Globalstar Announces Second Quarter 2017 Results

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| Source: Globalstar, Inc.

COVINGTON, La., Aug. 03, 2017 (GLOBE NEWSWIRE) -- Globalstar, Inc. (NYSE American:GSAT) today announced its financial results for the quarter ended June 30, 2017.

Jay Monroe, Chairman and Chief Executive Officer of Globalstar, commented, “In June, our core business achieved a significant milestone, reaching over 700,000 total subscribers on our satellite network. These subscribers contributed to meaningful growth during the quarter with a 12% increase in total revenue. ARPU continues to improve, including a 23% increase in Duplex ARPU from the prior year quarter. Net loss increased due to non-cash derivative losses resulting primarily from the recent increase in the Company's stock price. Importantly, Adjusted EBITDA increased 61%, reaching its highest level in more than ten years as performance continues to reflect the operating leverage inherent in this business. In addition to the revenue increase, I am particularly pleased with the team’s continued cost discipline during a period when we are all diligently working to secure the long-term value of our assets. At the end of the quarter, we also completed an amendment of our senior debt facility that provides additional flexibility by modifying certain longer-term provisions within the agreement. We appreciate the strong relationship we have with our French lenders and look forward to their continued partnership. In connection with this amendment, Thermo continued its financial support with a $33 million common equity financing to satisfy the capital requirements at the end of the quarter. Finally, on the regulatory front, we continue to make progress on our international plans to globally harmonize our 16.5 MHz of licensed 2.4 GHz spectrum for terrestrial services. We have filed applications in several international jurisdictions and plan to file additional applications before the end of the year. We are pleased with the positive reception to date and look forward to continuing to work with international regulatory agencies to obtain in-country authorities."

SECOND QUARTER FINANCIAL REVIEW

Revenue

Total revenue for the second quarter of 2017 increased by $3.0 million, or 12%, from the second quarter of 2016. This increase resulted primarily from higher service revenue resulting from growth in ARPU and total subscribers. The increase in service revenue was offset partially by a decrease in revenue from subscriber equipment sales.

Service revenue increased $3.3 million, or 16%, in the second quarter of 2017 compared to the second quarter of 2016. Nearly 90% of this increase resulted from higher Duplex and SPOT service revenue, which increased $1.2 million and $1.7 million, respectively. Higher ARPU propelled this growth with Duplex and SPOT up 23% and 14%, respectively, from the prior year quarter. Changes to legacy rate plans, particularly in our core markets, continue to be the primary reason for a higher ARPU across the base. The increase from higher ARPU was offset partially by the decrease in average Duplex subscribers, which were down 7% on lower phone sales and activations and an increased focus on promptly deactivating non-paying subscribers. Conversely, the 4% increase in average SPOT subscribers resulted in an additional $0.4 million increase to service revenue. Also contributing to the increase in service revenue was a $0.4 million increase in revenue generated from engineering services performed under certain government contracts.

Subscriber equipment sales revenue decreased $0.3 million, or 7%, due primarily to lower revenue generated from Duplex hardware sales as we manage our remaining phone inventory in our global markets and across our dealer network. This strategy focuses the sales effort on our core markets to ensure that we are maximizing future service revenue after activation. This decrease was offset partially by a higher volume of SPOT units sold during the quarter, which resulted in a $0.2 million increase in SPOT equipment sales revenue.

Loss from Operations

Loss from operations decreased $3.9 million, or 24%, from $16.4 million in the second quarter of 2016 to $12.5 million in the second quarter of 2017 due primarily to a $3.0 million increase in total revenue (for the reasons discussed above), coupled with a $0.9 million decrease in operating expenses. The decrease in operating expenses was due in part to lower management, general and administrative (MG&A) costs. These costs were down 17% due primarily to lower professional fees and legal expenses, including a $1.1 million accrual recorded in the second quarter of 2016 for the non-cash settlement of litigation related to one of our international operations. This decrease was offset partially by a higher cost of services, which increased 14% compared to the prior year quarter due to the additional cost to support new product development and our second-generation ground network.

Net Income (Loss)

Net income (loss) fluctuated from income of $14.1 million in the second quarter of 2016 to a loss of $98.7 million in the second quarter of 2017. The primary reason for this change was non-cash derivative gains (losses) recorded during the respective periods, which fluctuated from a gain of $40.5 million to a loss of $77.1 million. The loss recorded during the second quarter of 2017 resulted from variations in several valuation inputs, including particularly the appreciation of the Company's stock price from March 31, 2017 to June 30, 2017. The higher derivative loss was offset partially by other items, such as the lower loss from operations.

Adjusted EBITDA

Adjusted EBITDA increased 61% during the second quarter of 2017 driven primarily by a $3.0 million, or 12%, increase in total revenue, coupled by a $0.1 million decrease in total operating expenses (excluding EBITDA adjustments). The decrease in operating expenses during the second quarter of 2017 resulted from lower MG&A expenses and costs from subscriber equipment sales, offset partially by higher cost of services. The largest driver of the $1.1 million decrease in MG&A expenses (excluding EBITDA adjustments) was a reduction in subscriber acquisition costs due to changes in sales strategies, including lower advertising costs, rebates and co-op marketing credits given to our resellers during the second quarter of 2017. Offsetting this decrease was a $1.1 million increase in cost of services due primarily to higher support costs of $0.5 million related to our recently upgraded second-generation ground network. Additionally, research and development costs increased by $0.2 million driven by new products and technology being developed internally and through external partners. 

CONFERENCE CALL

The Company will conduct an investor conference call on August 3, 2017 at 5:00 p.m. ET to discuss its second quarter 2017 financial results. 

Details are as follows:
Conference Call:5:00 p.m. ET
Investors and the media are encouraged to listen to the call through the Investor Relations section of the Company's website at www.globalstar.com/investors.  If you would like to participate in the live question and answer session following the Company's conference call, please dial 1 (888) 771-4371 (US and Canada), 1 (847) 585-4405 (International) and use the participant pass code 45260680.
  
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 August 3, 2017. Dial: 1 (888) 843-7419 (US and Canada), 1 (630) 652-3042 (International) and pass code 4526 0680#.

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, SCADA and IoT applications. The Company's products include mobile and fixed satellite telephones, the innovative Sat-Fi satellite 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.

Investor contact information:
Kyle Pickens
kyle.pickens@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 actions by the FCC, 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.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
 
 Three Months Ended
 June 30,
 2017 2016
Revenue:   
Service revenues$24,301  $20,970 
Subscriber equipment sales3,822  4,116 
Total revenue28,123  25,086 
Operating expenses:   
Cost of services (exclusive of depreciation, amortization, and accretion shown separately below)9,036  7,937 
Cost of subscriber equipment sales2,778  2,886 
Marketing, general and administrative9,544  11,450 
Depreciation, amortization, and accretion19,275  19,224 
Total operating expenses40,633  41,497 
Loss from operations(12,510) (16,411)
Other income (expense):   
Gain (loss) on equity issuance1,964  (2,075)
Interest income and expense, net of amounts capitalized(8,850) (9,049)
Derivative gain (loss)(77,130) 40,499 
Other(2,102) 685 
Total other income (expense)(86,118) 30,060 
Income (loss) before income taxes(98,628) 13,649 
Income tax expense (benefit)106  (450)
Net income (loss)$(98,734) $14,099 
    
Net income (loss) per common share:   
Basic$(0.09) $0.01 
Diluted(0.09) 0.01 
Weighted-average shares outstanding:   
Basic1,128,985  1,049,381 
Diluted1,128,985  1,249,672 
      


GLOBALSTAR, INC.
RECONCILIATION OF GAAP NET INCOME (LOSS) TO NON-GAAP ADJUSTED EBITDA
(In thousands)
(Unaudited)
 
 
  Three Months Ended
  June 30,
  2017 2016
Net income (loss) $(98,734) $14,099 
     
Interest income and expense, net 8,850  9,049 
Derivative (gain) loss 77,130  (40,499)
Income tax expense (benefit) 106  (450)
Depreciation, amortization, and accretion 19,275  19,224 
EBITDA 6,627  1,423 
     
Non-cash compensation 1,426  1,193 
Foreign exchange and other 1,864  (685)
Legal settlement to be paid in stock   1,094 
Debt modification third party fees 238   
(Gain) loss on equity issuance (1,964) 2,075 
Adjusted EBITDA (1) $8,191  $5,100 


(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 significant 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
  June 30,
  2017 2016
  ServiceEquipment ServiceEquipment
Revenue      
Duplex $9,322 $612  $8,093 $1,171 
SPOT 11,193 1,815  9,489 1,654 
Simplex 2,526 1,072  2,644 1,072 
IGO 376 330  172 229 
Other 884 (7) 572 (10)
  $24,301 $3,822  $20,970 $4,116 
       
Average Subscribers      
Duplex 72,290   77,479  
SPOT 282,826   272,698  
Simplex 300,459   297,945  
IGO 37,162   39,091  
       
ARPU (1)      
Duplex $42.98   $34.82  
SPOT 13.19   11.60  
Simplex 2.80   2.96  
IGO 3.37   1.46  


(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.