seems marginal but we do see some effect because there has been some significant kind of price cutting going after that market. As you can tell from our numbers, it's not a huge impact, but it's one that's sort of new this year and I don't know if it's sustainable but we'll see. We think we have products and promotions that will address that low end, as well as address the usage situation. Unfortunately, as you've heard in the call, they're coming a little later than I'd like. Not too much later but a little later to at least make the impact in this year that we were expecting and that contributed to our guidance change. But we feel very positive about what they'll do to 2014 in mitigating these kind of issues.

Okay. And the SkyBitz relationship remains on track?

Yes, SkyBitz continues to be a really -- an exclusive partner of ours as we go forward. And they continue to go and focus on new business in this sector and are working with us. Not quite the volumes we originally expected from them for a variety of reasons. Really associated with them, but I don't think that's associated with any other competitor that they're using. I think that's just associated with the volume of business that they're doing right now.

Our next question comes from Brian Ruttenbur of CRT Capital.

Yes, first question is on the gross margins kind of going forward. They've been running in the mid-30s. I know it's all related to the -- I assume it's all related to the competition issue. So do you expect for the next several quarters to gross margins to run in that area, and am I making the right assumptions?

No, Brian, the gross margin in the quarter is artificially depressed by the approximately $2.4 million warranty reserve charge. So if you back that out of the quarter, you see margins are right in line with where we were in the comparable period last year, in the mid-40s. And that's how you should think about it going forward.

Okay. So that's helpful. Sorry about that. So mid-40s going forward and there should be no other charges that you anticipate related to any of these issues in the next couple of quarters, correct?

That's correct.

Okay. And then you mentioned that you're not going to have a cash tax rate yet on your income statement. You have roughly 40% taxes. What will be running through your income statement going forward?

Well, that's just deferred taxes.

Okay, and it should be at what rate?

In the area where it is now, I think what our effective rate was 38% or something like that. Right around there.

Okay. And then my other question related to the Aireon update on -- what's the next hurdle for NAV CANADA in order to fund you with a -- they just came through, as you said, with $40 million. What's the next tranche and what's your next hurdle in order to get additional funding from them?

Yes, I don't believe there's any more funding required this year. I don't think it's in the list. I mean, they're -- we haven't announced what those are. They're really more related just to the ongoing performance of Aireon and its relationship with the market, et cetera. I think given that they're $55 million into a $150-million program, I think they're definitely committed, if you will, to Aireon's success and I'd be surprise if that sort of same sort of focus didn't continue on into next year. They are fully engaged. They're extremely helpful around the world. They have great relationships with all the international ANSPs. They're viewed to be a leader in the world in terms of what they do. They're highly technically confident about ADS-B threshold as well as space-based processes. Their engagement with the FAA is very encouraging, the fact that they're really working now on sort of cross-border and cross-regional sort of performance issues is fantastic. So I think that, that's just going to continue sort of the path that they're on right now.

And then last question, on the DoD contract coming up this fall. Do you have an exact timing of that? And will you make a press release or should we be looking for Fed Biz Ops to make some kind of an announcement? How will we know when it happens, when the contract is renewed and the terms of that?

Well, it would be a material contract to us and so, of course, we would announce it. I mean, I think that's definitely a public announcement. I would expect we'd probably do a press release on it as well when time came. I don't have a defined time. I know when the current contract expires and, like everything else I think with the government these days, everything seems to come down to the wire when things have to happen. And I'm not expecting this will be any different. And so we're in discussions now, finally. It's taken a long time. We've sort of been engaging them for a long time in many levels. The sort of formalities of it really are just beginning, which is always been a little surprising to us given the size and importance of the contract. But more, they're very busy and distracted and know how important this is so I'm expecting we'll have a busy coming weeks and we'll have something to report to you before or shortly after it expires.

Our next question comes from Greg Burns of Sidoti & Company. Gregory Burns - Sidoti & Company, LLC: In terms of the M2M subscriber growth in the commercial side of the business, it looks like it's been decelerating over the last couple of quarters. Can you just maybe give us a little color on that and what you view as the kind of longer-term growth profile of that segment and maybe what you expect for the balance of the year in 2014?

Yes, it's -- there is definitely nothing fundamentally changed in terms of our view of the potential of the M2M, the satellite M2M segment or our position within it. I agree with you. It seems to be slightly decelerating in terms of numbers though our -- that is not due to any competitive or, frankly, market impact that we can ascertain. The same number of partners seem -- our actually growing number of partners seems to be going after a lot of opportunities. I would say, as I said in the last quarter or 2, we've had difficulty forecasting with accuracy, as you can tell, exactly because they tell us what they'll do and then they don't sometimes -- they don't seem to be following that. And one of the metrics we've often following in the past is equipment, when they buy equipment and when they activate that equipment. And one of the trends we have seen is it does seem to be taking longer between the time that they buy our equipment and the time that they activate it. And that maybe because of our equipment is getting less expensive. And so it doesn't cost as much to have in inventory or they like the flexibility of having it. It could reflect sort of a global market slowdown, outside in terms of the economics, where their partners are just not going quite as aggressively for whatever reason. Like everything else, it seems like everyone starts the year quite bullish and then sort of realizes that the economy hasn't quite support it. So companies end up just buying a little less or implementing a little less. And some of the reasons are these numbers are getting bigger, that some people are ordering from us. They went from thousands of units to tens of thousands of units and that's just inherently harder to forecast, I think, exactly how their customers will roll out, what implementation challenges they'll have, et cetera, as they get on to more and more things. So I still don't fundamentally see any changes there. We hear great things from our partners about our value proposition of our partners and how excited they are to move things. But then they don't quite activate as quickly as we were expecting and that's forecast. I think, as I said, we're getting better and better at that. So I think there'll be fewer and fewer surprises going forward, I hope, in that area. But that's been the nature of that business lately.

Just to qualify, Greg, you're right in observing that the add rates sort of in the first and second quarters, if you compare them to the same seasonal quarter in the prior years down a bit, sort of in the area of 70% of what the add rate was in the comparable quarter. Our expectation in the third and fourth quarters is that it will be over 100% of what we added in the comparable quarter in the prior year. So our confidence and bullishness around M2M is unwavering. Gregory Burns - Sidoti & Company, LLC: Okay, and in terms of netted on the government side, up 3%, I think, in the quarter. Can you just give us an update on kind of the adoption rate there and when we might expect to see that pace of growth pickup?

Yes, I've mentioned that in previous quarters and sort of the trend has continued. That they implement a lot of our Distributed Tactical Communications System or Netted Iridium in 2011 and somewhat in 2012. And then there's been a slowdown in the last several quarters, which continued into this quarter as they've been waiting for the next generation of the product, which they call Global Services. That allows them to go from regional nets to global nets. It allows them to have very low latency nets. It really expands the value of the service dramatically and that's been in development. It's been delayed a bit by sort of available R&D and timing of things and really doesn't sort of complete until next year significantly. So that's why I think this trend is going to continue the -- in terms of adopting a handset-based Netted Iridium now. On the other front, I think you're going to see much more activity on embedding Iridium into terrestrial tactical radio devices, that has heated up quite a bit. The ability to -- we have the ability to sort of support our modules or waveform into other people's devices and the government seems increasingly interested in that. That means higher volumes. That means even more embedded capabilities, as they take a threshold device that's line of sight and make it, basically, an online of sight and make it much more valuable. So there's a lot of activity around that. All that, though, doesn't translate until more 2014, 2015 kind of sales. And that's also, by the way, when our commercial push-to-talk service really ramps up, too, as later next year and then into 2015. And there's a lot of interest in that business as well from international, both international public safety operations as well as militaries in taking that business even further.

[Operator Instructions] Our next question comes from Chris Quilty of Raymond James. Chris Quilty - Raymond James & Associates, Inc., Research Division: Matt, I think you've some serial problems with the OpenPort pilot product, how confident are you that you've got those hardware issues resolved with the latest hardware released?

We're very confident. I mean, we started seeing this problem a while ago, really more manifested itself, if you will, in the financial results this quarter and its implication in terms of say, the warranty provisions and how that hit this quarter. But we've been working on this a while and it's been an all-hands-on-deck sort of issue to insure that, not just that we fix the problem, but we fix anything possible really around the problems that -- and it could be in any way causing the problems. So yes, we -- not just 1 fix, it's actually a number of improvements to the product. We've shared that with our customers, who are up to speed on what's going on there. We're getting into detail with many of them in terms of making sure that they understand what that will be. And most of them look like they're, while they're holding back right now, they're excited to get the new products as soon as it starts shipping, so we have good demand in the fourth quarter to fill the pipeline again essentially for them to pick up the new unit. But yes, we feel very confident that we know what the issues are. Chris Quilty - Raymond James & Associates, Inc., Research Division: Great, and it sounds like in addition to the OpenPort, you kind of implied you've got the new M2M hardware, a new handset or voice products shipping later this year. Do you see most of those product releases as just evolutionary? Or do you have something that you think is really significant in the product pipeline that could move the needle?

Well, I position in the latter regard. Sure, I think it's a move-the-needle significant product. Rather not get into the details of it. I wasn't really meaning to preannounce anything but I think it was important for us in this call to explain one of the reasons for sort of the equipment guidance going down a bit, which was we did believe that, that product would fill the channel quickly and would help make sort of that comparable year-over-year equipment. But now because it's not going to be able -- I think people just can't buy it fast enough in the fourth quarter to do that. It's part of our downgrading the guidance in that area. But yes, we're quite excited about its impact on '14 and excited to talk more about it. But I don't think this is probably the time to do that. Chris Quilty - Raymond James & Associates, Inc., Research Division: And any new developments on the personnel tracking side?

Well, I mean, there's a number of partners in that area. The one that's probably the most visible to everyone is DeLorme because of their price point in the market and they're more consumer oriented. We've seen significant increases in their demand. I don't want to go into the specifics because that's really for DeLorme to do. But literally, it's been in the last month or 2 that, that's really moved the needle up with their new, I think they call the inReach SE product that's, obviously, is being well received because they're ordering a lot of 9603 modules from us and we're seeing a lot more activations in that front. So I'm real pleased with -- for them for their progress there. Chris Quilty - Raymond James & Associates, Inc., Research Division: And given the competition on the voice side, albeit modest, does that change your thinking in terms of product positioning for potentially developing a product that addresses that low end of the market?

It does. I mean a little bit. I mean we've been considering this for a long time, as you know. I -- we've monitored and evaluated the market significantly. In some ways, we felt instead of going down market, it's better to almost go up market, and that's been a successful strategy overall. But we have to address, what I would call, that down market, especially the more valuable high-end user who really wants a global product, who wants a product that doesn't have any compromises, which is what we offer. So we've been thinking about how to offer that and think we have some ideas there. But the other thing that we really want to focus on is usage. I think that's been across the board. That's not losing certain subscribers to other people. That's just everyone is using the product slightly less quarter-by-quarter over the last year or 2 and we've been noticing that. And I think that's an over global trend where people just like to text more and have shorter calls and aren't talking as much as they do. And that's true of smartphones and the way that the overall market is. But the trend is towards data, it's towards apps, it's towards doing that and we have to evolve with that as well. So that's more shaped our thinking, too, about future products and promotions and also pricing around encouraging that type of behavior as well, too. So that's where we're really kind of tailoring our strategy going forward.

And with no further questions, I'd like to turn the conference back over to Mr. Matt Desch.

Well thanks, all. It was not our best quarter but as we said, we're still very comfortable with our long-term plan and see a lot of good there. And look forward to talking to you in the third quarter. Thanks, everyone, for joining us.

Ladies and gentlemen, this does conclude today's conference. You may all disconnect and have a wonderful day.