Globalstar, Inc. (NYSE American: GSAT) today announced its
operating and financial results for the quarter ended June 30,
2022.
Dave Kagan, Chief Executive Officer of Globalstar, commented,
"The first half of 2022 has been very strong with financial and
operational achievements that I expect will propel us into an even
better second half. Below is a discussion of certain of these
recent highlights, including our financial performance, which
continued to improve significantly in the second quarter led by a
revenue increase of over 21%. This increase in revenue contributed
to an improved operating margin, while non-cash items drove a net
loss, and, importantly, Adjusted EBITDA reached its highest level
in the history of our company, surging almost 50% from the prior
year's quarter. The past years of development and investment are
bearing fruit, and I have never been more excited about our
future."
OPERATIONAL UPDATE
Commercial IoT
The most notable achievement for the IoT sales team during the
quarter was the execution of a binding agreement for 23,000
SmartOne devices used to provide remote monitoring services in the
alternative energy industry. We expect to start delivering product
by the end of the year after certain routine back-office
engineering work is completed. We also hope to receive significant
follow-on orders from this customer, but even at the initial
quantity, it is the largest single IoT deal in our history.
Deployments such as this one expand the use cases and industries
that the products can support and have precedential value when
pursuing new partners and opportunities.
To further enhance Commercial IoT offerings, we recently
introduced the Realm Enablement Suite, a portfolio of satellite
asset tracking hardware and software solutions that gives us a
competitive advantage for penetrating the addressable IoT market.
At its core, Realm includes an advanced edge platform that
simplifies new applications and solutions development by processing
and transmitting data without additional code. Also included in the
solution set is the Integrity 150, which is the first
solar-powered, deployment-ready satellite asset tracking device
that operates on Realm. We have also introduced ST150M, a satellite
modem module which simplifies product development. With the launch
of the Realm Enablement Suite, Globalstar's product portfolio is
well-positioned to incorporate two-way and multi-mode devices,
which are under development and a catalyst for substantial growth
in this space.
Production Issue Resolution
Our second quarter 2022 financial performance is particularly
encouraging considering the prolonged period in which we could not
produce certain core SPOT and Commercial IoT devices due to
component part shortages. As we resume production over the coming
days and weeks, we expect equipment revenue to be meaningfully
higher in the second half of 2022, leading to further subscriber
revenue growth. Demand, particularly for Commercial IoT service and
products, has not faltered even in the face of material supply
issues. Sales orders continue to build at an impressive pace, and
we will fulfill these orders expeditiously.
Terrestrial Spectrum
In the last earnings release, we announced that we had signed a
term sheet with a large, global customer for the use of Band 53 /
n53, and this relationship has continued to move forward and
develop. We are in advanced negotiations on a number of other
important opportunities that further validate our view of the value
of the spectrum resource we control. These deals take a long time
to develop and we thank Nokia, Airspan, XCom, Global Telecom and
others in the ecosystem for continuing to drive these opportunities
forward.
Additionally, we expect to announce terrestrial approval of Band
53/n53 in additional countries during the upcoming months which we
expect will take us well over one billion covered POPs.
Satellite Network
In 2022, we have completed important milestones advancing the
objective of replenishing our satellite network. Early this year,
we executed the Procurement Agreement with Macdonald, Dettwiler and
Associates Corporation ("MDA") for the construction of 17 new
spacecraft with Rocket Lab as the bus vendor. These satellites are
planned to launch in 2025 and secure continuity of service. The
milestone work under this contract is progressing as expected.
In June, we successfully launched an existing on-ground spare
satellite in partnership with SpaceX. Today, this satellite is
being used as an in-orbit spare to be raised to its operating
altitude when and if needed.
Financing Arrangements
The Procurement Agreement provides for deferrals of milestone
payments through August 2022. We are actively pursuing a broader
financing of the satellite construction costs, and have been
diligent in these efforts in order to execute a financing
arrangement on the best available terms. We also plan to refinance
our 2019 senior credit facility in due course.
As previously discussed, the other party to the Terms Agreement
will reimburse us for 95% of the approved capital expenditures we
make in connection with the new satellites, interest costs of our
borrowings related to the new satellites, other approved costs and
termination costs, should any arise, under the Procurement
Agreement. The timing of this reimbursement is in line with the
depreciation of the satellites, which is expected to start in
2025.
Jay Monroe, Executive Chairman, commented, “I would like to
congratulate the team on excellent financial results with strong
revenue growth and record EBITDA. The financial and operational
achievements discussed above underpin the four pillars of value
that we have discussed previously - legacy Duplex and SPOT
services, wholesale satellite capacity, Commercial IoT and
terrestrial spectrum. These pillars illustrate how we think about
and manage the business. We have made substantial strides forward
on all four pillars and are closer than ever to increased value
realization. We have said this before but it is even more true
today, there has never been more interest in Globalstar’s satellite
services and terrestrial spectrum resources."
FINANCIAL REVIEW
Revenue
Total Revenue
Total revenue for the second quarter of 2022 increased $6.5
million, or 21%, from the second quarter of 2021 primarily due to
an increase in service revenue. Higher service revenue was offset
partially by a decrease in revenue generated from subscriber
equipment sales resulting from supply chain disruptions.
Service Revenue
Service revenue increased $7.4 million due primarily to the
timing and amount of engineering and other service revenue
associated with the Terms Agreement, which increased $6.6 million
from the second quarter of 2021. During the second quarter of 2022,
we recognized $8.8 million for consideration received for
performance obligations associated with work to expand and upgrade
gateways around the world and under the satellite procurement
agreement.
Subscriber service revenue also increased, up $0.6 million from
the prior year's second quarter.
Commercial IoT service revenue increased 12% in equal parts from
subscriber growth and improved ARPU. Over the last twelve months,
gross subscriber activations were up 25% and churn in the base was
lower. We have recently experienced steady growth in our Latin
American subscriber base; for the three and six month periods,
average subscribers in this region increased 63% and 55% and
represented 9% and 7% of our total average subscriber growth,
respectively. Consolidated ARPU increased due to a favorable mix of
subscriber rate plans.
SPOT service revenue increased 5% over the prior year's quarter
due almost entirely to an increase in average subscribers. Similar
to Commercial IoT, we have recently experienced growth in our Latin
American subscriber base; for the three and six month periods,
average subscribers in this region increased 13% and 3%, and
represented 10% and 3% of our total average subscriber growth,
respectively.
Partially offsetting the increases in service revenue from
Commercial IoT and SPOT was a decrease in Duplex service revenue
resulting from fewer average subscribers. Attrition in the
subscriber base has slowed significantly in 2022 compared to recent
years.
Subscriber Equipment Sales
Subscriber equipment sales decreased $0.9 million in the second
quarter of 2022 compared to the second quarter of 2021 due to lower
volume resulting from supply chain disruptions, which impacted our
ability to produce our most popular SPOT and IoT devices over the
past few quarters. Production issues related to the SmartOne Solar
were substantially resolved in the second quarter of 2022 and we
expect production of the remaining devices to resume in the third
quarter of 2022.
Commercial IoT equipment sales revenue decreased 9% over the
prior year's second quarter due to a temporary stop in production
since late 2021 resulting from the supply chain issues. After
selling through safety stock, we have accumulated significant
backorders for both SmartOne devices. If we were able to fulfill
these orders in the second quarter, sales would have been more than
double the prior quarter's volume. Products not impacted by
component part shortages, such as the ST100 board, which was
launched near the end of 2020, had its highest volume in any
quarter since its launch. We also increased pricing for certain
Commercial IoT devices near the end of 2021 resulting from higher
component part pricing; these increases favorably impacted revenue
for most device type despite volume being lower quarter over
quarter.
SPOT equipment sales revenue was down 25% because we did not
have inventory to fulfill sales orders for two core SPOT products.
Despite the production challenges caused by component part
shortages, our retail partners have remained committed to the brand
as they expand the number of store locations with SPOT devices and
showcase our products on endcaps in many of their stores. We expect
to resume production in the third quarter of 2022 and look forward
to capitalizing on this demand.
Loss from Operations
Loss from operations was $11.4 million during the second quarter
of 2022 compared to $16.0 million during the second quarter of
2021. This improvement was due to an increase in revenue (discussed
above) offset partially by an increase in operating expenses driven
primarily by higher cost of services.
Consistent with recent quarters, cost of services was higher due
primarily to an increase in lease expense for our gateway expansion
efforts associated with the Terms Agreement. Also contributing to
the increase were higher licensing and professional fees, which
were elevated to support the launch of a new ERP system in January
2022 and other information technology software and maintenance.
Personnel costs also contributed to the increase in cost of
services quarter over quarter.
Cost of subscriber equipment sales increased slightly due to the
reversal of a prior year accrual for tariffs during the second
quarter 2021 totaling $0.9 million. Excluding this reversal, cost
of subscriber equipment sales would have been down $0.7 million and
generally consistent with the decreases in total revenue from
subscriber equipment sales.
Finally, nonrecurring reductions in the value of long-lived
assets and inventory contributed to the remaining fluctuation in
loss from operations quarter over quarter. During the second
quarter of 2022, we wrote off work in progress associated with
spectrum licensing efforts in certain countries around the world
after we determined that attainment of such licenses was no longer
probable based on discussions with regulators and other
circumstances. During the second quarter of 2021, we wrote off
balances associated with obsolete material for discontinued
products.
Net Loss
Net loss was $26.8 million for the second quarter of 2022
compared to $21.4 million for the second quarter of 2021.
Unfavorable variances in non-cash items, such as foreign currency
rates on intercompany balances and a gain on extinguishment of debt
that did not recur in 2022, contributed to the increase in net
loss. These items were offset partially by lower interest
expense.
Adjusted EBITDA
Adjusted EBITDA was $14.6 million during the second quarter of
2022 up $4.8 million, or 49%, compared to the prior year's quarter
due to higher revenue offset partially by higher operating expenses
(excluding EBITDA adjustments) for the reasons previously
discussed.
Liquidity
As of June 30, 2022, we held cash and cash equivalents of $13.1
million. Our current sources of cash also include operating cash
flows generated from the business and vendor financing. We expect
our uses of cash over the next twelve months to include operating
costs, capital expenditures and the repayment of amounts being
financed through our satellite vendor. We are pursuing a new debt
financing arrangement to repay and fund amounts due under the
Procurement Agreement.
About Globalstar, Inc.
Globalstar pioneered personal safety by introducing its SPOT
Satellite GPS Messenger in 2007. Today, leveraging its low-earth
orbit (LEO) satellite constellation, Globalstar reliably connects
and protects assets, transmits key operational data, and saves
lives – from any location – for consumers, industrial companies and
government agencies in over 120 countries. With a portfolio that
includes SPOT GPS messengers, next-generation IoT products and
modems, and cloud-based telematics solutions, Globalstar’s cost
effective satellite-powered innovations give users visibility and
intelligence for improving safety and operational efficiencies.
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,
2022
2021
Revenue:
Service revenue
$
33,048
$
25,617
Subscriber equipment sales
3,752
4,662
Total revenue
36,800
30,279
Operating expenses:
Cost of services (exclusive of
depreciation, amortization, and accretion shown separately
below)
10,695
9,123
Cost of subscriber equipment sales
3,097
2,858
Cost of subscriber equipment sales -
reduction in the value of inventory
16
782
Marketing, general and administrative
9,693
9,681
Reduction in the value of long-lived
assets
525
—
Depreciation, amortization, and
accretion
24,130
23,843
Total operating expenses
48,156
46,287
Loss from operations
(11,356
)
(16,008
)
Other (expense) income:
Gain on extinguishment of debt
—
2,664
Interest income and expense, net of
amounts capitalized
(7,187
)
(10,778
)
Derivative loss
(1,242
)
(1,310
)
Foreign currency (loss) gain
(7,123
)
4,425
Other
272
(88
)
Total other expense
(15,280
)
(5,087
)
Loss before income taxes
(26,636
)
(21,095
)
Income tax expense
121
354
Net loss
$
(26,757
)
$
(21,449
)
Net loss per common share:
Basic
$
(0.01
)
$
(0.01
)
Diluted
(0.01
)
(0.01
)
Weighted-average shares outstanding:
Basic
1,799,886
1,791,943
Diluted
1,799,886
1,791,943
GLOBALSTAR, INC.
RECONCILIATION OF GAAP NET
INCOME (LOSS) TO NON-GAAP ADJUSTED EBITDA
(In thousands)
(Unaudited)
Three Months Ended
June 30,
2022
2021
Net loss
$
(26,757
)
$
(21,449
)
Interest income and expense, net
7,187
10,778
Derivative loss
1,242
1,310
Income tax expense
121
354
Depreciation, amortization, and
accretion
24,130
23,843
EBITDA
5,923
14,836
Non-cash compensation
1,241
1,143
Foreign exchange and other
6,851
(4,337
)
Reduction in value of inventory and
long-lived assets
541
782
Gain on extinguishment of debt
—
(2,664
)
Adjusted EBITDA (1)
$
14,556
$
9,760
(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 and
inventory, 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,
2022
2021
Service
Equipment
Service
Equipment
Revenue
Duplex
$
6,936
$
143
$
7,243
$
331
SPOT
11,536
1,674
11,139
2,230
Commercial IoT
5,038
1,908
4,504
2,090
Engineering and other
9,538
27
2,731
11
Total revenue
$
33,048
$
3,752
$
25,617
$
4,662
Average subscribers
Duplex
42,723
44,160
SPOT
277,815
264,508
Commercial IoT
433,578
409,346
Other
437
27,603
Total average subscribers
754,553
745,617
ARPU (1)
Duplex
$
54.12
$
54.67
SPOT
13.84
14.04
Commercial IoT
3.87
3.67
(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/20220804005773/en/
Investor Contact Information: Denise Davila
investorrelations@globalstar.com
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