Good day, ladies and gentlemen, and welcome to the Iridium Communications Third Quarter 2017 Earnings Conference Call. [Operator Instructions] I would now like to hand the floor over to Ken Levy, Vice President of Investor Relations. Please go ahead, sir.

Thanks, Karen. Good morning, and welcome to Iridium's third quarter 2017 earnings call. Joining me on today's call are our CEO, Matt Desch; and our CFO, Tom Fitzpatrick. Today's call will begin with a discussion of our third quarter results, followed by Q&A. I trust you’ve had an opportunity to review this morning's earnings release, which is available on the Investor Relations section of Iridium's website. Before I turn things over to Matt, I would like to caution all participants that our call 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 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 views or expectations change. During the call, we'll also be referring to certain non-GAAP financial measures. These non-GAAP financial measures are not prepared in accordance with Generally Accepted Accounting Principles. Please refer to today's earnings release and the Investor Relations section of our website for a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures. With that, let me turn things over to Matt.

Thanks, Ken, and good morning, everyone. As you saw this morning, we delivered another good quarter with both revenue and operational EBITDA growth. We’ve had excellent subscriber momentum this year with continued strength in the third quarter. Operational EBITDA is also tracking well to our full year outlook which gives us confidence in tightening our guidance with two months to go in the fiscal year. As you know we’ve completed three successful launches this year with the latest batch of ten Iridium NEXT satellites going into orbit two weeks ago. We now have closed the half of our 66 new operational satellites in orbit and expect this figure to reach about 60% by the end of the year with our next launch just eight weeks away. The satellites from launch three are currently being tested by our operations team and we’ll soon be inserted into our constellations. So everything is going according to plan on that front. Within the next two to three weeks, these new satellites will be inserted into their respective slots in plane four and will begin carrying live traffic to improve our network and improve our new service and support of new services. As we announced last week, our fourth launch is scheduled for Friday, December 22 and will carry another ten Iridium NEXT satellites to Orbit, this time to plane number two. Nine of these satellites is slated for immediate operation, while one will drift to play number one. Every launch really bolsters the quality and robustness of our network as we replace 20-year old satellites with brand new Iridium NEXT birds. We are seeing the benefit of these new satellites already and overall we are on track to complete our launch program by mid-2018. As you know, SpaceX is having a great year, they…

Thanks, Matt, and good morning, everyone. Let me start by summarizing our key financial metrics for the third quarter and highlight some trends we're seeing in our business. Then I'll review our balance sheet and liquidity position. Iridium generated third quarter total revenue of $116.5 million, which was up 3% from last year's comparable quarter. Iridium’s top line continues to benefit from s tong growth in commercial M2M. This quarter we also realized incremental revenues from equipment sales associated with seasonal storm activity. Operational EBITDA was up 3% from last year to $71.8 million, while our operational EBITDA margin remained at 62% this quarter. On the commercial side of our business we reported service revenue of $67.9 million in the third quarter, which was up 4% from the prior year’s quarter driven by continued strength in IoT. During the quarter, we added 33,000 net new commercial customers driven predominantly by our M2M business. M2M data subscribers now represent 57% available commercial subscribers up from 53% in the year ago period. In our commercial M2M business, we picked up 25,000 net new subscribers in the third quarter. This was an 80% increase from net subscriber growth a year earlier. As Matt noted, we’ve seen improved results from oil and gas partners and are seeing broader adoption of our IoT solution from fleet and maritime users Existing customers like Garmin and Caterpillar continue to activate new devices in large quantities, which give us confidence that the strong IoT subscriber growth we are enjoying this year will continue for some time to come. ARPU and our M2M business was $13 this quarter down from $15 a year earlier, while commercial M2M revenue grew 14% over the same period, reflecting our expanding portfolio of satellite IoT and their growing offering of applications. These incremental…

Thank you.[Operator Instructions] Our first question comes from the line of Andrew DeGasperi with Macquarie.

Yes, thanks for taking my questions. First, great quarter, just wondering the hurricane impact, I mean it seems that we should see this continue into fourth quarter, but after that I mean should we sort of be taking that estimates back down to a sort of a normalized level?

Yes, I would think so. I mean, clearly a spike and as I said it’s more an equipment than necessarily service revenue at this point because you know a lot of devices sort of had to go in those areas and then in the fourth quarter probably more backfilling those inventories for partners who sent those onto first responders and to individuals. As I said, I think this is a kind of more of advertising for Iridium service in many ways; I’ve had many people kind of call me in some of those areas, now that everything is passed like say and suddenly be interested and maybe a satellite device for the future. I mean, I think in some ways a lot of communities who might have thought that they could cut back realizes this is may be an essential communication tool for the future. So I think it’s sort of just overall generally supports this business, but we certainly are forecasting that this is a growth trend or anything like that.

Right. And then just quickly there’s been an uptick in I guess a chatter about non-geostationary orbit projects and constellations. Just curious to know your thoughts on the impact of Iridium’s business or degree perspective.

Yes, I mean from a business perspective almost in exclusively all those are non competitive systems. They are all looking to build broadband capabilities what I would call sort of commodity or general purpose kind of broadband capabilities in the KU and K band area or even in higher bands like V and those are all potential partners for us because our L-band will compliment those services nicely and our really approach and network is doing different things than they are forecast to do. So I don’t look at any of those from sort of a business impact, I empathize with the effort that they have to do to build some of those systems because we’ve been 30 years at this and know what’s involved but I’m sort of more cheering them on. Debris and other matter we’ve taken a leading position in the market on what and the industry really on what we think is necessary in that area, what needs to be happening and I urge all my satellite brethren and not to cheap out on the core technologies that they are putting in their satellites because they need to be manoeuvrable and avoid things, but and overall they certainly all seem to be very cognizant to that fact. So, I'm expecting that's not to be a long-term big issue but one we’re always cognizant of.

Right. And maybe last one from me. Can you maybe update us on what your current maritime mixes and how is the market trending at this point?

Yes. I mean the market is what the market is. We’re just in a pretty good position right now with our current product being sort of value-based and probably competitively more palatable to the distribution center to the distribution market then our main competitors because sort of the approach we have to pricing and not competing with our partner. So, our core business and our OpenPort product continue to do pretty well and are growing, and so we’re sort of net coming from a smaller position and growing into that. And then feel really good about the prospects going forward with the Iridium Certus because of the advantages that we’ll really have in the L-band market for a number of years we think. And I think from what I see in the partner base they’re quite excited about offering a really competitive offering there either standalone or in conjunction with VSAT products as we’re deployed lot of times just sort of a backup complements to the products. So we see growth in the maritime space right now. Despite challenges in sort of that market overall, we’re kind of coming from the right place if you will competitively there.

Great. Thank you.

Thanks, Andrew.

Thank you. And our next question comes from the line of Ric Prentiss with Raymond James.

Good morning, guys.

Good morning, Ric.

Hey. Appreciate the update on batch 4 launch and how you’re going to shoot those into Plane 2. Can you update us on the cadence for the next couple? You’re going to use the flight proven I guess for the next five batch, but how should we think about the cadence going into the rest of the 2018 then?

Yes. It’s going to definitely be pretty quick, because we still believe we can finish by mid-2018 and that means we have four launches in the first half of 2018 to complete that. We have a lot of discussions with SpaceX. They certainly are operating in a much higher rate than they did at this time last year and into the early part of the next year. They think they can handle it with both flight proven and new boosters. We’ve had – we got the Vandenberg seems cooperative in terms of launch schedules. And our satellite production appears able to meet the overall schedule. So it’s going to a busy first half, but everything is lining up right now to keep the pace up to be launching enough satellite to complete it as we hope to in mid-2018.

And it’s kind of the 60-day target still there or do you hope to do even better than that?

Well, you can kind of do the math and figure out that in some cases it will be even better than 60 days. We’ll even be able to tighten up beyond that. We think right now one of the gating items has been the ability to really fly those satellites in the position in a timely way. We were worried that it would take almost 60 days to position our satellite, but our team at our network operations center here in Leesburg is doing such a great job and our satellite are performing so well. We’re not having any hiccups with that. The things are moving a lot faster in that front. So we’re really able to launch quite a bit faster than 60 days. So it’s just really a matter now of getting rockets, putting the satellite on them and working through all that. And one of those four launches is really a rideshare launch with only five satellite and that takes a little bit of heat off that one in terms of the operations team because they don’t have as many to position, but yes, we feel good about the cadence for 2018.

Great. And last quarter you talk little bit about your thoughts on the FAA coming on board maybe by second half 2018. Any update to that process?

No. I wouldn’t say there’s really change in that. I just still feel good about the FAA. As a customer they have their decision processes and timelines and probably I’d say more of the focus right now is continuing to sign up customers around the rest of the world and continue to support the FAA's decision processes which we said we still believe will happen later in 2018 and for the eventual deployment of the service.

Okay. And then Tom, you mentioned the credit facility replacement, talking with lenders out there. How should we think about your timeline, what you're focused on and working on and what we should be watching from the outside as far as putting in place alternatives for that principle [Indiscernible] repayment kind of schedule we have with the existing one?

“: And so we’re just being -- in my prepared remarks we’re just trying to be prepared in the unlikely event of a significant launch delay. They were not flat but if so, we have a robust relationship with the French Bank, the French Treasury and we’re doing scenario plan in around that March of 2019. Maturity should it become a consideration and they're very constructive in and we’re on the same page to have a plan in place to deal with that. So, that’s how I should think about it. I think probably on our next earnings report we will probably have that contingency plan in place and you should expect us to report on what that is. ”: And so we’re just being -- in my prepared remarks we’re just trying to be prepared in the unlikely event of a significant launch delay. They were not flat but if so, we have a robust relationship with the French Bank, the French Treasury and we’re doing scenario plan in around that March of 2019. Maturity should it become a consideration and they're very constructive in and we’re on the same page to have a plan in place to deal with that. So, that’s how I should think about it. I think probably on our next earnings report we will probably have that contingency plan in place and you should expect us to report on what that is.

Great. And that’s I was looking for just kind of when we should think about getting some information out here.

Great. Thanks guys.

Thanks, Ric.

Thank you. And our next question comes from the line of Greg Burns with Sidoti.

Good morning. Could you just give us an update on where you stand in signing up partners for Certus? And I was wondering if you can maybe give us some color on the economic model there. How you’ll be working with those partners to resell the service? Will those partners be pre-buying capacity and reselling it. I just wanted to better understand kind of the Certus model?

Yes. So an awful lot activity I would say. There’s been very detailed discussions at the contractual level even at this point with pretty much everyone in the maritime aviation and even in the terrestrial markets to sell these new terminals starting second quarter of next year. We've actually signed a few probably more in the aviation section. We haven’t really talked about who those are and some smaller ones, the maritime ones, there are number of those right now that I think they’re going to conclude this quarter. I think it's going to be fairly broad-based in terms of the number of people that can distribute Certus and the general model is not that far off of what we do today where we provide, but we don’t provide just capacity, though that’s we provide basically broadband capability and then they mark it up and sell it along with terminals to their customers for periods of time. There is discounts for larger commitments and that sort of thing that they can get, so that they can even increase their margins and I think there's a fair amount of flexibility that they’re going get that they like in terms of how they can market our service to their partner base. So, we’re really in the finalization stage of these partners all over the world and I expect we’ll start announcing before long here.

Okay. And the change in the outlook for the timing on that last payments there. Was that a function of their outlook and the ability to sign maybe to pay or some other change in their business that kind of pushed out the timeframe on that [Indiscernible]?

That has nothing to do – Greg, it has nothing to do with the FAA expectation as the FAA will make a decision in the second half of 2018. That is been a consistent expectation and so there’s no change there. The change in the third payment its more around I would characterize that the credit facility has being highly refined, the Aireon credit facility and the bankers saw the need for it is, sort of an operational milestone that became clear to Aireon that they could pass that milestone in the second half of 2019 which then says, that the payment needs to kind of couldn’t happen in the first half of 2019 and they advised us to that most recently and so we’re advising you a bit, but [Indiscernible] has nothing to do with the FAA. We’ll remain very confident in that regard.

Okay. So they do have a credit facility lined up here as you kind of the visibility on that, the first payment coming in the first half?

I would characterize them its way down the road with their bankers.

Okay.

Then a lot of time on, but been in a lot of time in the fine points of their credit facility.

Okay. And the reusable Falcon 9 rocket, I mean, it doesn't sound like there's any additional risk from an insurance perspective. Was there any financial benefit to you in using that? Or was it just simply about getting the cadence of the launches to where you needed them to be?

Yes. There was a financial benefit. I haven’t really focused as much on talking about that, because not just the size of it but really the fact that wasn't the primary consideration. I mean, if the risk wasn't the same or lower and the cadence wasn't going to be improved that really wasn't going to -- I really couldn't put a price on that. So yes it has improved our contract somewhat. There some apples and oranges in the numbers, so quoting this specific price per rocket doesn’t sort of makes sense because there's a number of moving parts in that really, but yes it did have a financial positive impact.

Okay. Thank you.

Thank you. And our next question comes from the line of James Breen with William Blair.

Thanks for taking the question. Tom, I was wondering if you can just talk about given that you have a little bit more information that on what’s going over there and funding in general. Just talk about how you think about the puts and takes of funding over the next two or three years, and then how you think about delivering the business plan as the constellation gets fully launched in 2018? Thanks.

Right. So, how we think about our existing credit facility as well as it was like I said, in my remark while it was sort tailor-made for our needs during construction period. Once the construction period is over it calls for a number of things that we don’t think are appropriate in our circumstance which is significant principal, repayments, the inability to do things like share buybacks and consider paying dividends. And so it doesn't suit our circumstance anymore. The work that I talked about that several investors infact are doing as it we could put in a structure that has sort of five times through the banks with 1% principal amortization, very attractive interest rate and sort of slug of high yield in behind that. And so, that's the capital structure we focus on that. That’s the capital structure we think is appropriate for our circumstance in the post construction period, Jim.

And so, essentially in some way its terming out some of the debt, but there’s the plan in terms of deleveraging change much in terms of – before you delivered from 18 to 22?

No. It’s a firm naturally deleverage just as EBITDA growth, the capital structure is not going to determine the rate of deleveraging, right. So either it would be sitting on more cash or whatever but the credit statistic is not going to change.

Thanks. And then just one other question on the GMDS, maybe I missed it, but is there any update there on getting that put in place?

Yes. I mean, the process, so which takes a long time continue to progress. We've actually had some recent success in terms of testing with the organizations that are involved in it haven’t really announce this formally or anything that we may do that in the future, but we just had a very successful sort of testing program both in our labs and else. In Europe right now were they sort of observed that we were able to demonstrate a whole number of things really the capability of GMDSS and really somewhat I heard all that testing went flawlessly. So that all goes into a report and it goes to the whole International Maritime Organization and we still believe that that will successfully include in with a positive outcome in 2018 and as terminals become available the service will go into operation. So we’re still making great progress towards GMDSS certification and that still a core part of our strategy.

Thanks. And I guess just one more on the government side. It seem like you’ve seen pretty good growth there, even as a fixed price contract in terms of subscribers and usage over the course of the last year, when do you think about the renegotiation of that and the services rendered there?

Yes. We have a good subscriber growth which really kind of bodes well for the future. It’s a fixed price from a revenue perspective, but the whole point to that was to really promote subscriber adoption which lowers the overall cost per subscriber to the customer and even increases the overall value of Iridium to the customer. In addition to the core services with the new capabilities of Iridium Certus coming along with the sort of excitement about the new service we did one commercial last year satellite time and location and tactical radio services and everything, we feel really good about the future of our relationship with the government and the contract. That been said, the contract doesn't expire till – well, technically expire until next year in the fall and even then there's sort of we’re expecting -- you know there's a tale that they execute that goes in the 2019. So while we’ve had a lot of discussions with them about the overall structure and price in that sort of thing. It's really not going to come to a head until well into 2018 in my view probably more out to next year. So we’re not into the actual details. We feel good about the process. Have a very constructive relationship and a lot of activity around them that obviously makes us feel good about that that relationships going to continue long-term on reasonable terms for both of us.

Great. Thanks.

Thank you.

Thank you. And our next question comes from the line of Chris Quilty with Quilty Analytics.

Thanks. Just want to follow-up on the Aireon. You’ve got a number of MOUs. When you expect that those – where I guess Aireon has a number of MOUs. When do you expect that those would eventually convert over into data service agreement?

Yes. I can say they are really, really busy right now. The second half of 2017 they are on the road almost constantly right now because there’s a list of the Top 6 to 10 that I know that they’re kind of really focused on right now with the couple big ones in the near term. So they – really the pipeline is pretty well developed in many of the MOUs have really moved into the data service agreement, negotiations and we expect those to convert really in the next few months. So it’s a busy timeframe right now, and really I expect you’ll see lot of activity around that in the next six months.

Okay. Second part of that question for Tom, I think you mentioned previously that Aireon was out on the road looking to raise capital and something you mentioned about their current debt service agreement seem to indicate that they accomplish something? Or is that still something yet to be done?

They are actively on the road with their financing, Chris.

Okay. Something that will like….

That is not completed yet. It's just well-developed and into really sort of execution stage right now, but we don't have a result from that yet and really don't expect to in the next month or two.

No, but the trenching of payment to Iridium are part and parcel of the credit agreement that’s being marketed currently. So they had their financial model. They had their financial model. They have contract in hand the subject of the collateral. It has nothing to with the FAA. We will get our first payment even without the FAA coming in and that’s contemplated by credit facility. And then additional contracts are signed they essentially give rise to additional capital and collateral in the credit facility as that’s being marketed and that's where the additional payment come from – so it’s think about that way.

Got you. And do you expect that their financing will be in place before the end of the year?

We wouldn’t say that – we said that we can expect the payment to us by the end of the first quarter of 2018.

But we don’t really have a time timeline exactly. I would say, we’re showing some optimism only based upon a lot of discussions we've had with their bankers and them, but the market is the market and they got to get through their activities here and I don't frankly know exactly how long it will take for them to close. But -- and the anything could that suppose happen, but we’re obviously feeling good about the process overall from what we’ve heard.

Okay. Switching gears you mentioned that you on the MDM IoT side you got some customers that are now integrating chipsets. Those are presumably first generation chipsets that they’ve been developing for years. Is that fact that the SFX is not available or hold up for other customers not you doing the work to integrate, so that they're not making a switchover between current generation and future generation to look in?

No, we haven't seen any kind of hold up of where people are waiting for Certus technology to go forward. The current technology, current chipset technology which is based upon the 9602, 9603 platform, as you can tell by the subscriber growth is a very desirable technology and the larger partners like the idea of even though it's not that expensive overall, I think in the big scheme of things, but if they could just take the core chips and integrate them into their technologies they can even reduce their costs further and develop a platform more in line with what their technical needs are going forward and their sort product roadmap. So we’re seen a couple of those happened. It's exciting to see some of the product. More importantly, nice to know that you're being embedded in sort of their roadmaps because they’ve invested to take your technology and put it into their product roadmaps going forward, which obviously bodes well for long-term relationship. But now the SFX [ph] has a lot more capabilities, the lower end operating fit 22 kilobit per second with battery-powered all we have to say 88 kilobit per second, line power with different kind of antennas and range in between. We have had some discussions with the couple. We’re excited about that with challenging to license. We will open the license that technology of the SFX potentially as a chipset model, but we really have to complete the development to get a lot further down the road before that would really kind of actively happen. Anyway it’s too hard to license the technology while you're developing it, and they realized that. But I don't see anybody really waiting. I think to that the SFX isn’t really sort of so much a replacement, probably more of a replacement for what we call our L-Band transceiver and 9523 platform. And I think that there’ll be a lot of new applications that creates. I think they’ll also create new price points and that sort of thing and save the aviation market and some other kind of low-end application that in maritime as well. But that's really kind of a whole new area for us I think.

Okay. And is it fair to assume that if somebody's going to all the time and expense of integrating chipsets to drive down costs that we might see much higher volume applications in the future. And if so when might we see that?

Well, that’s always the hope. I know particularly in the consumer space you know that's where you can see bigger numbers, but there can also be some in the enterprise, government space as well where people have described plans that could have lot higher volume. Lot of those are lower ARPU but that's fine with us you know give that all incremental new revenue. So yes, I mean, we're starting to see the volume increase today and I would expect that to only improve really as the chipsets offering come into play as well, but no forecast going forward exact numbers but obviously that’s possible.

Okay. And any update you can give us on what you're seeing with your time and location business and partnership there?

Yes. I mean, I would say it’s only been positive. It's been hard to describe specifics to because a lot of that is related to both governmental and enterprise activities that are partners could tell us more directly controlled. We’ve been involved in a number of the discussions, so feel very -- I can say I'm excited about the potential for that technology really improving, not just -- really more on the time information, times become so important right now and the reliance on GPS for so many industries has made it aware recently that danger because GPS can be fragile with those single credit sort of technology. So Iridium, I think is rapidly becoming sort of a secondary backup to that or something that can complement and augment that technology for doing something lowering the cost in enterprise applications where you need to go put a GPS just even for communication network and utility networks et cetera. So for us its basically, we get payments to turn on the service around the world, so we don't kind of participate in the upside, but feel very good about the potential for even getting those payments for lighting up sections of the world in the next couple years based on everything we've heard.

Got you. And final question, I don't think you publicly commented on the MOU with magnitude space, since that was announced month ago or so. Can you give us your thoughts on that agreement?

Yes. I’d say, the IoT opportunity is huge in the coming years, we think we set very well positioned with on the real time high-end premium satellite IoT space and you can see by a subscriber numbers in our technology plans we think that’s going to continue to grow. We think that there is kind of marketed both the high-end to that where there is sort of a broadband distribution to things and we think we’re to play with that in the Certus market, but we also think there's kind of a low-end as well in the future where space can deliver to very very low-cost, very high fee application, think of like soil sensor. You know you may only want to spend $0.25 a month to get what this field, soil moisture rate is. That's not really something our current network is well-positioned for. We wouldn’t really want to go after that business, but someone like magnitude space is perfect for that. You don’t care when you get that information. They plan for 24 satellites that will be sort of a storm for network for that for low-cost sensors just like that, that could be very complementary to our base. So when we met magnitude space about a year ago and there one of couple companies looking to do this, we thought that was a nice complement and that's why we sign the MOU. They still need to get their funding in place. They need to launch satellite and that sort of things, so we’re not participating on that basis with them. We’re more focused on our own network for that. But we like the idea working with them on joint products may be a one-stop shop to our partner based towards our multiple technologies, and I think that could be very complementary.

Great. Thank you very much.

Thanks, Chris.

Thank you. [Operator Instructions] Our next question comes from the line of Greg Mesniaeff with Drexel Hamilton.

Yes. Thank you. When you look at your recent acceleration in subscriber growth relative to your revenue growth, is it fair to say, well, let me phrase it this way? What percentage of that roughly is greenfield opportunities versus gains in market share from competitors?

Yes. We don't have a really break down exactly that way. There are – as I mentioned the partners that we added two or three years ago are starting to come online, so you might see some new growth from a Komatsu for example, soon and you'll see other partners that we added a couple years ago and those are adding nicely. You’ll see new products that Garmin might have introduced the year or two ago starting to really take hold. You certainly seeing Caterpillar growth, but we don't kind of categorize that in one way or the other. We also see our base really continue to do pretty well in a number of different market sectors. We certainly seeing oil and gas, the headwinds kind of base there a little bit on that, that isn’t declining and you're potentially maybe there's growth, transportation et cetera. So it's pretty broad-based across and awful lot partners right now. And it is true that some of the big growth areas are maybe lower ARPU kind of devices, and as Tom mentioned since there is no incremental cost of those that all just drops to the bottom line our ARPU kind of falls a little bit, but that's incremental revenue. So we like to get that and those are those are good customers as well. They don't use that much of the network resources and end up adding to the base and driving equipment sales and others things there.

Yes. I would just add. The growth in Garmin is particularly strong and we think about the history they are, right, that Garmin acquired a company called Delorme that had – I would characterize as limited distribution when you compared to Garmin’s global distribution and we’re definitely seeing the benefit of that and you will characterize that as Greenfield that they're taking a product that wasn't distributed in certain geographies. And now it’s a global, global consumer offering that we think will fuel our subscriber additions for a quite some time.

Thank you. And just – if you could just also give us a quick update on your relationship with Harris and any color there?

Yes. You’re talking specifically about the ship tracking service.

Yes.

It’s a public part of that. Yes, that we formed a number of years ago as a result of the Aireon payloads. They won that contract to do the Aireon payloads, have done by the way of, I think the fantastic job of developing that payload. It seems to more extend from Aireon team is working really really well. They had some extra room in that, and as per the ability to kind of market some additional capabilities and we negotiated a hosting and data services arrangement a couple years ago and that's now sort of coming into play. The primary payload that they been public about is this AIS ship tracking service that is on most of the new satellites and they have been telling us that the testing of that has gone very very well. They market that I think to the U.S. government and exact [Indiscernible] of Canada kind of marketed to the rest of the world and both of them are very excited about potential for us. We don’t participate in the direct revenues as their business growth in that area to except that they sell that service, but we do get hosting and data service payments and those are things that are reflected in our financials right now.

Thank you.

Sure. Thanks, Greg.

Thank you. And our next question comes from the line of Jim McIlree with Chardan Capital.

Thank you. Good morning.

Good morning, Jim.

In the Q that was release this morning as well as the Q4 for the June quarter you cited about a $5 million year-over-year increase for insurance payments. And the question is how big do those go, when you have the entire next constellation of how large will those insurance payments be? Or in alternatively how much more of an increase is there?

Sure. So Jim, I think the insurance you’re referring to is the in orbit insurance. So when our launch insurance part of that is capitalized, but the in orbit piece of the insurance under gap needs to be expanse. From the way we look at it both elements of the insurance are part of our construction cost of Iridium NEXT, but the cost that you’re referring to which are in orbit hit the P&L. And so, they will be sort five, they were actually 4.4 million in the third quarter, it would five-ish next quarter and between four and seven in 2018 and that will tail off in the first and second quarters of 2019, they will be in a 3.5 million in the first quarter of 2019 and then will be done with it, done with the amortization in the second quarter of 2019.

Great. Thank you. And you are correct. I was referring to the in orbit insurance. And then secondly on the Aireon payments that you're expecting, can you put a range or a size on what you think those three tranches will be?

Now at this point let’s Aireon get through their processes, if they’re literally right in the middle or be premature. We do know that there will be those three tranches and we want to see exactly how they sort out that as a result of their marketing efforts.

Okay, great. Thank you. Appreciate it.

Thanks, Jim.

Thank you. And our final question will come from the line of Paul Penney with Northland Securities.

Good morning, guys. This is Greg on for Paul. Thanks for taking my question. Even almost I think have been answered. First, as service broadband speed begin to slowly ramp after testing is complete, how should we expect gross margins on both the service and equipment side if change there, will probably be new price points and antenna options?

Well, Chris, we have no revenues and service revenues for that sort of that line, that will all be brand-new revenue for us and if you're comparing it to say OpenPort or you comparing it to – its main competitor in the market [Indiscernible] with broadband that's a whole another question here. The reason we speak so positively about as we know that our partners are telling us the terminal cost that they plan to sell the product, we sell them in underlying card called the DCX and then they turn that into a terminal and that the costs that they have in the market are going to be very competitive with things out there in the market should be less expensive, smaller, they obviously operate on a wider scale of planet than the competitors products do and the data rates that we are – that we talked about in the previous questions, not the data rate, but the cost for the data really are very competitive in terms of what they currently see in the market. So all that leads to believe that we believe that’s going to be a successful product, but I don’t know what they are really compared to, since it’s new revenues for us really and OpenPort continues on for a while anyway to and that’s a separate product line.

Yes, but just to differentiate you know the access in airtime and in Certus has the same gross margin characteristics as they access in airtime generally which is there is minimal variable cost, it’s almost very high gross margins. As to the equipment margins, we are not selling that gear, that’s our partners are selling that, so it’s not going to be easier, you need to be accretive nor diluted to us, because we are not selling it and the equipment that we do sell in Maritime is not one of our higher margin product lines anyway. So, we just look at it as the incremental service revenue and very high gross margin opportunity that Certus brings us.

Yes, very helpful. And just one more, I know you questioned [ph] us in the past, but just to get you a clear picture of the CapEx expectations, is it safe to assume that approximately half of 2017s guidance range of 500 to 600 will be reasonable for 2018 now? And I just wonder if you could provide a little more color on what would drive that either higher or lower in 2018?

The CapEx is finite, so I would say in the areas thus we have, more than that in 2018.

And those are overall price contracts and everything and so there’s really not a lot of variability up or down, it’s more just about when the timing of it is and when payments are due and when milestones are met, that’s really been the only kind of variability.

Got it. So it’s safe to assume that some could be recognized in early 2019 too?

Well that would only be if you know the program really got delayed in some way and that’s really not our expectations, but we certainly our whole goal is to spend it all in 2018.

Okay, thank you.

All right. Great, thanks.

Thank you. And that concludes our question and answer session. I would like to turn the floor back over to Iridium for any closing remarks.

Thanks for joining us on the call. We look forward to updating you on and I’m sure you will be watching us on December 22 on our next launch. So thanks for joining us. Take care.

Ladies and gentlemen, thank you for your participation in today’s conference. And this does conclude the program and you may now disconnect. Everyone have a great day.