UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 4, 2017
GLOBALSTAR, INC.
(Exact name of registrant as specified in its charter)
Delaware (State or Other Jurisdiction of Incorporation) | 001-33117 (Commission File Number) | 41-2116508 (IRS Employer Identification No.) |
300 Holiday Square Blvd. Covington, LA | 70433 |
(Address of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number, including area code: (985) 335-1500
N/A
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | ||||
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | ||||
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | ||||
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | ||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition.
On May 4, 2017, Globalstar, Inc. (the "Company") issued a press release to report first quarter 2017 financial results. The text of the press release is furnished as Exhibit 99.1 to this Form 8-K. In addition, on May 4, 2017, the Company will hold a teleconference for investors to discuss results for the first quarter 2017. The teleconference is webcast on the Company’s website at www.globalstar.com. The documents available on, and the contents of, the Company's website are not incorporated by reference into this Report.
The information in this Current Report on Form 8-K and the Exhibit attached hereto is furnished pursuant to the rules and regulations of the Securities and Exchange Commission and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference in such a filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
99.1 | Press release dated May 4, 2017 | |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
GLOBALSTAR, INC. | ||
/s/ James Monroe III | ||
James Monroe III | ||
Chairman and | ||
Chief Executive Officer | ||
Date: May 4, 2017
GLOBALSTAR ANNOUNCES FIRST QUARTER 2017 RESULTS
Covington, LA - (May 4, 2017) - Globalstar, Inc. (NYSE MKT: GSAT) today announced its financial results for the quarter ended March 31, 2017.
Jay Monroe, Chairman and Chief Executive Officer of Globalstar, commented, “In March 2017, our SPOT business reached a significant milestone, enabling the 5,000th rescue since its launch in 2007. SPOT is currently being used by customers to initiate approximately two rescues per day, proving how essential our technology is to saving lives. Our core operations also produced meaningful financial growth with a 13% increase in total revenue as we continue to improve ARPU across all of our major types of revenue. Duplex ARPU was up 26% during the first quarter, contributing significantly to the reduction in net loss and increase in Adjusted EBITDA. We also continue to focus on product and business development through expanding our one-way and two-way product portfolio. Our efforts involve a strong group of internal engineers as well as strategic partners, such as Carmanah, who is currently designing and manufacturing a new solar powered M2M satellite product. Finally, as discussed a couple of months ago, we have initiated requests for authority to provide terrestrial services over our 16.5 MHz of licensed 2.4 GHz spectrum in several international jurisdictions. While we cannot discuss the specific countries we are pursuing, we have a strategy and we will update you as we reach milestones towards our goal."
FIRST QUARTER FINANCIAL REVIEW
Revenue
Total revenue for the first quarter of 2017 increased by $2.9 million, or 13%, from the first quarter of 2016. This increase was driven primarily by higher service revenue resulting from increased ARPU in all major service lines. A slight increase in revenue from subscriber equipment sales also contributed to the increase in total revenue due a higher volume of SPOT units sold during the quarter.
Service revenue increased $2.8 million, or 15%, in the first quarter of 2017 compared to the first quarter of 2016. This increase was driven by growth in both SPOT and Duplex service revenue, which each increased $1.3 million. Higher ARPU propelled this growth, with fluctuations in average subscribers contributing less to the quarter over quarter variances. The 26% and 10% increases in Duplex and SPOT ARPU, respectively, were due primarily to rate plan increases implemented throughout 2016 and the first quarter of 2017 for certain legacy plans to align rates with our service levels. The increase in Duplex ARPU also is attributed to continued popularity of our valuable annual, usage-based plans. These plans result in higher service revenue recognized when unused minutes expire on the anniversary date of the customer's contract. Also contributing to the increase in service revenue was a $0.4 million increase in revenue generated from services performed under a recently awarded government contract.
Subscriber equipment sales revenue increased $0.1 million, or 3%, due primarily to a higher volume of SPOT units sold during the quarter, which resulted in a $0.3 million increase in SPOT equipment sales revenue. Offsetting this increase was a $0.2 million decrease in equipment sales revenue from product sales to our IGOs, which can fluctuate between periods based on demand in their respective international territories.
Loss from Operations
Loss from operations decreased $0.5 million, or 3%, from $15.7 million in the first quarter of 2016 to $15.2 million in the first quarter of 2017 due primarily to a $2.9 million increase in total revenue (for the reasons discussed above), offset partially by a $2.4 million increase in operating expenses. The increase in operating expenses was due in part to a higher cost of services, which was elevated due to expenses to support new product development and our second-generation ground network. Higher management, general and administrative (MG&A) costs also contributed to the increase in operating expenses due to the timing of certain items, including stock compensation expense, subscriber acquisition costs to support sales promotions, and fluctuations in bad debt recoveries and expense between the periods.
1
Net Loss
Net loss decreased $6.7 million from $26.9 million in the first quarter of 2016 compared to $20.2 million in the first quarter of 2017. The primary reason for this decrease was a $4.6 million fluctuation in non-cash derivative valuation adjustments from a derivative loss in the first quarter of 2016 to a derivative gain in the first quarter of 2017. These fluctuations were driven primarily by changes in certain valuation inputs, including stock price, stock price volatility and the remaining estimated term of the instruments. Changes in other non-cash items, such as gain on equity issuance and foreign exchange gains/losses, also contributed to the decrease in net loss.
Adjusted EBITDA
Adjusted EBITDA increased 23% during the first quarter of 2017 driven primarily by a $2.9 million, or 13%, increase in total revenue, offset partially by a $1.8 million increase in total operating expenses (excluding EBITDA adjustments). The increase in operating expenses during the first quarter of 2017 resulted primarily from higher cost of services and MG&A expenses, offset partially by a slight decrease in cost of subscriber equipment sales. The $1.4 million increase in cost of services was due primarily to higher research and development costs of $0.7 million driven by new products and technology being developed internally and through external partners. Additionally, support costs related to our second-generation ground network increased $0.4 million as the Company accepted the work performed to upgrade its gateways during the fourth quarter 2016. The $0.5 million increase in MG&A expenses (excluding non-cash compensation) resulted primarily from a bad debt recovery being recorded in the first quarter of 2016 that did not recur in 2017.
2
CONFERENCE CALL
The Company will conduct an investor conference call on May 4, 2017 at 8:30 a.m. ET to discuss its first quarter 2017 financial results.
Details are as follows: | |
Conference Call: | 8:30 a.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 44675595. |
Audio Replay: | A replay of the earnings call will be available for a limited time and can be heard after 11:00 a.m. ET on May 4, 2017. Dial: 1 (888) 843-7419 (US and Canada), 1 (630) 652-3042 (International) and pass code 4467 5595#. |
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: [email protected]
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.
3
GLOBALSTAR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended March 31, | |||||||
2017 | 2016 | ||||||
Revenue: | |||||||
Service revenues | $ | 21,481 | $ | 18,749 | |||
Subscriber equipment sales | 3,171 | 3,087 | |||||
Total revenue | 24,652 | 21,836 | |||||
Operating expenses: | |||||||
Cost of services (exclusive of depreciation, amortization, and accretion shown separately below) | 8,974 | 7,591 | |||||
Cost of subscriber equipment sales | 2,096 | 2,178 | |||||
Marketing, general and administrative | 9,490 | 8,610 | |||||
Depreciation, amortization, and accretion | 19,294 | 19,155 | |||||
Total operating expenses | 39,854 | 37,534 | |||||
Loss from operations | (15,202 | ) | (15,698 | ) | |||
Other income (expense): | |||||||
Gain on equity issuance | 706 | 151 | |||||
Interest income and expense, net of amounts capitalized | (8,828 | ) | (9,105 | ) | |||
Derivative gain (loss) | 3,223 | (1,344 | ) | ||||
Other | (24 | ) | (760 | ) | |||
Total other income (expense) | (4,923 | ) | (11,058 | ) | |||
Loss before income taxes | (20,125 | ) | (26,756 | ) | |||
Income tax expense | 36 | 191 | |||||
Net loss | $ | (20,161 | ) | $ | (26,947 | ) | |
Net loss per common share: | |||||||
Basic | $ | (0.02 | ) | $ | (0.03 | ) | |
Diluted | (0.02 | ) | (0.03 | ) | |||
Weighted-average shares outstanding: | |||||||
Basic | 1,113,968 | 1,041,028 | |||||
Diluted | 1,113,968 | 1,041,028 | |||||
4
GLOBALSTAR, INC.
RECONCILIATION OF GAAP NET INCOME (LOSS) TO NON-GAAP ADJUSTED EBITDA
(In thousands)
(Unaudited)
Three Months Ended | |||||||||
March 31, | |||||||||
2017 | 2016 | ||||||||
Net loss | $ | (20,161 | ) | $ | (26,947 | ) | |||
Interest income and expense, net | 8,828 | 9,105 | |||||||
Derivative (gain) loss | (3,223 | ) | 1,344 | ||||||
Income tax expense | 36 | 191 | |||||||
Depreciation, amortization, and accretion | 19,294 | 19,155 | |||||||
EBITDA | 4,774 | 2,848 | |||||||
Non-cash compensation | 1,318 | 906 | |||||||
Foreign exchange and other | 24 | 760 | |||||||
Gain on equity issuance | (706 | ) | (151 | ) | |||||
Adjusted EBITDA (1) | $ | 5,410 | $ | 4,363 | |||||
(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. In light of recent SEC guidance on the use of non-GAAP measures, the Company has recast Adjusted EBITDA in the prior period. 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. |
5
GLOBALSTAR, INC.
SCHEDULE OF SELECTED OPERATING METRICS
(In thousands, except subscriber and ARPU data)
(Unaudited)
Three Months Ended | |||||||||||||||
March 31, | |||||||||||||||
2017 | 2016 | ||||||||||||||
Service | Equipment | Service | Equipment | ||||||||||||
Revenue | |||||||||||||||
Duplex | $ | 7,598 | $ | 899 | $ | 6,334 | $ | 848 | |||||||
SPOT | 10,397 | 1,236 | 9,101 | 961 | |||||||||||
Simplex | 2,416 | 907 | 2,365 | 933 | |||||||||||
IGO | 211 | 139 | 244 | 303 | |||||||||||
Other | 859 | (10 | ) | 705 | 42 | ||||||||||
$ | 21,481 | $ | 3,171 | $ | 18,749 | $ | 3,087 | ||||||||
Average Subscribers | |||||||||||||||
Duplex | 73,444 | 77,372 | |||||||||||||
SPOT | 278,790 | 267,523 | |||||||||||||
Simplex | 295,576 | 300,975 | |||||||||||||
IGO | 37,768 | 38,999 | |||||||||||||
ARPU (1) | |||||||||||||||
Duplex | $ | 34.48 | $ | 27.29 | |||||||||||
SPOT | 12.43 | 11.34 | |||||||||||||
Simplex | 2.72 | 2.62 | |||||||||||||
IGO | 1.86 | 2.08 | |||||||||||||
(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. | |
6