Globalstar, Inc. (NYSE American: GSAT) today announced its
financial results for the quarter ended March 31, 2019.
Dave Kagan, Chief Executive Officer, commented, "We continued to
penetrate the commercial IoT market during the first quarter,
evidenced by a 16% increase in this subscriber base which has grown
to over 390,000 customers at the end of the quarter. While our
newest solar-powered IoT device drove the growth, sales of our
legacy devices, which more than doubled from the prior year's first
quarter, also contributed meaningfully to a strong increase in
total revenue. The success across our product portfolio
demonstrates our ability to address various use cases and
applications that are required by our customers in the rapidly
growing IoT market. We have a robust pipeline of small bit data
solutions that align well with our satellite network. During the
first quarter, our elevated operating expenses reflected our
investment in this area of the business with many of our current
initiatives focused on expanding our IoT products and technology.
Our traction to date is an excellent indication that this focus is
well-founded as we continue to support growth through development
efforts."
Kagan continued, “Our strategy at Globalstar has been and
remains to maximize utilization of our unique combination of
satellite assets and terrestrial spectrum rights. We are
continuously evaluating opportunities to do just that, exploring
new products, solutions, distribution agreements, wholesale
arrangements, licensing agreements and partnerships. We also remain
focused on strengthening our balance sheet to best position us to
capitalize on these opportunities.”
OPERATIONAL HIGHLIGHTS
Spectrum Update
The first Band 53 industrial user terminals were received from
certain of our partners, including Nokia and Airspan and
terrestrial trials are ongoing. We are continuing the pursuit of
regulatory approvals around the world and have added terrestrial
authorizations for our S-band spectrum
licenses in several African nations, including one in
March for approximately 30 million POPs. We also continue to make
progress toward authorizations in additional geographies.
Financing Update
Together with our financial advisors, we are exploring various
financing alternatives to address our funding requirements for June
2019 and future periods, including, but not limited to, a financing
and an amendment to our existing debt obligations. We intend to
complete this process in a manner that is in the best interest of
our Company and its shareholders, while taking into account the
requirements of our senior lenders.
FINANCIAL REVIEW
Revenue
Total revenue for the first quarter of 2019 increased $1.3
million, or 5%, from the first quarter of 2018 due to a $1.2
million increase in revenue generated from subscriber equipment
sales and a $0.1 million increase in service revenue.
Success in the simplex (“Commercial IoT”) market contributed
$1.8 million to the increase in total revenue during the first
quarter. In March 2018, we launched SmartOne Solar™, our most
successful product introduction to date measured by the number of
units sold in the first year following launch. Sales of SmartOne
Solar™ devices represented nearly 70% of the $1.2 million increase
in Commercial IoT equipment revenue. As the total addressable
market expands, we continue to see demand from both current and
prospective customers. In addition to leveraging our existing
network of value-added resellers, we have also recently completed
our own back office solution allowing our sales team to sell direct
to end users. The $0.6 million increase in service revenue
generated by Commercial IoT customers was driven by higher ARPU and
16% growth in average subscribers, with Commercial IoT subscribers
now representing over 50% of total subscribers.
Duplex service revenue decreased 2%, while SPOT service revenue
increased 1%, each due to lower average subscribers offset by
higher ARPU. Lower activations over the last twelve months,
compared to the prior year period, contributed to a 13% and 2%
decline in average Duplex and SPOT subscribers, respectively.
Duplex and SPOT ARPU increased 13% and 3%, respectively, due to the
impact of price increases initiated over the past several quarters
as well as subscribers activating on rate plans higher than our
previous blended ARPU. Finally, a $0.5 million decline in other
service revenue resulted primarily from lower revenue recognized
from engineering service contracts during the first quarter of 2019
compared to the same quarter in 2018 due to the inherently episodic
nature of government contracts.
Revenue generated from subscriber equipment sales for Duplex and
SPOT products was also generally flat quarter over quarter with
Duplex down $0.2 million and SPOT up $0.1 million. While a higher
volume of sales of the products launched in 2018 (Sat-Fi2TM and
SPOT XTM) increased subscriber equipment revenue during the first
quarter of 2019, lower selling prices and volume of legacy Duplex
and SPOT products declined, offsetting the contribution from new
product sales.
Operating Loss
Operating loss increased $5.4 million during the first quarter
of 2019. This increase was due to higher operating expenses of $6.7
million, offset partially by a $1.3 million increase in total
revenue (for reasons previously discussed). Contributing to the
increase in operating expenses was a $4.6 million increase in
depreciation, amortization and accretion expense resulting from
upgraded ground infrastructure placed into service during 2018. The
cost of subscriber equipment sales increased $1.0 million,
consistent with the increase in equipment revenue. Additionally,
marketing, general and administrative (MG&A) and cost of
services increased $0.3 million and $0.8 million, respectively.
Higher cost of services was driven by an increase in R&D costs,
which were focused primarily on the development of Commercial IoT
products and derivatives of our existing Sat-Fi2TM Duplex device as
well as lower capitalized labor in the first quarter of 2019 due to
the timing and scope of capital projects. Contributing to the
increase in MG&A costs during the first quarter of 2019 was a
$0.6 million write-off of an aged receivable from one of our
independent gateway operators (IGO), which was determined to be
uncollectible. Increases in occupancy and subscriber acquisition
costs were offset by lower consultant and adviser costs during the
quarter.
Net Income
Net income decreased $62.1 million during the first quarter of
2019 due primarily to a lower non-cash derivative gain of $51.9
million. Changes in the Company's stock price and volatility
assumptions were the primary drivers of the derivative adjustments
recorded during the respective quarters. An increase in operating
loss of $5.4 million (as discussed above) as well as a $5.5 million
increase in interest expense resulting from lower capitalized
interest recorded during the quarter also contributed to the
decline in net income.
Adjusted EBITDA
Adjusted EBITDA decreased slightly to $7.2 million during the
first quarter of 2019 compared to $7.5 million during the first
quarter of 2018. A $1.6 million increase in total operating
expenses (excluding EBITDA adjustments) was offset partially by a
$1.3 million increase in total revenue.
CONFERENCE CALL
The Company will conduct an investor conference call on
May 2, 2019 at 8:30 a.m. ET to discuss its first quarter 2019
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
(888) 771-4371 (US and Canada), 1 (847) 585-4405 (International)
and use the participant pass code 48509813.
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 2, 2019. Dial: 1 (888)
843-7419 (US and Canada), 1 (630) 652-3042 (International) and pass
code 4850 9813#.
About Globalstar, Inc.
Globalstar is a leading provider of customizable satellite IoT
solutions for customers around the world in industries such as
government, oil and gas, emergency management, transportation,
maritime and outdoor recreation. As a pioneer of mobile
satellite voice and data services, Globalstar allows businesses to
streamline operations via the Globalstar Satellite Network by
connecting people to their devices, supplying personal safety and
communication and automating data to more easily monitor and manage
mobile assets. The Company's product portfolio includes the
industry-acclaimed SmartOne asset tracking products, Commercial IoT
satellite transmitters and Duplex satellite data modems, the
innovative Sat-Fi2 satellite wireless IP hotspot and the SPOT®
product line of personal safety, asset and communication devices,
all offered with a variety of data service plans. Learn more at
Globalstar.com
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.
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 EndedMarch
31,
2019 2018 Revenue: Service revenue $
26,119 $ 26,010 Subscriber equipment sales 3,959 2,739
Total revenue 30,078 28,749 Operating
expenses:
Cost of services (exclusive of
depreciation, amortization, and accretion shown separately
below)
9,853 9,029 Cost of subscriber equipment sales 3,149 2,172
Marketing, general and administrative 11,606 11,275 Depreciation,
amortization, and accretion 23,801 19,231 Total
operating expenses 48,409 41,707 Operating loss
(18,331 ) (12,958 ) Other income (expense): Interest income and
expense, net of amounts capitalized (12,870 ) (7,353 ) Derivative
gain 57,008 108,944 Other (9 ) (662 ) Total other income (expense)
44,129 100,929 Income before income taxes 25,798
87,971 Income tax expense 27 41 Net income $ 25,771
$ 87,930 Net income per common share: Basic $
0.02 $ 0.07 Diluted 0.02 0.06 Weighted-average shares outstanding:
Basic 1,448,318 1,262,336 Diluted 1,632,257 1,437,328
GLOBALSTAR, INC. RECONCILIATION OF GAAP NET INCOME (LOSS)
TO NON-GAAP ADJUSTED EBITDA
(In thousands)
(Unaudited)
Three Months Ended March
31, 2019 2018 Net income $ 25,771 $
87,930 Interest income and expense, net 12,870 7,353
Derivative gain (57,008 ) (108,944 ) Income tax expense 27 41
Depreciation, amortization, and accretion 23,801 19,231
EBITDA 5,461 5,611 Non-cash compensation 1,448 1,276
Foreign exchange and other (255 ) 595 Bad debt reserve of aged IGO
receivable 593 — Adjusted EBITDA (1) $ 7,247 $
7,482
(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.
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 revenue 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, 2019 2018 Service
Equipment Service
Equipment Revenue Duplex $ 8,645 $ 251 $ 8,783 $ 431 SPOT
13,095 1,591 12,962 1,474 Commercial IoT 3,698 2,072 3,089 833 IGO
166 — 209 — Other 515 45 967 1 $ 26,119 $ 3,959 $ 26,010 $ 2,739
Average Subscribers Duplex 59,978 69,033 SPOT 288,840
293,561 Commercial IoT 384,673 332,813 IGO 27,017 31,200
ARPU (1) Duplex $ 48.05 $ 42.41 SPOT 15.11 14.72 Commercial IoT
3.20 3.09 IGO 2.05 2.23
(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/20190502005126/en/
Investor Contact Information:Marcy
O'Learyinvestorrelations@globalstar.com
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