Good day, ladies and gentlemen, and welcome to the Iridium Fourth Quarter 2013 Earnings Conference Call. [Operator Instructions] As a reminder, today's call is being recorded. I would now like to turn the conference over to Steve Kunszabo. Sir, you may begin.

Good morning, and thanks for joining us. I'd like to welcome you to our Fourth Quarter 2013 Earnings Call. Joining me on the call this morning are our CEO, Matt Desch; and our CFO, Tom Fitzpatrick. Today's call will begin with a discussion of the 2013 fourth 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 facts 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 results to differ from the forward-looking statements. Such risks are more fully discussed in 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 things over to Matt.

Thanks, Steve. And good morning, everyone. Thanks for joining us. I'll get started by noting that 2013 was both a rewarding and a challenging year for us. We achieved our most important strategic objectives in the successful renewal of our agreements with the Department of Defense as well as all the great developments in our Aireon business, while also navigating through a slowdown in the commercial handset market and our maritime business. Our M2M business continued its streak of robust growth, posting 20% subscriber and revenue gains last year. And while 2013 didn't shape up exactly as I initially thought it would, especially in light of weak equipment sales, we had a revised operational EBITDA target and exceeded our guidance for total service revenue growth. Still, I'm happy to have 2013 in the books and to be off and running in 2014. Before I jump to where I'll be focusing our efforts this year, I want to share a few thoughts on our financial outlook and the discussions we've been having with our credit facility lenders. First, we published a new package of guidance today that covered both 2014 and our long-range projection to 2018. I trust this will allow you to take a fresh look at our growth prospects and cash flow profile as we head into the heart of the Iridium NEXT construction and launch period. As you probably know, our investment thesis is rooted in the transformational change to our cash flow profile that is expected to occur in a few years, as our capital cost go way down and our operational EBITDA continues to grow. In short, we anticipate generating significantly more free cash flow than we do now as these trends play out. I believe the new targets we gave today will help you evaluate…

Thanks, Matt. And good morning, everyone. Before I summarize our key financial metrics and the financial guidance we issued today, I'd like to briefly take you through what has become an increasingly clear picture of Iridium in 2018. Why 2018? I can think of very few enterprises that are poised to transform their free cash flow profiles in such a meaningful way in what is a relatively short period of time. There's little doubt that we're entering a critical and important part of our history that will define how we create long-term value for our stakeholders. Let's start with the elements that have the highest degree of certainty. Capital expenditures, which were $404 million in 2013, should fall dramatically and average less than $30 million annually for approximately 10 years beginning in 2018. This change alone creates a stark transformation in our free cash flow profile even before we layout the excellent prospects for materially increasing our operational EBITDA. First, we have eyes on a $22 million increase in government service revenue when comparing 2018 to 2014, as outlined by our airtime services deal with the Department of Defense. Given the recent developments in our Aireon business, I also think it's pretty safe to say that this venture is well-capitalized and on track to launch the world's first space-based global aviation monitoring system once Iridium NEXT is completed. When combining the revenue we expect to book from hosting fees and customer data contracts, this business will ramp to $34 million in incremental annual revenue in 2018. So in executing on these 2 strategic objectives alone, we have solid visibility to recurring service revenue growth of $56 million in 2018, we're about a 19% gain even before we start looking at growth in our commercial markets. Now let's quickly examine the…

[Operator Instructions] Our first question is from James Breen of William Blair. James D. Breen - William Blair & Company L.L.C., Research Division: Just a couple of questions. One, Matt, wondering if you can talk about the Caterpillar contract extension there, in terms of how it's different from the existing agreement you have, maybe potentially some of the services they're offering? And then secondly, you talked about the voice market in general being weak. You guys are gaining share. Why do you think you're gaining outside share there despite the weak market?

And that second question you said was about handsets? Is that what's your -- okay, yes, so the first question about Caterpillar: Yes, we did announce that last year. In fact, it was on a call like this. And it was really more what I would call the high-end part of their business, using higher-speed circuit-switch data to a higher -- for devices that they need to monitor a lot of different information from. We've been working on extending that and just finally completed the contract -- and for what I would call more the wire variety of lower-end tracking kind of applications, sometimes called slap-and-track, in some of these areas. And this really rounds out sort of a little lower ARPU but still much higher volume kind of business. So combined between the 2, we really see ourselves on pretty much everything that comes out of Caterpillar over time. So we're kind of -- we're quite excited about that. But even more excited of the fact that so as Cat goes, so do many others in the heavy equipment OEM space, and really a lot of the other players are also interested in many of the same sort of objectives that Caterpillar has in terms of expanding their telematics, helping their clients and their customers and their dealers, manage their equipment and inventories, service vehicles with their customers. And so we think that, that's going to be great for the future. The second question about handsets, and sort of the fact we've done very well in that segment. Yes, last year was sort of, as we look at everyone else in the industry, it wasn't only we that had sort of weaker results, it looked like the others did as well. But we did, as I said, almost twice…

Our next question comes from Andrew DeGasperi of Macquarie Capital.

I just had a follow-up on the handset market. I just wanted to know like going forward -- I know it was weak last year, but is it improving in general? And also on Aireon, have you had any talks with any of the Pacific air-traffic control entities or in Asia or in Africa, which obviously, lack coverage?

So first question on handsets and is it improving this year. Look, we're not -- I wouldn't say that we're projecting sort of necessarily any kind of particular improvement. I think our basis, as I think I said in the comments, was more on stability in this segment, that we think that we'll start to see -- we should see the same sort of performance overall in the big scheme of things as we go forward and then add to that with new segments, like Iridium GO!, and try to expand the market share by finding other applications. So that's not really where we perceive our long-term high-growth areas to be. That's more in data, in broadband, in machine-to-machine and in Aireon and other applications, but it's still a solid, important part of our business that we think, things like Iridium GO!. And later this year, I didn't talk a lot about it, maybe one of the most exciting things at our conference to our partners was commercial push-to-talk, which we'll formally announce later this year. But that will be an expansion, really, going forward and a new application segment that's using our handsets in enterprises. So that's handsets. On Aireon, yes, Aireon has had many discussions around the world with international players going beyond the North Atlantic and the FAA. A lot of interest in this in the Pacific. There's a lot of interest in this in Africa, particularly Africa has very -- almost no radar coverage, really, across the region. You almost have to look at Africa as, they once told me, as Oceanic territory in some ways. In the way that it's -- that the airlines really cross big regions without being in direct sight, if you will, of the controller. So it's a -- viewed as procedural airspace, where they have to keep airplanes far apart and inefficiently -- inefficient kind of routes. So yes, I really do believe, Aireon believes, and I have been told by the investors in Aireon who have aspirations not just in the regions, as you know, that they are in. In fact, the U.K. NATS announcement this morning that Aireon made, I thought, was interesting. As you notice, they really have aspirations to go beyond U.K.'s aerospace and provide air traffic control services elsewhere in the world, in Asia, Middle East, other places. And I think you're going to see that to be a trend really for Aireon.

Our next question is from Chris Quilty of Raymond James. Chris Quilty - Raymond James & Associates, Inc., Research Division: I had a follow-up question on the Iridium GO! and the distribution strategy with that product. It appears to me that it might have some more consumer-like potential. And given the fact you're going through your distribution partners, are you leaving money on the table or do you have some way through your partners to reach, call it, the REI, Cabela's type of channel where consumers can be aware of it?

Yes. Well, remember, leaving money on the table in terms of volume, you're also -- it's very expensive to create direct consumer channels for any company. And to do that, and to maintain -- to expand your brand and to put them not just in North America but around the world is an expensive proposition, which is why we haven't aggressively move towards consumer. Not that there aren't consumer applications, but really, our distribution channels can take us into those markets much more efficiently than we can. So I do think -- you noticed that we have a number of partners sign up to adopt the applications. One of them, for example, was DeLorme. And I think I could see DeLorme taking this product to their channels. They're in a lot of those places, and I think they'll be able to put it in front of consumers much more effectively than Iridium could. As could others that you don't see as much but show up in -- on websites and in other places that consumers happen to frequent where, increasingly, we're moving online as opposed to sort of the real world -- I mean, the bricks-and-mortar kind of world. But I think you'll see Iridium GO! in many of those online kind of outfits pushed by our distribution channel to those places. You just won't see us as direct in those places, selling direct. One, it screws up the channel. It makes us compete with our channel, and we're loath to do that, because it really ends up working against you. And secondly, it's very expensive to constantly have to advertise yourself and put all the expense into going to those channels directly. But I do think Iridium GO! will be much more broadly distributed than maybe particular handsets are today. Chris Quilty - Raymond James & Associates, Inc., Research Division: Okay. And on the Iridium OpenPort or Pilot, can you give us a little more color on what you're seeing there in the market, both in terms of customer acceptance of new hardware and performance of the new hardware, and sort of opportunity set as you go into 2014? I think for last year, you indicated that your -- at least your gross adds were up over the prior year, you were just churning a lot off.

Yes, that's correct. And in fact, despite having a lot of problems in the field with those older OpenPort units, we actually had, I think, almost record activations, record gross activations in 2013. The problem was we had a lot of deactivations. So the net activations were lower than expected, and that caused, with some falling ARPUs as we lost some higher-ARPU customers to lower-ARPU customers, it caused an overall contraction there, which I think is going to get fixed going forward. I think if we can keep the activation rates up, and right now the dynamics in the market are very similar to what they were last year, with competitors raising prices on all their lower-end customers who have to find other solutions, these customers called ENE customers, which are kind of being moved off of their area and they have to select something else, they have maybe enough [ph] choices now in terms of quality products, and Iridium Pilot will be part of that. And we're seeing positivity from our partner base and others. I mean, it still has to play out in the marketplace and everything and fleets have to move over. But if we can lower the deactivation rate, which has already gone down, we are seeing less churn already, that will really help in terms of making this a positive adder in the future. Chris Quilty - Raymond James & Associates, Inc., Research Division: Okay. And can you give as an update on the likely deployment for the Netted Iridium or DTCS with the military, which I think is sort of the gating factor for rolling the commercial side of that?

Yes, so that was actually what I was talking about a year ago, was that we were using sort of the enhancements that we're making to the Netted capability of the military, what they call global services or Phase 3 or whatever you want to do. And that we were -- the commercial products were being built on top of that. When we realized last year that we couldn't count on when the government R&D would flow -- it's flowing again, and that's going to get completed. We decoupled those 2 developments and have been really working now in the last year on the commercial push-to-talk product on its own R&D streams. So it's not, in any way, gated. And in fact, it's in initial demonstrations right now. The operational systems is really what has to be updated more than anything else, and I think they're going to be outstanding. Some of the ways that you can configure these -- configure our product for our customers and for them to have dealers be able to manage their talk groups and their nets globally, et cetera, that's all getting finalized right now. But we're going to have wide-scale demonstrations this summer, with the product going general availability in the second half of this year. I would say sometime in the third, fourth quarter it's going to be able to be deployed commercially and widely. So it's more of a 2015 event in terms of our bottom line. But again, it sort of supports our long-term thesis why we feel there'll be stability or growth in this sort of core underlying personal communications space, I think is the best way to really call it, as opposed to handsets.

[Operator Instructions] Our next question is from Greg Burns of Sidoti & Company. Gregory Burns - Sidoti & Company, LLC: On a previous call, you'd mentioned that the uptake in Russia is a little bit slower than you were originally projecting. Can you just give us an update on that market and maybe some other international markets that might be of interest to you in terms of expansion?

Yes, so I think we are really more describing that we had a plan that was based upon being licensed in Russia at a specific time, and it took a little longer to get really licensed. We are licensed now. We've been in market now for over a year, and it really still is turning out to -- it is right now, I think, what I'd call our highest growth market of any specific sort of country or region of any of ours in the market now because of that. So it's contributing more than the average, certainly, across the bases. And we have a lot of enthusiasm for that market. We've been adding resources, we're adding partners. We're going to start seeing, say, products like OpenPort or Pilot start to penetrate that market, which is great. And we'll see interesting things like GO! and other things, where that's more of a nascent market for many things. So Russia is still very positive. As far as others, we quietly open up other markets. There are countries in which we hadn't been licensed before where we become licensed, and we haven't made a really big deal out of it. The really bigger markets in terms of, I think, untapped growth are more China and India. They are taking longer, really, to find the right business model to get into there. India really requires gateways and other things, and the payback on that is still questionable, at least in terms of our partners and us. But I think long term, we'll see those markets open up. China continues to expand in terms of business with a number of different partners but not as fast as I think it could be growing in the future. But those are always still the bigger markets. Gregory Burns - Sidoti & Company, LLC: And given your long-range guidance, it doesn't appear that funding of NEXT or -- is at risk here. So I just wanted to gauge your -- get a sense of whether you feel additional capital will be needed, and that in relation to the discussions that you're having with your lenders, do you feel in a stronger position with those negotiations?

I would characterize our negotiations with the -- with our lenders as very productive, and we've made a lot of progress with them. And we'll announce the terms of our amendment once it's finalized. We are in the -- making great progress toward that end currently.

Our next question is from Jim McIlree of Chardan Capital.

The equipment margins have declined sharply in the last couple of quarters, is that the warranty expense issue? And do we see the equipment -- do you see the equipment margins improving in 2014?

So the equipment margins will improve due to 2 things, the -- we expect materially lower warranty expenses in 2014, and we also took a inventory op to lessen its charge $1.5 million in fourth quarter '13. So we don't expect those kind of unusual events to occur. As we think about just sort of regular equipment margins without those type of items, we see equipment margins declining usually just principally due to mix. So we get -- the growth areas in equipment is machine-to-machine. We talked about Caterpillar and others in that growth rate. We get lower margin on our SBD devices than we do handset. And so this is going to be mix that will cause margins to compress a bit over time.

Okay. So is the first half of 2013 more of a new normal for equipment margins?

I think we had a warranty charge in the first half of '13, so you have to pro forma for that.

Okay, great. And then I'm just trying to puzzle through the operating expenses. It sounds as if with the new initiatives that you're undertaking, that you're going to see an increase in SG&A. Kind of -- that you'll see an increase in SG&A. I'm trying to understand how that might -- what that level or what that rate of growth is in SG&A and for everything that you have going on?

Well, the new initiatives -- maybe give me a little bit more color on what initiative you're tracking to an increase in SG&A.

Well, for instance, you're bringing out these new products, GO!, Burst, you're trying to bring out the Netted Iridium for the commercial markets. I'm assuming that there's some sort of extra cost associated with the government contract as well.

No, there really isn't on any of those things. I mean, our overall, say, headcount and investment, if you will, and the resources we have to do this as well as generally really R&D, have been pretty consistent. We have happened to have a lot of products coming out this year. But that just happens to be based on the fact that a lot of these things, we have been working on over the last 18 to 24 months, and are coming to fruition at the same time. But they're really on the basis of more or less the same organization. We're not adding a lot of expense this year or anything. There may be some movements, for example, in bonus levels and things like that kind of year-over-year that make it look like SG&A is increasing, but it's really because they were overly depressed the previous year with lower, say, management bonuses and that sort of thing. And so I think that's more of just a -- is that correct, Tom?

Yes. I mean, this business is about operating leverage. The incremental service revenue does not come with incremental SG&A or other infrastructure costs. So we've guided that we see 2018 EBITDA margins at 60%, and we're out there with that. And so if you just draw a line from where -- from our last 12 months to that, then it should be pretty clear.

I mean, and the government contract doesn't require more resources or expense to service it. I mean, we may add one person, really, because there's a number of new business development opportunities with them right now, and we want to go after those and exploit the contract. But that's really on the margins in terms of expense.

Our next question is a follow-up from Chris Quilty of Raymond James. Chris Quilty - Raymond James & Associates, Inc., Research Division: A clarification on the government. The contract itself is just the service portion, so any of the equipment that's generated from deploying new devices or services, you're still going to see that flow through your general equipment line, correct?

That's correct. That's correct.

That is -- Chris, and when we cite the $22 million increase between '14 and '18, that is exclusive of new services.

New equipment.

Exclusive of equipment, but it's also exclusive of new services, new service offering. So that's a minimum number. Chris Quilty - Raymond James & Associates, Inc., Research Division: So if you're launching the military version of the Netted Iridium, presumably they're going to be buying lots of devices to deploy that service?

Well, yes. I mean, in fact, one of the bigger areas of interest right now is in the machine-to-machine area right now. Given that there's no incremental cost to, say, add tracking devices, say, to -- you could track every dismounted soldier if you wanted to. And if you do that, you could be adding tens of thousands of tracking devices at no additional costs that's already in the service revenues, but it is additional hardware each time we ship one of those units. So there's a number of areas to do that in. And there are additional services that as we move into broadband, as we move into NEXT services, I think there's going to be a lot of interest in buying additional things from them too, which were not... Chris Quilty - Raymond James & Associates, Inc., Research Division: Was the Burst service included as part of the overall agreement?

That was. That is part of the DoD contract, and they are taking advantage of that, but not on equipment. So for example, in terms of equipment for Burst, so Burst requires you create a device that looks a lot like a machine-to-machine device to embed in something. That isn't in the contract nor -- another one is waveform, the air interface of the system is not included in the contract. So as that gets embedded into tactical radios, for example, of others, there would be additional charges to utilize that and take advantage of that. Chris Quilty - Raymond James & Associates, Inc., Research Division: Got you. And I guess, both for Burst as well as the Netted Iridium business, when you launch on the commercial side, are we looking at, like, 1 discrete piece of hardware or do you have partners that you expect there'll be multiple devices coming to market? And is all of this based upon a single board or a single design that you've already developed and proven?

That is going to come to market in a couple of different ways. I think the primary one will be through a mobile device like -- well, really a variant, if you will, of our Extreme handset, that's sort of that's dual-mode that's able to deploy both voice service in the way it does today, with tracking and emergency functions, as well as have a personality that will turn it into a push-to-talk device as part of an unlimited number of users and a talk group that are global. So that will be 1 way and that will be developed our way, but another way will be through partnerships with threshold suppliers who embed, really, our services into their terrestrial services and use links, if you will, to tie the 2 together and deploy our products using, say, our 9523 transceiver card and build it into other devices that they already have for police and fire and first responders and government workers, and other people or enterprise workers who have push-to-talk requirements. So it will come to market in a couple of ways. Chris Quilty - Raymond James & Associates, Inc., Research Division: And in terms of pricing plans, both for Burst -- and I don't think you probably discussed on the Iridium GO!, are you using sort of a traditional handset pricing model or something that's designed to be more consumer-friendly?

A little more consumer-friendly. What we're going to do is we're really going to encourage data usage. We really think this makes it simple for someone to use e-mail, for text messaging, for transferring photos. And our pricing will reflect that to encourage people to do a lot of that. So I think it will, for a bundle, together, more value, if you will, when people use it so that they really are encouraged to take their smartphone out of their pocket and use it. We haven't talked specifically about that, we'll announce it formally when the product is available in the second quarter. We've been talking a bit about that to our partners, so they're aware of it and are excited about it, but we haven't really publicly announced that. Iridium Burst, you mentioned, is a completely different pricing mechanism, which is really what's exciting about Iridium Burst. It's not just that it can reach unlimited number of devices inside buildings to provide a kind of a broadcast capability of messaging or data, but the fact that we can kind of price that, if you will, on -- we will broadcast your data for a fixed fee and you can put as many devices as you want to. So really, in applications where people consider using many, many devices, in fact unlimited number of devices, really, their costs don't go up. In fact, their costs go way, way down on a per device basis; can be infinitely low if you put it in enough devices. So I think that's one of the unique aspects about Burst that I think will be attractive in the future, as the applications come on board to use it.

I would now like to turn the conference back over to Matt Desch for closing remarks.

Well, great. Another year under our belts. We're at the start of 2014. We look forward to seeing you all on our First Quarter Results Call in a couple of months and talking to you further after this call. Thanks for joining us today.