Globalstar, Inc. (NYSE American: GSAT) today announced its
operating and financial results for the quarter ended September 30,
2020.
Dave Kagan, Chief Executive Officer of Globalstar, commented,
“We are pleased to be in the home stretch of 2020. This year has
obviously not been what we expected, but we have enjoyed a few
victories, while also enduring the challenges presented by the
pandemic. The lingering impact of the oil and gas industry downturn
has temporarily altered the trajectory of our Commercial IoT
growth, but we remain focused on this area of our business because
we believe it will be a significant driver of future profitability.
We strongly believe that over the long-term Globalstar’s largest
satellite business opportunities are in providing reliable
connectivity around the globe for low bit rate IoT data, as well as
emergency messaging and tracking for both consumers and
enterprises, so we are continuing to pursue these strategies. Our
product lineup and many strategic initiatives target the expansion
of our Commercial IoT reseller relationships and device
offerings."
Kagan continued, "One ongoing initiative includes a recently
executed contract with a global leader in the design and
manufacture of remote monitoring and tracking solutions, who has
been engaged to upgrade certain gateway equipment to deliver
expanded capacity and improved performance. In connection with this
partnership, we are also developing new two-way Commercial IoT
modems, which we believe will provide immense opportunities in this
expanding space. We are developing these modems in close
coordination with our VARs and potential end customers so they may
address specific market verticals competitively with other
solutions. Our previously announced one-way IoT board, the ST100,
is also in its product infancy with many ongoing trials. One of our
largest opportunities is animal tracking to assure food supply
chain integrity. Given its sheer market size, these investments in
modems and infrastructure allow us to fulfill this need at a size
and price no other satellite providers have been able to touch.
"Another important component of our business plan has been
leveraging the immense brand equity in our SPOT family of products.
During the third quarter of 2020, we activated a record number of
SPOT subscribers, propelled by the addition of Bluetooth to our
SPOT X®, as well as our latest GPS messenger product, SPOT Gen4TM,
which was launched in August 2020. We believe that this volume was
driven by consumers going outdoors and off-the-grid during the
pandemic with our devices. While the global carriers have done a
good job of covering areas of major population density with
cellular services, most of the world’s surface area remains
uncovered by terrestrial systems, and that includes substantial
portions of North and South America, our largest markets. In the
COVID world, people want to be physically away from others, but
simultaneously desire to stay connected, which is ingrained in us
all."
Kagan added, "Our relationship with Fiat Chrysler and the Jeep
brand continues to expand on multiple fronts, with the launch of
our Spot Gen 4 Jeep edition, the addition of South America as a
licensed territory, and promotional opportunities with other Jeep
brand partners. The connected car market is a large and growing
opportunity for the Company and we are looking to add additional
partners beyond FCA and Jeep. Globalstar’s satellite constellation
still has available capacity and we are actively looking for
partners across all industries to help drive greater usage.”
Jay Monroe, Executive Chairman of Globalstar, commented, “In
regard to our international terrestrial spectrum efforts, our
pursuit of a globally harmonized band of commercial spectrum took a
major step forward in the recent days. We are very pleased that the
hard work of our team has culminated in obtaining terrestrial
authorizations across three continents with the successful
completion of the licensing processes in Canada, Brazil and Kenya.
These countries significantly expand our total terrestrial
authority to over 9 billion MHz/Pop and coverage to a total
population of approximately 700 million."
Monroe continued, “In regards to our efforts to commercialize
our S-band spectrum, the ecosystem and market are progressing well
for Band n53. Since the last quarter we have signed a few more
revenue producing spectrum deals which we are excited about because
they show momentum building, though they remain modest in terms of
revenue. While many of these deals take some time to convert to
revenue, interest in our spectrum has never been greater, which I
partially attribute to the anticipation of a broader Band 53 device
ecosystem, which will be available in 2021, and to early CBRS
deployments bringing more attention and investment to private
wireless networks. We are also actively adding to the companies,
partners and advisors helping us on our spectrum efforts. Nokia and
Airspan continue to be instrumental to the development of the band
and we have been working closely with XCOM Labs.”
Monroe concluded, "I am pleased with the progress we are making
every day to position the business as a unique global connectivity
provider. We believe that the future of Globalstar is to offer
connectivity to customers for critical communications both from
space and from the ground. Lastly, a little over a year ago we
completed the refinancing of the balance sheet to provide a longer
runway to realize Globalstar’s potential. Considering the progress
that we are making, if the share price does not rebound to at least
the current warrant strike price prior to March 31, Thermo is
prepared to support the Company by exercising its warrants even if
out-of-the-money.”
FINANCIAL REVIEW
Revenue
Total revenue for the third quarter of 2020 decreased 6% from
the third quarter of 2019, after excluding a non-recurring
adjustment to Duplex service revenue that was recorded during the
third quarter of 2019. The decrease in total revenue was due
primarily to a decline in service revenue as revenue generated from
subscriber equipment sales was generally flat.
Service revenue decreased over the prior year's quarter
resulting primarily from a decline in subscriber-driven revenue
streams totaling $4.0 million; this decline was due mostly to lower
SPOT and Duplex service revenue. Higher engineering service revenue
related to a network feasibility study contributed an additional
$2.0 million to service revenue during the quarter.
The decline in Duplex service revenue was due primarily to fewer
average subscribers driven by normal churn in the base exceeding
gross activations over the last twelve months. Notably, gross
activations during the third quarter of 2020 were up nearly 10%
from the prior year's quarter following a higher volume of Duplex
handset and hotspot sales during 2020. The decline in Duplex
service revenue was also impacted by lower ARPU resulting from
unfavorable exchange rate movements and the timing of usage-based
revenue.
The decline in SPOT service revenue in the third quarter of 2020
was due primarily to fewer subscribers, despite a significant
increase in SPOT activations in recent months. The decrease in SPOT
subscribers during 2020 is due to elevated churn, both voluntary
and involuntary. While the involuntary churn is related to
subscriber base cleanup and, therefore, not expected to recur, we
are focused on reducing normal subscriber churn through various
initiatives. Importantly, gross SPOT subscriber activations were
the highest quarterly amount since SPOT service commenced in 2007,
and were up 32% from the prior year's quarter and 11% over the last
twelve months. A meaningful component of our strategy to increase
activations was to reduce service pricing, and thereby expand our
addressable market. Also contributing to the decline in SPOT
service revenue was a decrease in ARPU, which reflects both a
strengthening of the USD, resulting from our foreign currency
denominated sales, as well as the impact from lower-priced service
plans rolled out during mid-2019. While these new plans will lower
ARPU over time, we believe that our change in pricing strategy has
stimulated the recent growth in activations, particularly
considering the disruption to the retail industry earlier in the
year due to COVID-19.
Subscriber equipment sales revenue decreased $0.1 million in the
third quarter of 2020 compared to the third quarter of 2019. This
decline was due primarily to a decrease in Commercial IoT sales,
offset by an increase in SPOT equipment sales. We continue to
experience lower demand for our Commercial IoT devices from our
customers that operate in the oil and gas industry. While we cannot
predict when this industry will recover, we remain focused on
expanding our product lineup to address the connectivity needs of
our other customers and be in a position to be responsive when our
oil and gas sales pipeline is renewed, as well as redirecting our
sales efforts to other sectors. Offsetting the decline from
Commercial IoT sales was a nearly 40% increase in revenue generated
from SPOT hardware sales. This increase in volume of SPOT sales is
driven primarily by our SPOT X® device and our refreshed SPOT
Satellite GPS Messenger, SPOT Gen4TM, which was launched in August
2020. Duplex equipment sales were also higher during the third
quarter of 2020 as previously mentioned.
Operating Loss
Operating loss was $14.6 million during the third quarter of
2020 compared to $16.0 million during the third quarter of 2019
(after excluding the out-of-period adjustment to Duplex service
revenue previously discussed). The fluctuation in operating loss
was due primarily to lower revenue of $2.0 million offset partially
by lower operating expenses of $3.2 million. The decrease in
operating expenses resulted primarily from a reduction in
marketing, general and administrative (MG&A) expenses, which
was due mostly to a $2.1 million write-off of certain financing
costs during the third of 2019 related to our refinancing efforts.
Also contributing to the decrease in operating expenses were lower
cost of services and cost of subscriber equipment sales, offset by
higher depreciation and amortization expense. The reduction in cost
of services was driven by lower maintenance costs resulting from
revisions to contract terms with certain vendors providing gateway
and software maintenance. The decrease in the cost of subscriber
equipment sales was due to the recognition of $0.9 million in the
third quarter of 2019 for accumulated tariffs on nearly all
Chinese-manufactured products sold since July 2018 following an
unfavorable ruling received from U.S. Customs in October 2019; we
continue to incur expense related to tariffs but not at the
elevated level from the third quarter of 2019.
Net (Loss) Income
Net (loss) income fluctuated $42.2 million from net income in
the third quarter of 2019 to net loss in the third quarter of 2020
(after excluding the out-of-period adjustment to Duplex service
revenue previously discussed). This change was due primarily to a
$49.0 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.
Lower interest expense and changes in foreign currency exchange
rates also impacted net (loss) income during the respective
periods.
Adjusted EBITDA
Adjusted EBITDA decreased 3% to $11.5 million during the third
quarter of 2020 due primarily to a $2.0 million decrease in total
revenue, offset partially by a $1.6 million decrease in operating
expenses, after excluding EBITDA adjustments.
Liquidity
Cash and cash equivalents were $19.5 million as of September 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 from the exercise 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. If our stock price remains below the warrant strike
price, we have other alternatives to meet this Facility Agreement
obligation and are evaluating which alternative is the optimal
solution in case of this downside scenario.
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
September 30,
2020
2019
Revenue:
Service revenue
$
28,385
$
34,152
Subscriber equipment sales
4,372
4,462
Total revenue
32,757
38,614
Operating expenses:
Cost of services (exclusive of
depreciation, amortization, and accretion shown separately
below)
8,580
9,216
Cost of subscriber equipment sales
4,032
4,482
Marketing, general and administrative
10,063
12,895
Depreciation, amortization, and
accretion
24,717
24,026
Total operating expenses
47,392
50,619
Loss from operations
(14,635)
(12,005)
Other income (expense):
Interest income and expense, net of
amounts capitalized
(11,398)
(14,471)
Derivative gain
1,225
50,156
Foreign currency gain (loss)
266
(2,194)
Other
(346)
(335)
Total other (expense) income
(10,253)
33,156
(Loss) income before income taxes
(24,888)
21,151
Income tax expense
58
40
Net (loss) income
$
(24,946)
$
21,111
Net (loss) income per common share:
Basic
$
(0.01)
$
0.01
Diluted
(0.01)
(0.01)
Weighted-average shares outstanding:
Basic
1,670,315
1,451,703
Diluted
1,670,315
1,647,734
GLOBALSTAR, INC.
RECONCILIATION OF GAAP NET
INCOME (LOSS) TO NON-GAAP ADJUSTED EBITDA
(In thousands)
(Unaudited)
Three Months Ended
September 30,
2020
2019
Net (loss) income
$
(24,946)
$
21,111
Interest income and expense, net
11,398
14,471
Derivative gain
(1,225)
(50,156)
Income tax expense
58
40
Depreciation, amortization, and
accretion
24,717
24,026
EBITDA
10,002
9,492
Non-cash compensation
1,449
1,419
Foreign exchange and other
81
2,482
Debt refinancing third party fees
—
2,403
Change to estimated impact upon adoption
of ASC 606
(3,885)
Adjusted EBITDA (1)
$
11,532
$
11,911
(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
September 30,
2020
2019
Service
Equipment
Service
Equipment
Revenue
Duplex (2)
$
9,956
$
510
$
12,704
$
349
SPOT
11,396
2,602
12,482
1,880
Commercial IoT
4,420
1,256
4,526
2,182
IGO
95
—
139
—
Engineering and other
2,518
4
416
51
Total Revenue
$
28,385
$
4,372
$
30,267
$
4,462
Average Subscribers
Duplex
49,533
57,091
SPOT
260,153
280,632
Commercial IoT
414,049
412,180
IGO
26,491
26,378
Other
870
912
Total Average Subscribers
751,096
777,193
ARPU (1)
Duplex (2)
$
67.00
$
74.17
SPOT
14.60
14.83
Commercial IoT
3.56
3.66
IGO
1.20
1.76
(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/20201106005300/en/
Denise Davila investorrelations@globalstar.com
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