Globalstar, Inc. (NYSE American: GSAT) today announced its
operating and financial results for the quarter ended March 31,
2020.
Jay Monroe, Executive Chairman of Globalstar, commented,
"Considering the truly unprecedented challenges brought on by the
coronavirus pandemic, I am encouraged by the adaptability of the
Globalstar organization and proud that productivity has been
largely sustained. During the quarter we added 5G status to Band 53
at 3GPP. This variant is known as n53. The process for
operationalizing spectrum can be summarized as follows: regulatory
approval, 3GPP standardizations, infrastructure ecosystem
development, early customer indications of interest, commitment to
chipset development, mass Band n53 device availability, and
customer adoption. With recent vendor commitments for chipset
development, which will enable Band 53 in next year’s chipsets and
dramatically increase device availability, our focus has shifted to
the last two steps.”
Mr. Monroe continued, “The pipeline of potential users of our
terrestrial spectrum continues to grow and includes a wide range of
industries as well as companies of all sizes in the U.S. and
abroad. To provide a little more context, we currently have four
potential deployments in what I would describe as the
transportation sector alone, and we are far from only
transportation focused. Considering the large number of potential
projects actively considering Band 53, I expect the initiation of
lease revenue from terrestrial spectrum in 2020 with upside in the
coming years."
Dave Kagan, Chief Executive Officer of Globalstar, added, "Our
world has changed significantly since we last reported earnings.
The success of our business depends on our global operations,
supply chain and consumer demand. As a result of COVID-19, we have
experienced a reduction in the volume of sales of our subscriber
equipment, received requests for service pricing concessions from
certain customers, and expect an impact on the ability of certain
customers to pay outstanding balances. These unfavorable
consequences have mostly related to our customers who operate in
the oil and gas and retail industries. The results of our
operations for the three months ended March 31, 2020 partially
reflect this impact; however, we expect that this trend will
continue as we weather this storm. Notwithstanding this impact, our
revenue increased during the first quarter as a result of
engineering revenue. We have implemented several measures to
minimize the impact on our operations and sustain our liquidity
position, and I would like to thank our employees and partners who
have worked tirelessly to operate critical services in this
difficult environment."
Mr. Kagan continued, "While the impact of COVID-19 has cast a
shadow over almost every other event or announcement, we did report
some very positive news in recent weeks. First, we announced a new
licensing partnership with the JEEP® brand. This partnership is
expected to increase consumer awareness of SPOT through an
exclusive new line of co-branded products and cross-promotional
opportunities in new distribution channels. Second, as Jay
mentioned, we announced the 3GPP approval of 5G for Band 53. We
have also continued to develop new potential services utilizing our
satellite assets including Assured PNT with our partners at
EchoRidge. Using similar technology, Globalstar’s satellite network
can offer Precision GPS which augments standalone GPS and could
provide us with a variety of commercial, automotive, and
governmental use cases, including autonomous platforms such as
drones, agriculture and shipping. Lastly, we shipped the first of
our newly developed IoT boards in the last few weeks and are
excited about initial customer feedback. While it is a relatively
inexpensive device and comes with comparatively low ARPU, we expect
the installed base will grow and offer a significant, recurring
cash flow stream in a broadening segment of the MSS market."
FINANCIAL REVIEW
Revenue
Total revenue for the first quarter of 2020 increased 7% from
the first quarter of 2019 due primarily to engineering service
revenue related to a network feasibility study, offset partially by
declines in other revenue streams.
Service revenue from our subscriber-driven revenue streams
declined by $1.4 million. This decrease was due primarily to lower
Duplex and SPOT service revenue. The decline in Duplex service
revenue was due to fewer average subscribers as gross activations
were lower than the previous trailing twelve-month period. However,
during the first quarter of 2020, we experienced higher activations
and equipment sales of our GSP 1700 phones as well as recently
launched products, including the improved Sat-Fi2® and new Sat-Fi2®
Remote Antenna Station devices. We believe that this
quarter-over-quarter improvement is a good indication of a
longer-term stabilization of the subscriber base.
The decline in SPOT service revenue in the first quarter of 2020
was due primarily to lower ARPU. Average SPOT subscribers were down
during the first quarter of 2020; however, excluding involuntary
churn of mostly non-revenue-generating subscribers in Latin
America, average subscribers were in line with the first quarter of
2019. On a pro-forma basis after adjusting for these
non-revenue-generating subscribers, ARPU was down 5% during the
first quarter of 2020 from the first quarter of 2019 reflecting in
part the impact from new service plans rolled out in mid-2019 with
rates below those previously offered. While we adjusted our rates
to increase subscriber additions, customers activating on these
lower-priced plans accounted for the majority of the decrease in
SPOT service revenue during the period.
Partially offsetting the declines in Duplex and SPOT service
revenue was a 17% increase in Commercial IoT service revenue
resulting from growth in our average subscriber base and higher
ARPU. The higher average subscriber count was from increased
activations of our SmartOne family of Commercial IoT devices during
the last twelve months compared to the prior twelve-month
period.
Subscriber equipment sales revenue decreased $0.7 million in the
first quarter of 2020 compared to the first quarter of 2019. This
decline was due almost entirely to a decrease in Commercial IoT
sales resulting directly from the impact of COVID-19. We also
experienced a decline in SPOT equipment revenue during the first
quarter of 2020 due to lower channel sales as the retail industry
was also directly impacted by COVID-19 since brick and mortar store
locations were closed in March 2020. Duplex equipment sales were
higher during the first quarter of 2020 as previously mentioned;
this variance partially offset the unfavorable Commercial IoT and
SPOT equipment revenue variances.
We have diversified our customer portfolio over the last several
years, but approximately 15% of our total revenue in 2019 was still
generated by customers who operate predominantly in the oil and gas
industry. Although the extent of the impact is uncertain, we expect
our revenue to continue to be negatively impacted by the industry
downturn reflected in both a reduction in the volume of subscriber
equipment sales and lower service pricing.
Operating Loss
Operating loss decreased from $18.3 million during the first
quarter of 2019 to $14.1 million during the first quarter of 2020
due to higher total revenue and lower operating expenses, each of
$2.1 million. The majority of the decrease in operating expenses
was a $1.1 million reduction in cost of services and $0.5 million
reductions in both marketing, general and administrative (MG&A)
expenses, and cost of subscriber equipment sales. Bad debt expense
was elevated in both periods. During the first quarter of 2020, we
recorded specific reserves related to certain customer receivable
balances that we do not believe are collectible due to the impact
of COVID-19, and during the first quarter of 2019, we reserved an
aged receivable from an IGO that was deemed to be uncollectible.
The decrease in cost of services was driven by lower R&D costs
due to fewer product development efforts during the first quarter
of 2020 and lower personnel expenses following the reorganization
of certain departments in the first quarter of 2019. The $0.5
million reduction in MG&A costs was due to higher subscriber
acquisition costs in 2019 resulting primarily from a single
promotion that did not recur in 2020. The $0.5 million decrease in
the cost of subscriber equipment sales was in line with the
decrease in subscriber equipment sales revenue as the blended
margin percentage was consistent quarter-over-quarter.
Net Income (Loss)
Net income (loss) fluctuated $64.0 million from net income in
the first quarter of 2019 to net loss in the first quarter of 2020.
This change was due primarily to a $57.0 million non-cash
derivative gain recorded during 2019 resulting from changes in our
stock price and stock price volatility. Also contributing to the
net loss during the first quarter of 2020 was a $9.0 million
non-cash loss driven by foreign exchange rate changes due to
strengthening of the U.S. dollar. Higher interest expense due
primarily to a higher weighted average cost of debt also impacted
net loss during 2020.
Adjusted EBITDA
Adjusted EBITDA increased to $11.0 million during the first
quarter of 2020 due primarily to a $2.1 million increase in total
revenue and a $1.7 million decrease in operating expenses
(excluding EBITDA adjustments).
Liquidity
Cash and cash equivalents were $10.5 million as of March 31,
2020. We also have $51.1 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 of approximately
$15.0 million, and interest payments of approximately $11.0
million. With our debt refinancing completed in late 2019, our next
scheduled principal payment is not due until June 2021 and is
expected to be funded from the proceeds of the warrants issued to
our second lien lenders that expire in March 2021.
About Globalstar 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, 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
March 31,
2020
2019
Revenue:
Service revenue
$
28,935
$
26,119
Subscriber equipment sales
3,259
3,959
Total revenue
32,194
30,078
Operating expenses:
Cost of services (exclusive of
depreciation, amortization, and accretion shown separately
below)
8,728
9,853
Cost of subscriber equipment sales
2,643
3,149
Marketing, general and administrative
11,091
11,606
Depreciation, amortization, and
accretion
23,817
23,801
Total operating expenses
46,279
48,409
Loss from operations
(14,085
)
(18,331
)
Other income (expense):
Interest income and expense, net of
amounts capitalized
(14,010
)
(12,870
)
Derivative (loss) gain
(821
)
57,008
Foreign currency (loss) gain
(8,953
)
86
Other
(333
)
(95
)
Total other (expense) income
(24,117
)
44,129
(Loss) income before income taxes
(38,202
)
25,798
Income tax expense
21
27
Net (loss) income
$
(38,223
)
$
25,771
Net (loss) income per common share:
Basic
$
(0.02
)
$
0.02
Diluted
(0.02
)
(0.02
)
Weighted-average shares outstanding:
Basic
1,557,960
1,448,318
Diluted
1,557,960
1,632,257
GLOBALSTAR, INC.
RECONCILIATION OF GAAP NET INCOME (LOSS) TO NON-GAAP ADJUSTED
EBITDA (In thousands) (Unaudited)
Three Months Ended
March 31,
2020
2019
Net (loss) income
$
(38,223
)
$
25,771
Interest income and expense, net
14,010
12,870
Derivative loss (gain)
821
(57,008
)
Income tax expense
21
27
Depreciation, amortization, and
accretion
23,817
23,801
EBITDA
446
5,461
Non-cash compensation
1,313
1,448
Foreign exchange and other
9,001
(255
)
Debt refinancing third party fees
284
—
Bad debt reserve of aged IGO
receivable
—
593
Adjusted EBITDA (1)
$
11,044
$
7,247
(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,
2020
2019
Service
Equipment
Service
Equipment
Revenue
Duplex
$
7,663
$
404
$
8,645
$
251
SPOT
12,123
1,407
13,095
1,591
Commercial IoT
4,310
1,413
3,698
2,072
IGO
91
—
166
—
Engineering and other
4,748
35
515
45
Total Revenue
$
28,935
$
3,259
$
26,119
$
3,959
Average Subscribers
Duplex
52,054
59,978
SPOT
271,276
288,840
Commercial IoT
418,424
384,673
IGO
26,256
27,017
Engineering and other
883
953
Total Average Subscribers
768,893
761,461
ARPU (1)
Duplex
$
49.07
$
48.05
SPOT
14.90
15.11
Commercial IoT
3.43
3.20
IGO
1.16
2.05
(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/20200507005846/en/
Denise Davila investorrelations@globalstar.com
Globalstar (AMEX:GSAT)
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