10-QPeriod: Q2 FY2014

Globalstar, Inc. Quarterly Report for Q2 Ended Jun 30, 2014

Filed August 11, 2014For Securities:GSAT

Summary

Globalstar, Inc. reported a significant net loss for the six months ended June 30, 2014, primarily driven by a substantial increase in derivative losses. While total revenue showed a modest increase of 14% year-over-year, reaching $44.5 million, the company's operational performance was overshadowed by a net loss of $684.3 million, compared to $151.3 million in the prior year period. This widening loss is largely attributable to derivative losses, which surged from $29.4 million to $585.7 million, signaling volatility in financial instruments linked to the company's debt. Despite these financial challenges, the company saw growth in its Duplex and Simplex service revenues, reflecting increased subscriber activations and improved service levels following the completion of its second-generation satellite constellation. However, the substantial derivative losses and an overall increase in operating expenses, including a significant inventory write-down, indicate ongoing financial pressures.

Financial Highlights

45 data points
Beta

Revenue

$23.99M

81.9% Gross Margin

Net Income

-$433.73M

-1807.7% Net Margin

EPS (Diluted)

$-7.20

Total Assets

$1.33B

Cash & Equivalents

$23.80M

Free Cash Flow

-$2.50M

Financial Statements
Beta
Revenue$23.99M
Cost of Revenue$4.33M
Gross Profit$19.66M
SG&A Expenses$8.25M
Operating Expenses$49.03M
Operating Income-$25.04M
Net Income-$433.73M
EPS (Basic)$-7.20
EPS (Diluted)$-7.20
Shares Outstanding (Basic)60.33M
Shares Outstanding (Diluted)60.33M

Key Highlights

  • 1Total revenue increased by 14% to $44.5 million for the six months ended June 30, 2014, driven by growth in service revenue (up 11%) and subscriber equipment sales (up 24%).
  • 2A substantial increase in derivative losses, from $29.4 million to $585.7 million, significantly impacted the net loss, which widened from $151.3 million to $684.3 million for the six-month period.
  • 3Operating expenses rose by 17% to $90.1 million, largely due to a $7.3 million reduction in the value of inventory related to a former Qualcomm contract and increased depreciation.
  • 4Duplex service revenue grew by 26% for the six months ended June 30, 2014, supported by increased subscriber activations and improved service quality after the second-generation satellite constellation was fully deployed.
  • 5The company's cash position improved, with cash and cash equivalents increasing to $23.8 million at June 30, 2014, up from $17.4 million at December 31, 2013.
  • 6Long-term debt decreased to $624.8 million (net) from $665.2 million, reflecting debt conversions and payments.

Frequently Asked Questions

The primary driver of the significantly increased net loss for the six months ended June 30, 2014, is a substantial surge in derivative losses. Derivative losses increased from $29.4 million in the prior year period to $585.7 million in the current period, primarily due to changes in the fair value of embedded derivative instruments related to the company's debt and warrants.

Total revenue for the six months ended June 30, 2014, increased by 14% to $44.5 million, compared to $39.2 million in the same period of 2013. This growth was primarily fueled by a 11% increase in service revenues and a 24% increase in subscriber equipment sales.

As of June 30, 2014, Globalstar had $23.8 million in cash and cash equivalents, an increase from $17.4 million at December 31, 2013. Long-term debt, net, decreased to $624.8 million from $665.2 million, reflecting debt conversions and payments. The company also has restricted cash of $37.9 million.

The completion of the second-generation satellite constellation in August 2013 has led to improved service levels and voice quality. This has positively impacted revenue, particularly in Duplex service revenue, which grew by 26% in the first half of 2014, as the company attracts new subscribers and retains existing ones due to enhanced service offerings.