Globalstar, Inc. (NYSE American: GSAT) today announced its
financial results for the quarter ended September 30,
2018.
Jay Monroe, Executive Chairman of Globalstar's Board of
Directors, commented, “Last month, we were thrilled to announce the
promotion of Dave Kagan to Chief Executive Officer. Dave has had an
extraordinary career in the satellite industry and this success has
continued during in his short time at Globalstar. I will remain in
my capacity as Chairman of the Board to manage the Company's
strategic opportunities, including our efforts related to
terrestrial spectrum and financing."
Dave Kagan, Chief Executive Officer, commented, "I am honored to
succeed Jay as CEO after he led this great company for the majority
of the last 14 years. This quarter continued our recent trajectory,
with significantly improved financial and operating results from
our satellite business, led by a 17% increase in total revenue.
This increase was driven by rapid growth in ARPU across all core
revenue streams. Although we continue to be challenged by
production issues, sales of our SPOT XTM device started to ramp
during the third quarter. Together with the launch of SPOT XTM in
the CALA region last month, we look forward to continuing this
sales momentum and delivering innovative products into the
marketplace to meet the demand from our dealer network and end
users. While increased service revenue and SPOT device sales
contributed to the net income recorded during the third quarter,
non-cash items were the largest drivers. Importantly, we are
excited to report that Adjusted EBITDA climbed 23% over the prior
year's third quarter, reaching its highest level since before the
Company went public in 2006."
Mr. Monroe continued, "Despite the continued fundamental
improvement of the operating business and the potential of the
Company’s vast spectrum holdings, the equity market appears to be
focused on litigation and required future capital raises. As we
have done in the past, we are working to resolve these issues."
THIRD QUARTER FINANCIAL REVIEW
Revenue
Total revenue for the third quarter of 2018 increased by $5.2
million, or 17%, from the third quarter of 2017. This increase
resulted from higher service revenue and subscriber equipment
sales.
Service revenue increased $3.8 million, or 15%, in the third
quarter of 2018 due to higher ARPU in all core revenue streams.
Increases in Duplex and SPOT ARPU, which were up 27% and 14%,
respectively, drove a combined $4.2 million increase in service
revenue. Rate plan changes that were rolled out across our
subscriber base over the last several quarters continue to be the
main component of this growth contributing approximately $2.9
million to the total ARPU increase. Also contributing to this ARPU
growth was the acceleration of Duplex prepaid usage revenue,
resulting from our adoption of the new revenue recognition standard
on January 1, 2018. A 9% decline in the average Duplex subscriber
base partially offset the increase in service revenue generated by
higher ARPU. New activations were not sufficient to offset churn by
our legacy Duplex customers due to fewer equipment sales.
Subscriber equipment sales revenue increased $1.4 million, or
32%, due primarily to sales of the recently launched SPOT XTM
device, the latest generation in our SPOT family of products. We
expect sales to continue to grow as immediate market demand for
this product has resulted in back order status for much of the past
few months. The brand loyalty associated with our SPOT products is
evident. Earlier this month we recorded our 6,000th SPOT rescue,
proving how essential our technology is to saving lives. Revenue
from Simplex equipment sales also increased during the third
quarter of 2018. Although this increase was minor, we recorded
revenue of $1.2 million related to our recently launched SmartOne
Solar™ device; the increase in revenue from this new product was
offset by a decline in sales of the previous generation SmartOne
tracking device, which experienced high sales volume in the third
quarter of 2017 to support disaster recovery efforts related to
hurricanes.
Operating Loss
Operating loss increased $7.2 million during the third quarter
of 2018. This increase was due to higher operating expenses of
$12.4 million, offset partially by a $5.2 million increase in total
revenue (for reasons previously discussed). Contributing to the
increase in operating expenses was a $5.5 million increase in
marketing, general and administrative (MG&A) expenses resulting
primarily from higher costs associated with the proposed merger
with Thermo Acquisitions, Inc. that was announced in April 2018 and
terminated in July 2018. A $5.3 million increase in depreciation,
amortization and accretion expense also contributed to the increase
in operating expenses as the majority of the costs from our
upgraded ground infrastructure was placed into service earlier this
year. Cost of services and cost of subscriber equipment sales were
also higher than the third quarter of 2017.
Net Income
Net income decreased $43.4 million during the third quarter of
2018 due primarily to a lower non-cash derivative gain of $39.7
million. Changes in the Company's stock price and volatility
assumptions were the primary factors of the derivative adjustments
recorded during the respective quarters.
Adjusted EBITDA
Adjusted EBITDA increased 23% to $12.2 million during the third
quarter of 2018 primarily from a $5.2 million increase in total
revenue, offset partially by a $2.9 million increase in total
operating expenses (excluding EBITDA adjustments). This improvement
was due to an increase in service revenue, offset partially by an
increase in MG&A expenses resulting primarily from subscriber
acquisition and other customer driven costs.
CONFERENCE CALL
The Company will conduct an investor conference call on
November 1, 2018 at 5:00 p.m. ET to discuss its third quarter
2018 financial results.
Details are as follows:
Conference Call:
5:00 p.m. ET
Investors 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 (888)
895-5271 (US and Canada), 1 (847) 619-6547 (International) and use
the participant pass code 47632872.
Audio Replay: A replay of the earnings call
will be available for a limited time and can be heard after 7:30
p.m. ET on November 1, 2018. Dial: 1 (888) 843-7419 (US and
Canada), 1 (630) 652-3042 (International) and pass code 4763 2872#.
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.
GLOBALSTAR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended September 30, 2018
2017 Revenue: Service revenue $ 29,898 $
26,069 Subscriber equipment sales 5,794 4,389 Total
revenue 35,692 30,458 Operating expenses: Cost of
services (exclusive of depreciation, amortization, and accretion
shown separately below) 9,429 9,315 Cost of subscriber equipment
sales 4,426 2,905 Marketing, general and administrative 15,061
9,545 Depreciation, amortization, and accretion 24,738
19,415 Total operating expenses 53,654 41,180
Operating loss (17,962 ) (10,722 ) Other income (expense): Loss on
extinguishment of debt — (6,306 ) Interest income and expense, net
of amounts capitalized (13,358 ) (8,954 ) Derivative gain 39,059
78,840 Other 1,331 (385 ) Total other income (expense)
27,032 63,195 Income before income taxes 9,070 52,473
Income tax expense 51 67 Net income $ 9,019 $
52,406 Net income per common share: Basic $ 0.01 $
0.04 Diluted 0.01 0.04 Weighted-average shares outstanding: Basic
1,264,516 1,169,993 Diluted 1,427,800 1,345,905
GLOBALSTAR, INC.
RECONCILIATION OF GAAP NET INCOME
(LOSS) TO NON-GAAP ADJUSTED EBITDA
(In thousands)
(Unaudited)
Three Months Ended September 30, 2018
2017 Net income $ 9,019 $ 52,406
Interest income and expense, net 13,358 8,954 Derivative gain
(39,059 ) (78,840 ) Income tax expense 51 67 Depreciation,
amortization, and accretion 24,738 19,415 EBITDA
8,107 2,002 Non-cash compensation 1,536 1,230 Foreign
exchange and other (1,398 ) 314 Loss on extinguishment of debt —
6,306 Merger-related costs 2,991 — Shareholder litigation costs 928
— Adjusted EBITDA (1) $ 12,164 $ 9,852
(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 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 September 30, 2018
2017 Service
Equipment Service Equipment
Revenue Duplex $ 12,213 $ 432 $ 10,576 $ 777 SPOT 12,957 2,871
11,248 1,410 Simplex 3,542 2,318 2,903 2,192 IGO 257 141 260 54
Other 929 32 1,082 (44 ) $ 29,898 $
5,794 $ 26,069 $ 4,389 Average
Subscribers Duplex 66,004 72,468 SPOT 292,521 289,265 Simplex
361,472 314,601 IGO 26,196 36,894 ARPU (1) Duplex $ 61.68 $
48.64 SPOT 14.76 12.96 Simplex 3.27 3.08 IGO 3.27 2.35 (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 revenue or ARPU in prior
periods.
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version on businesswire.com: https://www.businesswire.com/news/home/20181101006007/en/
Globalstar, Inc.Samantha
DeCastroinvestorrelations@globalstar.com
Globalstar (AMEX:GSAT)
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