10-KPeriod: FY2016

Globalstar, Inc. Annual Report, Year Ended Dec 31, 2016

Filed February 23, 2017For Securities:GSAT

Summary

Globalstar, Inc.'s 2016 10-K filing indicates a challenging year with revenue growth driven by service revenue, primarily from Duplex and SPOT services, which saw increases in subscriber bases and average revenue per user (ARPU). However, this growth was partially offset by a decline in equipment sales, particularly for Simplex and Duplex units, attributed to the oil and gas industry downturn and earlier promotions. The company continued to invest heavily in its second-generation satellite constellation and ground network upgrades, leading to substantial depreciation expenses and ongoing capital expenditures. Despite revenue growth, Globalstar reported an operating loss, reflecting these significant investments and operational costs. The company's financial position remains constrained by substantial debt obligations and the ongoing need for capital, with plans for future financing not yet fully arranged. A key development highlighted is the FCC's approval in December 2016 for terrestrial low-power services over a portion of Globalstar's licensed spectrum, which could offer a new avenue for future revenue generation.

Financial Highlights

48 data points
Beta

Revenue

$96.86M

89.8% Gross Margin

Net Income

-$132.65M

-136.9% Net Margin

EPS (Diluted)

$-1.80

Total Assets

$1.13B

Cash & Equivalents

$10.23M

Free Cash Flow

-$572K

Financial Statements
Beta
Revenue$96.86M
Cost of Revenue$9.91M
Gross Profit$86.95M
R&D Expenses$2.10M
SG&A Expenses$40.56M
Operating Expenses$160.11M
Operating Income-$63.25M
Net Income-$132.65M
EPS (Basic)$-1.80
EPS (Diluted)$-1.80
Shares Outstanding (Basic)70.96M
Shares Outstanding (Diluted)70.96M

Key Highlights

  • 1Revenue increased by approximately 6.4% to $96.9 million in 2016, driven by a 12% increase in service revenue, primarily from Duplex and SPOT services.
  • 2The company experienced an operating loss of $63.7 million in 2016, a slight improvement from $66.6 million in 2015, but still indicating ongoing profitability challenges.
  • 3Total debt remained significant, standing at $576.3 million (net of discounts and deferred financing costs) at the end of 2016, with substantial principal payments due in the coming years.
  • 4Globalstar reported approximately 689,000 subscribers at the end of 2016, with growth in both Duplex and SPOT subscriber bases.
  • 5The company completed major second-generation ground network upgrades with its partners Hughes and Ericsson, preparing for future service rollouts.
  • 6A key regulatory development was the FCC's approval in December 2016 for terrestrial low-power services over 11.5 MHz of Globalstar's licensed spectrum, effective March 2017, offering potential for new revenue streams.
  • 7The company's financial statements revealed substantial non-cash charges related to derivatives and equity issuances, reflecting complex financial instruments and market volatility.

Frequently Asked Questions

Globalstar reported a total revenue of $96.9 million in 2016, an increase from $90.5 million in 2015. This growth was driven by service revenue, particularly from its Duplex and SPOT services, which saw higher subscriber numbers and ARPU. However, the company continued to incur an operating loss, reporting a loss of $63.7 million for 2016, indicating that while revenues grew, operational costs and investments remained high.

Globalstar faces significant risks including substantial debt obligations, which require careful management and future financing to meet. The company also relies on the performance and longevity of its satellite constellation and ground network, which are subject to technological risks and potential disruptions. Competition from other satellite and terrestrial communication providers is intense, and regulatory changes could impact operations. Furthermore, the company experienced operating losses and significant non-cash charges related to its financial instruments, highlighting financial vulnerability.

In December 2016, the FCC approved Globalstar's proposal to offer terrestrial low-power services over 11.5 MHz of its licensed spectrum. This approval, effective March 2017, represents a significant opportunity for Globalstar to potentially expand its service offerings into terrestrial wireless broadband, creating a new revenue stream and enhancing the utilization of its spectrum assets. The company is in the process of modifying its licenses to implement this terrestrial authority.

Globalstar has substantial debt obligations, primarily under its Facility Agreement. The company's ability to service this debt is critical to its financial health. Management indicated that its current liquidity sources might be insufficient to meet obligations and that further financing would be required. The Facility Agreement contains restrictive covenants that limit the company's operating and financial flexibility, and compliance with these covenants is closely monitored. The company also utilizes 'Equity Cure Contributions' from stock issuances to maintain compliance with certain financial covenants.