Good day ladies and gentlemen and welcome to the Iridium Third Quarter 2014 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions). As a reminder, this conference 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 third-quarter 2014 earnings call. Joining me on the call this morning are CEO Matt Desch; and our CFO, Tom Fitzpatrick. Today's call will begin with a discussion of our 2014 third quarter results, followed by Q&A. 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 will 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 and the Investor Relations section of our web site 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. Let me start by noting that we posted our third consecutive quarter of solid growth. Total service revenue grew 8% and operational EBITDA grew 10% versus last year, with broad based contributions from our key commercial and government markets. We have raised our full year 2014 projections for both of these financial metrics, and are rapidly approaching our first scheduled Iridium NEXT launch. I'll spend my time with you today charting the developments around our major initiatives and programs, including Iridium NEXT and Aireon, and wrap up with a few thoughts on our key business lines. As I usually do, I'll begin with the status of our current network, which is performing very well despite the fact that we replaced two satellite losses with in-orbit spares during the quarter. Overall, the network is working great and continues to deliver strong performance and an excellent user experience to our partners and customers. By way of historical perspective, we have averaged about one satellite replacement annually over the last five years, so we are pretty much where I expected we'd be heading into next year, with one spare still available. The way our constellation works, allows it to be flexible and resilient in a way that no other commercial satellite network can. Thanks to that, and given the imminent launch of our next-generation system, we believe our constellation will provide an orderly and smooth transition to Iridium NEXT. With about eight months to go before our first planned Iridium NEXT launch, I can report again that everything is still lined up to have the new system fully deployed in 2017. The capital program is tracking to budget, and we are passing important milestones at a pretty rapid clip. Just to characterize to you where we are…

Thanks Matt and good morning everyone. I'll get started by summarizing our key financial metrics, then outline the 2014 financial targets we raised today and finish with the balance sheet and capital structure review. Iridium generated third quarter total revenue of $107.5 million, which was up 7% from last year's comparable period. Total revenue benefited primarily from a $6.2 million increase in the high margin service component. Operational EBITDA came in at $58.4 million, an increase of 10% from the prior year quarter. Our operational EBITDA margin was 54% for the third quarter, up from 53% in the year ago period. From an operating viewpoint, we reported commercial service revenue of $65.6 million in the third quarter, representing 7% growth over last year. We added 19,000 net commercial customers during the quarter, more than double the 8,000 we added last year, with 15,000 of the net customer gain coming from our M2M business. Commercial M2M data subscribers now represent 47% of billable commercial subscribers, an increase from 43% during the year-ago period. While subscriber gains were clearly the primary driver of commercial service revenue growth during the third quarter, it's important to note that we also booked a nonrecurring $1.4 million prepaid vouchers benefit that was likely related to episodic purchases by several large customers. Unlike last year's nonrecurring benefit, which resulted from a change to our prepaid airtime policy and was predictable, given known prepaid voucher expiration dates, this gain resulted from renewable vouchers not being renewed. Past history shows that these vouchers are often extended because of the low relative cost to our customers. This non-renewal from several large customers is therefore unusual, was difficult to predict, and likely the result of an episodic need that went away. We are pleased with the third quarter's performance in our…

(Operator Instructions). And the first question is from James Breen of William Blair. Your line is open.

Hello.

Hey Jim.

Can you hear me?

We can hear you Jim.

Okay, great. Just a couple questions. One, within the M2M space, obviously you saw good net adds this quarter. Can you just talk about -- I think, Tom, you talked about pricing a little bit there; and just competition in general in that space. Then two, Tom, we have recently talked about some of the -- getting qualified as a safety provider on some of the maritime ships. Can you update us there? Then just lastly with respect to the Caterpillar business, can you tell us how that is progressing there and when service revenues start to kick in? Thanks.

Sure. Your first question was about just overall in terms of M2M competition, pricing. That is becoming a big part, increasingly bigger part of our business around -- and a big part of our partner base is really focused on that business. Our growth in that area is driven by increasing partners; penetration of new market segments; existing partners continuing to order and expanding their business and expanding geographically and within their own market segments. And as Tom mentioned, we have become very price competitive in the last few years as we passed on cost reductions in new products and lowered the entry-level price for customers. So it is a broad-based business. We have mentioned that its kind of being driven in the near term by the heavy equipment OEM sector in terms of growth, though the consumer space has also really kind of taken off this year. But across-the-board really, we are seeing growth across-the-board. Competitively, I don't think we really find ourselves -- I want to be as constructive as I can be, but I think we're in an extremely good position competitively overall. We are picking up customers from others, and I don't think we have ever -- I don't think we are losing any customers or have lost any customers, just because our network works well and we have a real natural advantage in the M2M space that I don't think anybody can really match. When you are tracking devices or your equipment you really don't want any compromises in terms of coverage, in terms of latency, in terms of your ability to actually have a device register, and our customers just tell us that when they test our product it works; it works every time; it works immediately, and that is not true everywhere else.…

Great, and then just one follow-up. You talked about traffic volumes, data usage volumes hitting their highest levels this quarter, I think. How has that run across the different business lines, maritime versus M2M?

Yeah, I was really focused on maritime broadband, OpenPort services, when I was mentioning that. We had another really good quarter on OpenPort. That business is fully back now and growing again, now that our quality issues are well behind us. We are seeing some big fleets really starting to turn up the service and we are seeing a lot more data coming through our network as a result of that, as they use it for Internet services on behalf of their crew and for operational usage on ships. So that business not only is sort of expanding in numbers of units of OpenPort Pilot units on ships, but also in terms of the traffic going through that and therefore ARPU and total revenues. So that really is starting to contribute in a way that it wasn't over the last two years.

Great. Thank you very much.

Thanks James.

Thank you. The next question is from Andrew DeGasperi of Macquarie Capital. Your line is open.

Great. Thanks for taking my question. Just had a question on the sequential ARPU increase; was Iridium GO! responsible for some of this? I know that comes with a higher price point?

No, Iridium GO! is not -- you mean the sequential increase in M2M from 16 to 17?

Yes. I'm sorry, on the voice side, I forget. Does it come out of voice or M2M, the Iridium GO!?

I think there is a sequential on M2M for -- it is kind of rounding from 16 to 17 sequentially. But I don't see -- I don't think it's on the voice. And, GO! is not moving the needle yet, Andrew.

I feel very good about the fact that we are really holding our ARPU levels on voice. Long-term that has been coming down a bit. But I really think, as we said here, we said we don't have a higher price point on GO!; and in fact, in many ways you can spend what you need to and want to on whether you use that just occasionally or a lot. But as I said, we were very pleased to see that a lot of our earliest activations on that product were in the -- were of the unlimited or highest dollar because I think people really wanted to use their smartphones a lot. And that is in the rounding right now in terms of our ARPU. But it certainly helps support our voice revenues going forward, if people continue on that trend and take that price package anyway.

Right. What I would just comment on, the strength in the M2M on a year-over-year basis held at 17 on significant subscriber gains. So we think about M2M ARPUs as declining over time as we increase penetration. But to have posted the subscriber gain we posted and held the ARPU at 17 is most encouraging and is usage related. We brought on some customers who are using high volumes, and it has been accretive to the ARPU.

Great, and I'll stay on the topic of voice. Are you seeing an industry-wide improvement on the handset side, or are you taking share currently?

Well, we are definitely holding our own. It is hard to tell, and we will be looking forward to hear what others are saying about this as well. As you know through last year, after all things were said and done it was clear that we not only held our own, we probably did better than everybody else did in the sector in terms of handsets. When you add Iridium GO! to the mix this year, we really think we are extremely well positioned with a portfolio products that will continue to do well. And we are not hearing anything out there in our partner channels or clearly in our results that would tell us that we are not still winning the day. I just don't know if I can say that we are winning market share or not. I do think that this Iridium GO! kind of represents some new customer and new markets for us and I was particularly pleased to see just how much broader the application for that product was than I think we originally expected. We had expectations of what it would penetrate, but we are really seeing a lot of enthusiasm across some new market sectors that we hadn't really seen pickup in the past, and I think that bodes well for the future.

Andrew, sorry, let me just double back on the voice sequential increase. You are right; that relates to the one-time nonrecurring benefit of the prepaid voucher expiry. So that's why you saw that pop sequentially.

Great. Thank you very much.

Thank you. The next question is from Greg Burns of Sidoti and Company. Your line is open. Greg Burns - Sidoti & Company: Good morning. Morning. Over the last couple of months there's been some announcements from competitors like Globalstar and Inmarsat about some aviation surveillance services that they are looking to offer. Could you just compare what they are talking about to the Aireon service? How it differs or how it might compete against Aireon?

Sure. It's really apples and oranges, Greg. Aireon is a comprehensive, global surveillance program that really provides the position of every aircraft on the planet that is broadcasting ADS-B signals, which is mandated by 2020 in the airspace, and requires no new equipment on the aircraft to provide it. Everyone is already putting -- is mandated to put the equipment on that's necessary for us to track every aircraft. That will then be integrated into the air traffic control facilities and they will provide separation services, better separation services, more efficient climbs, better -- much more closer separations than any other means possible to do that. So it is really going to be the gold standard. Inmarsat is talking about really, when they mention offering a basic tracking service for free, coming out of the MH370. We both provide what was called ADS-C or FANS services or controller pilot data link; those provide some improvements in separations, but not what Aireon will do. And I think that is really sort of a stopgap measure just to -- and does require, by the way, if you really wanted to take advantage of it, you either have to upgrade to their latest vintage eventually or -- and it's not on every aircraft, so it requires a significant investment if you wanted to put that on every aircraft to do it. And that's difficult for airlines to do. Globalstar is talking about really using their satellite system again to retransmit and ADS-B signal. And remember, their network really only operates effectively today in land, because they're a bent pipe system, so it really is only a land-based system. It is non-polar, non-oceanic, which is really where the initial and highest value of Aireon service is going to become. So it's in testing and the other issue for that system, it's going to require equipage. So people are going to have to spend money to put that into aircraft, which the airlines and others have told us that is really a non-starter. That is why Aireon was designed to not require any additional equipment beyond what was already going to be in the aircraft anyway, and that is what makes it such a powerful concept. So really apples and oranges; don't really see them as competitive to Aireon in the long run. Perhaps can be used in certain niche environments or in their own specific areas, but really not related to Aireon at all. Greg Burns - Sidoti & Company: Okay thanks. And Tom, in terms of the OpEx, guided up sequentially; sounds like some near-term needs in terms of product development. But how should we think about OpEx going forward beyond the fourth quarter?

Right. Just the areas that we are seeing, we are most encouraged by the traction we are getting in maritime. OpenPort, we had said we thought it would turn and it has turned, and it has turned significantly. So we are thinking that some of our partners are desirous of getting the new pilot unit sooner rather than later, and we think that is a good bet. So we are going to take that on in the fourth quarter, as well as some increased R&D for cost savings kind of initiatives in the parts area. So you will see it pop, as it popped last year in the fourth quarter if you looked at -- there was a sequential increase in the fourth quarter of last year, it will be similar, and then I think it settles down sequentially into the first. Greg Burns - Sidoti & Company: Okay, thanks. Then lastly, the product margins were a little lower than we were expecting. Was there anything of note there driving that?

You think of product margins, right, as not going up over the long term. We think of them as it's going to be -- increasingly the product is going to be SBD machine-to-machine heavy. They're the volume. Those margins, while they are still attractive, are less than our legacy handset business. So we think about handset margins as not expanding over time. But the more SBD we sell, just because of mix you will see a lower margin. Greg Burns - Sidoti & Company: Okay, thanks.

Thank you. The next question is from Chris Quilty of Raymond James. Your line is open.

Good morning. I just want to follow up on the announcement with the Harris Corp. auxiliary payloads. I think you stated that was about $55 million now. Can you remind me? There was a number you guys had given previously, publicly announced, and I believe it was less than that?

Yes, I think we originally guided to $45 million as a potential for what that could be worth. But it was really -- it was up to $45 million we thought at the time, and we didn't know exactly how successful they would be at utilizing it. It could have been quite a bit less. Now we are starting to be able to see exactly what they are doing, what the revenues for that will be, and frankly, as you can see, cash is already starting to flow on those. So we can now point to $55 million as a much better target.

Great. So did -- were they able to squeeze on some extra sensors onto that platform?

No the issue was more that there was -- well, first of all, there was a set amount of space that they could use and we had an idea what they could use it for and who they could use it for. But we had no idea whether they would really be successful and line up contracts to take those in and to be able to make that valuable. Now we know that they have signed contracts or have specific arrangements that will lead to revenues coming to us of $55 million. So it went from up to $45 million now to approximately $55 million, so it is a nice change.

Yes, good news. Circling back on the Iridium GO!, you had mentioned that you are seeing new usage patterns in customers. Can you elaborate on, or do you have the visibility to elaborate on, who you think is using it and how they are using it?

Yes, I would say we always expected that there'd be a lot of land-based usage for people who were going beyond the cellular infrastructure and wanted to use their cell phones, if you will, off the grid. We are certainly seeing that application; but I would say it is even moving a bit into some enterprise segments where I would say there is some more business use of that than I was expecting. I always thought that there would be value in the aviation sector, but I have seen -- everybody is putting it in their gift guide, it seems like, for this Christmas, the reception from a lot of GA has been very, very positive. But we are also seeing it in corporate aircraft. In fact, there are some people who have been demonstrating it in larger aircraft as a tool for the pilot on a personal basis in some ways. And then, of course, the government side, I never really expected the interest that we are seeing on the government side, not just with the U.S. government but with other governments. There is a lot of desire to bring-your-own-device and support the troops, taking their standalone Android or iOS type devices and there is just a lot of interest in that area, not just in GO! but in building GO!-like functionality into other devices so that they can utilize them. So we keep hearing new sectors. Of course, boating has always been a possibility, and we are hearing good things from that, that they are really starting to talk that up across the light and midsize shipping or boating industry. So it has been very encouraging, the breadth.

Great. Can you also talk to whether your commercial Netted Iridium is still on track for a fourth-quarter launch?

Yes, and it is. And a lot of interest in that right now. Just didn't spend much time on in the prepared discussion just because I am sure we will be talking a lot more about that in the next quarter, once it is out there. But we're moving into the beta trials right now and the devices are ready; the final touches on network software and stuff are being finalized. There is a lot of training going on amongst our key initial partners, especially those with a lot of push-to-talk customers; and we still think that that is going to be a big winner for us going into 2015/2016.

Got you. On the DoD side, because I believe they are still funding their own parallel effort, have you seen any of the R&D funding free up there?

We have, actually. That is starting to move again, albeit slowly, but there is some movement there and some development going on and we are increasingly confident that that will eventually get done. It's basically the same product but they have different operational and maintenance type needs and provisioning systems and that sort of thing and those have to be prepared. All the satellite work and most of the device work is well underway, but they have really just got to keep finishing the software that really takes it to a global service versus the regional service it is today. But that should happen in 2015, and we should start seeing them really take advantage of it, say, late 2015/2016, something like that.

Okay. Final piece on the Netted, where do you stand now on the equipment side, either internally supplied or third party devices, and are you still looking at the potential in the military market for porting that onto the tactical radio or third party platforms to support a satcom capability?

Yes, it is a broad-based strategy that starts with our Iridium Extreme PTT product, which will be a unique version of the Iridium Extreme that has got a better loudspeaker and other accessories, and kind of a dual personality to be able to use it either as a phone or as a Netted push-to-talk device and that will be ready this year. There is also our 9523 and a development kit that is now available to partners and we are seeing the 9523 with a PTT mode now being integrated into a couple different partner products, so that push-to-talk can be both used in unique devices that are suited to specific markets or integrated with other technologies. We are already seeing a couple of those underway. Then that 9523 with PTT mode for the government is also looking to be both installed as sort of an add-on to tactical radio devices. There is some work in that area right now, as well as long-term we expect full integration of the PTT software into the software-defined radio aspects of those. But those are still -- those are coming along and there is movement in those areas, but they are still gated by the core operational readiness of the government for what they like to call Phase 3 or global services push-to-talk, which is still under development.

Got you. When you were talking about the commercial M2M, I think you made mention of the fact that you were seeing the consumer M2M taking off, which I presume is a reference to DeLorme. Are you seeing any broadening of other consumer products oriented companies looking at that tracking capability?

Not really sure what you mean. I mean we haven't signed up any that are at the level certainly of DeLorme that have as broad a distribution and as mature a distribution as they do. It has been good to see how they've really improved that, not just in the U.S. but externally in other countries as well, and how that's really starting to pay off, I think that's a value. So there's no other big consumer companies right now that are expanding in the same ways. But we are seeing they are not the only one who are doing tracking devices, that are doing low-cost devices, that may be into what I would call on the edges of the consumer business. But none I can really call out really for you.

And do you have any kind of an active sales effort to reach out and touch companies where there might be a tracking application, that they are just not cognizant of, because this is a relatively new capability?

Yes. I mean we -- first of all, we have expanded our business development efforts in this area, so we have actually added staff this year. We are really seeing the machine-to-machine, with the potential that it has, that having more business development resources actually looking into new market segments, of which what you call consumer but I would call -- in some cases might be called enterprise or personnel tracking on a broad basis, is really being pushed now. Not just in North America, but in other markets as well, so we are starting to see that pick up. We are also seeing geographical expansion. We have had very little machine-to-machine, for example, in Russia; but as we build out that market and as that is starting to really expand, we are starting to see new machine-to-machine applications there, which include consumer applications. So yes I think it is just across the board; a lot of activity in this area.

Thank you. (Operator Instructions). The next question is from Andrew Spinola of Wells Fargo. Your line is open.

Thanks. Nice quarter; nice momentum in the business. I just had a couple of concerns I was hoping you could address. One specifically was on CapEx. Tom, I think you said 2014/2015 is going to be the same; but your CapEx year-to-date of $145 million is a lot lower than where I was. I think I was looking for $650 million. And I am just wondering: was this always set up where you had a lot of milestones in Q4? Are you expecting big outflows in Q4? Or have any of the milestones slipped into Q1?

No, as I said in my remarks, we expect substantial increase in CapEx, NEXT-related CapEx in the fourth quarter, given the substantial completion of milestones by Thales as of this time. So yes, you will see a material increase in CapEx into the fourth quarter. And in fact, as we go into the first quarter of 2015, we see similar increases. So we look at 2014 and 2015 in the aggregate as being the same as we have indicated publicly for some time.

Okay.

But, Andrew, just to -- color about how the contract works with our supplier for Iridium NEXT, we have a very, very detailed contract on when they get paid for completion of a milestone; and together we hold ourselves to the highest standard that all the aspects of that milestone have to be complete. So even though the hardware might be done and the software is written and it is in testing, perhaps the documentation is incomplete. And I would rather they focus on actually completing the key areas to make sure we keep our launch program on track; but we jointly agree that perhaps while 95% of everything is done on that milestone, we really can't pay them at that time. So they end up kind of slipping sometimes quarter by quarter, and there is a little bit of a bow-wave effect here. But that is going to all eventually catch up to us, especially as we start launching Iridium NEXT satellites and have the program complete. So kind hard to forecast exactly which milestones get completed in which quarter, but they eventually catch up on you.

Yes, completely makes sense. I just wanted to reconcile the numbers I've seen with what I was looking for. But the other thing was just -- and again, this is just a concern; I want you to give me a sense of how this plays out. But you did mention that you lost two satellites in the quarter; you have one spare left. Just talk me through how it works if -- I know you said one per year has been the average. But let's say if you lost two in the next quarter, what happens to the service or revenues, or is there any impact? And then just to finish the thought, once NEXT is launched in mid-2015, my assumption is that those satellites backfill any capacity that maybe has been lost since then. Is that correct? And is that how this plays out? Thank you.

Yes and yes. We are not expecting to lose satellites at any specific time, but we have. And if we lost another satellite say -- and you never know -- if we lost it, whether -- say in first quarter we lost a satellite, hopefully we can replace it very quickly. If we lost another satellite or even any more beyond that, our experience has been a satellite or two in our network, if they were down even for a short or long period of time, wouldn't be very noticeable to our customers and would have no impact on our revenue. You would have to lose a lot of satellites to really be very noticeable, because of the way our system works. A satellite is only overhead over any customer, say, for between four and 10 minutes at a time. So if it happens to not be working once or twice a day, that may mean hat any specific customer might have an outage, so it really isn't very noticeable to most customers and yes, you're right that if for some reason we would be down a satellite or something, as soon as we launch our first two we are going to -- those really go into our network very quickly. They replace our satellites immediately and as we are launching new satellites, they will be replacing not just obviously good satellites, but if there for some reason was any hole, they would be replacing a hole immediately. So that is why we feel very good that there is going to be a very smooth transition to Iridium NEXT.

Perfect. Very helpful. Thank you very much.

Thank you. The next question is from Brian Ruttenbur of CRT Capital. Your line is open.

Hi, this is Corey Allen on for Brian. Thank you for taking my question. Most of mine have been asked, but just can you remind me of the launch schedule for NEXT and the number of satellites that are going up in 2015?

Yes, 2015, so our first launch is in June of next year. It is currently scheduled for June of 2015. That is two satellites going up on a Dnepr rocket out of Yasny, Russia, and that is on track and should be -- and we'll be testing this satellites out over the coming then 4 or 5 months. Then our next launch in 2015 would be late in the year on a SpaceX rocket with -- all of our SpaceX Falcon 9 launches are 10 satellites per launch. The first big launch then would be late in the year out at Vandenberg Air Force Base. Then we launch on about 3 to 4 month or so centers or so after that. We have a defined, specific and locked-in launch plan out of Vandenberg in 2016 and 2017, for the remaining six launches. That will then -- that makes up the 72 satellites that will be launched by about mid-2017 or so.

Thank you.

Thank you. There are no further questions in queue. I would like to turn the call back over to Matt for closing remarks.

Well, thanks everybody, for joining us. It was a good quarter. Look forward to seeing you all in 2015 with the fourth quarter results and also I hope you will start -- planning many of you for coming and joining us for the Analyst Day that we are starting to work out in March out in Arizona. So thanks all for joining us.