Globalstar, Inc. (NYSE American: GSAT) today announced operating
and financial results for the fourth quarter and year ended
December 31, 2021.
Dave Kagan, Chief Executive Officer of Globalstar, commented,
"2021 was a very productive year for Globalstar and we're excited
to share the details. In this release we provide a fulsome business
update, including the recent news on our satellite manufacturing
contract as well as our 2021 financial performance. We also revisit
the terrestrial spectrum progress that we have made in recent
months and expected developments in 2022 and beyond. I am proud of
our recent achievements yet most excited about our future."
BUSINESS UPDATE
Satellite Procurement Agreement
As previously announced, we entered into a satellite procurement
agreement (the "Procurement Agreement") with Macdonald, Dettwiler
and Associates Corporation (“MDA”) pursuant to which we will
acquire 17 new satellites that will replenish our existing
constellation and ensure long-term continuity of our mobile
satellite services to our subscribers and the potential customer
under the Terms Agreement.
The total initial contract price is $327.0 million. We maintain
the option to acquire up to nine additional satellites. The
contract allows flexibility from a timing perspective to place such
order. The Procurement Agreement requires MDA to deliver the
initial 17 satellites by 2025, with an expectation that all
satellites will be launched by the end of 2025. The timing and
amount of our payments under the Procurement Agreement are based on
contract milestones in the production schedule provided in the
Procurement Agreement. The Procurement Agreement provides for
payment deferrals of milestone payments through August 2022 at a 0%
interest rate.
By the time all deferred payments become due in August 2022, we
intend to complete a senior secured financing. This financing is
intended to provide sufficient proceeds for the manufacturing and
launch of the satellites. We also plan to refinance our 2019 senior
credit facility.
Dave Kagan commented, “We were very pleased to announce the
execution of the satellite procurement agreement and our
partnership with MDA and Rocket Lab to manufacture our new
satellites. With these satellites, we will be able to provide
continuous mobile satellite services to our customers beyond the
life of our current fleet.”
Terms Agreement
As previously disclosed, in February 2020 we entered into an
agreement providing for non-recurring engineering (NRE) services in
connection with the assessment of a potential service utilizing
certain of our assets and capacity, and setting forth the primary
terms for the potential development and operation of the service
(the “Terms Agreement”). In connection with the Terms Agreement, we
have received two advance payments of $37.5 million each as well as
additional advance payments of $36.4 million. These advance
payments are expected to be recognized into revenue as we perform
under the contract. In addition, if the customer elects to obtain
services from us under the Terms Agreement, they have agreed to
make additional service payments and cost reimbursements to us
which would be material.
We are acquiring the satellites described above to provide
continuity of service should this customer elect to obtain the
services contemplated by the Terms Agreement. Accordingly, as the
potential customer has approved the amounts related to the
manufacture of the new satellites, it 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.
Capital Structure
During 2021, we significantly reduced outstanding debt,
including the full payoff of our French credit facility. Using the
proceeds from warrant exercises, the advance payments received
under the Terms Agreement, and cash on hand, we eliminated $187
million of first lien debt during the year. As mentioned above, we
intend to complete a senior secured financing in the coming months
related to the Procurement Agreement and structured as part of the
Terms Agreement. Additionally, we look forward to refinancing our
2019 senior credit facility this year.
Jay Monroe, Executive Chairman, commented, “Globalstar has never
been in a better position with the value story materializing in
front of us. Globalstar offers investors the upside potential of
LEO-based Satellite IoT, Band 53 and Band n53 driving new private
wireless networks, in the US and elsewhere, and further optionality
in our other spectrum bands. It’s a multifaceted growth story and
we are set up to hit on every cylinder.”
Terrestrial Spectrum
2021 saw further development in the Band 53 and n53 ecosystem.
We have made significant progress that improves the value and
usability of the band. Airspan, Nokia, XCom, Pivotal Commware,
Global Telecom and others are all actively helping us develop this
asset. We have never been engaged with as many partners, at as high
levels of the organizations and with such frequency of engagement.
With an Airspan radio, we recently saw nearly 40 MB/s down on a
very stable connection white testing in a real-world office
environment. We also recently conducted trials with our new module
maker, Global Telecom, where we demonstrated speeds of 400 MB/s
down when aggregating with CBRS. We believe that we can drive that
considerably higher in the future with 5G and that we can also do
very well in uplink which is a focus of many enterprise
customers.
We have long believed that Band 53 and n53 offered utility for a
host of potential parties across various industries, including the
carriers, cable, automotive, and global tech companies given that
our spectrum is a uniform global resource. We are more confident of
this than ever. The future will require ubiquitous wireless
coverage and ever increasing data needs are driving the density of
networks. Our spectrum is an important resource to deploy for the
mission critical 5G applications.
We can offer carriers and cable companies with an existing
wireless business additional dedicated spectrum band to improve
their network performance. We also can work with other parties to
create private wireless networks so they can have increased
influence on their end user experience or better control of their
data. Additionally, we do not have to choose a single strategy but
could partner with a cable company in one market and provide a
private wireless service in another and deploy similar structures
in countries across the globe. Ultimately, we will seek the
combination that maximizes shareholder value.
We are currently reviewing deployment opportunities in the US,
Canada, across Africa and a few countries that are not yet
terrestrially approved but where we expect to achieve approval in
2022. When reviewing any of these deals we balance near-term
revenue opportunities with the longer-term value of the asset. The
revenue ramp has not been as fast as we would have liked but the
opportunity ahead of us is large and the ecosystem we are
developing removes barriers to its use.
Commercial IoT
As we discuss in the financial review section below, we are
pleased with the recovery of IoT and continue to believe in
shifting the focus of the organization to growth-minded
positioning. IoT represents a multi-year opportunity for Globalstar
with potential customers all over the world. Like terrestrial
spectrum, this opportunity requires proper strategic thinking and
substantial effort. While the team has done a great job of getting
us to where we are today, we believe that the future will require
additional support and new ideas.
We continue to develop our inexpensive and small two-way IoT
module, which has represented a significant hole in our product
offering and closes the competitive gap that has existed for years.
We are planning new enterprise partnerships with VARs, system
integrators, carriers and any party looking to extend their
business models with satellite connectivity. Our plan incorporates
a channel enablement suite allowing our partners to efficiently
serve their customers with our connectivity.
Jay Monroe continued, “We know that an investment in Globalstar
has required a longer horizon than any of us wanted, but we expect
that our investors' patience will be rewarded and are working hard
every day to close on the opportunities in front of us.”
FOURTH QUARTER FINANCIAL REVIEW
Total Revenue
Total revenue for the fourth quarter of 2021 increased $1.3
million, or 4%, from the fourth quarter of 2020 due to increases in
service revenue and subscriber equipment sales revenue.
Service Revenue
Service revenue increased $1.1 million, or 4%, in the fourth
quarter of 2021 compared to the fourth quarter of 2020. This
increase was due primarily to higher SPOT and Commercial IoT
service revenue.
SPOT service revenue increased 6% due to higher average
subscribers. Gross activations increased 5% over the prior year's
quarter driven in large part by strong sales to a global mining
company headquartered in Latin America. ARPU was generally in line
quarter over quarter as we believe the price adjustments we made in
mid-2019 have been fully absorbed into the base.
Commercial IoT service revenue increased 9% due to increases in
both ARPU and average subscribers. ARPU increased due to higher
usage and the mix of subscribers during 2021. As of December 31,
2021, our Commercial IoT subscriber base recovered to pre-COVID
levels, ending at approximately 422,000 subscribers. We are pleased
to see a recovery in our IoT subscriber base with gross activations
up over 50% from the prior year's quarter which is an indicator for
continued revenue growth. We are pleased with the progress of IoT
and continue to believe in shifting the focus of the organization
to growth-minded positioning, led by Commercial IOT. IoT represents
a multi-year opportunity for Globalstar with potential customers
all over the world leveraging an expanded product portfolio
including the important evolution from one-way to two-way products
which will allow command and control in addition to tracking and
reporting. Like terrestrial spectrum, this opportunity requires
proper strategic thinking and substantial effort. While the team
has done a great job of getting us to where we are today, we
believe that the future will require additional support and new
ideas and we are expanding our leadership and sales team to execute
on product develop and sales opportunities.
Duplex service revenue was generally flat quarter over quarter
due to higher ARPU offset by fewer average subscribers. As
expected, we continue to see attrition in our Duplex subscriber
base given the shift in demand across the industry from Duplex
voice and data services to IoT-enabled devices.
Engineering and other service revenue was also generally flat
quarter over quarter. During the fourth quarter of 2020, we
recognized revenue totaling $2.9 million associated with a contract
that was executed in 2007. This contract was terminated in December
2020 due to a lack of performance by the partner, and our
performance of all obligations in accordance with the terms of the
contract. Excluding this $2.9 million, engineering and other
service revenue increased over 100% driven by the timing and
magnitude of milestones completed associated with the Terms
Agreement. As engineering services revenue is generally
milestone-based, we continue to see relatively sporadic revenue
recognition.
Subscriber Equipment Sales
Revenue generated from subscriber equipment sales increased $0.2
million, or 4%, in the fourth quarter of 2021 compared to the
fourth quarter of 2020. SPOT and Commercial IoT contributed to the
increase in revenue with each increasing 8% and 12%, respectively.
Duplex declined quarter over quarter due to lower sales volume for
the reasons discussed above.
The increase in SPOT equipment sales revenue was driven by
higher pricing and volume during 2021.
The increase in Commercial IoT equipment sales resulted from
higher volume despite ending the year in a sales back order
position due to inventory shortages. We continue to navigate
through supply chain disruptions caused by component part
shortages. Demand exceeded supply at times during 2021 and
fulfillment of certain orders has continued to be delayed into the
first quarter of 2022. We have various efforts underway to help
mitigate these challenges, including ordering available material in
higher volumes than historically done and, in certain cases,
redesigning board layouts using alternative parts with the same
functionality. Importantly, we do not expect a significant impact
on sales margin in the near term.
Loss from Operations
Loss from operations fluctuated $0.4 million, or 3%, to $15.5
million in the fourth quarter of 2021 from $15.1 million in the
fourth quarter of 2020. This change was driven by higher revenue of
$1.3 million offset by higher operating expenses of $1.8 million.
Higher operating expenses reflect increases in marketing, general
and administrative (MG&A) and cost of services. MG&A
increased primarily for stock-based compensation resulting from a
higher fair value of awards granted resulting from an increase in
the stock price during 2021, as well as higher legal and
professional fees to support strategic opportunities; lower bad
debt expense partially offset some of these MG&A increases.
Cost of services increased quarter over quarter resulting from
higher lease expense for our gateway expansion efforts associated
with the Terms Agreement as well as higher licensing and
professional fees to support the launch of a new ERP system in
January 2022. Other smaller items, such as lower asset impairment
charges and depreciation expense, offset these increases.
Net Loss
Net loss was $24.0 million for the fourth quarter of 2021
compared to $21.7 million for the fourth quarter of 2020. This
increase was driven primarily by fluctuations in foreign currency
exchange rates, offset partially by lower interest expense and a
gain on extinguishment of debt following the payoff of our senior
debt agreement in November 2021.
Adjusted EBITDA
Adjusted EBITDA increased 26% to $12.4 million for the quarter
ended December 31, 2021 from $9.8 million for the same period in
2020. Higher revenue of $4.2 million was offset partially by a $1.6
million increase in operating expenses (both excluding adjustments
for non-cash or non-recurring items).
ANNUAL FINANCIAL REVIEW
Total Revenue
During the twelve months ended December 31, 2021, total revenue
decreased 3% to $124.3 million from $128.5 million in 2020. The
decrease in total revenue was driven by lower service revenue of
$6.7 million offset partially by an increase in revenue generated
from subscriber equipment sales of $2.5 million.
Service Revenue
The decrease in service revenue was due primarily to lower
revenue generated from engineering service contracts and Duplex
subscribers. Higher Commercial IoT service revenue partially offset
these decreases.
Revenue for engineering services, which decreased $1.4 million,
is generally milestone-based; therefore, the timing of revenue
recognition is sporadic. We also recognized $2.9 million in revenue
during the fourth quarter of 2020 related to the termination of a
legacy contract in December 2020 that did not recur in 2021.
Looking to our subscriber driven revenue, Duplex service was
down 8% during 2021 due primarily to fewer average subscribers.
Contributing to the decrease in average subscribers was the
deactivation of Sat-Fi2® subscribers in the first quarter of 2021.
SPOT service revenue was down less than 1% due to a slight decrease
in ARPU and increase in average subscribers. Our subscriber base
grew in 2021, propelled by a 12% increase in gross subscriber
activations and the 18% decrease in churn over the last twelve
months.
Commercial IoT service revenue increased 5% during 2021, driven
primarily by higher ARPU. Average subscribers were generally in
line year over year as we rebuilt our subscriber base during 2021
after the unusually high churn during 2020 from COVID-19. ARPU was
higher due to an increase in usage and the rate plan mix among our
subscribers.
Subscriber Equipment Sales
The increase in revenue generated from subscriber equipment
sales was driven by higher Commercial IoT and SPOT sales offset
partially by fewer Duplex sales.
The volume of Commercial IoT equipment increased over 40% in
2021 due primarily to the popularity of our SmartOne devices.
Commercial IoT equipment sales would have been even higher if we
were able to produce sufficient units to fulfill customer orders,
particularly during the fourth quarter of 2021. As mentioned above,
we continue to navigate through supply chain challenges, which have
not allowed us to produce an adequate amount of devices to meet
demand. Revenue from SPOT equipment sales also increased due to
higher volume as well as favorable pricing for all products.
For Duplex, during 2021, we temporarily ceased sales of and
services to subscribers for certain Duplex devices, such as
Sat-Fi2®. The decrease in revenue from Duplex equipment sales was
almost entirely due to a decrease in volume of Sat-Fi2® and related
devices.
Loss from Operations
Loss from operations was $65.5 million during 2021 compared to
$59.2 million during 2020. This fluctuation of $6.3 million, or
10%, was due to a $4.2 million decrease in total revenue and a $2.1
million increase operating expenses. The increase in operating
expenses was due primarily to higher cost of services, which
increased due to the same drivers discussed above in the fourth
quarter analysis.
Net Loss
Net loss was $112.6 million for 2021 compared to $109.6 million
for 2020. This fluctuation is due primarily to non-cash items,
including a $3.9 million unfavorable change in derivative valuation
adjustments as well as a $5.6 million unfavorable change in foreign
currency gains/losses. These items were offset partially by a $4.9
million decrease in net interest expense, a $3.1 million gain on
extinguishment of debt as well as a $2.1 million settlement loss
for our pension plan recognized in 2020 that did not recur in
2021.
Adjusted EBITDA
Adjusted EBITDA decreased 8% to $38.7 million in 2021 due
primarily to a $1.3 million decrease in total revenue (for reasons
previously discussed) and a $2.2 million increase in operating
expenses (both excluding adjustments for non-cash or non-recurring
items).
Liquidity
Cash and cash equivalents were $14.3 million as of December 31,
2021. During 2021, cash flows generated from operations of $137
million were used to fund capital expenditures of $45 million and
financing activities of $146 million. The financing activities
during the year included the full payoff of our senior debt
agreement using proceeds from warrant exercises, advance payments
under the Terms Agreement, and cash on hand. Over the next twelve
months, our sources of cash are expected to include primarily
operating cash flows generated from the business and reimbursements
under the Terms Agreement as previously discussed. We expect our
uses of cash over the next twelve months to include primarily
operating costs and capital expenditures related to the new
satellites described above and other network expenditures. We have
no scheduled principal debt payments until 2025.
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
modules, 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.
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, 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.
CONSOLIDATED STATEMENTS OF
OPERATIONS
(In thousands, except per share
data)
(unaudited)
Three Months Ended
Twelve Months Ended
December 31,
December 31,
2021
2020
2021
2020
Revenue:
Service revenue
$
29,913
$
28,781
$
106,464
$
113,191
Subscriber equipment sales
4,562
4,391
17,833
15,296
Total revenue
34,475
33,172
124,297
128,487
Operating expenses:
Cost of services (exclusive of
depreciation, amortization and accretion shown separately
below)
9,524
8,796
37,372
34,751
Cost of subscriber equipment sales
3,731
3,653
13,587
13,268
Cost of subscriber equipment sales -
reduction in the value of inventory
151
662
1,004
662
Marketing, general and administrative
12,384
10,331
41,358
41,738
Reduction in the value of long-lived
assets
—
416
242
416
Depreciation, amortization and
accretion
24,206
24,378
96,237
96,815
Total operating expenses
49,996
48,236
189,800
187,650
Loss from operations
(15,521
)
(15,064
)
(65,503
)
(59,163
)
Other (expense) income:
Gain on extinguishment of debt
1,263
—
3,098
—
Interest income and expense, net of
amounts capitalized
(9,778
)
(11,513
)
(43,536
)
(48,429
)
Derivative gain (loss)
1,167
1,333
(1,043
)
2,897
Foreign currency (loss) gain
(1,666
)
6,646
(6,308
)
(727
)
Other
(39
)
(2,643
)
368
(3,555
)
Total other expense
(9,053
)
(6,177
)
(47,421
)
(49,814
)
Loss before income taxes
(24,574
)
(21,241
)
(112,924
)
(108,977
)
Income tax (benefit) expense
(616
)
493
(299
)
662
Net loss
$
(23,958
)
$
(21,734
)
$
(112,625
)
$
(109,639
)
Loss per common share:
Basic
$
(0.01
)
$
(0.01
)
$
(0.06
)
$
(0.07
)
Diluted
(0.01
)
(0.01
)
(0.06
)
(0.07
)
Weighted-average shares outstanding:
Basic
1,794,149
1,671,561
1,765,139
1,642,359
Diluted
1,794,149
1,671,561
1,765,139
1,642,359
GLOBALSTAR, INC.
RECONCILIATION OF GAAP NET
INCOME (LOSS) TO NON-GAAP ADJUSTED EBITDA
(In thousands)
(unaudited)
Three Months Ended
Twelve Months Ended
December 31,
December 31,
2021
2020
2021
2020
Net loss
$
(23,958
)
$
(21,734
)
$
(112,625
)
$
(109,639
)
Interest income and expense, net
9,778
11,513
43,536
48,429
Derivative (gain) loss
(1,167
)
(1,333
)
1,043
(2,897
)
Income tax (benefit) expense
(616
)
493
(299
)
662
Depreciation, amortization, and
accretion
24,206
24,378
96,237
96,815
EBITDA
8,243
13,317
27,892
33,370
Non-cash reduction in the value of
inventory
151
662
1,004
662
Non-cash reduction in the value of
long-lived assets
—
416
242
416
Non-cash compensation
3,544
1,783
6,729
5,808
Foreign exchange and other
1,663
(5,852
)
5,725
1,629
Debt refinancing third party fees
43
308
217
1,113
Gain on extinguishment of debt
(1,263
)
—
(3,098
)
—
Revenue recognition related to terminated
contract
—
(2,915
)
—
(2,915
)
Non-cash settlement of pension plan
—
2,075
—
2,075
Adjusted EBITDA (1)
$
12,381
$
9,794
$
38,711
$
42,158
(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 revenues 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
Twelve Months Ended
December 31,
December 31,
2021
2020
2021
2020
Service
Equipment
Service
Equipment
Service
Equipment
Service
Equipment
Revenue
Duplex
$
7,667
$
122
$
7,703
$
344
$
31,197
$
1,011
$
33,878
$
1,883
SPOT
12,044
2,663
11,319
2,472
46,040
9,427
46,417
8,176
Commercial IoT
4,508
1,717
4,146
1,532
17,951
7,169
17,174
5,140
Engineering and Other
5,694
60
5,613
43
11,276
226
15,722
97
$
29,913
$
4,562
$
28,781
$
4,391
$
106,464
$
17,833
$
113,191
$
15,296
Average Subscribers
Duplex
44,879
48,420
45.789
50,116
SPOT
275,451
261,008
268,735
267,816
Commercial IoT
417,277
410,803
414,689
414,452
Other
26,117
27,373
26,864
27,264
ARPU (1)
Duplex
$
56.95
$
53.03
$
56.78
$
56.33
SPOT
14.57
14.46
14.28
14.44
Commercial IoT
3.60
3.36
3.61
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/20220224006028/en/
Investor Contact Information: Denise Davila Email:
investorrelations@globalstar.com
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