Globalstar, Inc. (NYSE American:GSAT) today announced its financial
results for the quarter ended September 30, 2017.
Jay Monroe, Chairman and Chief Executive Officer
of Globalstar, commented, “Our core business continues to achieve
significant financial growth as we expand our subscriber base and
execute on opportunities to grow revenue. During the quarter, areas
of our country were impacted by several natural disasters. As a
satellite communications provider, we provide critical connectivity
to individuals, businesses and governmental agencies during the
aftermath of these types of tragedies when traditional cellular
service is unavailable and disaster recovery efforts are underway.
Also, in the near future we expect to deliver new and innovative
products that will provide even more options for connectivity in
our addressable markets.
This quarter, growth in our subscriber base and
significant improvement in ARPU contributed to a 19% increase in
total revenue. We recorded net income during the quarter due to a
non-cash derivative gain resulting primarily from changes in our
stock price. Importantly, Adjusted EBITDA increased 68% from the
prior year quarter reflecting the operating leverage inherent in
this business. Also, our successful common stock offering in
October resulted in a significant improvement in our liquidity
position. This raise satisfies a requirement from our recently
amended senior debt facility and is expected to provide us with
sufficient liquidity until at least December 2018. As expected,
Thermo continued its financial support by participating in the
offering and contributing nearly 40% of the net proceeds, in
addition to the $33 million invested in June.
We also recently announced two major business
development opportunities. We commenced commercial satellite
service in Japan, an important market for our mobile satellite
products and services, and announced a partnership with the
University of Mississippi, where we will construct and operate a
new Globalstar ground station as part of the school's new science,
technology, engineering and math building. Both initiatives
represent new and innovative ways we are expanding our MSS
business.
Finally, on the regulatory front, we continue to
make progress on our international plans to globally harmonize our
16.5 MHz of licensed 2.4 GHz spectrum for terrestrial services. We
are engaged in substantive discussions with numerous international
regulatory agencies, including several countries where we have
filed applications, representing a combined population of over 800
million people. We are pleased with the positive reception to date
and expect to receive our first international terrestrial authority
approval in the near future. While not large from a population
perspective, this imminent initial foreign approval has strong
precedential value and we look forward to completing the end of
this process in the coming weeks."
THIRD QUARTER FINANCIAL
REVIEW
Revenue
Total revenue for the third quarter of 2017
increased by $4.9 million, or 19%, from the third quarter of 2016.
This increase resulted primarily from higher service revenue driven
by growth in ARPU and total subscribers. An increase in subscriber
equipment sales revenue also contributed to this growth.
Service revenue increased $4.1 million, or 19%,
in the third quarter of 2017 compared to the third quarter of 2016.
The majority of this increase resulted from higher Duplex and SPOT
service revenue, which increased $1.3 million and $1.6 million,
respectively. Higher ARPU propelled this growth with Duplex and
SPOT up 22% and 11%, respectively, from the prior year quarter.
Changes to rate plans, impacting both new and legacy subscribers,
continue to be the primary reason for a higher ARPU across the
customer base. The increase from higher ARPU was offset partially
by the decrease in average Duplex subscribers, which were down 6%
on lower phone sales and activations. Conversely, average SPOT
subscribers grew 5%. Also contributing to the increase in service
revenue was a $0.7 million increase in revenue generated from
engineering services performed under certain government
contracts.
Subscriber equipment sales revenue increased
$0.8 million, or 22%, due primarily to a significant volume of
tracking units sold to support disaster recovery efforts following
the recent hurricane activity during the third quarter 2017. Lower
revenue generated from Duplex hardware sales partially offset this
increase as we manage our remaining phone inventory prior to the
introduction of a second-generation device.
Loss from Operations
Loss from operations decreased $4.0 million, or
27%, from $14.8 million in the third quarter of 2016 to $10.8
million in the third quarter of 2017 due primarily to a $4.9
million increase in total revenue, for the reasons discussed above.
Higher operating expenses partially offset this increase due
primarily to an 11% increase in cost of services resulting from the
additional cost to support our second-generation ground network.
The cost of subscriber equipment sales also increased from the
prior year quarter in-line with higher equipment revenue as
discussed above. These increases were offset partially by a 5%
decrease in management, general and administrative (MG&A)
costs.
Net Income (Loss)
Net income (loss) fluctuated from a loss of $2.6
million in the third quarter of 2016 to income of $52.4 million in
the third quarter of 2017. The primary reason for this change was a
higher non-cash derivative gain, up from $11.0 million in the third
quarter of 2016 to $78.8 million in the third quarter of 2017. The
gain recorded during the third quarter of 2017 resulted from
variations in several valuation inputs, including the decline in
the Company's stock price from June 30, 2017 to September 30, 2017.
The impact from the higher derivative gain was offset partially by
other non-cash items, including a gain on equity issuance and tax
benefit recorded during the third quarter of 2016.
Adjusted EBITDA
Adjusted EBITDA increased 68% to $9.9 million
during the third quarter of 2017 driven primarily by a $4.9
million, or 19%, increase in total revenue, offset partially by a
$1.0 million increase in total operating expenses (excluding EBITDA
adjustments). The increase in operating expenses during the third
quarter of 2017 resulted from higher cost of services and cost of
subscriber equipment sales, offset partially by lower MG&A
expenses. Nearly the entire increase in cost of services was due to
higher support costs of $0.9 million related to our recently
upgraded second-generation ground network.
CONFERENCE CALL
The Company will conduct an investor conference
call on November 2, 2017 at 5:00 p.m. ET to discuss its third
quarter 2017 financial results.
Details are as follows: |
Conference Call: |
5:00 p.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/investors. 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 45791188. |
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 November 2, 2017. Dial: 1
(888) 843-7419 (US and Canada), 1 (630) 652-3042 (International)
and pass code 4579 1188#. |
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, SCADA and IoT
applications. The Company's products include mobile and fixed
satellite telephones, the innovative Sat-Fi satellite 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.
Investor contact information:Kyle
Pickenskyle.pickens@globalstar.com
Safe Harbor Language for Globalstar ReleasesThis
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
actions by communications regulators, 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 Ended September
30, |
|
2017 |
|
2016 |
Revenue: |
|
|
|
Service
revenues |
$ |
26,069 |
|
|
$ |
21,952 |
|
Subscriber equipment sales |
4,389 |
|
|
3,592 |
|
Total
revenue |
30,458 |
|
|
25,544 |
|
Operating
expenses: |
|
|
|
Cost of
services (exclusive of depreciation, amortization, and accretion
shown separately below) |
9,315 |
|
|
8,373 |
|
Cost of
subscriber equipment sales |
2,905 |
|
|
2,411 |
|
Marketing, general and administrative |
9,616 |
|
|
10,077 |
|
Depreciation, amortization, and accretion |
19,415 |
|
|
19,446 |
|
Total
operating expenses |
41,251 |
|
|
40,307 |
|
Loss from
operations |
(10,793 |
) |
|
(14,763 |
) |
Other income
(expense): |
|
|
|
Loss on
extinguishment of debt |
(6,306 |
) |
|
— |
|
Gain on
equity issuance |
— |
|
|
4,272 |
|
Interest
income and expense, net of amounts capitalized |
(8,954 |
) |
|
(8,866 |
) |
Derivative gain |
78,840 |
|
|
10,982 |
|
Other |
(314 |
) |
|
(505 |
) |
Total
other income (expense) |
63,266 |
|
|
5,883 |
|
Income (loss) before
income taxes |
52,473 |
|
|
(8,880 |
) |
Income tax expense
(benefit) |
67 |
|
|
(6,303 |
) |
Net income (loss) |
$ |
52,406 |
|
|
$ |
(2,577 |
) |
|
|
|
|
Net income (loss) per
common share: |
|
|
|
Basic |
$ |
0.04 |
|
|
$ |
0.00 |
|
Diluted |
0.04 |
|
|
0.00 |
|
Weighted-average shares
outstanding: |
|
|
|
Basic |
1,169,993 |
|
|
1,080,313 |
|
Diluted |
1,345,905 |
|
|
1,080,313 |
|
GLOBALSTAR, INC. |
RECONCILIATION OF GAAP NET INCOME (LOSS) TO
NON-GAAP ADJUSTED EBITDA |
(In thousands) |
(Unaudited) |
|
|
|
Three Months Ended |
|
|
|
September 30, |
|
|
|
2017 |
|
2016 |
Net income
(loss) |
|
$ |
52,406 |
|
|
$ |
(2,577 |
) |
|
|
|
|
|
|
|
Interest income and
expense, net |
|
8,954 |
|
|
8,866 |
|
|
Derivative gain |
|
(78,840 |
) |
|
(10,982 |
) |
|
Income tax expense
(benefit) |
|
67 |
|
|
(6,303 |
) |
|
Depreciation,
amortization, and accretion |
|
19,415 |
|
|
19,446 |
|
EBITDA |
|
2,002 |
|
|
8,450 |
|
|
|
|
|
|
|
|
Non-cash
compensation |
|
1,230 |
|
|
1,242 |
|
|
Foreign exchange and
other |
|
314 |
|
|
505 |
|
|
Loss on extinguishment
of debt |
|
6,306 |
|
|
— |
|
|
Gain on equity
issuance |
|
— |
|
|
(4,272 |
) |
Adjusted
EBITDA (1) |
|
$ |
9,852 |
|
|
$ |
5,925 |
|
|
|
|
|
|
|
|
|
|
(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 significant 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 |
|
|
|
September 30, |
|
|
|
2017 |
|
2016 |
|
|
|
Service |
Equipment |
|
Service |
Equipment |
Revenue |
|
|
|
|
|
|
|
Duplex |
|
$ |
10,576 |
|
$ |
777 |
|
|
$ |
9,303 |
|
$ |
1,125 |
|
|
SPOT |
|
11,248 |
|
1,410 |
|
|
9,662 |
|
1,436 |
|
|
Simplex |
|
2,903 |
|
2,192 |
|
|
2,294 |
|
832 |
|
|
IGO |
|
260 |
|
54 |
|
|
238 |
|
175 |
|
|
Other |
|
1,082 |
|
(44 |
) |
|
455 |
|
24 |
|
|
|
|
$ |
26,069 |
|
$ |
4,389 |
|
|
$ |
21,952 |
|
$ |
3,592 |
|
|
|
|
|
|
|
|
|
Average
Subscribers |
|
|
|
|
|
|
|
Duplex |
|
72,468 |
|
|
|
77,485 |
|
|
|
SPOT |
|
289,265 |
|
|
|
276,384 |
|
|
|
Simplex |
|
314,601 |
|
|
|
298,186 |
|
|
|
IGO |
|
36,894 |
|
|
|
39,318 |
|
|
|
|
|
|
|
|
|
|
ARPU
(1) |
|
|
|
|
|
|
|
Duplex |
|
$ |
48.64 |
|
|
|
$ |
40.02 |
|
|
|
SPOT |
|
12.96 |
|
|
|
11.65 |
|
|
|
Simplex |
|
3.08 |
|
|
|
2.56 |
|
|
|
IGO |
|
2.35 |
|
|
|
2.02 |
|
|
(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. |
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