01—Abstract
Summary
Summary of the 10-K filed February 23, 2018. Cited figures are marked; the original filing is the authoritative source.
Globalstar, Inc.'s 2017 Form 10-K details a challenging year marked by revenue growth but continued operating losses.
The company's primary business involves providing Mobile Satellite Services (MSS) globally, with its services extending to areas underserved by terrestrial networks. Key revenue drivers are its Duplex (two-way voice and data) and SPOT (consumer tracking and messaging) services, which saw an increase in service revenue in 2017 due to higher average revenue per user (ARPU) and subscriber growth in the SPOT segment. However, the company's financial health remains strained by significant debt obligations and substantial depreciation expenses related to its second-generation satellite constellation.
Operating expenses increased, primarily due to a large reduction in the value of long-lived assets and higher costs of services. Despite efforts to improve liquidity through equity financings, including a public offering in October 2017, the company anticipates its current liquidity sources will be insufficient to meet its obligations for the upcoming year. The company also highlights ongoing risks related to satellite performance, technological advancements, competition, and regulatory changes, particularly concerning its spectrum utilization for terrestrial broadband services.
02—Key points
Key Highlights
- Total revenue increased by approximately 16.3% to $112.7 million in 2017, driven primarily by a 18.4% increase in service revenue to $98.5 million.
- The company reported an operating loss of $68.8 million for 2017, a slight increase from $63.7 million in 2016, indicating persistent operational challenges.
- Significant debt remains a concern, with total debt (less current portion) at $434.7 million as of December 31, 2017, although total debt decreased from the previous year.
- Globalstar received FCC authorization to provide terrestrial broadband services over its satellite spectrum, a potential future revenue stream.
- The company's liquidity remains tight, with management expecting current sources to be insufficient for obligations in 2018, despite raising $115.0 million in net proceeds from a stock offering in October 2017.
- Depreciation, amortization, and accretion expenses remained high at $77.5 million in 2017, reflecting the significant investment in its satellite constellation.
- The company faces various risks, including satellite operational issues, intense competition from other MSS providers, and the need for ongoing capital expenditures.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2017, Globalstar lost $0.79.
- Revenue$112.7M100.0%
- Cost of revenue−$9.9M8.8%
- Gross profit$102.7M91.2%
- Operating costs−$171.2M151.9%
- Operating income−$68.4M60.8%
- Interest, other & tax−$20.6M18.3%
- Net income−$89.1M79.1%
04—Financials
Financial Highlights
Figures from 10-KFY2017filed February 23, 2018Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $112.66M$96.86M | +16.3% |
| Cost of Revenue | $9.94M$9.91M | +0.4% |
| Gross Profit | $102.72M$86.95M | +18.1% |
| R&D Expenses | $3.80M$2.10M | +81.0% |
| SG&A Expenses | $38.76M$40.56M | −4.4% |
| Operating Expenses | $181.11M$160.11M | +13.1% |
| Operating Income | -$68.45M-$63.25M | −8.2% |
| Net Income | -$89.07M-$132.65M | +32.8% |
| EPS (Basic) | $-1.20$-1.80 | +33.3% |
| EPS (Diluted) | $-1.20$-1.80 | +33.3% |
| Shares Outstanding (Basic) | 77.77M70.96M | +9.6% |
| Shares Outstanding (Diluted) | 77.77M70.96M | +9.6% |
05—Questions
Frequently Asked Questions
What were Globalstar's primary sources of revenue in 2017?
In 2017, Globalstar's revenue primarily came from service revenues, accounting for approximately 87% of the total. The main service revenue streams were from Duplex (voice and data) and SPOT (consumer tracking and messaging) services, both of which saw an increase in service revenue due to higher ARPU and subscriber growth, particularly for SPOT.
What is Globalstar's financial health and liquidity situation?
Globalstar's financial health remains strained. While total revenue increased in 2017, the company continued to report significant operating losses. Its liquidity is a major concern, with management noting that current sources are expected to be insufficient for upcoming obligations. Despite a recent equity financing, the company carries substantial debt, which, along with restrictive covenants, limits its financial flexibility.
What are the key risks identified by Globalstar in its 2017 10-K filing?
Key risks highlighted include the operational reliability of its satellite constellation, the potential for technological obsolescence, intense competition from other MSS and terrestrial providers, its substantial indebtedness and associated restrictive covenants, and the need for significant capital expenditures. Additionally, the company faces regulatory risks and potential disruptions from global economic conditions and international operations.
What is the significance of the FCC authorization for terrestrial broadband services?
The FCC authorization granted in 2017 allows Globalstar to provide terrestrial broadband services over its licensed satellite spectrum. This represents a strategic opportunity for the company to potentially diversify its revenue streams and monetize its spectrum assets in new ways, although its full impact and timeline for deployment are still developing.
06—Continue