Globalstar Inc (GSAT) 2014 Q3 法說會逐字稿

Welcome to the Third Quarter 2014 Earnings Conference call. (Operator Instructions) I will now like to turn the call over to Jay Monroe. Mr. Monroe, you may begin.

Good afternoon, this is Jay Monroe, the Chairman and CEO of Globalstar. Thank you for joining us today. Before we begin, I'm excited to welcome back Rebecca Clary to these calls this time as the Company's newly appointed CFO. Rebecca will kick off the call with a review of the financial results for the quarter.

Following Rebecca's remarks, I'll provide an operational and strategic update. We'll follow with Q&A. Tim Taylor will join us for that. As we begin, I'd like to note that this call contains forward-looking statements that are intended to fall within the Safe Harbor provided under the Securities laws. Factors that could cause results to differ materially are described in the forward-looking statement section of today's press release and in Globalstar's SEC filings.

I'll now turn the call over to Rebecca.

Thank you, Jay, and good afternoon, everyone. To date, our 2014 financial performance has demonstrated significant year-over-year improvement in almost every critical measure. During the last nine months we made significant progress in successfully expanding our duplex business by leveraging our second generation constellation; which was completed in the third quarter of 2013.

Key metrics from our duplex business experienced material growth on a year-over-year basis with service revenues up 25%, ARPU up 18%, and growth subscriber additions up 24%. Successes in our SPOT and commercial Simplex products and services further supplemented duplex growth.

Adjusted EBITDA increased over 70% to $13.6 million on a year to date basis from 2013, which was driven by a substantial improvement in total revenues.

Now focusing on our quarter-over-quarter financial results. As shown on slide 2, our financial performance improved during the third quarter of 2014 compared to the prior year quarter due primarily to growth and Duplex service revenue, which increased 23%.

As previously mentioned, we continue to make substantial progress in enhancing our Duplex business. This growth has been driven by an increasing subscriber base and higher ARPU levels. Comparing the third quarter of 2014, to the same period in 2013, the number of subscriber activations increased 23% growing ending subscribers to over 65,000 as of September 30, 2014.

Current take rates demonstrate that these subscribers are choosing rate plans that are on average more than 15% higher than our current ARPU level, and 29% higher than ARPU in the third quarter of 2013.

Our current line up of rate plans provides a great value for our customers to experience our improved voice quality. In addition, growth in our SPOT brand contributed substantially to the increase in total revenue this quarter. This was driven by a combination of increases in both service and equipment revenue.

Ending SPOT subscribers increased over 15,000 from September 30, 2013, reflecting the success of new products introduced during the second half of including the SPOT Trace and SPOT Gen3. Decreases in revenue related to commercial Simplex resulted primarily from specific customer demand; which is predicated on shipments to customers to meet their various commercial projects and needs; as well as the contractual rates in place with these customers during the respective quarters.

Ending Simplex subscribers increased over 56,000, or 26% from September 30, 2013. However, revenue growth from our Simplex customers is not necessarily commensurate with subscriber growth due to the various competitive pricing plans we offer as well as variations in customer usage.

Globalstar reported adjusted EBITDA of $4.8 million for the three months ended September 30, 2014. Nearly a 100% increase from the $2.5 million reported for the third quarter 2013. As previously discussed, the continued improvement in Duplex service revenue was the main driver of the increase in total revenue contributing $1.5 million overall.

Lower operating expenses were seen across all categories but were due primarily to increased expenditures in the prior year quarter to support our sales and marketing initiatives around the rollout of new products and services as well as brand marketing as we deployed the final second-generation satellites into our constellation. The Company incurred an incremental $400,000 related to these efforts in the third quarter of 2013, as compared to the third quarter of 2014.

Net income was $129 million during the third quarter of 2014, driven primary by a noncash gain of $167 million and due to a decrease in the value of the derivative liabilities associated with our convertible notes. This valuation adjustment resulted mostly from the fluctuation in our stock price from June 30 to September 30, 2014. The derivative gains was offset partially by other noncash items, including depreciation, interest, and loss and extinguishment of debt.

I would now like to provide an update on the Company's liquidity positions. We ended the third quarter with an unrestricted cash balance of $27 million, up 15% from June 30, 2014, due to cash flows generated from our core operations.

We also have $24 million available under the committed equity line with Terrapin, which can be drawn through August 2015; and $38 million in a debt service reserve account which is restricted to make payments towards principle and interest amounts due under the COFACE facility.

Projected contractual obligations over the next 12 months include primarily debt service payments estimated to be $27 million and amounts due to our space and ground vendors totaling $31 million; which is mainly for work being performed to upgrade our gateway infrastructure.

Debt service amounts include the first two principle payments due under the COFACE facility in December 2014, and June 2015; which in total are $7 million; as well as semiannual interest payments due under the facility and subordinated notes, which in aggregate are estimated to be $20 million. We continue to decrease our outstanding debt balance through the conversion of in the money notes.

During the third quarter of 2014, an additional $7 million of principle from our 8% notes was equitized. These conversions also eliminated the relative portion of derivative liabilities associated with the conversion option embedded in these notes as well as the future interest payments otherwise due on these notes.

Deferred revenue also continued to increase during the quarter. This is an important metric to the Company and to our lenders as it is reflective of both our ability to generate operating cash flow and future revenue that will be recognized. Also important to note is that we are in compliance with all financial and non-financial covenance under our debt agreements as of September 30, 2014.

To the extent that we do not meet our covenant levels in the future, our current facility agreement includes a mechanism that allows for a minimal cure or provision to avoid any event or default that ordinarily would result from noncompliance.

Lastly, we are encouraged by the growth in our core business during the first nine months of 2014, and are confident about our financial outlook and the positive trends we are seeing. As we have discussed with you in the last few earnings calls; and is included in the third quarter earnings release, we continue to capitalize on opportunities around the globe to efficiently expand our footprint.

We are leveraging existing partners in areas where we know that significant demand exists. Investments in our ground stations have been made over the past several quarters and the progress is ramping up. These efforts to upgrade our infrastructure will not only support improved service in harbor offerings in North America but also in the various regions around the world where we are looking to expand our customer base and drive near and long-term sales. I will now turn the call back over to Jay.

Thanks, Rebecca. I'm exceedingly pleased with the Company's continued progress especially with our nearly doubled adjusted EBITDA over the third quarter of 2013. These improving financial results demonstrate Globalstar's unique value proposition and the successful execution of our strategic and operational initiatives.

Quarter after quarter, we consistently demonstrate the potential of our MSS business and the progress we've made after a significant turnaround period. As we look forward, we are confident we will achieve substantial revenue, EBITDA and cash flow growth. These are all functions of our ability to successfully expand our subscriber base since each new customer provides a very high margin contribution.

The ability to grow our base is a function of three primary variables. These include, one, expanding market share within our existing footprint. Two, expanding our footprint to cover additional territories; and three, introducing new products with increased functionality and at reduced prices.

This third point drives the increased relevance of satellite technology, and therefore, satisfies our customers' communication everywhere desire. These three variables are key components of our strategy and operational initiatives. We have made strong progress over the past year.

I'd like to reflect on recent performance and provide an overview of our plans for continued growth. The team here is focused on these initiatives. I would like to thank all of our dedicated employees who execute against these key components daily. Every operating decision we make involves driving one or more of these pillars.

We committed to increasing market share, expanding into new markets, and developing, and rolling out new products, all with a disciplined capital allocation strategy. We're delivering on those commitments. The United States and Canada have been the Company's core operating territories since the original constellation was launched 15 years ago.

We own the service in these areas of the market. We have a direct sales structure as opposed to working through an independent gateway operator. This set up provides the Company with the highest net economics per subscriber while ensuring control of the customer experience.

Through 2006, the primary North America business achieved $137 million of revenue and $34 million of adjusted EBITDA with effectively Duplex products only. At that time we had a nascent M2M business and the first SPOT product was still in just the early stages of development.

Duplex provided a healthy stream of high margin business with accelerating revenue in EBITDA. We've overcome the challenges that Duplex experienced during the constellation and reconstruction period; and the share gains and growth opportunities available to us today are a testament to the significant progress we've made.

Additionally, we've built a $50 million annual one-way consumer and commercial M2M business that we're able to layer on top of Duplex. In North America, we have reestablished our relationships with many dealers and expanded into additional channels. Both are critical to our sales infrastructure.

Importantly, we have evolved our sales structure to include a reseller model, the primary MSS industry distribution structure. While dealers provide Globalstar with improved economics on a per subscriber basis, resellers provide the Company with access to a much larger network of points of presence while also simplifying subscriber provisioning and subscriber maintenance.

While we believe this evolution will continue over the coming quarters and years, the majority of our subscriber base whether mass consumer retail, commercial, government, enterprise, will continue to be owned and directly billed by us. Over the past year, we have made doing business with Globalstar simpler and easier for our customers; which is improving our competitive positioning.

As we've discussed on previous calls, we have recently rolled out initiatives that allow our subscribers increased flexibilities by providing prepaid plans, increased rental options, no cost roaming through a large home zone footprint. This footprint now expands to include Canada, the U.S., Europe, Brazil, North Africa, as well as the Atlantic, Mediterranean, and North Sea.

With regard to expanding our territorial footprint, we have made strong progress over the last year expanding these services. We believe we can continue our expansion while maintaining a strict disciplined capital allocation strategy.

On the international front, we have initially focused on building out our Brazilian operations. After upgrading the gateways earlier this year, we worked to properly scale the sales and marketing infrastructure to support diverse industries, including oil and gas transportation, mining, forestry, government; all big markets in Brazil.

We believe the expansion in Brazil serves as a test case to highlight our combination of quality coverage, supported by appropriate sales resources. That is key to developing a successful global businesses and securing meaningful market share in any market.

Today, the early results of these efforts support the rationale for continued international expansion. By way of example, just a year ago Q3 of '13, Brazil represented less than 2% of the Company's quarterly additions across all products, and three percent of Duplex. These percentages roughly tripled in the third quarter of this year.

This impact comes only months after we achieved critical mass in the sales organization. We expect sales performance to ramp even further as we build market awareness and more distribution. In fact, we expect Duplex additions in Brazil to grow to approximately 30% of total additions within a two year period.

We also expect the market for SPOT and Simplex in Brazil to be as strong as Duplex. We are encouraged by our performance in the quarter for SPOT. Immediately following the receipt of certification of SPOT Trace in Brazil, we received the largest single order ever for the product. It was in excess of 2,500 units. Given relatively poor cellular infrastructure and noncontiguous cellular systems, the market in Brazil for tracking services via satellite represents a significant opportunity and Trace provides a low cost solution to fill that void.

Our international expansion includes strategic expansion of our assets throughout all of South and Latin America. Recently we began out a sales force in Columbia and growing the sales organization in Panama, too. We've also entered into our preliminary agreement with TE.SA.M. Peru, Globalstar's current IGO partner for the Peruvian gateway.

The agreement lays the foundation for Globalstar's ultimate control of the Peru service area where we will run the gateway, control the market operations, and improve the sales structure, bypassing the former wholesale IGO arrangement. This transaction, expected to be completed in early 2015, allows the Company to leverage the existing gateway assets in Peru to expand our direct sales territory.

We expect similar transactions with other IGOs to be executed over the coming years. On the Greenfield front, in September, we announced the construction of a new gateway in Botswana to offer Simplex and SPOT coverage to the entire South African area with a local partner. Construction is nearing completion now.

The gateway should be fully operational by the end of the year. This project fills in the largest remaining coverage area for our Simplex and SPOT services. We will soon provide service to almost every inch of the world's inhabited land mass. Similar to our business in Latin America, Southern Africa is a significant opportunity for Globalstar to offer an affordable solution to highly fragmented, existing wireline and cellular systems in the coverage territory.

With a single contiguous service for our asset and personal tracking, satellite provides an affordable solution. Further, we underwrote the investment with interest from operators in the oil and gas sector with the current presence throughout the coverage footprint. This initiative allows us to deploy one of our spare gateways while leveraging the existing infrastructure on site; which was previously built for tracking telemetry and control operations during the launch of the constellation.

The selection of the existing location provides a very attractive economic opportunity for the Company where we can once again utilize existing assets and upgrade equipment for their highest and their best use.

As we turn to new products, during the quarter Globalstar continued to advance its track record of innovative product launches with the introduction of the 9600. The 9600 connects to a Globalstar phone allowing existing satellite phone subscribers to pair their smartphone or other Wi-Fi enabled devices to the 9600 to access the Globalstar network for data services.

Priced at only $150.00, the 9600 is designed to offer an affordable data product for current Duplex subscribers while seamlessly using existing airtime plans. We are confident this unit will accelerate equipment sales and drive increased data usage. We've accelerated the rollout of our Sat-Fi technology.

The first iteration in the line of future products that will provide smartphone connectivity for both commercial and consumer applications. Our current product R&D efforts include reducing the product's bill of materials and decreasing the size to drive down the selling price. The upgraded Hughes [based] ground system and device ecosystem allows us to sell an inexpensive consumer device.

We continue to believe that the future iterations of Sat-Fi will grow to become one of the Company's predominate product offerings. Hughes and Ericsson are hitting their scheduled milestones. We look forward to the completion of the upgraded North American gateways next year.

These upgrades will increase data speed by as much as 25X, complete our ground infrastructure upgrades, and greatly improve our handset capabilities to support multiple new applications. During the quarter, Hughes delivered the first Radio Access Network to our gateway in Texas. We are currently performing site acceptance testing.

We are also installing the Ericsson Core Network at the Clifton Site. We'll soon implement the control software. Following this work, we will begin the integration process that will provide the first connection between the newly developed Hughes and Ericsson equipment. We look forward to completing the first site, which will be followed by the rollout of the remaining North America gateways and then gateways around the world.

As previously discussed, we will continue to support the legacy Qualcomm equipment at these new gateways since it's fully backwards compatible. Our internal engineering teams have also initiated work on the new [Shoes Chip Based] user terminals and other next-generation products. This development effort will accelerate through 2015.

In Q3, in partnership with ADS-B technologies, Globalstar completed a 7,000 mile comprehensive test flight of our satellite based ADS-B aircraft tracking system. This test flight began in Alaska. It traveled down to the Gulf of Mexico and then back again. It was the world's first full test for dual length space based ADS-B including extended tests in virtually all flight environments.

The flight showed that the technology works continuously by providing aircraft position reports in one second increments. We will keep working with the FAA to certify a space based ADS-B, which we expect will conclude successfully next year.

Now I want to update on the progress of the FCC. As you know, we started this process by filing a petition for rulemaking two years ago this month. We requested a full rulemaking to ensure that all interested parties would have an opportunity to comment. Most importantly, that any final decision by the FCC would provide Globalstar with permanent terrestrial relief.

After two full years of consideration, we are now approaching the finish line. We have recently met with various FCC offices and believe they are moving forward with a final decision [in our proceedings]. Though the FCC has not yet announced the exact timing of a final order, we do believe the FCC will adopt the rules it proposed promptly.

In line with our statements last quarter, we have also filed additional experimental license applications for testing TLPS. These tests, which are conducted by and for the benefit of potential long-term partners provide the opportunity for those partners to test TLPS in various environment settings, including outdoors, and for specific but varying applications.

Before we turn the call over to the Q&A, I want to briefly address recent speculation about our Company and the commentary from short seller Kerrisdale. We continue to believe that Kerrisdale's reports and attacks on Globalstar -- trying to be the most charitable here -- demonstrate their lack of understanding of the Company, the telecommunications industry generally; wireless network deployment specifically, and the actual physics of spectrum.

Kerrisdale's commentary is nothing more than an attempt to drive Globalstar's stock price down for Kerrisdale's own short-term financial gain, all at the expense of Globalstar's shareholders. Where they rely upon unnamed technical resources, our responses have been formulated with the help and advice of some of the most respected wireless industry engineers in the country.

It's important to note that we are well advised on this matter both technically and strategically. But also understand that while they have had an effect on our stock price in the short-term with aggressive misstatements and technical absurdities, communicated by a social media and hastily assembled conference calls, they will not effect our long-term value.

Kerrisdale is excellent at skewing selective data for their own narrow self-interest. However, we appreciate the significant technical and financial due diligence performed by our investors which has helped to firm the value of the Company and dispel the very underpinnings of Kerrisdale's views.

We have remained focused on growing our core MSS operations and on making progress on the FCC proceedings. The next few months are very important times for the Company. We look forward to updating our shareholders as we hit additional milestones. With that, we can now open up the call for questions. Operator?

Thank you. We will now begin the question and answer session. (Operator Instructions) Our first question comes from Jim McIlree of Chardan. Please go ahead.

Thank you and good evening, everyone. Hey, Jay at the end of your comments, you talked about the FCC will adopt a rule that it proposes promptly. I was a little bit confused by what you were saying. Are you saying that there is going -- That the rules get promulgated and then there is a break in period. You think that break in period so to speak is going to be short? Is that what you were trying to say?

No, Jim, I'm sorry. I was not clear. That is not the case. What I really meant is that the FCC can issue a final rule almost at any time. They can do it by circulation. Or they can do it by posting it at the public meeting. We anticipate that will happen in the relative near-term. I was not implying that there was a two step process.

OK, great. I will try to see if you'll get more detailed on what you think the relative near-term or promptly means?

I guess here is my overall observation about the process. We think the FCC has done a terrific job in running a thorough process to invite maximum input from other parties over the last year or two. We think that they have all of the information they need to make a final decision.

Clearly, the FCC has a lot of interesting things on its plate right now with mega mergers, a spectrum option; which is taking place shortly. Net neutrality and so forth; and with those things in the pipeline, it's difficult to handicap with any great specificity exactly when something like ours will come out. The truth is though that this chairman does not allow grass to grow under his feet.

He has put a lot of things in motion, which were on the back burner at the FCC. [Nominees] trying to get those things completed as soon as possible. We anticipate that ours will be no different. It is moving.

It came out right at the beginning of this chairman's chairmanship. We know well that is very aware of it in the meetings that we have had at the FCC at all levels in the FCC when we know that bureaus are writing an order.

It will come out in due course. But we hope that it will be sooner than later, but it will come out as soon as it's ready to come out, Jim.

OK. I thought that is what I would get from you. The comments that have been made recently, not only from Kerrisdale, but I think Iridium had a couple of comments; and [EIBASS] had a couple of comments, if I'm saying that one right. Does that really have an impact at this stage in the process?

I mean, we're far past the comment and reply comment period. As far as I can tell, it doesn't seem -- none of those comments really seem to be adding anything to the record. Am I being a little bit too optimistic in thinking it really doesn't have a big impact on the proceedings?

But we don't believe that any of those things that you mentioned have an impact on the FCC's thinking. I mean, if you go back to the order that they put out awhile ago in a Notice of Proposed Rulemaking. That is their order.

They said here is what is the outcome that we would like to see. If you have any information that bears on that outcome, then please present it. That process is now almost exactly a year old. The Iridium comments are exactly what you would expect.

They're competitive and they relate to a subset of the case. They deal with a slice of spectrum that Globalstar uses every day that they would like to control. They're tangential to anything on TLPS. We've talked a lot about the Kerrisdale comments.

I don't believe the FCC has any concerns based upon what Kerrisdale has filed. I've asked -- is someone that's been in this case since the very beginning, they've got a service which has to be respected in certain areas. It is respected in certain areas.

It's a service that does not impact us. We do not impact it in any meaningful measure. We don't expect that to be a problem. Even in this case, their last comments that they made were more to say remember us we're EIBASS and we're still in this case as opposed to providing anything that was substantiative against TLPS. I think overall, Jim, we're not worried about it.

OK. I've got a few more questions. But I could get back in line, if you'd prefer?

That is fine.

OK.

We'll take another question --

All right, I'm trying to puzzle through this Brazilian ad that you've talked about. I was just trying to do the back of the envelope. But it seems to me that if Brazil is now 18% of the -- I'm assuming that's gross ads.

It was 3% a year ago, does that imply? Doesn't imply that all other markets are, the net ads about the same? That we're not growing -- that you're not growing the net ads in all other markets on a year-over-year basis?

No, Jim. The number wasn't from 3% to 18%. It was a triple. It's still below 10%.

OK. Excuse me, all right, yes. You said triple and I heard six, excuse me. All right, great, so you're still? The question I will still ask it. You still have growth in net ads in the other markets?

We do, and in every market throughout the U.S. Canada, [South America] as well.

OK. Great. Rebecca, a couple of things for you. You mentioned something about $400,000 early in your remarks. Could you just repeat what that was referring to?

No. I was referring to the decrease in operating expenses. (Technical difficulty) the launch of the various SPOT products in 2013, and services that we introduced to the market as well. We had increased advertising expense in the third quarter '13 by $400,000 relative to the third quarter '14.

I was -- but the service gross margins and the hardware gross margins are both down from Q2 levels. Was Q2 unusually high? Are these gross margin levels in both service and hardware, are those a normalized gross margin going forward?

No. I'm sorry. On equipment, I have a 23% margin for the quarter. As we've discussed that's just kind of a trend with the product -

Yes.

-- Between Duplex and SPOT with Duplex having a tighter margin. On the service side, I have a margin of 58%. Unfortunately, I don't have the second quarter margin in front of me.

Jim, to follow that up [it's already done] Q2 at least, a sequential quarter-over-quarter. You had a pretty substantial. We had a pretty substantial sale in Q2 for very high margin Simplex equipment. That margin is significantly greater in Simplex than it is for SPOT or Duplex.

We essentially sell Duplex pretty close to cost. Obviously, the Simplex ARPU is lower. But that significantly inflated the total gross margin for Q2. We wouldn't expect that type of inflation on average going forward.

Right, but the service gross margin at least I calculated it was 60% in Q2. Is that also related to some one-time things? I'm just trying to peg what's the more normal? What's the better number going forward? Is it closer to like that 57%, 58%, or closer to the 60%?

I think going forward, you're going to have a slight increase where it could even expand beyond 60% slightly. I would say between long-term, between 60% and the mid 60s would be the max.

But that is the long-term, but then -- and that will be something that you glide path towards?

That's correct. That's correct.

OK, great.

Just to add --

The last one --

-- A little bit of color, Jim. Because we've talked about these concepts in the past. The third quarter cost of services, it was a little bit high compared to second quarter. Because we had a little bit more gateway work that we have kind of seen off and on throughout the last couple of years in terms of repairs and maintenance at various gateways.

We had that in the third quarter. In the future, we might see an increased in capitalized salaries related to our groundwork with Hughes and Ericsson, which would have a reduction in expenses.

Great, and this is my last one. The marketing and G&A costs were up fairly substantially quarter to quarter. I think you were $8.7 million, excuse me -- $8.9 million this quarter versus $8.2 million in Q2. Does that continue to rise as you continue to enter markets like Brazil, Columbia, and Panama -- or, excuse me, Peru? Or is that to start growing at lower rates at some point?

Those amounts include pretty hefty stock [comp]. You should probably adjust the items that we have on the EBITDA reconciliation page to kind of get a normalized level.

I see.

Once you do that, you'll see Q2 had an [NGA] of 7.6 and Q3 was 7.5. That's probably a better run rate to be looking at.

OK. Great, thanks a lot, and thank you very much. Thank you for indulging my litany of questions.

Thank you, Jim.

No problem, and thank you.

(Operator Instructions) Our next question comes from Jason Bernstein of Odeon Capital. Please go ahead.

Hi, and good evening. Just a couple of questions, if I can. I just wanted to follow up on the San Carlos testing. Will those results be posted to the docket? Is the FCC going to wait on that in any way, shape, or form in making their decision?

No and no, Jason. Those are tests being run by a third party. We filed the license for them. But they're being conducted by a third party. That information will be available to them in their testing. But it is subject to a confidentiality agreement. No, the license has not even issued yet. That process with the FCC can take a month or two. We haven't even begun the testing in San Carlos yet.

I got it. I saw that the ARPU ticked up on Duplex. What would you guys think is a target where you want to get that back to?

The $40.00 level at third quarter reflects an increase over second quarter. Because as we're adding subscribers to the network, they're coming on at our current line up of rate plans, which I mentioned in my previous remarks on, on average, we're seeing those ARPU levels around $46.00 just in terms of the blend of what rate plans people are option for.

It will take a while for that $46.00 level to kind of filter through the base. Because we've probably only have about half on current rate plans. The other half are on our legacy plans. That's kind of the relationship there.

Then just keep in mind that 2Q and 3Q are seasonally strong for us. There's a usage component that needs to be factored in and it's in terms of forecasting what ARPU will be in the next couple of quarters.

I got it. Jim, I'm wondering if you can put on your Thermo hat for us for a moment. With the Level 3 Time Warner telecom deal closing, are you able to disclose what the cash proceeds from that were to Thermo?

Jason, that was largely a stock for stock transaction that also had a cash component. No, I won't talk about what that cash component is, so sorry.

OK.

But that is just -- that is kind of a different pocket. But generally speaking, we have been a committed long-term investor in Globalstar since 2004. We will do what is in the best interest of our shareholders with respect to continued investment in the Company.

Whether that comes out of the proceeds of the merger with Level 3, or just our accumulated cash and other investments is a matter of internal decision that we'll make at Thermo. But either way, we will continue to be an investor in Globalstar.

I got it. Thank you.

You're welcome.

I'm showing no further questions at this time.

I see one more.

We have a question from Lyman Delano of Beck, Mack & Oliver. Please go ahead.

Good afternoon. I had just an anecdote to make. I have been a Globalstar phone user for probably ten or 12 years. In recent years, I used the call times tool in order to connect when I was in remote locations.

I just wanted to say that this past September, I was up in the remote wilds of Northern Maine by the Canadian border and had -- for a few days, and I had my Globalstar phone, the old one that's probably 15 years old now. Literally, I had 100% 24/7 reliability at all times. The service was literally 100%.

My question arises, too, with this improved Duplex service as people are aware of it and the service gets used. Before the new handsets are available using the Hughes chipsets, do you have sufficient availability of equipment that will meet growing needs for Duplex service?

Yes. Lyman, we actually do. It comes in multiple flavors as you know. There are handsets that we have an inventory that were manufactured for us by Qualcomm. There seems to be an adequate supply of those before the new handsets are cut over once the ground infrastructure is completed towards the end of this year. To the extent that we have additional handsets after the gateways are cut over to Hughes based, those additional gateways can -- excuse me, those additional handsets can be used elsewhere in the world.

We also have a supply of Sat-Fis utilizing the Qualcomm 1720 board. That product as well will be available in this market. Ultimately, we'll transition that product into the smaller form factor product using the Hughes chip architecture and the Hughes chips themselves.

We're anxious to make certain that all times we have something to sell to our customers; and are, of course, overjoyed that your experience has been as good as it is. Thank you.

OK, thanks.

I'm showing no further questions at this time.

OK, thank you all for joining the call today. We appreciate it.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.