Globalstar, Inc. (NYSE American: GSAT) today announced its
operating and financial results for the quarter ended March 31,
2021.
Dave Kagan, Chief Executive Officer of Globalstar, commented,
“We are pleased to see recent signs of recovery in our Commercial
IoT sales channel with both service and equipment revenue higher
than pre-pandemic levels in the first quarter of 2020. We expected
to return to pre-COVID sales levels by the second half of this year
and that expectation proved to be conservative. Our sales pipeline
remains robust and diverse and we're excited to see this recent
momentum. Over the last several months we have made numerous
strategic decisions to align our overall business model with our
expectations for growth in the Commercial IoT space, from
organizational changes to network infrastructure upgrades and
product development efforts, and we believe these refinements have
positioned us for success.
"Our Commercial IoT pipeline has grown meaningfully over the
last several weeks, including a large opportunity, potentially
north of 100,000 units, that we are actively pursuing for remote
monitoring in the alternative energy segment. If we secure it, this
deployment would drive significant efficiencies in the customer's
operations and could serve as a catalyst for similar use cases in
the future. Additionally, last month, we shipped the first 10,000
Commercial IoT units for the animal tracking deployment with our
Australian partner, Ceres Tag. We believe animal tracking is a
significant opportunity for Globalstar given not only its market
size and the industry's need to improve food supply chain
integrity, but also because our network is uniquely designed to
fulfill this need at a device size and price point unmatched in the
satellite industry.
"We are also making significant progress with our initiative to
upgrade certain gateway equipment known as appliques. The impetus
for this initiative is to support large opportunities like animal
tracking to ensure that our network performance continues to excel
as capacity needs grow. Our partner has delivered test results that
have exceeded our specifications in terms of system efficiency and
latency, with one applique delivering an overall capacity increase
of 8X and another applique proving capable of sending equivalent
data while utilizing 75% less capacity than our current system.
Round-trip end-to-end latency using the new system will also
dramatically decrease to about 4 seconds, which will help the
system meet expanding needs for latency sensitive applications. The
system's ability to allow different power levels gives us
flexibility to provide IoT service in customized scenarios,
including in markets with high numbers of densely clustered
devices. We look forward to providing updates over the coming
months as this project advances.
"Entering the pandemic, we had reported year-over-year service
revenue growth from Commercial IoT subscribers of 26%. Subscribers
and ARPU were both increasing at a significant pace. This momentum
was in line with our strategic initiatives, which were anchored in
the belief that the untapped potential of our satellite network
should be focused towards Commercial IoT opportunities. Our pursuit
of these opportunities has not wavered, but we are at an inflection
point and we have worked to expand the list of targeted industries
to develop a more diversified revenue base. While the
quarter-over-quarter and sequential improvement in Commercial IoT
is not material, it is a meaningful step in the right direction
given the COVID headwinds in 2020."
Kagan continued, "We also continue to explore revenue-generating
opportunities outside of our traditional satellite device and
service offerings in order to monetize our assets in various ways.
For instance, we have recently executed teleport leases that allow
our partners to host their equipment at our existing ground
stations around the world. These arrangements leverage the real
estate, equipment and regulatory advantages of our owned gateway
sites. There is no question that the ground infrastructure needs of
the satellite industry is accelerating and many new constellations
need access to ground based infrastructure which we can provide and
allow accelerated time to market. We are exploring many more
opportunities in this space and expect to grow this area as an
incremental source of revenue and cash flow.
"Finally, since our last earnings release, we announced the
completion of the second lien warrant exercises. The proceeds from
this exercise satisfied loan agreement requirements to raise $45
million of equity prior to the end of the first quarter 2021. Down
from the initial first lien principal balance of almost $600
million, we now only have a net principal balance of $84 million
remaining, most of which is not due until the final maturity date
in December 2022."
Jay Monroe, Executive Chairman of Globalstar, commented, “We
have long talked about how Globalstar presented many opportunities
for value creation and we are adding a new leg to the stool by
turning our ground station assets into revenue opportunities. This
is exciting because it requires little incremental investment or
operating expense from us and poses little competitive threat as
well. We feel like we are taking a page out of the playbook of
other successful technology or infrastructure companies that have
effectively monetized their physical and other resources. I applaud
the team on this effort and look forward to what comes from it.
"The Commercial IoT effort is also progressing and showing
increasing traction with large customers. I am confident the team
is creating the right products for where that market is going. We
believe we will be able to offer customers remote connectivity at a
value which is hard for others to match.
"Lastly, the terrestrial spectrum effort is progressing well
and, as discussed last quarter, we are entering the period during
which we can move to fulsome monetization. During the quarter we
had multiple transformative announcements including Qualcomm’s
inclusion of band 53 in their upcoming modem and Nokia’s
announcement of the deployment at the Port of Seattle, proving the
ability for Band 53 to compete well where other licensed,
semi-licensed and unlicensed alternatives are present. We are
currently reviewing several private networking opportunities of
varying sizes and in many of the geographies where we have received
terrestrial authority."
Monroe concluded, "A few quarters ago we laid out the process to
get to commercialization of our spectrum. We will soon be at the
point where the only impediment to terrestrial deployments will be
commercial negotiations. The work to date has been a herculean
effort accomplished by a focused team. Our approach has been to
leverage the support of our growing ecosystem to encourage adoption
of Band 53 for diverse opportunities which we continue to believe
offers the greatest chance of success. We will continue with this
go to market plan but will also likely need to expand our spectrum
team around the world to fully prosecute this effort."
FINANCIAL REVIEW
Revenue
Total Revenue
Total revenue for the first quarter of 2021 decreased 16% from
the first quarter of 2020; however, this decline was due primarily
to the timing of engineering service revenue. Lower service revenue
was offset partially by an increase in revenue generated from
subscriber equipment sales.
Service Revenue
Service revenue decreased over the prior year's quarter
resulting primarily from engineering service revenue recognized
during the first quarter of 2020 related to a network feasibility
study, which totaled $4.0 million. This contract continues with
variable impact on the financial statements based on the timing and
amount of contract milestones; services completed during the first
quarter of 2021 generated revenue of $0.5 million.
Subscriber-driven revenue streams decreased $2.0 million due
primarily to fewer Duplex and SPOT subscribers following a period
of elevated churn during peak pandemic months in 2020.
While the continued decline in Duplex subscribers is expected as
we focus our resources on other revenue streams, we continue to see
consumer demand for our handsets, which drives consistent
activations and recurring service revenue; however, these
activations are limited by the amount of devices in the
channel.
SPOT churn has recovered to normal levels based on the number of
deactivations during the first three months of 2021. Additionally,
despite the decline in SPOT service revenue in the first quarter of
2021, gross activations were up 14% from the first quarter of 2020
and up 15% over the last twelve months. We continue to experience
an increase in gross activations, which were propelled by the
retail store re-openings in mid-2020 and the enhancements in our
online product distribution strategy following the start of the
pandemic. Also contributing to the increase in subscriber
activations is our competitively-priced service plans. These prices
are lower than our current blended ARPU; therefore, ARPU will
decrease over time, particularly in periods with a high volume of
activations. However, we expect that the increase in volume of new
subscribers will more than offset the revenue impact from lower
ARPU.
Finally, we are pleased to see that service revenue generated
from Commercial IoT increased in the first quarter of 2021, which
was driven by higher ARPU compared to the prior year's quarter.
Notably, Commercial IoT subscribers increased on a sequential basis
from December 31, 2020.
Subscriber Equipment Sales
Subscriber equipment sales increased $0.6 million in the first
quarter of 2021 compared to the first quarter of 2020. The majority
of the revenue increase was driven by a higher volume of SPOT X®
and Trace device sales. Commercial IoT equipment sales also
increased during the first quarter of 2021 resulting from a higher
volume of SmartOne asset tracking devices and our most recently
launched Commercial IoT product, the ST100 satellite transmitter.
Although not a significant amount of revenue, the increase in
volume of Commercial IoT devices this quarter indicates a
meaningful step in the recovery from COVID-19 and the oil and gas
downturn experienced in 2020.
Loss from Operations
Loss from operations was $19.3 million during the first quarter
of 2021 compared to $14.1 million during the first quarter of 2020.
The increase in operating loss was due primarily to lower revenue
of $5.3 million (previously discussed), offset partially by lower
operating expenses of $0.1 million. The decrease in operating
expenses resulted primarily from a reduction in marketing, general
and administrative (MG&A) expenses, offset partially by minor
increases in cost of subscriber equipment sales, cost of services,
and depreciation expense. A fluctuation in bad debt expense
favorably impacted MG&A expenses between the respective
quarters. During the first quarter of 2020, we recorded reserves
related to certain customer receivable balances that we did not
expect to collect due to the impact of COVID-19. During the first
quarter of 2021, we recovered $0.3 million related to a previously
reserved customer after a final bankruptcy ruling.
Net Loss
Net loss decreased $1.9 million from the first quarter of 2020
to the first quarter of 2021. This change was due primarily to
lower interest expense and foreign currency losses. The decrease in
interest expense was driven by lower interest costs resulting from
the conversion of the Thermo loan in February 2020 and lower
interest accrued on the First Lien Facility Agreement due to
principal payments made in the last twelve months as well as
favorable interest rates.
Adjusted EBITDA
Adjusted EBITDA decreased to $6.0 million during the first
quarter of 2021 due primarily to a decrease in total revenue,
offset partially by a decrease in operating expenses, for the
reasons previously discussed.
Liquidity
As of March 31, 2021, we held cash and cash equivalents of $8.4
million and restricted cash of $98.4 million, of which $47.3
million and $51.1 million was recorded as current and non-current
restricted cash, respectively, on our balance sheet as required
under our First Lien Facility Agreement. As previously announced,
during the first quarter of 2021, we received proceeds totaling
$43.7 million from the exercise of the remaining outstanding
warrants issued to the lenders of our Second Lien Facility
Agreement. This equity issuance, which generated $47.3 million in
total proceeds, satisfied our requirement in our loan agreements to
raise a minimum of $45.0 million of equity by March 30, 2021. As of
March 31, 2021, these proceeds were held in our equity proceeds
account and, in April 2021, were used to pay principal due under
the First Lien Facility Agreement. The non-current restricted cash
of $51.1 million is held in our debt service reserve account and
will be used towards to the final principal and interest payment
due upon maturity of our First Lien Facility Agreement next year.
Net of restricted cash, our remaining principal payments due under
this agreement are $5.8 million in December 2021 and $78.4 million
in 2022.
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 operating costs, capital expenditures related
primarily to network upgrades, and interest payments.
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. 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
March 31,
2021
2020
Revenue:
Service revenue
$
23,086
$
28,935
Subscriber equipment sales
3,843
3,259
Total revenue
26,929
32,194
Operating expenses:
Cost of services (exclusive of
depreciation, amortization, and accretion shown
separately below)
9,077
8,728
Cost of subscriber equipment sales
2,899
2,643
Marketing, general and administrative
10,097
11,091
Depreciation, amortization, and
accretion
24,116
23,817
Total operating expenses
46,189
46,279
Loss from operations
(19,260)
(14,085)
Other (expense) income:
Interest income and expense, net of
amounts capitalized
(11,574)
(14,010)
Derivative loss
(1,129)
(821)
Foreign currency loss
(4,315)
(8,953)
Other
22
(333)
Total other (expense) income
(16,996)
(24,117)
Loss before income taxes
(36,256)
(38,202)
Income tax expense
77
21
Net loss
$
(36,333)
$
(38,223)
Net loss per common share:
Basic
$
(0.02)
$
(0.02)
Diluted
(0.02)
(0.02)
Weighted-average shares outstanding:
Basic
1,679,754
1,557,960
Diluted
1,679,754
1,557,960
GLOBALSTAR, INC.
RECONCILIATION OF GAAP NET
INCOME (LOSS) TO NON-GAAP ADJUSTED EBITDA
(In thousands)
(Unaudited)
Three Months Ended
March 31,
2021
2020
Net loss
$
(36,333)
$
(38,223)
Interest income and expense, net
11,574
14,010
Derivative loss
1,129
821
Income tax expense
77
21
Depreciation, amortization, and
accretion
24,116
23,817
EBITDA
563
446
Non-cash compensation
1,137
1,313
Foreign exchange and other
4,294
9,285
Adjusted EBITDA (1)
$
5,994
$
11,044
(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,
2021
2020
Service
Equipment
Service
Equipment
Revenue
Duplex
$
6,655
$
293
$
7,663
$
404
SPOT
10,984
1,915
12,123
1,407
Commercial IoT
4,481
1,521
4,310
1,413
Engineering and other
966
114
4,839
35
Total revenue
$
23,086
$
3,843
$
28,935
$
3,259
Average subscribers
Duplex
45,687
52,054
SPOT
261,171
271,276
Commercial IoT
409,089
418,424
Other
27,487
27,139
Total average subscribers
743,434
768,893
ARPU (1)
Duplex
$
48.56
$
49.07
SPOT
14.02
14.90
Commercial IoT
3.65
3.43
(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/20210506006041/en/
Investor Contact Information: Denise Davila
investorrelations@globalstar.com
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