Globalstar, Inc. (NYSE American: GSAT) today announced its
financial results for the quarter ended March 31, 2018.
Jay Monroe, Chairman and Chief Executive Officer of Globalstar,
commented, “In late April, after our quarter ended, we announced a
transformative transaction to merge Globalstar with FiberLight and
almost $400 million of other assets to create a diversified telecom
company with assets spanning satellite, spectrum and fiber. We
expect that the combined company will have a fortified balance
sheet, generate significant cash flow and will be well positioned
for the evolution of next-generation networks. We look forward to
closing the transaction in the third quarter."
Mr. Monroe continued, "We are pleased with continued growth in
the core satellite business and to see this reflected in the first
quarter financial results. Increased ARPU across all revenue
streams drove a 17% increase in total revenue. We recorded net
income during the quarter due to a non-cash derivative gain
resulting primarily from changes in our stock price while producing
strong Adjusted EBITDA growth of 39% over the prior year's first
quarter.
In April, we released our highly anticipated Sat-Fi2TM, the
first Duplex product utilizing our next-generation ground
infrastructure, providing reliable satellite communications via any
Wi-Fi enabled smart device. In late March, we also released our
latest Simplex device, SmartOne SolarTM, a solar-powered asset
tracking device that expands the Simplex market by addressing
operations in remote areas that would otherwise go unserved or
underserved without solar capabilities. Our new two-way SPOT
product is launching imminently and will allow users to communicate
in remote areas like never before, further bolstering our product
line up. We also continue to expand into other service offerings
including the launch of Globalstar Automotive, which will serve the
connected autonomous vehicle market. On the spectrum front, we
achieved "working item" status at the 3GPP meeting in Chennai,
India, keeping us on schedule for standardization."
FIRST QUARTER FINANCIAL REVIEW
Revenue
Total revenue for the first quarter of 2018 increased by $4.0
million, or 17%, from the first quarter of 2017. This increase
resulted primarily from higher service revenue across all core
revenue streams, driven by growth in ARPU. Partially offsetting
this increase was a decrease in subscriber equipment sales.
Service revenue increased $4.5 million, or 21%, in the first
quarter of 2018 compared to the first quarter of 2017. The majority
of this increase resulted from higher SPOT and Duplex service
revenue, which increased $2.6 million and $1.2 million,
respectively. Higher SPOT and Duplex ARPU were the main drivers for
this growth, increasing 18% and 23%, respectively, from the first
quarter of 2017. Rate plan increases continue to be the primary
driver for higher ARPU. Fluctuations in our average subscriber base
also impacted service revenue this quarter, with SPOT subscribers
increasing 5% and Duplex subscribers decreasing 6%. Also
contributing to the increase in service revenue was a $0.7 million
increase in Simplex service revenue, driven by increases in both
ARPU and average subscribers.
Subscriber equipment sales revenue declined $0.5 million, or
16%, due primarily to a decrease in Duplex equipment revenue.
Volume for our Duplex equipment was lower due to our continued
management of remaining phone inventory anticipating the launch of
Sat-Fi2TM in April. Offsetting this decline was an increase in SPOT
equipment revenue which is expected to accelerate after the release
of the next generation product.
Loss from Operations
Loss from operations decreased $2.1 million, or 14%, from $15.1
million in the first quarter of 2017 to $13.0 million in the first
quarter of 2018 due primarily to a $4.0 million increase in total
revenue, for the reasons discussed above. Higher operating expenses
partially offset this increase due primarily to a 20% increase in
marketing, general and administrative (MG&A) costs; cost of
services were flat and cost of subscriber equipment sales increased
5%. The increase in MG&A was driven by the addition of
personnel, both internal and external, to support our strategic
initiatives, including spectrum related activities and other
technology opportunities, such as our IoT and connected car product
development.
Net Income (Loss)
Net income (loss) fluctuated from a loss of $20.2 million in the
first quarter of 2017 to income of $87.9 million in the first
quarter of 2018. The primary reason for this change was a higher
non-cash derivative gain, up from $3.2 million in the first quarter
of 2017 to $108.9 million in the first quarter of 2018. The gain
recorded during the first quarter of 2018 resulted from variations
in several valuation inputs, including the decline in the Company's
stock price from December 31, 2017 to March 31, 2018 as well as
shorter remaining estimated term of the instruments.
Adjusted EBITDA
Adjusted EBITDA increased 39% to $7.5 million during the first
quarter of 2018 driven primarily by a $4.0 million, or 17%,
increase in total revenue, offset partially by a $1.9 million
increase in total operating expenses (excluding EBITDA
adjustments). The increase in operating expenses during the first
quarter of 2018 resulted from higher MG&A expenses, as
discussed above.
MERGER AGREEMENT
On April 25, 2018, Globalstar announced it signed a merger
agreement with Thermo Acquisitions, Inc. (Thermo Acquisitions)
pursuant to which the following assets will be combined with
Globalstar: metro fiber provider FiberLight, LLC (FiberLight), 15.5
million shares of common stock of CenturyLink, Inc. (NYSE: CTL)
(CenturyLink), $100 million of cash and minority investments in
complementary businesses and assets of $25 million in exchange for
Globalstar common stock valued at approximately $1.65 billion,
subject to adjustments. Thermo Acquisition is controlled by Jay
Monroe, Executive Chairman of the Board of Directors and Chief
Executive Officer of Globalstar. At closing, we expect that the
parent company will be renamed Thermo Companies, Inc., and its
stock will continue to trade publicly. The transaction has been
unanimously recommended by the Special Committee of the Board of
Directors of Globalstar, consisting entirely of independent
directors, and unanimously approved by the full Board of Directors.
The merger is expected to close in the third quarter of 2018.
The merger is expected to create a fundamentally stronger
company with significantly reduced leverage and diversified
holdings serving the global telecommunications industry. The
anticipated combined Adjusted EBITDA of the pro forma Company is
projected to be at least 4x standalone Globalstar. The pro forma
cash flow of the combined Company is expected to be derived from
five principal sources including (i) satellite operations, (ii)
leasing or other monetization revenue from spectrum, (iii)
FiberLight operations, (iv) dividend income and (v) other Thermo
Investments’ returns. The pro forma Company is expected to benefit
from Globalstar’s $1.7 billion U.S. net operating losses allowing
growth in a tax efficient manner. By materially improving the
combined Company’s liquidity position, Globalstar believes the
merger will best position the Company for monetizing its 2.4 GHz
terrestrial spectrum in addition to maximizing the global use of
its licensed spectrum.
Globalstar has reached an agreement in principle with its
lenders on an amendment of its BPIFAE (formerly known as COFACE)
senior debt facility, which is subject in all respects to lender
and BPIFAE committee approvals as well as satisfactory final due
diligence. Additionally, final amended terms will be subject to
documentation in a binding agreement to be agreed among the parties
that will be effective concurrent with the closing of the merger.
The agreement in principle provides for annual deferrals of
principal amortization up to $30 million and a fixed margin of
3.25% over 6 month LIBOR, both subject to liquidity tests performed
over time.
Upon completion of the merger, the Company expects to initiate a
rights offering of up to $100 million for minority shareholders on
terms to be agreed. It is anticipated that the rights offering
would be consummated approximately 45 days following closing, is
expected to be available to holders of record on the date of
closing and will include an over-subscription privilege allowing
for the subscription of additional shares with allotments otherwise
on a pro rata basis.
CONFERENCE CALL
The Company will conduct an investor conference call on
May 10, 2018 at 8:30 a.m. ET to discuss its first quarter 2018
financial results.
Details are as follows: Conference Call:
8:30 a.m. ETInvestors and the media are
encouraged to listen to the call through the Investor Relations
section of the Company's website at www.globalstar.com/corporate.
If you would like to participate in the live question and answer
session following the Company's conference call, please dial 1
(800) 708-4540 (US and Canada), 1 (847) 619-6397 (International)
and use the participant pass code 46617030.
Audio Replay: A replay of the earnings
call will be available for a limited time and can be heard after
11:00 a.m. ET on May 10, 2018. Dial: 1 (888) 843-7419 (US and
Canada), 1 (630) 652-3042 (International) and pass code 4661 7030#.
About Globalstar, Inc.
Globalstar is a leading provider of mobile satellite voice and
data services. Customers around the world in industries such as
government, emergency management, marine, logging, oil & gas
and outdoor recreation rely on Globalstar to conduct business
smarter and faster, maintain peace of mind and access emergency
personnel. Globalstar data solutions are ideal for various asset
and personal tracking, data monitoring, SCADA and IoT applications.
The Company's products include mobile and fixed satellite
telephones, the innovative Sat-Fi satellite hotspot, Simplex and
Duplex satellite data modems, tracking devices and flexible service
packages.
Note that all SPOT products described in this press release are
the products of SPOT LLC, a subsidiary of Globalstar, which is not
affiliated in any manner with Spot Image of Toulouse, France or
Spot Image Corporation of Chantilly, Virginia.
For more information, visit www.globalstar.com.
Safe Harbor Language for Globalstar Releases
This press release contains certain statements that are
“forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995. These forward-looking
statements are based on current expectations and assumptions that
are subject to risks and uncertainties which may cause actual
results to differ materially from the forward-looking statements.
Forward-looking statements, such as the statements regarding our
expectations with respect to the pursuit of terrestrial spectrum
authorities globally, future increases in our revenue and
profitability and other statements contained in this release
regarding matters that are not historical facts, involve
predictions. Any forward-looking statements made in this press
release are believed to be accurate as of the date made and are not
guarantees of future performance. Actual results or developments
may differ materially from the expectations expressed or implied in
the forward-looking statements, and we undertake no obligation to
update any such statements. Additional information on factors that
could influence our financial results is included in our filings
with the Securities and Exchange Commission, including our Annual
Report on Form 10-K, Quarterly Reports on Form 10-Q and Current
Reports on Form 8-K.
In addition forward-looking statements related to the merger,
such as the structure, timing and completion of the proposed
transaction, future financial and operating results, benefits and
synergies of the proposed transaction, future opportunities for the
combined company, the ability of the parties to satisfy the
conditions to closing contained in the Merger Agreement, the
complete of the 2017 FiberLight audit and the results thereof, and
any adjustments to the merger consideration based on the last
twelve month Adjusted EBITDA of FiberLight and other statements
contained in this release regarding matters that are not historical
facts, involve predictions. Any such forward-looking statements
made in this press release are believed to be accurate as of the
date made and are not guarantees of future performance. Actual
results or developments may differ materially from the expectations
expressed or implied in the forward-looking statements, and we
undertake no obligation to update any such statements. These risks,
as well as other risks associated with the transaction, will be
more fully discussed in the proxy statement/prospectus that will be
included in the Registration Statement on Form S-4 that will be
filed with the SEC in connection with the transaction.
GLOBALSTAR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended March 31, 2018
2017 Revenue: Service revenue $ 26,010 $
21,481 Subscriber equipment sales 2,739 3,171 Total
revenue 28,749 24,652 Operating expenses: Cost of
services (exclusive of depreciation, amortization, and accretion
shown separately below) 9,029 8,974 Cost of subscriber equipment
sales 2,172 2,096 Marketing, general and administrative 11,275
9,419 Depreciation, amortization, and accretion 19,231
19,294 Total operating expenses 41,707 39,783
Loss from operations (12,958 ) (15,131 ) Other income (expense):
Gain on equity issuance — 706 Interest income and expense, net of
amounts capitalized (7,353 ) (8,828 ) Derivative gain 108,944 3,223
Other (662 ) (95 ) Total other income (expense) 100,929
(4,994 ) Income (loss) before income taxes 87,971 (20,125 ) Income
tax expense 41 36 Net income (loss) $ 87,930 $
(20,161 ) Net income (loss) per common share: Basic $ 0.07 $
(0.02 ) Diluted 0.06 (0.02 ) Weighted-average shares outstanding:
Basic 1,262,336 1,113,968 Diluted 1,437,328 1,113,968
GLOBALSTAR, INC.
RECONCILIATION OF GAAP NET INCOME
(LOSS) TO NON-GAAP ADJUSTED EBITDA
(In thousands)
(Unaudited)
Three Months Ended March 31, 2018
2017 Net income (loss) $ 87,930 $ (20,161 )
Interest income and expense, net 7,353 8,828 Derivative gain
(108,944 ) (3,223 ) Income tax expense 41 36 Depreciation,
amortization, and accretion 19,231 19,294 EBITDA
5,611 4,774 Non-cash compensation 1,276 1,318 Foreign
exchange and other 595 24 Gain on equity issuance — (706 )
Adjusted EBITDA (1) $ 7,482 $ 5,410 (1) EBITDA
represents earnings before interest, income taxes, depreciation,
amortization, accretion and derivative (gains)/losses. Adjusted
EBITDA excludes non-cash compensation expense, reduction in the
value of assets, foreign exchange (gains)/losses and certain other
non-recurring charges as applicable. Management uses Adjusted
EBITDA in order to manage the Company's business and to compare its
results more closely to the results of its peers. EBITDA and
Adjusted EBITDA do not represent and should not be considered as
alternatives to GAAP measurements, such as net income/ (loss).
These terms, as defined by us, may not be comparable to similarly
titled measures used by other companies. In connection with the
adoption of Accounting Standards Updates ("ASU") No. 2017-07,
Compensation-Retirement Benefits: Improving the Presentation of Net
Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,
the Company has recast Adjusted EBITDA in prior periods and in
connection with the adoption of ASU No. 2014-09, Revenue from
Contracts with Customers, the Company has not recast Adjusted
EBITDA in prior periods.
The Company uses Adjusted EBITDA as a
supplemental measurement of its operating performance. The Company
believes it best reflects changes across time in the Company's
performance, including the effects of pricing, cost control and
other operational decisions. The Company's management uses Adjusted
EBITDA for planning purposes, including the preparation of its
annual operating budget. The Company believes that Adjusted EBITDA
also is useful to investors because it is frequently used by
securities analysts, investors and other interested parties in
their evaluation of companies in similar industries. As indicated,
Adjusted EBITDA does not include interest expense on borrowed money
or depreciation expense on our capital assets or the payment of
income taxes, which are necessary elements of the Company's
operations. Because Adjusted EBITDA does not account for these
expenses, its utility as a measure of the Company's operating
performance has material limitations. Because of these limitations,
the Company's management does not view Adjusted EBITDA in isolation
and also uses other measurements, such as revenues and operating
profit, to measure operating performance.
GLOBALSTAR, INC.
SCHEDULE OF SELECTED OPERATING
METRICS
(In thousands, except subscriber and ARPU
data)
(Unaudited)
Three Months Ended March 31, 2018
2017 Service
Equipment Service Equipment
Revenue Duplex $ 8,783 $ 431 $ 7,598 $
899 SPOT 12,962 1,433 10,397 1,236 Simplex 3,089 804 2,416 907 IGO
209 70 211 139 Other 967 1 859
(10 ) $ 26,010 $ 2,739 $
21,481 $ 3,171 Average
Subscribers Duplex 69,033 73,444 SPOT 293,561 278,790 Simplex
332,813 295,576 IGO 31,200 37,768 ARPU (1) Duplex $ 42.41 $
34.48 SPOT 14.72 12.43 Simplex 3.09 2.72 IGO 2.23 1.86 (1)
Average monthly revenue per user (ARPU) measures service revenues
per month divided by the average number of subscribers during that
month. Average monthly revenue per user as so defined may not be
similar to average monthly revenue per unit as defined by other
companies in the Company's industry, is not a measurement under
GAAP and should be considered in addition to, but not as a
substitute for, the information contained in the Company's
statement of operations. The Company believes that average monthly
revenue per user provides useful information concerning the appeal
of its rate plans and service offerings and its performance in
attracting and retaining high value customers. In connection with
the adoption of ASU No. 2014-09, Revenue from Contracts with
Customers, the Company has not recast Adjusted EBITDA in prior
periods.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180510005145/en/
Globalstar, Inc.Samantha
DeCastroinvestorrelations@globalstar.com
Globalstar (AMEX:GSAT)
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