Good day and thank you for standing by. Welcome to the Globalstar Q4 2023 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Paul Jacobs, CEO. Please go ahead.

Thank you. Good morning, everyone and thanks for joining us today. Before we begin, please note that today's 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 and Risk Factors section of Globalstar's SEC filings, including its annual report on Form 10-K for the financial year ending 2023 which we will file in due course following this call as well as this morning's earnings release. Before we review our financial performance, some operational highlights and our outlook. I'd like to recognize Globalstar's employees and partners for our performance in 2023. We had a very successful year. So thanks to all of you. Last time we spoke, I was barely 60 days in the job. Since then, I've gotten to know the organization and the expertise that was already in place at Globalstar and now augmented by XCOM Labs resources is quite impressive. While each group has its own areas of expertise, the cross-fertilization and knowledge transfer between the teams is already bearing new innovations that will bring performance improvements to our existing businesses and create new ones. This talent, combined with our execution and improved financial performance enables us to fund growth initiatives which we expect to create a virtuous cycle of innovation and differentiation. I'm excited to say that this cycle has started and we are already gaining traction on a number of our new initiatives. Since my arrival, we already have a new partnership with the government services company, a new terrestrial spectrum lease and the first commercial order from a major U.S. retailer for multiple XCOM RAN wireless system. Even at this early stage, these initial victories are responsible for roughly $5 million of new revenue…

Thank you, Paul and good morning, everyone. Today, I will recap and provide color on our 2023 results and 2024 guidance. To start, last year was an exceptional year for Globalstar in so many respects. From a financial perspective, we hit records from every KPI that we focus on with the management team. We have had many firsts over the last few quarters, starting in late 2022 when we held our first investor conference and provided financial guidance to the investor and analyst community for the first time. We have experienced a significant increase in engagement and coverage of the company since then and we thank you all for your support. Now turning to a review of our financial performance during 2023. We reported total revenue of $52.4 million during the fourth quarter, bringing our total revenue to $224 million on a full year basis, a 51% increase over the prior year and reaching the midpoint of our guidance. The revenue increase was due primarily to higher wholesale capacity service revenue following the launch of services in November of 2022. Our subscriber revenue story continues to be focused on commercial IoT with service revenue increasing 17% in both the fourth quarter and full year periods due to generally equal growth in both subscribers and ARPU and reaching a record high service revenue for the year. We have experienced steady growth in IoT subscribers with gross subscriber activations up 8% over the last 12 months. ARPU increased on both the quarterly and full year basis compared to 2022 due to a favorable mix of rate plans among our subscribers as more customers selected unlimited plans or otherwise have higher usage on the network. We also continue to pursue a meaningful pipeline of sales opportunities in the IoT space and are working…

[Operator Instructions] Our first question comes from the line of Mike Crawford of B. Riley Securities.

If we could start with this initial deployment for the major U.S.-based retailer, so Paul, back in 2022, you talked about CBRSs. I think your exact quote was spectrum that was super great to have but you needed anchor spectrum to really make that work. So you just kind of alluded to Band 53 potentially becoming part of this deployment in the future. Can you just elaborate on that and what that would entail for Globalstar?

Yes. It's not a big technical lift. It's really just that we have to get the radio unit that's multi-band. And we weren't developing that yet at XCOM Labs. So we've made that initiative for this year. And so we'll have that capability to support the band. So it's super important because CBRS, like I said, it is great. But when you have a mission-critical application where communication link can't go down, you don't want to be at the mercy of the SaaS telling you that -- the server telling you that you have to move your band or something while you're robust for the private around. So knowing that we have the Band 53 anchor is a great opportunity. And as we bring that capability on board, I'm sure we'll be in a good position to sell that to private network customers.

How would you sell the spectrum? And broadly, people look as kind of a back of the envelope spectrum value mechanism as value per megahertz pop. But when you're talking about very targeted deployments, that analogy kind of breaks down a little bit. So how should we think about the value of your spectrum and the value that you will be creating from your terrestrial spectrum?

Yes. I think there's multiple ways that we will be able to monetize it. I mean there are cases where it'll be a more broad deployment across a large geography. The one that we're talking about with Nokia is very targeted and probably not a lot of pop in that area. It's because there's an application for a very specific geographies. So the way that we end up doing it for particular customers, I think, will be subject to negotiation. But there are many different ways that we can do it, whether it's a use fee, it's fee based on the number of base stations, fee based on times. There's a number of ways that it can be done. And so we don't have -- we're not locked into any one particular way. And I think that we will show the value of having that spectrum in the fact that it's also a competitive differentiator that breaks along other sales like the XCOM RAN sales that we have. So it's not just about the spectrum but it's the spectrum plus other capabilities that we can bring to bear that, I think, gets us all really excited about the opportunity to create a lot of value.

Maybe if I just tried one more comment on that. If you -- I mean $1.5 million of hardware sales for a couple of warehouses is one thing but like what -- is there any way to seize the opportunity with that customer or overall?

Yes, that customer has a lot of sites. So this $1.5 million, obviously, is not a large number. It's just what intended to say that we are making real traction here, these are just a very, very initial system deployment and that's why that number is what it is. But of course, that's not our aspiration. We're here to build a large business around this and having the Band 53 as part of the portfolio is going to be a significant competitive differentiator. But we've won this deal without having that. I mean even without that, the game-changing performance that we have from the technology that we licensed over from XCOM Labs that was -- it really showed itself. It really worked better than a competitive system. So there's a synergy between the two than having the spectrum and having this incredible technology and that was really the industrial logic behind the deal that we did of the combination of the technology with the spectrum that Globalstar has.

Okay. I'll hop out. Just two quick financial questions. One, as if spectrum lease revenue become significant, how are you going to report that? And then two, just what the outsized stock comp in Q4, how should we think about stock comp in 2024 in kind of SG&A?

Sure, Mike. Thanks for the question. So on your first, how we report that. I assume you mean how will it be reflected in the financial statements. And I think at this point, it's not material, so it will be in other service revenues. And then to the extent it becomes material, we'll obviously break it out on the line item that's required under SEC presentation roles. If that answers your question, I'll move on to the stock comp question.

Yes, yes.

Okay. Great. So stock comp is elevated in 2023. We broke it out just for users of the financial statements to see kind of that amount because previously, it was recorded in G&A. So it varies but it's important because it's noncash. It is like I said, elevated in 2023 and will be for the next 2 years as we recognize the compensation costs associated with the restricted stock units that we issued to certain XCOM executives. Those are performance based, as you know, tied to stock price. So the way the accounting works is that, that will be recognized over kind of a weighted average 3-year period.

[Operator Instructions] Our next question comes from the line of Walter Piecyk of Lightshed Partners.

Paul, on the terrestrial thing, I assume they're using Nokia radios, not the XCOM stuff? Or is there any XCOM equipment in there? Also, I know you've termed it as mission-critical. Can you give any more color in terms of type of bandwidth that's getting delivered? Are you using the full depth in that limited geographic area where this particular usage is happening?

So, when you're talking about the terrestrial spectrum lease, yes, that's Nokia‘s – we’re doing that through Nokia, so Nokia will be deploying their stuff. Are you talking about the retailer that's our stuff?

Yes, the Nokia one. Yes, the Nokia one.

Yes, yes, that's Nokia's customer. And then on the mission-critical side, yes, we're not -- we haven't -- it is not a bandwidth-constrained environment. So we're not pushing for massive throughput there is definitely the case where there can be uplink data like video come off the robots and there's lots of them. So that could end up being a future way that we would expand the system to even provide more capacity. But the key benefit of it is actually the fact that it's super reliable that there's no handoff regions that in an environment where it's in a metal -- 3-dimensional metal structure with metal robots and carrying stuff around. So, the RF environment is quite complex and changing all the time. And so our system handles that extremely well, really doesn't share that much and robots are moving in and out of things like chillers and freezers and some of these metal structures. That's where the technology shine a lot. So, we're not as focused on the spectral efficiency there. Although, like I said, I mean, in the future, as more and more data and telemetry is coming off the robots, then we'll start to push the throughput even higher.

Got it. And then you talked about this, the network services agreement that you announced today. $20 million minimum fifth year significant upside probably a dumb question but given kind of the allocation of capacity within the constellation, including the new satellites are going up with the first customer, if $20 million, if it ends up being a huge success, $20 million turns into whatever $100 million, is there any incremental CapEx satellites, whatever associated with growing that network services agreement to larger numbers?

No. The way that it's set up, it can be served from the satellite constellation, the way that we have it with the capacity that we have. So, we're not pushing the limits on capacity and we're not pushing the limits on the system and it's great. It's a perfect example of how with the bent-pipe architecture and the constellation we have, we can launch new services that are super impactful without having to make big CapEx. So it's a really nice example.

The 4 pillars of value, wholesale legacy, IoT, terrestrial, 10 years from now, 5 years from now, pick a time, are they equally weighted? Or are you just like, look, one of these may be huge, you just don't know? Or is there a sense right now having been there a while which is your largest opportunity? Obviously, things can change over the upcoming years. But what are you most optimistic about among those 4 pillars?

I mean I'm pretty excited about -- obviously, the terrestrial side is where we came from. So super excited about that opportunity, both on the leasing and the equipment side and services side. But the other -- of the existing businesses, the commercial IoT, we've seen good growth on. We have ideas of how we can make that better to kind of work our way up the stack, provide solutions. It's something that we've done before. I probably remember, we did a similar kind of path that OmniTRACS where we went from selling bits to selling services and solutions and you can generate significant value that way. So I'm definitely excited about that. And there's lots of new technologies we can apply to create value there. So I think that's going to be great. The company has got a great platform now. The wholesale business has been transformative for the company, created a great platform. And I think we will continue to grow them but like we've shown. But I think the one that scales a lot is the one where there's just so many devices in the IoT business where we can drive solutions business. And then everybody, like I said, the spectrum is super valuable and we're going to make good value out of that one, too. So those are, I think, the areas that I like a lot. The legacy business, obviously, we've been working on that for a long time. It continues to truck along and save people's lives. We are investing some in it but I would say that's not the place where I'm the most focused.

Just going back to terrestrial. I might be misremembering this but I think you have the opportunity perhaps to get additional terrestrial rights outside of the U.S. Correct me if I'm wrong but I guess the question though, if that's true, do these trials -- not trials or these initial deployments, I guess, provide an opportunity to convince global regulators to perhaps move that along? Or is that a completely separate process?

I mean that's a great point that if you can show proof points to why having the terrestrial rights are valuable and will create new economic opportunity, regulators are always interested in that kind of outcome. So yes, I think that's being able to have proof points is super valuable.

And then, just a last question. The FCC came out some documents about whatever sat to ground. It looks like there's some exclusion zones as everyone certainly would have expected in terms of using existing cellular spectrum. Just any thoughts you have on at least the original or the initial proposal by the FCC in that market?

On using the terrestrial spectrum?

Using, yes, the cellular license spectrum that Elon and AST [ph] and others would hope to use, I guess?

Yes. I mean, obviously, that's going to provide new services if it gets done. And so we're watching that and, obviously, have great relationships with cellular operators. So we talked to them a lot about where the opportunities are and also what the competitive responses are going to be. But one of the things that we like the most is really shows the support of using spectrum and satellites to go direct to devices. Obviously, we've been in the forefront of doing that so far. So yes, I think it's going to be interesting to see how that plays out. Obviously, if you're building a network around mobile network operator spectrum, you got to go around the world and as we federate all those different things, whereas one nice thing is with Globalstar, we have spectrum around the world and it's kind of a one-stop shop. So there's definitely pluses and minuses to it and obviously, go in and talk to the FCC. While they are also interested in the mobile network spectrum, there's a lot of support already for existing mobile satellite service operators as well. They see that there's going to be a good competition set up in the marketplace and that's what U.S. is all about. It's creating opportunities for innovators to do well. So we expect to innovate.

All right. I am showing no further questions at this time. I would now like to turn it back to Paul Jacobs for closing remarks.

Thanks, everybody. And once again, it was a great 2023. And like I said, it really sets us up well for the future to have the company in such a good position and financials better. We're looking forward to launching new satellites as well. And yes, we are investing in some new initiatives. Hopefully, you can see that we're thoughtful about that and those new initiatives are already bearing fruit. So along with where we've been going on the existing initiatives and what the company has built to date, we're excited about what's coming for the future and we look forward to sharing more about that in the coming weeks and months and years ahead. So, thanks everybody for your support and we look forward to talking to you next time.

All right. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.