Globalstar, Inc. (NYSE American: GSAT) today announced financial
and operating results for the fourth quarter and year ended
December 31, 2018.
Dave Kagan, Chief Executive Officer of Globalstar, commented,
“In December, we completed pivotal events positioning us well to
realize the value of our assets. First, we announced that the Third
Generation Partnership Project (“3GPP”) approved Globalstar’s
S-band spectrum at 2483.5-2495 MHz for terrestrial use. The 3GPP
standardization approval represents the culmination of intensive
standards work driven by our technical team and the wireless
industry’s support leading to Globalstar’s newly designated 3GPP
Band 53. Second, we settled an ongoing litigation with certain
large shareholders. As part of this settlement agreement, the
parties agreed to enact changes to our corporate governance
structure and joined together to support the late 2018 financing.
We raised $60 million in a fully backstopped equity financing to
secure funding for our December 2018 debt obligations and continue
our ongoing compliance with the terms of our Facility Agreement. Of
our corporate governance changes, the addition of a Strategic
Review Committee is among the most significant with new members
having substantial operating, spectrum and capital structure
experience. This Committee is laser-focused on helping to drive the
Company to realize the full value of our assets and fortify our
balance sheet.”
Dave Kagan continued, “Turning to 2018 financial performance,
our operating business continued its positive trajectory with
significantly improved results, highlighted by a 15% increase in
total revenue from 2017, a reduced net loss and the highest annual
Adjusted EBITDA ever recognized by Globalstar. While I am proud of
what we have accomplished to date, I remain focused on the future.
I believe that the Company's significant assets combined with an
enhanced leadership team provide a foundation for financial growth
and asset value realization that is more solid than ever.”
FOURTH QUARTER FINANCIAL REVIEW
Revenue
Total revenue for the fourth quarter of 2018 increased by $2.5
million, or 9%, from the fourth quarter of 2017 due to increases in
both service revenue and subscriber equipment sales.
Service revenue increased $0.6 million, or 2%, in the fourth
quarter of 2018 compared to the fourth quarter of 2017. Higher
Simplex service revenue contributed over 90% of this increase,
driven primarily by an increase in average subscribers. The higher
subscriber count resulted from commercial Simplex equipment sales
during the last twelve months, primarily in North America due to
the 2018 launch of SmartOne SolarTM as well as strong sales of
legacy devices. The SmartOne SolarTM is a solar-powered IoT asset
tracking device (with ATEX and intrinsically safe certifications),
proving to be a cost-effective, low power and secure monitoring
solution for a variety of security applications.
Subscriber equipment sales revenue increased $1.9 million, or
70%, in the fourth quarter of 2018 compared to the fourth quarter
of 2017. This growth was driven by sales of the recently launched
SmartOne SolarTM and SPOT XTM, contributing $1.0 million and $0.6
million, respectively, to the increase.
Loss from Operations
Loss from operations decreased $11.7 million, or 39%, to $18.4
million in the fourth quarter of 2018. This decrease was due to a
$9.2 million decrease in operating expenses, coupled with a $2.5
million increase in total revenue. The decrease in operating
expenses was due primarily to $17.9 million in asset impairment
charges recorded during the fourth quarter of 2017 that did not
recur in 2018. This decrease was offset partially by increases in
the cost of subscriber equipment sales, MG&A expenses and
depreciation. In line with the increase in subscriber equipment
sales revenue discussed above, the increase in cost of subscriber
equipment sales reflected a higher volume of units sold during the
fourth quarter of 2018 at a similar blended margin to the prior
year's fourth quarter. MG&A expenses increased during 2018
primarily due to $1.5 million in costs incurred to defend the
securities claim that was settled during the fourth quarter.
Depreciation expense increased following approximately $208.0
million of ground infrastructure assets placed into service during
2018, which represent the gateways capable of supporting commercial
traffic from our newest Duplex device.
Net Loss
Net loss was $96.5 million for the fourth quarter of 2018
compared to $22.6 million for the fourth quarter of 2017. This
increase resulted primarily from the change in non-cash derivative
valuation adjustments during the respective quarters, which
contributed $81.1 million to the increase in net loss. This
fluctuation resulted primarily from changes in certain valuation
inputs, including stock price, stock price volatility, discount
rate and remaining estimated term of the instruments. Lower
operating expenses and an increase in total revenue partially
offset the impact to net loss from derivative changes.
Adjusted EBITDA
Adjusted EBITDA for the quarters ended December 31, 2018
and 2017 was $9.7 million and $8.7 million, respectively. This 11%
increase in Adjusted EBITDA was due to a $2.5 million increase in
revenue offset partially by a $1.5 million increase in expenses
(excluding EBITDA adjustments). The increase in expenses during the
fourth quarter of 2018 resulted primarily from higher cost of
subscriber equipment sales as cost of services and MG&A costs
were flat after adjusting for non-cash stock compensation and
litigation costs. The $1.5 million increase in cost of subscriber
equipment sales reflected a higher volume of units sold during the
fourth quarter of 2018 as previously discussed.
ANNUAL FINANCIAL REVIEW
Revenue
Total revenue increased $17.4 million, or 15%, to $130.1 million
during 2018. This increase was due to higher service revenue of
$12.6 million and higher revenue generated from subscriber
equipment sales of $4.8 million. The increase in service revenue
resulted from higher ARPU in all core revenue streams. SPOT service
revenue contributed over half of the total increase in service
revenue, increasing $6.9 million, or 15%, from 2017. Higher SPOT
ARPU of 13% was the primary driver of the increase in SPOT service
revenue due to rate plan changes and the blend of subscribers in
the SPOT base. For example, service rates for subscribers
activating our SPOT Gen3 and SPOT XTM devices are higher than our
2017 ARPU. Duplex and Simplex service revenue increases of $3.6
million and $2.5 million, respectively, also contributed to the
increase in service revenue. An increase in Duplex ARPU of 21%
resulted in $7.2 million additional revenue, which was offset
partially by a decline in average subscribers of 10%, or a $3.6
million decrease in revenue. Duplex ARPU was impacted by new
subscribers joining the network at higher rates than 2017 ARPU
levels, as well as rate plan increases for legacy subscribers.
Average Duplex subscribers were lower due to lower gross
activations resulting from fewer equipment sales over the last
twelve months and a consistent level of churn year over year.
Finally, the increase in Simplex service revenue was driven by
higher average subscribers and ARPU due primarily to sales of our
SmartOne SolarTM device during 2018, which also contributed
significantly to the increase in subscriber equipment sales when
compared to 2017.
Loss from Operations
Loss from operations decreased $21.1 million, or 31%, during
2018 due to a $17.4 million increase in total revenue, coupled with
a $3.7 million decrease in operating expenses. The $3.7 million
decrease in operating expenses was due to impairment charges for
inventory and long-lived assets that were recorded in the prior
year and did not recur in 2018 as well as the reversal of a
previously recorded contract termination charge during 2018, offset
partially by increases in cost of subscriber equipment sales,
MG&A and depreciation expense. The increase in cost of
subscriber equipment sales was due to a higher volume of units sold
during 2018 and at a lower blended margin compared to 2017. The
MG&A increase was driven primarily by $10.8 million in costs
incurred to support our efforts associated with the proposed merger
and associated litigation. Finally, the increase in depreciation
expense was due to ground infrastructure assets placed into service
during 2018, which represent the gateways capable of supporting
commercial traffic from our newest Duplex device.
Net Loss
Net loss was $6.5 million for 2018 compared to $89.1 million for
2017 due primarily to non-cash items, including a $59.9 million
increase in derivative gains. An increase in total revenue and a
decrease in operating expenses further reduced net loss, for
reasons previously discussed.
Adjusted EBITDA
Adjusted EBITDA increased 26% to $40.6 million in 2018 from
$32.2 million in 2017. The increase was driven primarily by a $17.4
million increase in total revenue, offset partially by a $9.0
million increase in operating expenses (excluding EBITDA
adjustments). Approximately half of the increase in operating
expenses was due to higher cost of subscriber equipment sales as
previously discussed. The remaining increase was due mostly to
higher MG&A costs, including professional fees to pursue
business development opportunities as well as subscriber
acquisition and other customer-driven costs.
CONFERENCE CALL
The Company will conduct an investor conference call on
February 28, 2019 at 5:00 p.m. ET to discuss the 2018 fourth
quarter and annual 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 (800)
708-4539 (US and Canada), 1 (847) 619-6396 (International) and use
the participant pass code 48129163.
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 February 28, 2019. Dial: 1 (888) 843-7419 (US and
Canada), 1 (630) 652-3042 (International) and pass code 4812 9163#.
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, M2M and IoT applications.
The Company's products include mobile and fixed satellite
telephones, the innovative satellite Wi-Fi 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.
CONSOLIDATED STATEMENTS OF
OPERATIONS
(In thousands, except per share data)
(unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31, 2018
2017 2018 2017 Revenue: Service revenue
$ 27,186 $ 26,622 $ 111,089 $ 98,473 Subscriber equipment sales
4,760 2,805 19,024 14,187 Total revenue
31,946 29,427 130,113 112,660 Operating
expenses: Cost of services (exclusive of depreciation, amortization
and accretion shown separately below) 9,664 9,697 37,648 37,022
Cost of subscriber equipment sales 3,673 2,165 14,441 9,944 Cost of
subscriber equipment sales - reduction in the value of inventory —
843 — 843 Marketing, general and administrative 13,163 10,323
55,443 38,759 Reduction in the value of long-lived assets — 17,040
— 17,040 Revision to contract termination charge — — (20,478 ) —
Depreciation, amortization and accretion 23,853 19,514
90,438 77,498 Total operating expenses 50,353
59,582 177,492 181,106 Loss from
operations (18,407 ) (30,155 ) (47,379 ) (68,446 ) Other income
(expense): Loss on extinguishment of debt — — — (6,306 ) Gain on
equity issuance — — — 2,670 Interest income and expense, net of
amounts capitalized (12,596 ) (8,139 ) (43,612 ) (34,771 )
Derivative gain (loss) (64,824 ) 16,249 81,120 21,182 Gain on legal
settlement — — 6,779 — Other (617 ) (559 ) (3,299 ) (3,213 ) Total
other income (expense) (78,037 ) 7,551 40,988 (20,438
) Loss before income taxes (96,444 ) (22,604 ) (6,391 ) (88,884 )
Income tax expense (benefit) 9 (19 ) 125 190
Net loss $ (96,453 ) $ (22,585 ) $ (6,516 ) $ (89,074 ) Loss
per common share: Basic $ (0.07 ) $ (0.02 ) $ (0.01 ) $ (0.08 )
Diluted (0.07 ) (0.02 ) (0.01 ) (0.08 ) Weighted-average
shares outstanding: Basic 1,287,742 1,251,826 1,269,548 1,166,581
Diluted 1,287,742 1,251,826 1,269,548 1,166,581
GLOBALSTAR, INC.
RECONCILIATION OF GAAP NET INCOME
(LOSS) TO NON-GAAP ADJUSTED EBITDA
(In thousands)
(unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31, 2018
2017 2018 2017 Net loss $ (96,453 ) $
(22,585 ) $ (6,516 ) $ (89,074 ) Interest income and
expense, net 12,596 8,139 43,612 34,771 Derivative (gain) loss
64,824 (16,249 ) (81,120 ) (21,182 ) Income tax expense (benefit) 9
(19 ) 125 190 Depreciation, amortization, and accretion 23,853
19,514 90,438 77,498 EBITDA 4,829
(11,200 ) 46,539 2,203 Reduction in the value of inventory —
843 — 843 Reduction in the value of long-lived assets — 17,040 —
17,040 Non-cash compensation 2,811 1,622 7,373 5,594 Foreign
exchange and other 564 433 3,067 2,873 Loss on extinguishment of
debt — — — 6,306 Gain on equity issuance — — — (2,670 ) Merger and
shareholder litigation costs 1,500 — 10,831 — Gain on legal
settlement — — (6,779 ) — Revision to contract termination charge —
— (20,478 ) — Adjusted EBITDA (1) $ 9,704
$ 8,738 $ 40,553 $ 32,189
(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 Twelve Months Ended
December 31, December 31, 2018
2017 2018 2017 Service
Equipment Service Equipment
Service Equipment Service
Equipment Revenue Duplex $ 10,093 $ 403 $ 10,139 $ 466 $
41,223 $ 2,016 $ 37,635 $ 2,754 SPOT 12,576 1,834 12,589 933 52,363
8,046 45,427 5,394 Simplex 3,612 2,362 3,101 1,072 13,459 8,330
10,946 5,243 IGO 250 151 221 256 932 498 1,068 779 Other 655
10 572 78 3,112 134 3,397
17 $ 27,186 $ 4,760 $ 26,622 $ 2,805 $
111,089 $ 19,024 $ 98,473 $ 14,187
Average Subscribers Duplex 62,999 71,261 65,501 72,443 SPOT 290,461
292,798 291,289 285,683 Simplex 372,658 326,720 354,678 313,553 IGO
26,816 36,463 31,537 37,165 ARPU (1) Duplex $ 53.40 $ 47.43
$ 52.45 $ 43.29 SPOT 14.43 14.33 14.98 13.25 Simplex 3.23 3.16 3.16
2.91 IGO 3.11 2.02 2.46 2.39
(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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190228005890/en/
Investor Contact Information:Kyle PickensEmail:
investorrelations@globalstar.com
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