10-KPeriod: FY2018

Globalstar, Inc. Annual Report, Year Ended Dec 31, 2018

Filed February 28, 2019For Securities:GSAT

Summary

Globalstar, Inc.'s 2018 10-K filing details a challenging year characterized by revenue growth driven by service increases in SPOT and Simplex segments, alongside an increase in equipment sales, primarily from new product launches. However, the company continued to incur operating losses, impacted by significant depreciation expenses related to its second-generation satellites and ground infrastructure. The company's liquidity remains a key concern, with management anticipating that current sources of liquidity will be insufficient to meet obligations for the next twelve months, potentially requiring additional financing. Significant progress has been made in the strategic initiative to utilize its spectrum for terrestrial broadband services, including obtaining necessary FCC modifications and achieving Band 53 designation from 3GPP. Despite these developments and a focus on product innovation and market expansion, the company faces ongoing risks related to its capital-intensive operations, substantial debt obligations, and the competitive satellite services market.

Financial Highlights

47 data points
Beta

Revenue

$130.11M

Net Income

-$6.52M

-5.0% Net Margin

EPS (Diluted)

$-0.15

Total Assets

$1.05B

Cash & Equivalents

$15.21M

Free Cash Flow

-$1.43M

Financial Statements
Beta
Revenue$130.11M
R&D Expenses$2.70M
SG&A Expenses$55.44M
Operating Expenses$177.49M
Operating Income-$47.38M
Net Income-$6.52M
EPS (Basic)$-0.15
EPS (Diluted)$-0.15
Shares Outstanding (Basic)84.64M
Shares Outstanding (Diluted)84.64M

Key Highlights

  • 1Revenue increased by 15.5% year-over-year to $130.1 million, primarily driven by a $12.6 million increase in service revenue and a $4.8 million increase in equipment sales.
  • 2The company experienced a net loss of $6.5 million for the year ended December 31, 2018, a significant improvement from the $89.1 million net loss in 2017.
  • 3Operating expenses decreased by 2% to $177.4 million, mainly due to a $20.5 million revision to a contract termination charge with Thales Alenia Space.
  • 4Depreciation, amortization, and accretion expenses increased by $12.9 million to $90.4 million, largely due to assets placed into service for next-generation ground infrastructure upgrades.
  • 5Total debt decreased by $63.2 million to $510.5 million, primarily due to principal payments on the Facility Agreement.
  • 6Globalstar made progress on its terrestrial broadband strategy, receiving FCC modification to its licenses and obtaining Band 53 designation from 3GPP for its 2.4 GHz spectrum.
  • 7The company anticipates current liquidity sources will be insufficient for the next twelve months, indicating a need for additional financing.

Frequently Asked Questions

In 2018, Globalstar reported total revenue of $130.1 million, a 15.5% increase from 2017, driven by growth in both service and equipment sales. However, the company continued to operate at a loss, reporting a net loss of $6.5 million for the year, although this was a significant improvement from the $89.1 million net loss in 2017. Operating expenses decreased slightly due to a favorable contract termination charge revision, but were offset by higher depreciation expenses related to infrastructure investments.

Globalstar faces several significant risks, including its substantial debt obligations totaling over $510 million as of December 31, 2018, and the anticipation that current liquidity sources will be insufficient for the next twelve months, necessitating potential additional financing. The business is capital-intensive, with ongoing depreciation expenses from its satellite constellation and ground network. Additionally, the company operates in a highly competitive mobile satellite services market and faces risks associated with satellite operational failures and technological obsolescence.

Globalstar has made notable progress in its strategy to utilize its licensed spectrum for terrestrial broadband services. The FCC modified Globalstar's MSS licenses in August 2017 to permit terrestrial broadband services over a portion of its spectrum. Furthermore, in December 2018, Globalstar successfully obtained approval to create a new defined band class, Band 53, from the 3GPP for its 2.4 GHz terrestrial spectrum, which is crucial for integrating its spectrum into handset and infrastructure ecosystems.

Globalstar's debt stood at $510.5 million as of December 31, 2018. The company made principal payments on its Facility Agreement, reducing its overall debt. However, management has indicated that its current liquidity sources are expected to be insufficient for the next twelve months, and it may need to seek additional financing. The company's liquidity is also impacted by restrictive covenants in its Facility Agreement, which include requirements for equity cure contributions to maintain compliance with financial covenants.