Globalstar, Inc. (NYSE American: GSAT) today announced its
operating and financial results for the quarter ended June 30,
2020.
Dave Kagan, Chief Executive Officer of Globalstar, commented,
"Globalstar recorded improved overall profitability for the second
quarter, and I am pleased with our ability to continue to execute
our business plan on so many fronts even in the face of the extreme
adversity that COVID-19 presents. We continue to see the negative
impacts of the pandemic and the oil and gas industry downturn on
our revenue, particularly with lower customer demand of our
Commercial IoT products. While we recognize that we are
experiencing unprecedented times, our confidence in the future
expansion of our Commercial IoT business remains and the execution
of our product development efforts continues. Just this quarter, we
introduced three new products, including the ST100, the latest
satellite transmitter in our family of Commercial IoT solutions.
Intended for rapid development in partnership with our resellers,
the ST100 is a low-cost data modem suitable for any commercial
market that needs remote data connectivity. Utility contractor
Potelco will be a launch customer of the ST100 through our
partnership with Recon Dynamics. Potelco operates from 12 offices
spread around the Pacific Northwest with 1,100 employees utilizing
over 3,500 pieces of equipment. We expect there to be many more
companies with needs similar to Potelco."
Mr. Kagan continued, "The other two devices recently launched
expand our award-winning SPOT family of products, the SPOT Gen4™
and the Jeep branded SPOT X®. The SPOT Gen4™ is the latest
generation of our SPOT Satellite GPS Messenger™ and offers
increased functionality with more tracking features, an enhanced
mapping interface, improved product specifications, and a modern
look and feel. The launch of the exclusive SPOT X® Jeep® Edition
2-way satellite messenger is the first product launch since SPOT
recently entered a licensing deal with the Jeep brand. We are
excited about the potential for these products and look forward to
the full rollout in the third quarter. In addition to product
development efforts, we also continued to make progress with
improving our global gateway performance and coverage through
ongoing efforts to develop and deploy new gateway antennas, as well
as the expansion of second-generation service in South America with
a new gateway in Argentina. A critical step in our global growth
strategy, this expanded coverage enables us to sell affordable
voice and data products into the surrounding territories."
Jay Monroe, Executive Chairman of Globalstar, added, "Echoing
Dave's sentiment, I am encouraged by Globalstar's continued
productivity and resiliency as an organization, and with the
financial results reported for the second quarter. While the full
extent of the pandemic’s impact on the telecommunications industry
will play out over the coming quarters, I think that we can have
confidence that the importance of wireless connectivity has
increased, and that is true both in populated settings and remote
environments. The early ST100 demand is proof of the growing need
for remote connectivity. In a post-pandemic world, it’s rational to
expect that most industries will seek even greater automation or
remote control of their processes to limit the impacts of shutdowns
like we have experienced. Also, in this new world the importance of
reliable wireless connections for new types of dispersed
collaboration increase. All of this will require spectrum like we
can offer."
Mr. Monroe continued, "We remain focused on pursuing meaningful
revenue opportunities to augment our current revenue streams. In
addition to launching new products and geographies, we are
committed to monetizing Globalstar's significant portfolio of
satellite and terrestrial spectrum assets in new and innovative
ways. In partnership with Nokia, we are very pleased to announce
that we have signed our first commercial deal for the use of Band
53 in a private LTE network deployment serving a logistics operator
in a port automation use case. Band 53 was chosen over other
spectrum options because of the reliability of the band in all
locations including coastal areas. While Globalstar’s revenue share
from this deal is expected to be relatively modest, it is a
significant milestone for Band 53 and we expect it to be the first
of many more to come. We are confident that executing this deal
will help further the momentum we are seeing in the development of
the Band 53/n53 ecosystem. More infrastructure and device options
increase the attractiveness of the band and make it easier to
engage us as a partner. We also continue to pursue our
international regulatory agenda, although it has slowed due to
travel restrictions. We expect progress on that front in this
calendar year. I believe the future is very bright for
Globalstar."
FINANCIAL REVIEW
Revenue
Total revenue for the second quarter of 2020 decreased 3% from
the second quarter of 2019 due primarily to a decline in subscriber
equipment sales revenue, offset partially by an increase in service
revenue.
Service revenue increased over the prior year's quarter
resulting primarily from engineering service revenue related to a
network feasibility study, which contributed an additional $2.0
million, while subscriber-driven revenue streams declined by $1.6
million. This decrease was due primarily to lower SPOT and Duplex
service revenue.
The decline in SPOT service revenue in the second quarter of
2020 was due to lower ARPU and, to a lesser extent, fewer
subscribers. Average SPOT subscribers were down during the second
quarter of 2020 resulting particularly from involuntary
deactivations of non-revenue-generating subscribers in Latin
America over the last twelve months. On a pro-forma basis after
adjusting for these subscribers, average subscribers and ARPU were
down 3% and 5%, respectively, from the second quarter of 2019. The
remaining decrease in SPOT subscribers during 2020 is due to fewer
activations and elevated churn over the past twelve months. A
meaningful component of our strategy to increase activations was to
reduce service pricing, and thereby expand our addressable market.
The decrease in ARPU reflects, in part, the impact from the new
service plans rolled out in mid-2019 with rates below those
previously offered. While the impact on the retail industry from
COVID-19 is reflected in the decrease in SPOT subscribers during
2020, gross activations were up 16% following store re-openings in
the month of June compared to June 2019, which is an early positive
indication that our service pricing and plan options have
positioned us well for growth.
The decline in Duplex service revenue was due primarily to fewer
average subscribers driven by lower gross activations. However,
during the second quarter of 2020, we continued to experience a
higher volume of Duplex equipment sales, including our newest
products, Sat-Fi2® and the new Sat-Fi2® Remote Antenna Station. We
remain optimistic that this trend is a good indication of
stabilization of the subscriber base.
Subscriber equipment sales revenue decreased $1.2 million in the
second quarter of 2020 compared to the second quarter of 2019. This
decline was due almost entirely to a decrease in Commercial IoT
sales resulting directly from the impact of COVID-19 and the oil
and gas industry downturn. While the volume of units sold for the
quarter was down over 40% from the second quarter of 2019, we
believe that our sales pipeline has not been reduced, only delayed.
We also experienced a decline in SPOT equipment revenue resulting
from lower prices due to e-commerce sales promotions during the
second quarter of 2020. As with subscriber activations, we continue
to see a rebound in sales of SPOT hardware devices following store
re-openings in June, recognizing a 26% increase in volume sold
during the month compared to June 2019. Duplex equipment sales were
higher during the second quarter of 2020 as previously mentioned;
this variance partially offset the unfavorable Commercial IoT and
SPOT equipment revenue variances.
Operating Loss
Operating loss decreased from $16.7 million during the second
quarter of 2019 to $15.4 million during the second quarter of 2020
due to lower operating expenses of $2.1 million, offset partially
by lower revenue of $0.8 million. The decrease in operating
expenses resulted from reductions in cost of services, marketing,
general and administrative (MG&A) expenses, and cost of
subscriber equipment sales, each of approximately $0.7 million. The
decrease in cost of services was driven by lower R&D costs due
to fewer product development efforts during the second quarter of
2020. The reduction in MG&A costs was due primarily to lower
expected performance-based compensation costs. The decrease in the
cost of subscriber equipment sales was directionally in line with
the decrease in subscriber equipment sales revenue, however we
recognized a narrower blended margin percentage during the second
quarter of 2020 reflecting the SPOT hardware sales promotions.
Net Income (Loss)
Net income (loss) fluctuated $30.9 million from net income in
the second quarter of 2019 to net loss in the second quarter of
2020. This change was due primarily to a $33.9 million decrease in
non-cash derivative gains recorded during the respective periods.
The conversion of the Thermo loan in February 2020 contributed to
the reduction in derivative activity, as well as interest expense
during the second quarter of 2020.
Adjusted EBITDA
Adjusted EBITDA increased to $9.8 million during the second
quarter of 2020 due primarily to a $1.8 million decrease in
operating expenses (excluding EBITDA adjustments), offset partially
by a $0.8 million decrease in total revenue.
Liquidity
Cash and cash equivalents were $12.1 million as of June 30,
2020, up from $7.6 million at year-end. We also have $54.9 million
in restricted cash, including $51.2 million in our debt service
reserve account, which is restricted to making longer-term
principal and interest payments under our Facility Agreement. Our
sources of cash also include operating cash flows generated from
the business. We expect our uses of cash over the next twelve
months to include primarily operating costs, capital expenditures
related to network expenditures, and interest payments. Our next
scheduled principal payment is due in the second quarter of 2021
and is expected to be funded from the proceeds of the warrants
issued to our second lien lenders that expire in March 2021,
assuming these warrants are in-the-money at the time of
expiration.
About Globalstar, Inc.
Globalstar is a leading provider of customizable Satellite IoT
Solutions for customers around the world in industries such as oil
and gas, transportation, emergency management, government, maritime
and outdoor recreation. A pioneer of mobile satellite voice and
data services, Globalstar solutions connect people to their devices
and allow businesses to streamline operations providing safety and
communication and enabling mobile assets to be monitored remotely
via the Globalstar Satellite Network. The Company's Commercial IoT
product portfolio includes industry-acclaimed SmartOne asset
tracking products, Commercial IoT satellite transmitters and the
SPOT® product line for personal safety, messaging and emergency
response, all supported on SPOT My Globalstar, a robust cloud-based
enhanced mapping solution. Completing the satellite product suite
are Duplex satellite data modems, the innovative Sat-Fi2® Satellite
Wi-Fi Hotspot, and Sat-Fi2® Remote Antenna Station with all product
solutions offering 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, 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, the impact on our business due to unexpected events
such as the COVID-19 coronavirus, 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
June 30,
2020
2019
Revenue:
Service revenue
$
27,090
$
26,700
Subscriber equipment sales
3,274
4,491
Total revenue
30,364
31,191
Operating expenses:
Cost of services (exclusive of
depreciation, amortization, and accretion shown separately
below)
8,647
9,395
Cost of subscriber equipment sales
2,940
3,578
Marketing, general and administrative
10,253
11,022
Depreciation, amortization, and
accretion
23,903
23,852
Total operating expenses
45,743
47,847
Loss from operations
(15,379
)
(16,656
)
Other income (expense):
Interest income and expense, net of
amounts capitalized
(11,508
)
(12,808
)
Derivative gain
1,160
35,116
Foreign currency gain
1,314
880
Other
(233
)
(286
)
Total other (expense) income
(9,267
)
22,902
(Loss) income before income taxes
(24,646
)
6,246
Income tax expense
90
57
Net (loss) income
$
(24,736
)
$
6,189
Net (loss) income per common share:
Basic
$
(0.01
)
$
0.00
Diluted
(0.01
)
(0.01
)
Weighted-average shares outstanding:
Basic
1,668,974
1,450,380
Diluted
1,668,974
1,640,442
GLOBALSTAR, INC.
RECONCILIATION OF GAAP NET
INCOME (LOSS) TO NON-GAAP ADJUSTED EBITDA
(In thousands)
(Unaudited)
Three Months Ended
June 30,
2020
2019
Net (loss) income
$
(24,736
)
$
6,189
Interest income and expense, net
11,508
12,808
Derivative gain
(1,160
)
(35,116
)
Income tax expense
90
57
Depreciation, amortization, and
accretion
23,903
23,852
EBITDA
9,605
7,790
Non-cash compensation
1,263
1,700
Foreign exchange and other
(1,081
)
(689
)
Adjusted EBITDA (1)
$
9,787
$
8,801
(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
June 30,
2020
2019
Service
Equipment
Service
Equipment
Revenue
Duplex
$
8,556
$
625
$
9,031
$
306
SPOT
11,579
1,695
12,619
2,186
Commercial IoT
4,298
939
4,353
1,972
IGO
109
—
179
—
Engineering and other
2,548
15
518
27
Total Revenue
$
27,090
$
3,274
$
26,700
$
4,491
Average Subscribers
Duplex
50,491
58,654
SPOT
264,395
286,101
Commercial IoT
415,004
400,193
IGO
26,463
26,930
Other
879
929
Total Average Subscribers
757,232
772,807
ARPU (1)
Duplex
$
56.49
$
51.32
SPOT
14.60
14.70
Commercial IoT
3.45
3.63
IGO
1.37
2.22
(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/20200806005871/en/
Investor Contact Information: Denise Davila
investorrelations@globalstar.com
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