Globalstar Announces 2018 Fourth Quarter and Annual Results
COVINGTON, La.–(BUSINESS WIRE)–Globalstar, Inc. (NYSE American: GSAT) today announced financial and
operating results for the fourth quarter and year ended December 31,
2018.
Dave Kagan, Chief Executive Officer of Globalstar, commented, “In
December, we completed pivotal events positioning us well to realize the
value of our assets. First, we announced that the Third Generation
Partnership Project (“3GPP”) approved Globalstar’s S-band spectrum at
2483.5-2495 MHz for terrestrial use. The 3GPP standardization approval
represents the culmination of intensive standards work driven by our
technical team and the wireless industry’s support leading to
Globalstar’s newly designated 3GPP Band 53. Second, we settled an
ongoing litigation with certain large shareholders. As part of this
settlement agreement, the parties agreed to enact changes to our
corporate governance structure and joined together to support the late
2018 financing. We raised $60 million in a fully backstopped equity
financing to secure funding for our December 2018 debt obligations and
continue our ongoing compliance with the terms of our Facility
Agreement. Of our corporate governance changes, the addition of a
Strategic Review Committee is among the most significant with new
members having substantial operating, spectrum and capital structure
experience. This Committee is laser-focused on helping to drive the
Company to realize the full value of our assets and fortify our balance
sheet.”
Dave Kagan continued, “Turning to 2018 financial performance, our
operating business continued its positive trajectory with significantly
improved results, highlighted by a 15% increase in total revenue from
2017, a reduced net loss and the highest annual Adjusted EBITDA ever
recognized by Globalstar. While I am proud of what we have accomplished
to date, I remain focused on the future. I believe that the Company’s
significant assets combined with an enhanced leadership team provide a
foundation for financial growth and asset value realization that is more
solid than ever.”
FOURTH QUARTER FINANCIAL REVIEW
Revenue
Total revenue for the fourth quarter of 2018 increased by $2.5 million,
or 9%, from the fourth quarter of 2017 due to increases in both service
revenue and subscriber equipment sales.
Service revenue increased $0.6 million, or 2%, in the fourth quarter of
2018 compared to the fourth quarter of 2017. Higher Simplex service
revenue contributed over 90% of this increase, driven primarily by an
increase in average subscribers. The higher subscriber count resulted
from commercial Simplex equipment sales during the last twelve months,
primarily in North America due to the 2018 launch of SmartOne SolarTM
as well as strong sales of legacy devices. The SmartOne SolarTM
is a solar-powered IoT asset tracking device (with ATEX and
intrinsically safe certifications), proving to be a cost-effective, low
power and secure monitoring solution for a variety of security
applications.
Subscriber equipment sales revenue increased $1.9 million, or 70%, in
the fourth quarter of 2018 compared to the fourth quarter of 2017. This
growth was driven by sales of the recently launched SmartOne SolarTM
and SPOT XTM, contributing $1.0 million and $0.6 million,
respectively, to the increase.
Loss from Operations
Loss from operations decreased $11.7 million, or 39%, to $18.4 million
in the fourth quarter of 2018. This decrease was due to a $9.2 million
decrease in operating expenses, coupled with a $2.5 million increase in
total revenue. The decrease in operating expenses was due primarily to
$17.9 million in asset impairment charges recorded during the fourth
quarter of 2017 that did not recur in 2018. This decrease was offset
partially by increases in the cost of subscriber equipment sales, MG&A
expenses and depreciation. In line with the increase in subscriber
equipment sales revenue discussed above, the increase in cost of
subscriber equipment sales reflected a higher volume of units sold
during the fourth quarter of 2018 at a similar blended margin to the
prior year’s fourth quarter. MG&A expenses increased during 2018
primarily due to $1.5 million in costs incurred to defend the securities
claim that was settled during the fourth quarter. Depreciation expense
increased following approximately $208.0 million of ground
infrastructure assets placed into service during 2018, which represent
the gateways capable of supporting commercial traffic from our newest
Duplex device.
Net Loss
Net loss was $96.5 million for the fourth quarter of 2018 compared to
$22.6 million for the fourth quarter of 2017. This increase resulted
primarily from the change in non-cash derivative valuation adjustments
during the respective quarters, which contributed $81.1 million to the
increase in net loss. This fluctuation resulted primarily from changes
in certain valuation inputs, including stock price, stock price
volatility, discount rate and remaining estimated term of the
instruments. Lower operating expenses and an increase in total revenue
partially offset the impact to net loss from derivative changes.
Adjusted EBITDA
Adjusted EBITDA for the quarters ended December 31, 2018 and 2017 was
$9.7 million and $8.7 million, respectively. This 11% increase in
Adjusted EBITDA was due to a $2.5 million increase in revenue offset
partially by a $1.5 million increase in expenses (excluding EBITDA
adjustments). The increase in expenses during the fourth quarter of 2018
resulted primarily from higher cost of subscriber equipment sales as
cost of services and MG&A costs were flat after adjusting for non-cash
stock compensation and litigation costs. The $1.5 million increase in
cost of subscriber equipment sales reflected a higher volume of units
sold during the fourth quarter of 2018 as previously discussed.
ANNUAL FINANCIAL REVIEW
Revenue
Total revenue increased $17.4 million, or 15%, to $130.1 million during
2018. This increase was due to higher service revenue of $12.6 million
and higher revenue generated from subscriber equipment sales of $4.8
million. The increase in service revenue resulted from higher ARPU in
all core revenue streams. SPOT service revenue contributed over half of
the total increase in service revenue, increasing $6.9 million, or 15%,
from 2017. Higher SPOT ARPU of 13% was the primary driver of the
increase in SPOT service revenue due to rate plan changes and the blend
of subscribers in the SPOT base. For example, service rates for
subscribers activating our SPOT Gen3 and SPOT XTM devices are
higher than our 2017 ARPU. Duplex and Simplex service revenue increases
of $3.6 million and $2.5 million, respectively, also contributed to the
increase in service revenue. An increase in Duplex ARPU of 21% resulted
in $7.2 million additional revenue, which was offset partially by a
decline in average subscribers of 10%, or a $3.6 million decrease in
revenue. Duplex ARPU was impacted by new subscribers joining the network
at higher rates than 2017 ARPU levels, as well as rate plan increases
for legacy subscribers. Average Duplex subscribers were lower due to
lower gross activations resulting from fewer equipment sales over the
last twelve months and a consistent level of churn year over year.
Finally, the increase in Simplex service revenue was driven by higher
average subscribers and ARPU due primarily to sales of our SmartOne SolarTM
device during 2018, which also contributed significantly to the increase
in subscriber equipment sales when compared to 2017.
Loss from Operations
Loss from operations decreased $21.1 million, or 31%, during 2018 due to
a $17.4 million increase in total revenue, coupled with a $3.7 million
decrease in operating expenses. The $3.7 million decrease in operating
expenses was due to impairment charges for inventory and long-lived
assets that were recorded in the prior year and did not recur in 2018 as
well as the reversal of a previously recorded contract termination
charge during 2018, offset partially by increases in cost of subscriber
equipment sales, MG&A and depreciation expense. The increase in cost of
subscriber equipment sales was due to a higher volume of units sold
during 2018 and at a lower blended margin compared to 2017. The MG&A
increase was driven primarily by $10.8 million in costs incurred to
support our efforts associated with the proposed merger and associated
litigation. Finally, the increase in depreciation expense was due to
ground infrastructure assets placed into service during 2018, which
represent the gateways capable of supporting commercial traffic from our
newest Duplex device.
Net Loss
Net loss was $6.5 million for 2018 compared to $89.1 million for 2017
due primarily to non-cash items, including a $59.9 million increase in
derivative gains. An increase in total revenue and a decrease in
operating expenses further reduced net loss, for reasons previously
discussed.
Adjusted EBITDA
Adjusted EBITDA increased 26% to $40.6 million in 2018 from $32.2
million in 2017. The increase was driven primarily by a $17.4 million
increase in total revenue, offset partially by a $9.0 million increase
in operating expenses (excluding EBITDA adjustments). Approximately half
of the increase in operating expenses was due to higher cost of
subscriber equipment sales as previously discussed. The remaining
increase was due mostly to higher MG&A costs, including professional
fees to pursue business development opportunities as well as subscriber
acquisition and other customer-driven costs.
CONFERENCE CALL
The Company will conduct an investor conference call on February 28,
2019 at 5:00 p.m. ET to discuss the 2018 fourth quarter and annual
financial results.
| Details are as follows: | ||||
|
Conference Call: |
5:00 p.m. ET | |||
|
Investors and the media are encouraged to listen to the call |
||||
| Audio Replay: |
A replay of the earnings call will be available for a limited time and can be heard after 7:30 p.m. ET on February 28, 2019. Dial: 1 (888) 843-7419 (US and Canada), 1 (630) 652-3042 (International) and pass code 4812 9163#. |
|||
About Globalstar, Inc.
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, the innovative satellite Wi-Fi hotspot, Simplex
and Duplex satellite data modems, tracking devices and flexible service
packages.
Note that all SPOT products described in this press release are the
products of SPOT LLC, a subsidiary of Globalstar, which is not
affiliated in any manner with Spot Image of Toulouse, France or Spot
Image Corporation of Chantilly, Virginia.
For more information, visit www.globalstar.com.
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 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. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (unaudited) |
||||||||||||||||||
| Three Months Ended | Twelve Months Ended | |||||||||||||||||
| December 31, | December 31, | |||||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||||
| Revenue: | ||||||||||||||||||
| Service revenue | $ | 27,186 | $ | 26,622 | $ | 111,089 | $ | 98,473 | ||||||||||
| Subscriber equipment sales | 4,760 | 2,805 | 19,024 | 14,187 | ||||||||||||||
| Total revenue | 31,946 | 29,427 | 130,113 | 112,660 | ||||||||||||||
| Operating expenses: | ||||||||||||||||||
|
Cost of services (exclusive of depreciation, amortization and accretion shown separately below) |
9,664 | 9,697 | 37,648 | 37,022 | ||||||||||||||
| Cost of subscriber equipment sales | 3,673 | 2,165 | 14,441 | 9,944 | ||||||||||||||
|
Cost of subscriber equipment sales – reduction in the value of inventory |
— | 843 | — | 843 | ||||||||||||||
| Marketing, general and administrative | 13,163 | 10,323 | 55,443 | 38,759 | ||||||||||||||
| Reduction in the value of long-lived assets | — | 17,040 | — | 17,040 | ||||||||||||||
| Revision to contract termination charge | — | — | (20,478 | ) | — | |||||||||||||
| Depreciation, amortization and accretion | 23,853 | 19,514 | 90,438 | 77,498 | ||||||||||||||
| Total operating expenses | 50,353 | 59,582 | 177,492 | 181,106 | ||||||||||||||
| Loss from operations | (18,407 | ) | (30,155 | ) | (47,379 | ) | (68,446 | ) | ||||||||||
| Other income (expense): | ||||||||||||||||||
| Loss on extinguishment of debt | — | — | — | (6,306 | ) | |||||||||||||
| Gain on equity issuance | — | — | — | 2,670 | ||||||||||||||
| Interest income and expense, net of amounts capitalized | (12,596 | ) | (8,139 | ) | (43,612 | ) | (34,771 | ) | ||||||||||
| Derivative gain (loss) | (64,824 | ) | 16,249 | 81,120 | 21,182 | |||||||||||||
| Gain on legal settlement | — | — | 6,779 | — | ||||||||||||||
| Other | (617 | ) | (559 | ) | (3,299 | ) | (3,213 | ) | ||||||||||
| Total other income (expense) | (78,037 | ) | 7,551 | 40,988 | (20,438 | ) | ||||||||||||
| Loss before income taxes | (96,444 | ) | (22,604 | ) | (6,391 | ) | (88,884 | ) | ||||||||||
| Income tax expense (benefit) | 9 | (19 | ) | 125 | 190 | |||||||||||||
| Net loss | $ | (96,453 | ) | $ | (22,585 | ) | $ | (6,516 | ) | $ | (89,074 | ) | ||||||
| Loss per common share: | ||||||||||||||||||
| Basic | $ | (0.07 | ) | $ | (0.02 | ) | $ | (0.01 | ) | $ | (0.08 | ) | ||||||
| Diluted | (0.07 | ) | (0.02 | ) | (0.01 | ) | (0.08 | ) | ||||||||||
| Weighted-average shares outstanding: | ||||||||||||||||||
| Basic | 1,287,742 | 1,251,826 | 1,269,548 | 1,166,581 | ||||||||||||||
| Diluted | 1,287,742 | 1,251,826 | 1,269,548 | 1,166,581 | ||||||||||||||
|
GLOBALSTAR, INC.
RECONCILIATION OF GAAP NET INCOME (LOSS) TO NON-GAAP ADJUSTED (In thousands) (unaudited) |
|||||||||||||||||
| Three Months Ended | Twelve Months Ended | ||||||||||||||||
| December 31, | December 31, | ||||||||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||||||
| Net loss | $ | (96,453 | ) | $ | (22,585 | ) | $ | (6,516 | ) | $ | (89,074 | ) | |||||
| Interest income and expense, net | 12,596 | 8,139 | 43,612 | 34,771 | |||||||||||||
| Derivative (gain) loss | 64,824 | (16,249 | ) | (81,120 | ) | (21,182 | ) | ||||||||||
| Income tax expense (benefit) | 9 | (19 | ) | 125 | 190 | ||||||||||||
| Depreciation, amortization, and accretion | 23,853 | 19,514 | 90,438 | 77,498 | |||||||||||||
| EBITDA | 4,829 | (11,200 | ) | 46,539 | 2,203 | ||||||||||||
| Reduction in the value of inventory | — | 843 | — | 843 | |||||||||||||
| Reduction in the value of long-lived assets | — | 17,040 | — | 17,040 | |||||||||||||
| Non-cash compensation | 2,811 | 1,622 | 7,373 | 5,594 | |||||||||||||
| Foreign exchange and other | 564 | 433 | 3,067 | 2,873 | |||||||||||||
| Loss on extinguishment of debt | — | — | — | 6,306 | |||||||||||||
| Gain on equity issuance | — | — | — | (2,670 | ) | ||||||||||||
| Merger and shareholder litigation costs | 1,500 | — | 10,831 | — | |||||||||||||
| Gain on legal settlement | — | — | (6,779 | ) | — | ||||||||||||
| Revision to contract termination charge | — | — | (20,478 | ) | — | ||||||||||||
| Adjusted EBITDA (1) | $ | 9,704 | $ | 8,738 | $ | 40,553 | $ | 32,189 | |||||||||
|
(1) |
EBITDA represents earnings before interest, income taxes, |
||||||||||||||||
|
The Company uses Adjusted EBITDA as a supplemental measurement of |
|||||||||||||||||
|
GLOBALSTAR, INC. SCHEDULE OF SELECTED OPERATING METRICS (In thousands, except subscriber and ARPU data) (unaudited) |
||||||||||||||||||||||||||||||||
| Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||||||||||
| December 31, | December 31, | |||||||||||||||||||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||||||||||||||||||
| Service | Equipment | Service | Equipment | Service | Equipment | Service | Equipment | |||||||||||||||||||||||||
| Revenue | ||||||||||||||||||||||||||||||||
| Duplex | $ | 10,093 | $ | 403 | $ | 10,139 | $ | 466 | $ | 41,223 | $ | 2,016 | $ | 37,635 | $ | 2,754 | ||||||||||||||||
| SPOT | 12,576 | 1,834 | 12,589 | 933 | 52,363 | 8,046 | 45,427 | 5,394 | ||||||||||||||||||||||||
| Simplex | 3,612 | 2,362 | 3,101 | 1,072 | 13,459 | 8,330 | 10,946 | 5,243 | ||||||||||||||||||||||||
| IGO | 250 | 151 | 221 | 256 | 932 | 498 | 1,068 | 779 | ||||||||||||||||||||||||
| Other | 655 | 10 | 572 | 78 | 3,112 | 134 | 3,397 | 17 | ||||||||||||||||||||||||
| $ | 27,186 | $ | 4,760 | $ | 26,622 | $ | 2,805 | $ | 111,089 | $ | 19,024 | $ | 98,473 | $ | 14,187 | |||||||||||||||||
| Average Subscribers | ||||||||||||||||||||||||||||||||
| Duplex | 62,999 | 71,261 | 65,501 | 72,443 | ||||||||||||||||||||||||||||
| SPOT | 290,461 | 292,798 | 291,289 | 285,683 | ||||||||||||||||||||||||||||
| Simplex | 372,658 | 326,720 | 354,678 | 313,553 | ||||||||||||||||||||||||||||
| IGO | 26,816 | 36,463 | 31,537 | 37,165 | ||||||||||||||||||||||||||||
| ARPU (1) | ||||||||||||||||||||||||||||||||
| Duplex | $ | 53.40 | $ | 47.43 | $ | 52.45 | $ | 43.29 | ||||||||||||||||||||||||
| SPOT | 14.43 | 14.33 | 14.98 | 13.25 | ||||||||||||||||||||||||||||
| Simplex | 3.23 | 3.16 | 3.16 | 2.91 | ||||||||||||||||||||||||||||
| IGO | 3.11 | 2.02 | 2.46 | 2.39 | ||||||||||||||||||||||||||||
|
(1) |
Average monthly revenue per user (ARPU) measures service revenues |
|||||||||||||||||||||||||||||||
Contacts
Investor Contact Information:
Kyle Pickens
Email: [email protected]
