Aug 9, 2012
Operator
Welcome to the Q2 2012 Globalstar Inc. Earnings Conference Call.
My name is Eric and I’ll be your operator for today’s call. At this time, all participants are in a listen-only mode.
Later we will conduct a question and answer session. Please note that this conference is being recorded.
Operator
I will now turn the call over to Dean Hirasawa, Director of Public and Investor Relations for Globalstar. Mr.
Hirasawa, you may begin.
Dean Hirasawa
Thank you, operator. Good morning, everyone.
Thank you for joining us for today’s conference call to discuss Globalstar’s 3 month results for the period ended June 30, 2012.
Dean Hirasawa
Before we begin, please note the following. This call may contain forward-looking statements within the meaning of Federal Securities law.
Factors that could cause results to differ materially are described in the Safe Harbor section of today’s press release and in Globalstar’s SEC filings including the Quarterly Report on Form 10-Q for the period ended June 30, 2012 which will be filed later today.
Dean Hirasawa
The press release of this conference call and the associated slide presentation which is available on the Investor Relations page of our company website include discussions of certain non-GAAP financial measures as defined under SEC rules. The press release provides a reconciliation of each of those non-GAAP measures to the most comparable GAAP measure.
Please note that the information in this call is accurate only as of today Thursday, August 9, 2012.
Dean Hirasawa
Today’s press release containing certain financial information is available on the company website at www.globalstar.com. Later today an audio recording of this conference call will also be made available via telephone dial-in and a webcast recording along with the copy of the slide presentation which will also be made available on the company website.
Dean Hirasawa
Today’s call is being hosted by Jay Monroe, Chairman and CEO of Globalstar Inc; Joining Jay are Corporate Controller, Rebecca Clary; and President of Global Operations, Tony Navarra. Each will be available for questions following their prepared remarks.
At this time I would like to turn the call over to Mr. Monroe.
James Monroe
Thanks, Dean, and good morning, everyone. I am pleased to report that Globalstar concluded the second quarter of 2012 by continuing the positive momentum in growth in adjusted EBITDA that we began late last year, with over 42,000 gross activations not only did we had a record number of subs during the quarter but we also continued to improve our coverage and service quality as we deployed additional second generation satellites.
James Monroe
Significantly, during the quarter we also reached a settlement with Thales Alenia Space, effectively resolving our differences regarding the purchase and delivery of second generation satellites. Therefore we are back on track to complete the final launch of the new constellation.
I’ll discuss these events in more detail shortly, but first, Globalstar’s Corporate Controller Rebecca Clary will lead off with the financial review. I’ll then provide a short operational update for the company and will conclude with a Q&A session in which Rebecca, Tony and I will be available to respond to any questions.
I’ll turn it over to Rebecca.
Rebecca Clary
Thank you, Jay, and good morning, everyone. I am pleased to report that in the second quarter of 2012 the company had positive adjusted EBITDA for the third consecutive quarter.
The company’s adjusted EBITDA for the second quarter was $2.9 million, an improvement of $4.9 million from the second quarter of 2011. This improvement was due to our combination of increased revenue and a reduction in operating expenses.
Rebecca Clary
Our revenue was $20 million in the second quarter of 2012, compared to $19 million in the second quarter of 2011. Service revenue accounted for most of the increase in total revenue while equipment sales grew slightly.
The growth in service revenue resulted primarily from a $1.6 million or 33% increase in SPOT service revenue. The continued growth in our average SPOT subscriber base which increased 28% was the primary driver of this increase.
Rebecca Clary
The growth in SPOT service revenue was offset by a decrease of $900,000 in Duplex service revenue compared to the second quarter of 2011. This decrease was due to the mix of rate plans our subscribers were enrolled in during the respective periods as well as attrition in our average Duplex subscriber base.
Lower rate plans in effect in the second quarter of 2012 were the primary reasons for the ARPU decrease from the second quarter 2011.
Rebecca Clary
However, when comparing the second quarter to the first quarter of 2012, there was an increase in both Duplex service revenue and ARPU. We expect this trend to continue as our coverage and call completion rates continue to improve.
We expect that these improvements will not only allow us to regain our subscriber base, but also to offer rate plans that are more commensurate with our call quality and dependability.
Rebecca Clary
As discussed over the last couple of quarters, the cost saving initiatives we implemented in late 2011 continued to benefit the company’s operations and liquidity position. In the second quarter of 2012, operating expenses decreased by $3.9 million from second quarter of 2011, excluding EBITDA adjustments.
The company’s net loss in the second quarter of 2012 increased by $13.4 million to $27.5 million. This was driven primarily by a $22 million accrual for the termination charge related to the settlement with Thales, a $7.1 million reduction in the value of our first generation satellite constellations and an increase in depreciation expense of $3.1 million as additional satellites were placed into service.
These items were offset partially by a $16.6 million increase in the derivative gains compared to the second quarter of 2011.
Rebecca Clary
Now a few comments about liquidity. As of June 30, 2012, the company had cash on hand of $4.8 million.
The funds to be drawn from the COFACE facility and the contingent equity account are $3 million and $22.8 million, respectively.
Rebecca Clary
In addition, we hold a total of $47.5 million in restricted debt service accounts. During the second quarter we drew down a total of $4.5 million from the contingent equity account and expect to draw all remaining funds from this account by the end of the year.
While we are benefiting from our continued ability to control expenses as well as are improving cash flow from operations particularly as a result of the success of our SPOT and commercial Simplex lines of business the contractual obligations upcoming over the next 12 months will require financing.
Rebecca Clary
We are currently seeking financing and amendments to our existing debt obligations and expect this process to be completed by the end of the year. Concurrent with the debt financing and similar to our 2009 COFACE financing we plan to raise additional equity and/or subordinated debt by an amount that will fully fund our business plans.
Looking forward, with the Thales arbitration matter and the principal terms of the new commercial agreements for the purchase of additional salaries agreed upon our long-term capital expenditure requirements are more defined.
Rebecca Clary
We are now able to focus on rebuilding the business by continuing our improvement in financial performance and arranging the requisite financing needed to complete our network infrastructure.
Rebecca Clary
I will now turn the call back over to Jay.
James Monroe
Thanks, Rebecca. As you just heard, we are pleased with the financial momentum that began in the fourth quarter of last year and are encouraged with our progress.
These past 3 quarters of positive adjusted EBITDA demonstrate a turnaround for our business and are the result of the hard work of everyone at Globalstar.
James Monroe
As I discussed in May, with increased discipline in sales, marketing and product development plus a new constellation offering vastly improved coverage and the return of the industry’s highest quality voice service, we’re laying a strong foundation for the business. Globalstar continues to make the necessary investments and operational improvements to realize the opportunities that lie ahead and we are focused on increasing our revenue and our adjusted EBITDA through the end of this year and beyond.
James Monroe
As announced on June 25, we reached a settlement of our prior disputes with Thales and both companies agreed to the principal terms of commercial proposal for the purchase of 6 additional spacecraft. The mutual settlement also provides that Thales will complete their current work and timely deliver the remaining Batch 4 satellites.
With the resolution of our disputes now behind us, we continue to plan the fourth and final launch for later this year subject to the delivery of the remaining satellites.
James Monroe
All of us at Globalstar as well as our satellite and launch partners Thales and Arianespace are working diligently to make this happen as soon as possible. We will update you with further information once the launch date is finalized.
So we’re back on track and just one launch away from restoring full coverage even as we deploy previously launched satellites into the constellation which further improves our call completion rates.
James Monroe
Our customers in key markets are already experiencing connection rates of greater than 80% today from placing more satellites into service since the May earnings call. These connection rates will increase further in the near-term as even more satellites start operating over the next 2 to 3 months.
In fact, we now anticipate that some of our key market areas will approach 90% call success rates even before our final launch, increasing service levels are expected to drive both usage and new subscriber additions later this year.
James Monroe
Also the momentum real issue that we discussed affects only one satellite and the others are performing nominally. We’re working diligently with Thales on the development of a software patch designed to correct the problem.
Once the solution is installed, we expect the one affected satellite launched in 2010 to return to service and successfully complete its 15 year mission. The software will also allow us to implement the same solution should any other satellite ever be affected by a momentum real issue.
James Monroe
Throughout the quarter, we worked hard to expand our retail consumer market segment. Due to the continued success of SPOT and its related consumer products, to-date Globalstar has sold more than 395,000 SPOT units to over 10,000 points of retail distribution worldwide.
As the number of SPOT subscribers increases, so do the number of SPOT initiated rescues. Since its introduction in late 2007, SPOT products have been used in more than 2,000 rescues around the globe.
James Monroe
Indeed, this year already our customers had used SPOT for over 300 rescues involving more than 660 lives. For some perspective that’s more than one rescue per day from this remarkable product.
I’d like to acknowledge our partners at GEOS International Emergency Response Center for contributing to the success of our SPOT products. They are literally on the front line of each and every rescue.
James Monroe
With regards to our spectrum initiatives, as most of you are aware the SEC’s national broadband plan recommended additional spectrum including Globalstar’s be freed up for delivery of wireless terrestrial broadband services. We view the SEC’s implementation of this plan as a significant future value driver for our shareholders.
James Monroe
In March of this year, the SEC initiated a rule making to permit another MSS company Dish Networks to provide terrestrial broadband service within its 2 gigahertz spectrum near Globalstar’s own spectrum. We have consistently in support the SEC efforts in this regard and are pleased that they appear to ready to take final action in that proceeding soon, perhaps as early as September.
James Monroe
The SEC as indicated intends to use the Dish proceeding as a model for providing spectrum flexibility to other licensed bands. Given Globalstar’s spectrum bands, we believe we are uniquely situated to provide specialized terrestrial broadband applications that will be unlike any other MSS providers.
We’re fully engaged with the SEC in discussions concerning flexible use of our spectrum and our recent discussions with them have been favorable.
James Monroe
We look forward to continuing this dialog over the next several weeks and we expect this will lead to the commencement of our own proceeding, of course we will update you in the future on this exciting opportunity. Also as we previously discussed Globalstar is a part of a joint venture with ADS-B Technologies Inc., which is developing a space based air traffic surveillance system utilizing Globalstar’s second generation constellation and our bent pipe architecture.
ADS-B is a recognized leader in the development and installation of air traffic systems around the world including the largest such system ever deployed in China.
James Monroe
During our first quarter call, we discussed ADS-B Technology’s recent successful test flights in Alaska using a small, inexpensive set of hardware installed on an aircraft that forwards the ADS-B data from the aircraft up to the satellite constellation and then down to our ground stations located around the world. This Globalstar based system is the least expensive, lowest latency, most easily deployable space based air traffic management solution imaginable.
James Monroe
Moreover, because the electronics of our system are on the ground rather than in the satellites our system is easily upgradeable to the changing requirements of the air traffic industry over time. Finally, unlike any other competitive offering, our technology is proven and no hosted payloads or other modifications to our satellites are needed to bring this solution to the market.
Our solution is ready now.
James Monroe
This opportunity represents one of many new uses for Globalstar that could prove very lucrative over time. In sum, for the third consecutive quarter, Globalstar has reported positive Adjusted EBITDA, combined with our record subscriber growth, the continued deployment of the new constellation and the encouraging trends regarding utilization of our spectrum for terrestrial purposes relating laying the product and business operations foundation necessary for long-term revenue and EBITDA growth for the second half of 2012 and into the future.
James Monroe
I thank you all for your time today and look forward to speaking to you again. Rebecca, Tony and I are now available to answer your questions.
Dean Hirasawa
Thank you, Jay. That concludes the prepared portion of the presentation and we will now proceed with the Q&A portion of the call.
Operator can you please proceed with the first question?
Operator
[Operator Instructions] Our first question comes from Marco Rodriguez from Stonegate Securities.
Marco Rodriguez
Had a pretty strong quarter in SPOT and Simplex from a sub basis. I am assuming the SPOT was positively affected by this 6000 order for the U.S.
Forest Service. So if we exclude that, is that a kind of a fair assumption as far as what are the normalized number there and can you talk about those Simplex as was there a large one-time order or do you have any pricing promotions in the quarter given the lower ARPU?
Rebecca Clary
It was obviously an exceptional quarter as it relates to our SPOT and Simplex subscriber additions, the forestry service sale obviously helped but it also, seasonality played a role in that as well. We are experiencing strong demand for our products so we expect to continue to see additions.
I don’t know if you can expect to see them at the same level as we did this quarter because we had several large sales like you mentioned with forestry service and like I mentioned with seasonality.
James Monroe
Marco to embellish that a little bit, the order with the forest service is one that you still have got to account for over a long period of time. It’s a contract for the first year.
Secondly, we are working on a series of opportunities like that globally. And lastly, the commercial Simplex business is growing and will continue to grow.
It’s the nature of it is that it can be a little bit lumpy. So I guess you can see things in one month, not see them for a month or 2 and then see big hits again because those are going to operators of large numbers of commercial Simplex units.
Marco Rodriguez
Okay, that’s helpful. So on the Simplex side, are you using increased demand there or increased interest, any kind of additional color you can give there on end markets?
James Monroe
Yes, definitely the Simplex units non-SPOTs and not consumer products but commercial Simplex, is a growing marketplace. We’ve developed less and less expenses solutions for people.
It’s what I fondly refer to as data heroin, as soon as you give people data and they can acquire that data inexpensively they want more and more of it. And that’s the kind of thing we’re seeing in commercial Simplex market.
So people used to be unable to monitor devices because it was expensive or difficult to gather the data. Now they can do that readily and so the enabling technology is Simplex.
And the market takes off and people find out more and more about it and as they do, word spreads rapidly and we’re now monitoring things for instance in the oil field which are small, and historically people wouldn’t have cared about them. But there are individual items of high inventory values that are getting monitored today.
Marco Rodriguez
Got it. And then kind of shifting gears here to your Duplex services, I believe in your prepared remarks you said that currently you’re at about 80% call completion rates and the expectation is for that to hit 94, I believe you said in September.
Is that having all of your satellites that are up in space right now in service or placed in service, can you give a little more color around that?
James Monroe
Tony, I think you can probably do that one best.
Anthony Navarra
Marco, the anticipation is that we will have all of our Batch 3 and those were the 6 satellites that we launched in December of last year, they will all be in service by the end of September. So we’re very pleased, number one, with the performance of satellites and we’re very happy with the amount of service that they are taking, so that’s why we expect to see the services in the number of subscribers really get a better quality of both their calls as well as the SPOT and consumer products that are being served well on the Simplex side.
Marco Rodriguez
Got it. And then in terms of marketing the service there, have you started to aggressively turn on the marketing program or is that still kind of being held back a bit until you get to a higher level of call completion?
James Monroe
There is actually a little bit of both. We are reaching out to our historic customers and starting to convert the plans that they are on to higher value plans and make people aware of the increased utility and we will began more aggressive marketing here in the near term for new customers.
Marco Rodriguez
Okay. And can you provide any kind of color as far as how that marketing plan is being setup from a strategic standpoint?
James Monroe
Can you elaborate on the question just a little bit Marco?
Marco Rodriguez
Yes, just wondering what the approach is, is it trade shows is it going to end customers or any kind of color there, how you’re going to kind of launch that aggressive marketing campaign?
James Monroe
Sure. It comes in a lot of different categories, all of which that you’ve mentioned and then more.
We have a ton of dealers, agents and resellers who we have reengaged and those agents and resellers have been on the sidelines for Globalstar over the last couple of years as we have repopulated the constellation. So we’re going back out to all of those.
We are absolutely in the trade show business. We were just at the outdoor trade show which is the biggest in the world for the outdoor retailers in Salt Lake City last week and the week before that, we were in Oshkosh for the general aviation show.
So both of those are important aspects. We also have a very long customer list of folks who have stuck with us and those are commercial vertical market and government customers and those customers we are recontacting to make certain that they turn on the phones that they have and become paying customers again, and fulfill additional needs by using Globalstar instead of some other solution.
So we’re attacking all of those plus a few more.
Marco Rodriguez
Got it. And asking you here now to kind of bring out your crystal ball here for fiscal ’13, just kind of wondering with the additional or the aggressive marketing campaign that you will be rolling out here shortly, how are you guys kind of thinking about the Duplex subs, the ending subs or average subs obviously directionally they should be higher.
Just kind of trying to understand some of your thinking and any kind of color there would be helpful.
Rebecca Clary
In the short term Marco obviously we expect to have churn that exceeds our gross additions. But once we have the coverage levels to the commercially competitive levels that we expect that’s when we would expect an increase in our subs.
James Monroe
But I think Marco if the question is are we willing to give forward guidance on the anticipated number, that is not something that we have historically done and until the constellation is up and the final launch completed, I don’t think it’s something that we want to do right yet.
Marco Rodriguez
Understood. And then you mentioned on the call the financing, you’re looking for equity and debt financing to fully fund your business plan.
Is that inclusive of the 5.75% convertible that is puttable in April ’13?
James Monroe
Obviously that is a capital consideration for us and we’re in conversation with the holders of those instruments and we will be.
Marco Rodriguez
Okay. So you have had discussions with them in terms of what to do there?
James Monroe
We’re in conversation, it’s small group in number and very important people to us that we have conversations with frequently so we are in discussion about how to resolve those.
Marco Rodriguez
Okay, got it. And just a real quick housekeeping item, what was the diluted share count in the quarter?
James Monroe
Great question.
Rebecca Clary
Marco, we don’t have that in front of us.
Marco Rodriguez
Okay.
Rebecca Clary
Can we connect after the call?
Marco Rodriguez
Yes, that’s it. I’ll look for it a little later.
Operator
Our next question comes from Lyman Delano from Beck, Mack & Oliver.
Lyman Delano
I’ve got a couple of questions but I just thought I’d say one thing anecdotally. I was in a remote part of Iceland last week fishing and I used my Globalstar phone on a number of occasions utilizing the call time tool, but I must say that I was very, very impressed by the call availability as well as the quality and the speed of the calls going through.
So I am just trying to say that your call completion rate is already dramatically better than it was 6 or 12 months ago. So that’s great.
James Monroe
We spend a lot of money making that true.
Lyman Delano
My first question is related to ground operations and I am curious -- I have sort of 3-part question to it, one is sort of the timing and expense of the second generation software upgrades for the gateways around the world. Two, do you have any new gateways planned?
And three, could you just sort of update us on the relationship that you have with the IGOs the Independent Gateways Operators? And then I have a follow-up question?
James Monroe
Okay. First of all the IGOs are we’ll take it in reverse order.
The IGOs are engaged but they like we have been waiting for a period of time until we get the new constellation up. They are important partners to us in the regions of the countries and world that they operate and that’s really only about half of the world to us.
Secondly, for gateways planned, absolutely we’re always looking at additional gateways. We’re looking at gateways specific to the ADS-B opportunity which would handle certain air traffic routes.
We’re looking at a number of other things around ADS-B which would broaden the appeal of the already appealing opportunity there. So we’re always looking at gateways to fill in different areas of the world.
And lastly, in terms of the ground upgrades that you were talking about. Lyman, was that to see the second generation ground infrastructure holistically, were you asking…
Lyman Delano
Yes, that’s what I am referring to, just the preparing for the second generation equipment.
James Monroe
Right. As you know, we timed the second generation ground to occur approximately a year or 2 after the satellites are placed in service.
I mean there were several different reasons for that. And so we still look at the ground infrastructure as lagging the last launch by somewhere between 1 and 2 years.
And so I mean from today you might look at it as a 2 years from now plus or minus.
Lyman Delano
Okay, fine. My other questions related to ADS-B and you talked about it in the May call and just talked on it briefly here, and as a potentially valuable model for Globalstar.
Could you update us particularly in respect to some of the news that we’ve seen coming out of Iridium about their own ADS-B solution which has had a fair amount of publicity and they’ve talked about their joint venture partner NAV Canada, and suppliers Harris and Exelis. I saw in one publication I think it’s the air traffic control newsletter from last week that your counterpart at Iridium had said something to the effect, and I think it’s a quote of his that “Globalstar does not provide real time connectivity over the oceans or poles and never will.”
And could you just comment about the competitive aspects and how to make sure that you can provide this question. Could you address his commentary whether you have a solution for that?
James Monroe
Sure. A couple of points.
One, our solution is almost exactly real time that the solution that is planned by Iridium just by nature of its constellation is different. So the latency involved in our solution is much more satisfactory and that’s because of the bent pipe architecture.
Secondly, I addressed the gateways a couple of strategic gateways allow us to pick up additional aircraft routes and we can place as many or as few of those as are required because gateways as you know are not an expensive undertaking for Globalstar. I mean lastly, there is nothing that prohibits us at all from launching a couple of polar orbiting satellites at our elevation, nothing at all.
It’s just a function of the business model. The business model is a good one.
We will launch additional satellites to cover the poles. Historically that was not a good business for us because there is relatively little usage but the ADS-B opportunity would change the polar opportunity.
So no reason in the world that we would not do that.
Operator
Our next question comes from Tony Lodier [ph] from Scarsdale Equity [ph].
Unknown Analyst
First, I would like to congratulate you guys in getting through this difficult period and for the job you’ve done. And really I have 2 questions.
The first one is whether you could shed any light on whether as a result of this most recent agreement, Thales has agreed to a date whereby they would deliver to you the remaining 6 satellites. And the second question I have is that given the improvement in the performance of your system and the continuing degradation of Iridium system it seems to me that we’re close to a crossover point where your service shortly is going to become better than Iridium’s even without the launch of the 6 satellites.
And given that fact at some point the duplex system should kind of get a -- how should I say, hockey stick type of acceleration boost in revenues from taking business away from Iridium. And I’d like you to comment on how close we might be to that point and how much revenue that might involve?
James Monroe
Tony, why don’t you take the delivery of the satellite issue and I’ll take the other one.
Anthony Navarra
Sure enough, Jay. Thales is working very closely and frankly has been even through the settlement period in getting all of the remaining 6 satellites for delivery to include one additional what we call prototype flight model available by the end of September.
We’re doing additional testing to make sure that the momentum wheels are operating properly. We’re making certain that all of the final subsystems are ready for flight worthiness.
And their current date is that they will be available at the end of September, which will therefore give us the opportunity to make the final launch for Globalstar second generation satellites in December. Obviously we’re still dependent upon their date that they select for all the satellites to be ready.
But the current plan is for them to be done at the end of September which will have us be able to launch the fourth launch in December.
James Monroe
Tony [ph], to the question of the competitive provisioning of Globalstar versus Iridium, clearly Globalstar is back. We have got the least expensive handset by a large margin and it’s a terrific one.
We have $40 plans that allow people all they can eat which are unprecedented in this industry. We have voice quality that is unimaginably clear if you haven't used it, it’s almost landline quality.
And so those are very significant competitive differences. We have seen some releases by Iridium over time and of course we’re in discussion with many of their customers, and there is no question but that they are experiencing some of the difficulties that we experienced in our constellation or seem to be, and as a result there will be a crossover.
We expect that, that crossover is very, very soon and though we’re not testing Iridium system carefully to know exactly what their call completion rates are and their call durations. They are making some announcements about ways that they are ganging satellites together in unique and creative ways in order to solve challenges in their constellation.
So we expect a tough competitive environment with them but I believe that history has shown where customers have the choice with 2 constellations operating at similar quality levels, they have traditionally chosen Globalstar in the areas that we serve, which is the land masses where most of the population of the world is.
Unknown Analyst
Your costs are much lower than I would say I would guess, right? At least on an incremental basis.
James Monroe
Well, if you look at the operations of the constellation, I can't speak to that precisely because any number of differences. However, if you look at the total cost of constructing their new constellation against the cost of us constructing ours, theirs will be 3x more expensive.
I mean so the cost of the total operating cost inclusive of depreciation will of course be vastly more expensive in their case than it is in ours. If you want to be in the consumer business which is what we want to be in, you have to be the low cost provider of the service.
Globalstar has said to anybody who would ever listen that that’s exactly what we intend to be, we want to be in the consumer marketplace which we view as the broadest marketplace and we want to be the low cost provider, and by virtue of our constellation, we will be.
Operator
Our last question comes from Jim McIlree from Dominick and Dominick.
James McIlree
It seems that as your constellation improves its coverage you should be able to increase your ARPU. When is it reasonable to expect that to show up in the financials?
Rebecca Clary
As we said in our press release, we expect the coverage levels to reach 90% approximately by the end of the third quarter. That will really allow us to penetrate the market, with our coverage levels at those commercially competitive and acceptable levels.
So I would expect increases in revenue subsequent to that.
James McIlree
So there should be an almost immediate increase?
James Monroe
I think so Jim. The way to think of this is on a couple of different prongs.
We have customers that have been on inexpensive plans historically. Some of them on plans which don’t require them to pay anything except when they are using the system and those people will be converted to higher plans.
That will roll through ARPU. As you sell new plans to people that are not $40 all you can eat plans but something more tailored to a higher quality constellation.
If you add a new customer and he is paying you a $60 a month, or $80 a month that rolls through ARPU as well. So I think that ARPU will be a choppy number to look at over the next couple of quarters as those things happen but generally speaking, it will be up into the right as we add new customers.
James McIlree
Is there a significant amount of duplex subscribers who have gotten a deal where they are going to have low prices permanently or for an extended period of time?
James Monroe
No, the extended periods of time have largely run and so those customers are changing plans now.
Operator
Brian Davidson from Stark Investments.
Brian Davidson
I might have missed this during the prepared remarks but how much is left on the contingent equity line?
Rebecca Clary
We had just under $23 million left.
Brian Davidson
Okay. And you said you expect to withdraw that by the rest of the year?
Rebecca Clary
We do.
Brian Davidson
With respect to the comment about raising additional equity to fully fund needs of the company, can you give some guidance as to how much that would likely be?
James Monroe
I can't give specific guidance at this point but think about Brian any additional CapEx that we do. It is CapEx that plays out over many years, so it’s not necessary for us to go and do a financing which includes 100% of the whole future.
I mean if you think about the use of the term fully funded business plan as we have used it, if you did, a single lump sum financing you would want to do it that way. But the actual needs of the capital are over many years.
Brian Davidson
Okay. How about in terms of the $23 million that’s left on the equity line that will be drawn through the end of the year.
Will any of that be used for CapEx or is that mostly to fund the operations?
Rebecca Clary
Well we do have launched 4 plans before the end of the year. So our operating expenses will be funded by the remaining amount of contingent equity account and then our operating inflows will go to fund the launch.
Anything in addition to that we would need external financing.
Brian Davidson
And you guys have you I’ve assume you’ve retained someone to help you raise the funds?
James Monroe
We’re in conversations with some but we’re not in market right now Brian.
Dean Hirasawa
Operator, are there any other questions?
Operator
We have no further questions.
Dean Hirasawa
Okay. With that, we’ll end the conference call then.
Thank you again everyone for joining us. We appreciate your patience at the beginning for the delay and hopefully you didn’t hear too much thunder from a local storm that just went through.
Please remind that later in this morning an audio recording of the conference call will become available, a telephone dial in and a webcast recording and the copy of the presentation will also be available on our website. Thank you and good morning.
Operator
Thank you, ladies and gentlemen. This concludes today’s conference.
Thank you for participating. You may now disconnect.