Globalstar, Inc. (NYSE American: GSAT) today announced its
operating and financial results for the quarter ended September 30,
2022.
"The third quarter of 2022 was transformational for Globalstar,"
commented Dave Kagan, Chief Executive Officer of Globalstar,
referring to the September 7 announcement and Form 8-K filing.
Kagan continued, "Globalstar is now well positioned as a
next-generation telecom infrastructure provider, offering long-term
connectivity solutions to customers from space and over terrestrial
networks, with stable cash flows that will drive innovation and
growth into the future. In addition to meaningful operational
highlights that represent a series of successful milestones across
wholesale services, terrestrial spectrum and product innovation, we
continue to report strong financial results, including
year-over-year revenue up 19% through the first nine months of
2022, and we look forward to continued growth from here."
QUARTERLY FINANCIAL REVIEW
Total Revenue
Total revenue for the third quarter of 2022 increased $5.0
million, or 15%, from the third quarter of 2021 primarily due to an
increase in service revenue, offset partially by a decrease in
revenue generated from subscriber equipment sales resulting from
continued supply chain disruptions.
Service Revenue
Service revenue increased $5.5 million due primarily to higher
wholesale capacity service revenue - one of our four strategic
pillars. The increase in revenue recognized during the third
quarter of 2022 is due primarily to consideration received for
performance obligations associated with our work to expand and
upgrade our gateways as well as support the construction of the new
satellites.
Our subscriber driven service revenue was down slightly due to
continued headwinds from supply chain challenges which have
resulted in reduced equipment sales, and therefore subscriber
activations, for many of our core products. Importantly, Commercial
IoT, another strategic pillar, increased from the prior year's
quarter.
Commercial IoT service revenue increased 5% from the third
quarter of 2021 due to growth in our subscriber base. We continue
to see steady growth in net subscriber additions, including a 24%
increase in gross activations over the last twelve months and lower
churn. Consistent with prior quarters, growth in our Latin American
average subscriber base represented 5% of our total subscriber
growth and average subscribers from this region increased nearly
50% from the prior year's quarter.
Looking to legacy services, SPOT and Duplex service revenue
decreased 1% and 6%, respectively, over the prior year's quarter.
Despite an increase in average SPOT subscribers, lower ARPU more
than offset the growth in subscribers. Lower ARPU was due to the
mix of subscriber rate plans, including the continued popularity of
flex plans, which have contributed to the increase in average
subscribers, however, generally carry lower rates than traditional
prepaid unlimited plans. The decrease in Duplex service revenue was
due to churn in our subscriber base, which is expected as we focus
on other service offerings.
Subscriber Equipment Sales
Subscriber equipment sales decreased $0.4 million in the third
quarter of 2022 compared to the third quarter of 2021 due to a lack
of inventory to fulfill sales orders. Component part shortages have
continued to impact our ability to produce our most popular SPOT
and IoT devices over the past few quarters. However, we have
resolved certain production issues during the quarter and are
making substantial progress on others as we expect more normalized
supply next year.
Commercial IoT equipment sales revenue increased almost 50% over
the prior year's quarter due to a higher volume of SmartOne Solar
unit sales, primarily due to our ability to resume production
during the third quarter of 2022. While sales orders continue to
outpace production, we are striving to fulfill our remaining back
orders by the end of the year. Our SmartOne C device was in a
back-order status during the third quarter of 2022; however, we
started fulfilling these orders during the fourth quarter of
2022.
SPOT equipment sales revenue was down 41% due to a lack of
inventory to fulfill sales orders for two core SPOT products.
Similar to Commercial IoT, we are navigating these supply chain
challenges and expect to resume production and successfully fulfill
our back orders in the coming weeks.
Loss from Operations
Loss from operations was $186.6 million during the third quarter
of 2022 compared to $14.7 million during the third quarter of 2021
driven predominantly by a non-cash charge of $174.5 million
following the abandonment of our second-generation Duplex assets
during the third quarter of 2022. Upon the announcement in
September 2022, our strategy associated with these assets
permanently shifted and we determined that we would no longer
support second-generation Duplex services. Our first-generation
Duplex services will continue to be offered within the retained
capacity for our direct services.
Excluding the reductions in value of equipment and long-lived
assets, loss from operations would have improved quarter over
quarter due to an increase in revenue (discussed above) offset
partially by an increase in operating expenses driven primarily by
higher cost of services and management, general and administrative
costs (MG&A).
Consistent with recent quarters, cost of services was higher due
primarily to higher licensing and professional fees, which have
been elevated to support the launch of a new ERP system and other
information technology security and maintenance. Higher lease and
related occupancy costs associated with gateway expansion efforts
also contributed to the increase in cost of services. Higher
personnel costs also contributed to the increase in cost of
services quarter over quarter.
MG&A costs were higher during the third quarter of 2022 due
primarily to non-cash stock-based compensation designed to retain
key employees.
Net Loss
Net loss was $204.4 million for the third quarter of 2022
compared to $30.9 million for the third quarter of 2021.
Unfavorable variances in non-cash items, such as foreign currency
losses due to changes in exchange rates on intercompany balances, a
loss on the termination of our pension plan, a gain on
extinguishment of debt that did not recur in 2022, and the
abandonment of ground assets described above, contributed to the
increase in net loss. These items were offset partially by lower
interest expense.
Adjusted EBITDA
Adjusted EBITDA was $14.2 million during the third quarter of
2022 up $3.7 million, or 35%, 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.
YEAR TO DATE FINANCIAL REVIEW
Total Revenue
For the nine months ended September 30, 2022, total revenue
increased 19% to $107.2 million driven by higher service revenue,
offset partially by lower revenue generated from subscriber
equipment sales due primarily to continued supply chain disruptions
impacting our SPOT product sales. The increase in service revenue
was driven by revenue recognized for wholesale services, while
revenue from our MSS subscribers was up modestly over the prior
year's period due to increases in Commercial IoT and SPOT, offset
partially by a decline in Duplex.
Net Loss
Similar to the third quarter variance, net loss for the nine
months ended September 30, 2022 was significantly impacted by a
reduction in value of second-generation Duplex assets. Without this
impairment, net loss would have improved from the prior year period
due primarily to higher net revenue.
Adjusted EBITDA
Adjusted EBITDA increased 48% to $39.1 million for the nine
months ended September 30, 2022, due primarily to an $18.6 million
increase in total revenue recognized from wholesale services.
Liquidity
As of September 30, 2022, we held cash and cash equivalents of
$14.7 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 vendor
financing. We are pursuing a new debt financing arrangement to fund
amounts due under the Procurement Agreement, which provide for
deferral of milestone payments through mid-December 2022, as
amended.
FINANCIAL OUTLOOK
We recently provided financial guidance for full-year 2023,
excluding revenue from terrestrial spectrum opportunities. We
reiterate this guidance today with anticipated results included
below. We expect to update this guidance on an annual basis, or
more frequently if determined necessary.
- Total revenue in 2023 between $185 million and $230
million
- Adjusted EBITDA margin of approximately 55%, up from 36% during
the nine months ended September 30, 2022
We expect these financial metrics to continue to improve
significantly by 2026, which is expected to be the first full year
in which the new satellites are operational, with total revenue
expected to increase by approximately 35% compared to the 2023
forecast.
Jay Monroe, Globalstar Executive Chairman, commented,
“Globalstar has an established satellite network and global
spectrum portfolio, as well as a long history of providing
reliable, life-saving satellite connectivity, and technological
innovations. I believe this quarter is a substantial step forward
in unlocking shareholder value through the continued execution of
our four pillars strategy. Beyond Globalstar’s unique asset
quality, the Company's persistence is leading us to additional
large opportunities for growth in both terrestrial and commercial
IoT, and we look forward to sharing these successes with you.”
Investor Day
We will hold an Investor Day on Wednesday, November 16, 2022, at
9:00 a.m. ET in New York City. Members of our executive leadership
team will present an overview of our four pillars of value,
including a discussion of our business, future strategies, and
financial outlook followed by a live Q&A. Those who are
interested in attending are encouraged to register as space is
limited. Register on www.globalstar.com/investorday.
About Globalstar, Inc.
Globalstar empowers its customers to connect, transmit and
communicate in smarter ways – easily, quickly, securely, and
affordably – offering reliable satellite and terrestrial
connectivity services as an international telecom infrastructure
provider. The Company’s LEO satellite constellation assures secure
data transmission for connecting and protecting assets, delivering
key operational data, and saving lives – from any location – for
consumers, businesses, and government agencies across the globe.
Globalstar’s terrestrial spectrum, Band 53/n53, offers carriers,
cable companies, and system integrators a versatile, fully licensed
channel with a growing ecosystem to improve customer wireless
connectivity. In addition to SPOT GPS messengers, Globalstar offers
next-generation IoT hardware and software products for efficiently
tracking and monitoring assets, processing smart data at the edge,
and managing analytics with cloud-based telematics solutions to
drive safety, productivity, and profitability.
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
September 30,
2022
2021
Revenue:
Service revenue
$
33,301
$
27,848
Subscriber equipment sales
4,325
4,766
Total revenue
37,626
32,614
Operating expenses:
Cost of services (exclusive of
depreciation, amortization, and accretion shown separately
below)
11,294
9,648
Cost of subscriber equipment sales
3,490
4,099
Cost of subscriber equipment sales -
reduction in the value of inventory
8,537
71
Marketing, general and administrative
10,707
9,196
Reduction in the value of long-lived
assets
166,001
242
Depreciation, amortization, and
accretion
24,238
24,072
Total operating expenses
224,267
47,328
Loss from operations
(186,641
)
(14,714
)
Other (expense) income:
Loss on extinguishment of debt
—
(829
)
Interest income and expense, net of
amounts capitalized
(7,583
)
(11,406
)
Derivative gain
662
229
Foreign currency loss
(9,406
)
(4,752
)
Pension settlement loss
(1,501
)
—
Other
(45
)
473
Total other expense) income
(17,873
)
(16,285
)
Loss before income taxes
(204,514
)
(30,999
)
Income tax benefit
(153
)
(114
)
Net loss
$
(204,361
)
$
(30,885
)
Net loss per common share:
Basic
$
(0.11
)
$
(0.02
)
Diluted
(0.11
)
(0.02
)
Weighted-average shares outstanding:
Basic
1,800,504
1,793,144
Diluted
1,800,504
1,793,144
GLOBALSTAR, INC.
RECONCILIATION OF GAAP NET
INCOME (LOSS) TO NON-GAAP ADJUSTED EBITDA
(In thousands)
(Unaudited)
Three Months Ended
September 30,
2022
2021
Net loss
$
(204,361
)
$
(30,885
)
Interest income and expense, net
7,583
11,406
Derivative gain
(662
)
(229
)
Income tax benefit
(153
)
(114
)
Depreciation, amortization, and
accretion
24,238
24,072
EBITDA
(173,355
)
4,250
Non-cash compensation
2,100
905
Foreign exchange and other
9,451
4,279
Reduction in value of inventory and
long-lived assets
174,538
313
Non-cash settlement of pension plan
1,501
—
Loss on extinguishment of debt
—
829
Adjusted EBITDA (1)
$
14,235
$
10,576
(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, forecign 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
September 30,
2022
2021
Service
Equipment
Service
Equipment
Revenue
Subscriber
Duplex
$
9,021
$
15
$
9,632
$
265
SPOT
11,753
1,558
11,873
2,619
Commercial IoT
4,673
2,713
4,458
1,841
Wholesale capacity
6,972
—
1,301
—
Engineering and other
882
39
584
41
Total revenue
$
33,301
$
4,325
$
27,848
$
4,766
Average subscribers
Duplex
41,204
45,004
SPOT
276,203
271,843
Commercial IoT
444,397
410,630
Other
428
26,848
Total average subscribers
762,232
754,325
ARPU (1)
Duplex
$
72.98
$
71.34
SPOT
14.18
14.56
Commercial IoT
3.51
3.62
(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/20221103006324/en/
Denise Davila investorrelations@globalstar.com
Globalstar (AMEX:GSAT)
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