Globalstar Announces Third Quarter 2020 Results
Kagan continued, "One ongoing initiative includes a recently executed contract with a global leader in the design and manufacture of remote monitoring and tracking solutions, who has been engaged to upgrade certain gateway equipment to deliver expanded capacity and improved performance. In connection with this partnership, we are also developing new two-way Commercial IoT modems, which we believe will provide immense opportunities in this expanding space. We are developing these modems in close coordination with our VARs and potential end customers so they may address specific market verticals competitively with other solutions. Our previously announced one-way IoT board, the ST100, is also in its product infancy with many ongoing trials. One of our largest opportunities is animal tracking to assure food supply chain integrity. Given its sheer market size, these investments in modems and infrastructure allow us to fulfill this need at a size and price no other satellite providers have been able to touch.
"Another important component of our business plan has been leveraging the immense brand equity in our SPOT family of products. During the third quarter of 2020, we activated a record number of SPOT subscribers, propelled by the addition of Bluetooth to our SPOT X®, as well as our latest GPS messenger product, SPOT Gen4TM, which was launched in
Kagan added, "Our relationship with
Monroe continued, “In regards to our efforts to commercialize our S-band spectrum, the ecosystem and market are progressing well for Band n53. Since the last quarter we have signed a few more revenue producing spectrum deals which we are excited about because they show momentum building, though they remain modest in terms of revenue. While many of these deals take some time to convert to revenue, interest in our spectrum has never been greater, which I partially attribute to the anticipation of a broader Band 53 device ecosystem, which will be available in 2021, and to early CBRS deployments bringing more attention and investment to private wireless networks. We are also actively adding to the companies, partners and advisors helping us on our spectrum efforts. Nokia and
Monroe concluded, "I am pleased with the progress we are making every day to position the business as a unique global connectivity provider. We believe that the future of
FINANCIAL REVIEW
Revenue
Total revenue for the third quarter of 2020 decreased 6% from the third quarter of 2019, after excluding a non-recurring adjustment to Duplex service revenue that was recorded during the third quarter of 2019. The decrease in total revenue was due primarily to a decline in service revenue as revenue generated from subscriber equipment sales was generally flat.
Service revenue decreased over the prior year's quarter resulting primarily from a decline in subscriber-driven revenue streams totaling
The decline in Duplex service revenue was due primarily to fewer average subscribers driven by normal churn in the base exceeding gross activations over the last twelve months. Notably, gross activations during the third quarter of 2020 were up nearly 10% from the prior year's quarter following a higher volume of Duplex handset and hotspot sales during 2020. The decline in Duplex service revenue was also impacted by lower ARPU resulting from unfavorable exchange rate movements and the timing of usage-based revenue.
The decline in SPOT service revenue in the third quarter of 2020 was due primarily to fewer subscribers, despite a significant increase in SPOT activations in recent months. The decrease in SPOT subscribers during 2020 is due to elevated churn, both voluntary and involuntary. While the involuntary churn is related to subscriber base cleanup and, therefore, not expected to recur, we are focused on reducing normal subscriber churn through various initiatives. Importantly, gross SPOT subscriber activations were the highest quarterly amount since SPOT service commenced in 2007, and were up 32% from the prior year's quarter and 11% over the last twelve months. A meaningful component of our strategy to increase activations was to reduce service pricing, and thereby expand our addressable market. Also contributing to the decline in SPOT service revenue was a decrease in ARPU, which reflects both a strengthening of the USD, resulting from our foreign currency denominated sales, as well as the impact from lower-priced service plans rolled out during mid-2019. While these new plans will lower ARPU over time, we believe that our change in pricing strategy has stimulated the recent growth in activations, particularly considering the disruption to the retail industry earlier in the year due to COVID-19.
Subscriber equipment sales revenue decreased
Operating Loss
Operating loss was
Net (Loss) Income
Net (loss) income fluctuated
Adjusted EBITDA
Adjusted EBITDA decreased 3% to
Liquidity
Cash and cash equivalents were
About
Note that all SPOT products described in this press release are the products of
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
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|||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
|||||||
(In thousands, except per share data) |
|||||||
(Unaudited) |
|||||||
|
Three Months Ended |
||||||
|
|
||||||
|
2020 |
|
2019 |
||||
Revenue: |
|
|
|
||||
Service revenue |
$ |
28,385 |
|
|
$ |
34,152 |
|
Subscriber equipment sales |
4,372 |
|
|
4,462 |
|
||
Total revenue |
32,757 |
|
|
38,614 |
|
||
Operating expenses: |
|
|
|
||||
Cost of services (exclusive of depreciation, amortization, and accretion shown separately below) |
8,580 |
|
|
9,216 |
|
||
Cost of subscriber equipment sales |
4,032 |
|
|
4,482 |
|
||
Marketing, general and administrative |
10,063 |
|
|
12,895 |
|
||
Depreciation, amortization, and accretion |
24,717 |
|
|
24,026 |
|
||
Total operating expenses |
47,392 |
|
|
50,619 |
|
||
Loss from operations |
(14,635) |
|
|
(12,005) |
|
||
Other income (expense): |
|
|
|
||||
Interest income and expense, net of amounts capitalized |
(11,398) |
|
|
(14,471) |
|
||
Derivative gain |
1,225 |
|
|
50,156 |
|
||
Foreign currency gain (loss) |
266 |
|
|
(2,194) |
|
||
Other |
(346) |
|
|
(335) |
|
||
Total other (expense) income |
(10,253) |
|
|
33,156 |
|
||
(Loss) income before income taxes |
(24,888) |
|
|
21,151 |
|
||
Income tax expense |
58 |
|
|
40 |
|
||
Net (loss) income |
$ |
(24,946) |
|
|
$ |
21,111 |
|
|
|
|
|
||||
Net (loss) income per common share: |
|
|
|
||||
Basic |
$ |
(0.01) |
|
|
$ |
0.01 |
|
Diluted |
(0.01) |
|
|
(0.01) |
|
||
Weighted-average shares outstanding: |
|
|
|
||||
Basic |
1,670,315 |
|
|
1,451,703 |
|
||
Diluted |
1,670,315 |
|
|
1,647,734 |
|
||
|
||||||||
RECONCILIATION OF GAAP NET INCOME (LOSS) TO NON-GAAP ADJUSTED EBITDA |
||||||||
(In thousands) |
||||||||
(Unaudited) |
||||||||
|
|
Three Months Ended |
||||||
|
|
|
||||||
|
|
2020 |
|
2019 |
||||
Net (loss) income |
|
$ |
(24,946) |
|
|
$ |
21,111 |
|
|
|
|
|
|
||||
Interest income and expense, net |
|
11,398 |
|
|
14,471 |
|
||
Derivative gain |
|
(1,225) |
|
|
(50,156) |
|
||
Income tax expense |
|
58 |
|
|
40 |
|
||
Depreciation, amortization, and accretion |
|
24,717 |
|
|
24,026 |
|
||
EBITDA |
|
10,002 |
|
|
9,492 |
|
||
|
|
|
|
|
||||
Non-cash compensation |
|
1,449 |
|
|
1,419 |
|
||
Foreign exchange and other |
|
81 |
|
|
2,482 |
|
||
Debt refinancing third party fees |
|
— |
|
|
2,403 |
|
||
Change to estimated impact upon adoption of ASC 606 |
|
|
|
(3,885) |
|
|||
Adjusted EBITDA (1) |
|
$ |
11,532 |
|
|
$ |
11,911 |
|
(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 revenue and operating profit, to measure operating performance. |
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|
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SCHEDULE OF SELECTED OPERATING METRICS |
||||||||||||||||
(In thousands, except subscriber and ARPU data) |
||||||||||||||||
(Unaudited) |
||||||||||||||||
|
|
Three Months Ended |
||||||||||||||
|
|
|
||||||||||||||
|
|
2020 |
|
2019 |
||||||||||||
|
|
Service |
|
Equipment |
|
Service |
|
Equipment |
||||||||
Revenue |
|
|
|
|
|
|
|
|
||||||||
Duplex (2) |
|
$ |
9,956 |
|
|
$ |
510 |
|
|
$ |
12,704 |
|
|
$ |
349 |
|
SPOT |
|
11,396 |
|
|
2,602 |
|
|
12,482 |
|
|
1,880 |
|
||||
Commercial IoT |
|
4,420 |
|
|
1,256 |
|
|
4,526 |
|
|
2,182 |
|
||||
IGO |
|
95 |
|
|
— |
|
|
139 |
|
|
— |
|
||||
Engineering and other |
|
2,518 |
|
|
4 |
|
|
416 |
|
|
51 |
|
||||
Total Revenue |
|
$ |
28,385 |
|
|
$ |
4,372 |
|
|
$ |
30,267 |
|
|
$ |
4,462 |
|
|
|
|
|
|
|
|
|
|
||||||||
Average Subscribers |
|
|
|
|
|
|
|
|
||||||||
Duplex |
|
49,533 |
|
|
|
|
57,091 |
|
|
|
||||||
SPOT |
|
260,153 |
|
|
|
|
280,632 |
|
|
|
||||||
Commercial IoT |
|
414,049 |
|
|
|
|
412,180 |
|
|
|
||||||
IGO |
|
26,491 |
|
|
|
|
26,378 |
|
|
|
||||||
Other |
|
870 |
|
|
|
|
912 |
|
|
|
||||||
Total Average Subscribers |
|
751,096 |
|
|
|
|
777,193 |
|
|
|
||||||
|
|
|
|
|
|
|
|
|
||||||||
ARPU (1) |
|
|
|
|
|
|
|
|
||||||||
Duplex (2) |
|
$ |
67.00 |
|
|
|
|
$ |
74.17 |
|
|
|
||||
SPOT |
|
14.60 |
|
|
|
|
14.83 |
|
|
|
||||||
Commercial IoT |
|
3.56 |
|
|
|
|
3.66 |
|
|
|
||||||
IGO |
|
1.20 |
|
|
|
|
1.76 |
|
|
|
||||||
(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. |
|
(2) |
We recorded an out-of-period adjustment of |
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