Globalstar, Inc. (NYSE American: GSAT) today announced its
operating and financial results for the quarter ended June 30,
2021.
Dave Kagan, Chief Executive Officer of Globalstar, commented,
“We are pleased with the improvement of several key performance
indicators during the second quarter, including a significant
increase in SPOT and Commercial IoT equipment sales, which is a
leading indicator of future subscriber activations and service
revenue growth. SPOT activations continue at record levels with LTM
gross activations up 26% from the prior period, while Commercial
IoT ARPU continues to increase driven by higher usage and a
favorable rate plan mix. We have executed on our robust sales
pipeline while opening up new opportunities that would expand the
customer relationships and distribution channels that we currently
serve."
Kagan continued, "Many people in our organization are focused on
the blocking and tackling associated with supporting our existing
VAR relationships, progressing our product development efforts, and
developing our next generation of network assets. These fundamental
roles are critical to our success and they have been hitting on all
cylinders. However, what will be essential to our ability to
meaningfully capitalize on the vast opportunities available to us,
particularly in the Commercial IoT space, is identifying, pursuing
and closing large deals. One such opportunity in particular is
remote monitoring in the alternative energy industry, which has
progressed over the last few months with successful field testing.
While this opportunity isn't yet secured, deployments such as this
one will expand the use cases and industries that our products can
support, which would further reduce the oil and gas concentration
that contributed to lower demand during 2020 and provide a more
diverse revenue base.
"We also continue to reduce leverage, and I am happy to report
that we have less than $50 million of net first lien principal
outstanding and we are working to continue to optimize our balance
sheet."
Jay Monroe, Executive Chairman of Globalstar, commented, “Dave
and his team are executing on the plan to transition the satellite
business to an internet of things focused service and I am
confident that the new products in the pipeline will meet the
evolution of the IoT space beyond the reach of cellular. The
spectrum opportunity is also progressing very rapidly, and its
potential gets clearer to us every quarter. While Nokia, Airspan
and XCom continue to pursue Band 53 opportunities, we have added to
the growing list of Band 53 supporters to now include a large
global systems integrator. We have deployed our first revenue
producing private network in Africa at a large mining complex and
have made promising inroads with several large potential partners
across the continent while continuing to execute on opportunities
in the western hemisphere."
Monroe concluded, "Lastly, the international regulatory effort
continues across four continents and we expect to announce
additional regulatory wins that will take us to over one billion
people covered by Band 53 authorities. This is a very nice time to
be at Globalstar with the capital structure greatly improved and
the realization of our long held strategy closer and closer to our
grasp."
FINANCIAL REVIEW
Revenue
Total Revenue
Total revenue for the second quarter of 2021 decreased slightly
from the second quarter of 2020. Higher revenue generated from
subscriber equipment sales was offset by lower service revenue.
Service Revenue
Service revenue decreased over the prior year's quarter due
primarily to fewer Duplex subscribers. While the decline in Duplex
subscribers is expected to continue as we focus our resources on
other revenue streams, we continue to see consistent subscriber
activations and recurring service revenue; however, these
activations are limited by the amount of devices available for
sale.
Conversely, SPOT activations were up 33% and churn was down 40%
from the second quarter of 2020. This positive subscriber behavior
had led to an end-of-period subscriber increase during the quarter,
following a period of elevated subscriber churn during 2020.
Despite the improved subscriber metrics, service revenue declined
3% during the second quarter of 2021 due to a decline in ARPU. Our
competitively-priced service plans are lower than our historic
rates; therefore, ARPU will continue to decrease in the near term,
particularly in periods with a high volume of activations. However,
based on recent experience, we continue to expect that the increase
in volume of new subscribers will more than offset the revenue
impact from lower ARPU.
Finally, service revenue generated from Commercial IoT
subscribers increased 5% in the second quarter of 2021 driven by
higher ARPU compared to the prior year's quarter. Additionally, as
discussed later, Commercial IoT equipment sales were up
significantly from the prior year period, which is a key indication
of future service revenue growth.
Subscriber Equipment Sales
Subscriber equipment sales increased $1.4 million in the second
quarter of 2021 compared to the second quarter of 2020. The
majority of the revenue increase was driven by a higher volume of
Commercial IoT sales. Revenue generated from Commercial IoT sales
more than doubled with each device type selling more than in the
prior year period. Revenue from SPOT equipment sales also increased
significantly with revenue up 32% in the second quarter of 2021 as
we continue to expand retailer distribution channels and experience
growing demand for our SPOT products.
Regarding the supply chain shortage impacting a variety of
industries, we are actively managing this situation. We are
ordering material in higher volumes and at higher costs than
historically done, but believe that our production quantities will
be sufficient to meet our sales demand. As this situation relates
to sales margins, we negotiated a reduction in labor rates with our
primary manufacturer in the third quarter of 2020. This cost
reduction has offset the impact from higher component parts when
comparing the first half of 2021 to the prior year period.
Loss from Operations
Loss from operations was $16.0 million during the second quarter
of 2021 compared to $15.4 million during the second quarter of
2020. The increase in operating loss was due primarily to higher
operating expenses of $0.5 million. During the second quarter of
2021, we recorded a reduction in the value of inventory of $0.8
million related to obsolete material for discontinued products.
An increase in cost of services due to higher licensing fees for
new software products was offset by a reduction in marketing,
general and administrative (MG&A) expenses due to a favorable
fluctuation in bad debt expense following the bad debt reserve and
subsequent recovery of an individually significant customer
balance.
Notably, cost of subscriber equipment sales was generally flat
between periods despite a significant increase in equipment
revenue. During the second quarter of 2021, we reversed an accrual
for potential tariffs owed on imports from China made prior to a
ruling by the U.S Customs and Border Protection in September 2019
that are no longer due, resulting in an expense reduction of $0.9
million recognized during the quarter. Excluding this reversal,
cost of subscriber equipment sales increased in line with the
increase in total revenue from subscriber equipment sales.
Net Loss
Net loss decreased $3.3 million from the second quarter of 2020
to the second quarter of 2021. This change was due primarily to
lower interest expense, a gain on extinguishment of debt, and
higher foreign currency gains, offset partially by a higher
derivative loss. The decrease in interest expense was driven by
lower interest costs on the First Lien Facility Agreement due to
principal payments made in the last twelve months. The gain on
extinguishment of debt was due to the SBA's forgiveness of our PPP
loan in June 2021, offset partially by an extinguishment loss from
prepayments on our First Lien Facility Agreement during the second
quarter of 2021.
Adjusted EBITDA
Adjusted EBITDA was $9.8 million during the second quarter of
2021, consistent with the prior year's quarter, as revenue and
operating expenses (excluding EBITDA adjustments) were generally
flat for the reasons previously discussed.
Liquidity
As of June 30, 2021, we held cash and cash equivalents of $15.7
million and restricted cash of $51.0 million. As previously
announced, we received an advance payment of $37.5 million during
the second quarter of 2021. We used these proceeds to pay a portion
of the remaining amount due under the First Lien Facility
Agreement. Net of the $51.0 million held in a restricted cash
account, the remaining principal balance due under the First Lien
Facility Agreement is $46.8 million in December 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
June 30,
2021
2020
Revenue:
Service revenue
$
25,617
$
27,090
Subscriber equipment sales
4,662
3,274
Total revenue
30,279
30,364
Operating expenses:
Cost of services (exclusive of
depreciation, amortization, and accretion shown separately
below)
9,123
8,647
Cost of subscriber equipment sales
2,858
2,940
Cost of subscriber equipment sales -
reduction in the value of inventory
782
—
Marketing, general and administrative
9,681
10,253
Depreciation, amortization, and
accretion
23,843
23,903
Total operating expenses
46,287
45,743
Loss from operations
(16,008
)
(15,379
)
Other (expense) income:
Loss on extinguishment of debt
2,664
—
Interest income and expense, net of
amounts capitalized
(10,778
)
(11,508
)
Derivative (loss) gain
(1,310
)
1,160
Foreign currency gain
4,425
1,314
Other
(88
)
(233
)
Total other (expense) income
(5,087
)
(9,267
)
Loss before income taxes
(21,095
)
(24,646
)
Income tax expense
354
90
Net loss
$
(21,449
)
$
(24,736
)
Net loss per common share:
Basic
$
(0.01
)
$
(0.01
)
Diluted
(0.01
)
(0.01
)
Weighted-average shares outstanding:
Basic
1,791,943
1,668,974
Diluted
1,791,943
1,668,974
GLOBALSTAR, INC.
RECONCILIATION OF GAAP NET
INCOME (LOSS) TO NON-GAAP ADJUSTED EBITDA
(In thousands)
(Unaudited)
Three Months Ended
June 30,
2021
2020
Net loss
$
(21,449
)
$
(24,736
)
Interest income and expense, net
10,778
11,508
Derivative loss (gain)
1,310
(1,160
)
Income tax expense
354
90
Depreciation, amortization, and
accretion
23,843
23,903
EBITDA
14,836
9,605
Non-cash compensation
1,143
1,263
Reduction in the value of inventory
782
—
Foreign exchange and other
(4,337
)
(1,081
)
Adjusted EBITDA (1)
$
9,760
$
9,787
(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,
2021
2020
Service
Equipment
Service
Equipment
Revenue
Duplex
$
7,243
$
331
$
8,556
$
625
SPOT
11,139
2,230
11,579
1,695
Commercial IoT
4,504
2,090
4,298
939
Engineering and other
2,731
11
2,657
15
Total revenue
$
25,617
$
4,662
$
27,090
$
3,274
Average subscribers
Duplex
44,160
50,491
SPOT
264,508
264,395
Commercial IoT
409,346
415,004
Other
27,603
27,342
Total average subscribers
745,617
757,232
ARPU (1)
Duplex
$
54.67
$
56.49
SPOT
14.04
14.60
Commercial IoT
3.67
3.45
(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/20210805005223/en/
Investor Contact Information: Denise Davila
investorrelations@globalstar.com
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