Welcome to the Globalstar Incorporated first quarter 2016 earnings conference call. My name is Adrian and I will be your operator for today's call. [Operator Instructions] Please note this conference is being recorded. I'll now turn the call over to Jay Monroe, Chairman and CEO. Mr. Monroe, you may begin.

Good afternoon, everyone, and thanks for joining today's call to review Q1 results. After my operational remarks, CFO Rebecca Clary will provide a summary of the Q1 2016 financial results and then Tim Taylor will join us for Q&A. Our update today will be comparatively brief given the complete review provided about two months ago. It's important to note upfront that our view regarding further discussion of the FCC process remains consistent with our previous message. Though we are quite positive on the outcome, in deference to the FCC's internal deliberations, we won't be providing additional information on the proceeding today. And also, although we wish we could, we're not able to field any questions about the proceeding during the Q&A portion of the call today for the same reasons. We look forward to speaking to you again just as soon as we have additional information that we can share about the completion of that process. Please note this call contains forward-looking statements 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 statements section of today's press release and in Globalstar's SEC filings. On the operational front, we remain focused on our core growth initiatives including commissioning the second-generation ground system, the rollout of new products across many business lines and expansion activities into new geographies. After joining us in January as the company's President and COO, Dave Kagan has been leading all of these efforts. Dave is charged with driving the product, network and sales teams, as we continue to innovate and expand our MSS service worldwide. He's doing a great job. From Q1 '15 to Q1 '16 our subscriber count increased by 38,000, as we approach 700,000 total subs and this contributed…

Thank you, Jay, and good afternoon everyone. As Jay mentioned this quarter was highlighted by subscriber growth driving increases in high-margin service revenue and adjusted EBITDA. Today I will discuss the primary factors impacting these and other key operating metrics and will also provide an update on our liquidity position. First, total revenue increased $800,000 or 4% compared to the first quarter of 2015, driven primarily by growth in our subscriber base with average Duplex, SPOT and Simplex of subscribers up 13%, 10% and 5% respectively. Our total subscriber base increased by 38,000 users from the prior year's quarter resulting primarily from a 22% increase in subscribers outside of North America; continued pressure on revenue from currency exchange rate effects and a decrease in equipment selling prices partially offset this growth. Total service revenue increased $1.6 million or 9% during the first quarter of 2016 compared to the prior year's first quarter, resulting primarily from significant growth in our SPOT subscriber base and higher SPOT ARPU. These improvements drove a 21% increase in SPOT service revenue. Gross SPOT subscriber additions, which were up 11% during the last 12 months compared to the preceding 12 months, propelled this growth. The ARPU increase was driven by the higher price tracking features associated with our most popular SPOT device. Duplex service revenue, which increased $200,000 or 3%, during the first quarter of 2016 was up due to a 13% increase in our average Duplex subscriber base, but continues to be burdened by lower ARPU compared to 2015. The strengthening dollar and more aggressive collections efforts drove the almost $3 decrease in ARPU. We continue to see a significant disconnect between the amount of billings from our international subsidiaries and the revenue recognized in our consolidated financial statements due to changes in foreign currency…

[Operator Instructions] And we have a question from Jim McIlree from Chardan Capital.

The inventory of the old generation of handsets is that significant or are you still working that inventory off?

Jim, we have sufficient inventory to take us into the first quarter of next year for those types of handsets, but well before that we'll have the second generation of products available. So there will be a bit of an overlap there. And we'll end up with additional generation-one handsets that we can sell. After generation two becomes available gives us opportunities to do things in foreign jurisdictions as well, but I think we're in good shape with that.

Let me ask it a little bit differently. So in order to hit the plan that you are contemplating, will you need capital for -- will you need cash for working capital or you're going to be able to liquidate the gen-one handsets in order to fund the working capital needs for the rest of the business?

So Jim, on the liquidity front obviously the depletion of our 1,700 handsets creates cash and so that is certainly part of the operating cash flow to fund CapEx and principal and interest payments over time. But in general on the liquidity front we ended the quarter with about $12 million of cash. We had about $53 million left in the Terrapin facility, $38 million in the DSRA, although as you know that is only available for principal and interest and it's fully restricted, so unrestricted liquidity of about $65 million to end the quarter with total commitments including CapEx, principal, and interest in 2016 of $61.3 million. So we have enough liquidity to get us through the end of the year and that is exclusive of any operating cash flow that we generate over the next three quarters.

And how does that DSRA work? Is that flat through 2017 or is there an increased amount that's required as you go through this year and into 2017?

That is flat. It's increased once before a couple of years ago, but the max is $38 million. And it will remain so until the termination of the facility.

And next year 2017 there's a step up in the principal repayment, is that correct?

That's correct. So principal through December 2017 for just the year is $76 million and total interest and fees is about $42 million. So let's just assume on a conservative basis that we're just going to do a run rate of call it $30 million operating cash flow for 2016 and 2017, so completely flat with no growth through 2017. You would be able to get through the end of 2017 after fully tapping Terrapin, having the operating cash flow generation, and you would have a shortfall of about $61 million through December 2017, so the need to raise capital before the end of 2017.

So given that, I'm trying to respect your no TLPS questions, so if I'm violating it excuse me, I'm not trying to be difficult. Tim, are you contemplating looking at spectrum reallocation in geographies outside of North America potentially starting that this year or next year?

I think for the moment, Jim, anything on the TLPS front is something we're not comfortable talking about until after the FCC process is complete. So I'd rather not have a discussion about other markets.

How about on the OpEx -- well no, I think Tim just answered it. So roundish numbers $30 million in operating cash flow for this year and next kind of gives me an indication of what you're thinking in terms of the growth as well as OpEx or were you just doing that kind of, Tim, as of back of the envelope kind of way to look at things?

Yes, I think we would be very disappointed if there's no growth '17 over '16. So that is just for liquidity purposes where we always look at things on a very conservative basis and we're forecasting liquidity. So that was just an example back of the envelope.

So as we look into 2017 Duplex, where do you think the major growth is coming from? Are you still hopeful that Duplex can accelerate from here or are you thinking that there's other areas where you are going to see service revenue grow?

I think the main areas of growth relate to the new second-generation Sat-Fi product, which is Duplex, and also our new next-generation SPOT product, which rolls out in a couple of months. And obviously, I think that we're going to have continued growth in the core markets in the U.S. and Canada, but I think most of the growth is going to be new product driven in non-North American markets with those two new products.

And the covenants on the debt, how are you relative to those for this year and into next? Are you starting to brush up against any covenants?

The covenants for the first half of 2016 for the adjusted consolidated EBITDA that is about $24 million and for the second half of 2016 is about $32 million. And so and so in terms of the equity cures we have equity cures through the end of the year and we would time any capital raises including those coming from the Terrapin facility in order to satisfy any equity cure requirements.

And what are those EBITDA requirements in 2017?

In the first half is $32 million, in the second half I believe is $41 million.

Do you have the same equity cures available?

We do. End of Q&A

Okay, operator, thank you very much. We have no additional questions at this time. Thank you all for joining and look forward to getting back to people, perhaps even before we have our next quarterly call, with an update on the FCC. Thank you very much.

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