Globalstar, Inc. (NYSE American: GSAT) today announced financial
and operating results for the fourth quarter and year ended
December 31, 2019.
Dave Kagan, Chief Executive Officer of Globalstar, commented,
"In November, we successfully refinanced our capital structure when
we executed an amendment of our existing senior secured credit
facility and raised a new second lien term loan facility led by
Thermo and Echostar. This transaction significantly improved our
balance sheet, provided us with extended runway and maintained the
favorable interest rates of our existing credit facility. Our
capital structure now positions us well to execute our plan for
value creation from our spectrum and satellite assets."
Mr. Kagan continued, "As our 2019 financial performance
reflects, we continue to capitalize on the IoT growth opportunities
in front of us, with a 26% increase in Commercial IoT service
revenue over 2018 as both subscriber count and average pricing
increased. We have focused our product development efforts around
Commercial IoT devices, particularly modules that can be integrated
into the products of our partners, which should broaden our current
reach. These modules offer enhanced functionality in a very small
form factor and competitive price point, which we think will be
attractive to those needing data reporting capabilities in remote
or harsh environments. Outside of Commercial IoT, 2019 was a
transitional year in many respects. We believe we are back on the
right track with the updates that we made to our consumer products
based on the positive trajectory of SPOT subscriber additions
following the release of SPOT X ® with Bluetooth® technology late
in the third quarter. We also have received positive customer
responses to our most recently launched Duplex product, Sat-Fi2®
RAS. In the last 12 months, we have made many critical decisions,
from how best to improve our capital structure to determining
appropriate consumer service pricing. All of these decisions are
founded on positioning Globalstar for growth, and we have the team,
products and network advantages to be successful.”
Jay Monroe, Executive Chairman of Globalstar, added, "Since our
last business update call, we have made progress on terrestrial
spectrum by cultivating the asset, adding to our roster of
potential ecosystem partners and advancing our international
regulatory efforts. After the initial 3GPP approval in late 2018,
Jarvinian Advisors and the spectrum team have continued to make
additional progress at 3GPP with respect to 5G and carrier
aggregation specifications which will further align the
capabilities of the band with what is required from the equipment
ecosystem and potential partners. We expect both the 5G variant of
Band 53 and carrier aggregation to be completed by the 3rd quarter
2020. It’s a complicated time in the wireless industry with the
variables of C-band, CBRS and the recently approved T-Mobile and
Sprint merger; however, our S-band provides a clear and
understandable resource in an industry experiencing so much
uncertainty. We are eager to conclude our 3GPP efforts so that our
spectrum can be a part of new network builds in 5G. While this
effort is underway, we are actively working on potential private
LTE deployments that can serve as the proving grounds for our
commercial efforts with the potential to produce meaningful
revenue."
Mr. Monroe continued, “As evidenced by Thermo’s additional
investment in the new second lien, open market stock purchases and
conversion of our 2009 loan into stock at a price well above the
current market price, my confidence in the value of our spectrum
and satellite business remains high. Our spectrum strategy has been
consistent, and we will continue to increase the marketability of
the spectrum through both international regulatory successes and
3GPP standardization. We are driving the ecosystem to have more
infrastructure and industrial devices working on Band 53 and are
actively pursuing a variety of deployments with partners like
Nokia, Airspan and Airwavz. We are working through product
certifications for the first deployments with these partners to
meet their customer needs across industries including utilities,
transportation systems, ports, in-building wholesale networks,
in-building and on-campus private LTE networks and fixed and mobile
wireless services, among others. While I am eager to see that first
dollar come in from use of our spectrum, I am encouraged by the
progress we have made and confident in our strategy. We are closer
than ever to realizing our long-held belief that 5G networks will
require greater density thus leading to increased small cell
deployments where our spectrum is well-suited. We are also closer
than ever to realizing the potential for a single company to have
an internationally harmonized spectrum band. Our regulatory efforts
in major countries continue to ramp up. However, from a broader
investment perspective, Thermo does not deploy capital in
Globalstar only for the spectrum potential. I believe significant
untapped value exists in the satellite network. The continued shift
towards IoT is the right move not only from a competitive
perspective but also because it is a large and growing market where
the longer-term value of acquiring a customer should be very
attractive due to low churn. I applaud the team’s efforts on the
new IoT module. The initial feedback has been very
constructive."
Howard Trott, CEO of Recon Dynamics, said, “Globalstar’s new IoT
board significantly expands the strength of our operational
intelligence platform, helping customers gain critical insight
needed to drive productivity and efficiency regardless of
geography.” Recon expects to be shipping products leveraging this
connectivity in 2020.
Mr. Monroe continued, "The Company also continues to expand its
consumer efforts and expects to soon begin cross selling products
in the auto market, an opportunity which started as an IoT
application but is now expanding to utilize other Globalstar
services. Globalstar’s satellite network represents a large
in-space resource and getting more and more IoT services to go over
that network will drive free cash flow. Finally, the Company is
committed to conveying the most fulsome information to our investor
base and doing so in a cadence that matches fundamental
developments rather than following a strict quarterly schedule.
Going forward we believe that our investors would be best informed
of significant business developments through comprehensive press
releases, such as this earnings release, and periodic business
update calls and investor events when appropriate.”
FOURTH QUARTER FINANCIAL REVIEW
Revenue
Total revenue for the fourth quarter of 2019 was essentially
flat from the fourth quarter of 2018 due to an increase in
subscriber equipment sales offset by a decrease in service
revenue.
Service revenue decreased $0.8 million, or 3%, in the fourth
quarter of 2019 compared to the fourth quarter of 2018. This
decrease was primarily driven by fewer Duplex subscribers as churn
was greater than gross additions during the last twelve months.
Although churn was generally consistent with average historical
levels, gross additions were lower than the previous twelve-month
period due to fewer equipment sales. We have various initiatives
underway to drive higher Duplex activations. We released an
improved Sat-Fi2® device during September 2019 and a derivative
product, the Sat-Fi2® Remote Antenna Station, during October 2019
in response to customer demand and to expand the use cases for the
Sat-Fi2® device. Further development efforts are underway to launch
additional derivatives of this device. SPOT service revenue was
down slightly from the fourth quarter of 2018. This decrease was
due particularly to a 5% decline in average subscribers, even
though the majority of the churn was involuntary as we deactivated
nearly 10,000 non-revenue-generating subscribers in Latin America.
Excluding this involuntary churn, SPOT subscribers at the end of
2019 would have been in line with the end of 2018. Offsetting the
decline in Duplex service revenue was a 22% increase in Commercial
IoT service revenue. This increase was driven by growth in our
average Commercial IoT subscriber base of 12% and higher ARPU of
9%. The higher subscriber count resulted from Commercial IoT
equipment sales during the last twelve months, primarily of our
SmartOne family of products led by our SmartOne SolarTM which
launched in 2018. 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 $0.7 million, or
14%, in the fourth quarter of 2019 compared to the fourth quarter
of 2018. As previously mentioned, this growth was due almost
entirely to sales of Commercial IoT devices, including particularly
our SmartOne SolarTM device, which contributed $1.0 million to the
increase. Revenue generated from Duplex and SPOT equipment sales
were flat quarter over quarter.
Loss from Operations
Loss from operations decreased $1.4 million, or 7%, to $17.1
million in the fourth quarter of 2019. This decrease was due
primarily to a decrease in operating expenses resulting from lower
MG&A expenses and cost of services, offset partially by higher
cost of subscriber equipment sales and asset impairment charges of
$1.5 million recorded during 2019. The $3.5 million decrease in
MG&A expenses was due primarily to the timing of costs incurred
(and the recovery of those costs) to defend the securities claim
that was settled during the fourth quarter of 2018. These costs did
not recur in the fourth quarter of 2019; additionally, we received
an insurance recovery during the fourth quarter of 2019 of $1.7
million, which further reduced expenses. The asset impairment
charges were due primarily to a $1.1 million write-down in the
carrying value of our former gateway site in Nicaragua, which was
classified as held for sale as of December 31, 2019.
Net Loss
Net loss was $37.7 million for the fourth quarter of 2019
compared to $96.5 million for the fourth quarter of 2018. This
decrease resulted primarily from the change in non-cash derivative
valuation adjustments during the respective quarters, which
contributed $67.6 million to the decrease in net loss. This
fluctuation resulted primarily from changes in certain valuation
inputs, including stock price, stock price volatility and the
remaining estimated term of the instruments. Partially offsetting
this decrease was higher interest expense due primarily to lower
capitalized interest, higher average interest rates in place during
2019 and higher amortization of deferred financing costs. In
connection with the refinancing in November 2019, which included a
partial paydown of our senior credit facility, we wrote off a
proportional amount of the remaining deferred financing costs
associated with that debt.
Adjusted EBITDA
Adjusted EBITDA for the quarter ended December 31, 2019
increased slightly to $9.8 million as compared to the prior year's
fourth quarter. This increase was due to higher revenue of $0.2
million offset partially by a $0.1 million increase in operating
expenses (both excluding EBITDA adjustments for non-cash or
non-recurring items). The increase in operating expenses during the
fourth quarter of 2019 resulted primarily from higher cost of
subscriber equipment sales in line with the higher volume of
hardware sales, offset partially by a decrease in cost of services
due in part to lower ground network support costs.
ANNUAL FINANCIAL REVIEW
Revenue
During the twelve months ended December 31, 2019, total revenue
increased $1.6 million to $131.7 million from $130.1 million in
2018. This increase was impacted by an out-of-period adjustment of
$3.9 million during the third quarter of 2019 related to a change
in the calculation of the estimated impact from the initial
adoption of ASC 606. Excluding this adjustment, total revenue
decreased $2.3 million from 2018. This decrease was due primarily
to a $1.6 million decrease in service revenue, driven by fewer
Duplex subscribers and lower revenue recognized from government
contracts. Also contributing to the decrease in service revenue was
a 3% decline in average SPOT subscribers; approximately 10,000
subscribers were involuntarily deactivated during 2019 as they were
non-revenue-generating. Excluding this involuntary churn, SPOT
subscribers at the end of 2019 would have been higher than at the
end of 2018. These items were offset by an increase in Duplex ARPU
as well as significant growth in our Commercial IoT business,
including subscribers, ARPU and hardware sales. Total revenue
generated from subscriber equipment sales decreased $0.7 million,
which resulted primarily from lower volume and pricing of Duplex
and SPOT units sold.
Loss from Operations
Loss from operations increased $16.7 million, or 35%, during
2019 due to an $18.3 million increase in operating expenses, offset
partially by a $1.6 million increase in total revenue. The increase
in operating expenses was due primarily to the $20.5 million
reversal of a contract termination charge during 2018. An increase
in depreciation as well as asset impairment charges recorded during
2019 also increased operating expenses. The increase in
depreciation expense was due to a full year of depreciation of the
second-generation ground infrastructure assets placed into service
during mid-2018. Offsetting these increases was a decrease in
MG&A driven primarily by the costs incurred to support our
efforts associated with the proposed merger and associated
litigation during 2018, which did not recur at the same level in
2019.
Net Income (Loss)
Net income was $15.3 million for 2019 compared to net loss of
$6.5 million for 2018. This fluctuation is due primarily to
non-cash items, including a $64.0 million increase in derivative
gains, offset partially by an $18.9 million increase in net
interest expense and an $18.2 million increase in operating
expenses (as previously discussed). The anticipated conversion of
the Thermo loan agreement during the first quarter of 2020 was the
primary driver of the higher derivative gain during 2019 as the
value to the holder of the conversion feature within the loan
agreement is lower. The increase in interest expense was driven
primarily by lower capitalized interest of $6.6 million (which
increases interest expense) and an increase in interest costs of
$12.5 million due to a higher average cost of debt during 2019
compared to the prior year as well as the write-off of a portion of
the deferred financing costs related to our senior credit facility
following the partial paydown of that debt in November 2019.
Adjusted EBITDA
Adjusted EBITDA decreased by 7% to $37.8 million in 2019 due
primarily to a $1.9 million decrease in total revenue (for reasons
previously discussed) and a $0.9 million increase in operating
expenses (both excluding EBITDA adjustments for non-cash or
non-recurring items). The increase in operating expenses during
2019 resulted primarily from $1.2 million in costs related to
tariffs on nearly all of our Chinese-manufactured products sold
since July 2018. The recognition of these costs followed an
unfavorable ruling received from U.S. Customs in October 2019. We
are pursuing options to mitigate the impact of these tariffs,
including negotiating lower costs from our primary manufacturer and
suppliers.
CONFERENCE CALL
The Company will conduct an investor conference call on February
27, 2020 at 5:00 p.m. ET to discuss its fourth quarter and annual
2019 financial results. Dave Kagan and Rebecca Clary will be joined
by John Dooley, who will participate to answer any terrestrial
spectrum related questions.
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)
771-4371 (US and Canada), 1 (847) 585-4405 (International) and use
the participant pass code 49428597.
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 27, 2020. Dial: 1 (888) 843-7419 (US and Canada), 1 (630)
652-3042 (International) and pass code 4942 8597#.
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, satellite Wi-Fi hotspots, Commercial IoT and Duplex
satellite data modems, and tracking devices.
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,
2019
2018
2019
2018
Revenue:
Service revenue
$
26,415
$
27,186
$
113,386
$
111,089
Subscriber equipment sales
5,420
4,760
18,332
19,024
Total revenue
31,835
31,946
131,718
130,113
Operating expenses:
Cost of services (exclusive of
depreciation, amortization and accretion shown separately
below)
8,992
9,664
37,456
37,648
Cost of subscriber equipment sales
4,554
3,673
15,763
14,441
Cost of subscriber equipment sales -
reduction in the value of inventory
416
—
416
—
Marketing, general and administrative
9,710
13,163
45,233
55,443
Reduction in the value of long-lived
assets
1,124
—
1,124
—
Revision to contract termination
charge
—
—
—
(20,478
)
Depreciation, amortization and
accretion
24,093
23,853
95,772
90,438
Total operating expenses
48,889
50,353
195,764
177,492
Loss from operations
(17,054
)
(18,407
)
(64,046
)
(47,379
)
Other income (expense):
Interest income and expense, net of
amounts capitalized
(22,315
)
(12,596
)
(62,464
)
(43,612
)
Derivative gain (loss)
2,793
(64,824
)
145,073
81,120
Gain on legal settlement
—
—
120
6,779
Other
(750
)
(617
)
(2,814
)
(3,299
)
Total other income (expense)
(20,272
)
(78,037
)
79,915
40,988
Income (loss) per common share:
(37,326
)
(96,444
)
15,869
(6,391
)
Income tax expense
421
9
545
125
Net income (loss)
$
(37,747
)
$
(96,453
)
$
15,324
$
(6,516
)
Income (loss) per common share:
Basic
$
(0.03
)
$
(0.07
)
$
0.01
$
(0.01
)
Diluted
(0.03
)
(0.07
)
(0.07
)
(0.01
)
Weighted-average shares outstanding:
Basic
1,452,614
1,287,742
1,450,768
1,269,548
Diluted
1,452,614
1,287,742
1,655,191
1,269,548
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,
2019
2018
2019
2018
Net income (loss)
$
(37,747
)
$
(96,453
)
$
15,324
$
(6,516
)
Interest income and expense, net
22,315
12,596
62,464
43,612
Derivative (gain) loss
(2,793
)
64,824
(145,073
)
(81,120
)
Income tax expense
421
9
545
125
Depreciation, amortization, and
accretion
24,093
23,853
95,772
90,438
EBITDA
6,289
4,829
29,032
46,539
Non-cash reduction in the value of
inventory
416
—
416
—
Non-cash reduction in the value of
long-lived assets
1,124
—
1,124
—
Non-cash compensation
1,595
2,811
6,162
7,373
Foreign exchange and other
(702
)
564
690
3,067
Debt refinancing third party fees
2,451
—
5,232
—
Non-cash adjustment to international
operations
334
—
927
—
Merger and shareholder litigation costs
(recovery)
(1,709
)
1,500
(1,820
)
10,831
Gain on legal settlement
—
—
(120
)
(6,779
)
Revision to contract termination
charge
—
—
—
(20,478
)
Change to estimated impact upon adoption
of ASC 606
—
—
(3,885
)
—
Adjusted EBITDA (1)
$
9,798
$
9,704
$
37,758
$
40,553
(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 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,
2019
2018
2019
2018
Service
Equipment
Service
Equipment
Service
Equipment
Service
Equipment
Revenue
Duplex(2)
$
9,414
$
419
$
10,093
$
403
$
39,794
$
1,325
$
41,223
$
2,021
SPOT
12,265
1,960
12,576
1,970
50,461
7,617
52,363
8,425
Commercial IoT
4,395
3,074
3,612
2,377
16,972
9,300
13,459
8,444
IGO
13
—
250
—
497
—
932
—
Other
328
(33
)
655
10
1,777
90
3,112
134
$
26,415
$
5,420
$
27,186
$
4,760
$
109,501
$
18,332
$
111,089
$
19,024
Average Subscribers
Duplex
54,352
62,999
56,856
65,501
SPOT
275,629
290,461
281,584
291,289
Commercial IoT
417,818
372,658
399,960
354,678
IGO
26,072
26,816
26,553
31,537
ARPU (1)
Duplex(2)
$
57.74
$
53.40
$
58.33
$
52.45
SPOT
14.83
14.43
14.93
14.98
Commercial IoT
3.51
3.23
3.54
3.16
IGO
0.17
3.11
1.56
2.46
(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.
(2)
We recorded an out-of-period adjustment of
$3.9 million during the third quarter of 2019 as a result of a
change in the estimated impact of the adoption of ASC 606 on
January 1, 2018. This adjustment, which increased Duplex service
revenue, is excluded from service revenue and ARPU in the table
above.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200227005270/en/
Denise Davila Email: investorrelations@globalstar.com
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