10-QPeriod: Q1 FY2016

Globalstar, Inc. Quarterly Report for Q1 Ended Mar 31, 2016

Filed May 5, 2016For Securities:GSAT

Summary

Globalstar, Inc. reported a net loss of $26.9 million for the first quarter ended March 31, 2016, a significant improvement from the $129.7 million net loss in the same period of 2015. This improvement was largely driven by a substantial decrease in derivative losses, which were $1.3 million in Q1 2016 compared to $107.9 million in Q1 2015. Total revenue saw a modest increase of 4% to $21.8 million, primarily due to a 6% rise in service revenues, led by strong performance in SPOT services, which grew 21%. However, subscriber equipment sales decreased by 21% year-over-year. The company's balance sheet shows total assets of $1.17 billion and total liabilities of $1.15 billion as of March 31, 2016. Notably, the company holds a significant amount of property and equipment, largely related to its second-generation satellite system. Long-term debt remains substantial at $555 million. Cash and cash equivalents increased to $11.9 million from $7.5 million at the end of 2015, and the company has access to a $53.5 million credit line under its common stock purchase agreement with Terrapin. While the reduction in net loss is a positive development, investors should note the ongoing substantial debt obligations and the dependence on continued equity financing and debt restructuring. The company's operational performance shows growth in service revenue, particularly in its SPOT segment, but equipment sales remain a concern. The legal dispute with Thales Alenia Space regarding long-lead items for satellites also remains an unresolved contingent liability.

Financial Statements
Beta

Key Highlights

  • 1Net loss significantly narrowed to $26.9 million in Q1 2016 from $129.7 million in Q1 2015, primarily due to a substantial reduction in derivative losses.
  • 2Total revenue increased by 4% to $21.8 million, driven by a 15% increase in service revenues to $18.7 million.
  • 3SPOT service revenue saw a significant 21% increase year-over-year, indicating strong growth in this segment.
  • 4Subscriber equipment sales decreased by 21% to $3.1 million, impacted by a price reduction for Duplex phones and a downturn in the oil and gas sector affecting Simplex sales.
  • 5Cash and cash equivalents increased to $11.9 million as of March 31, 2016, from $7.5 million at the end of 2015.
  • 6Long-term debt remains substantial at $555 million, with a significant portion being the Facility Agreement and the Thermo Loan Agreement.
  • 7The company has $53.5 million available under its common stock purchase agreement with Terrapin for potential future funding needs.

Frequently Asked Questions

The primary reason for the improved net loss is a significant reduction in derivative losses. Derivative losses decreased from $107.9 million in Q1 2015 to $1.3 million in Q1 2016. This was mainly due to less volatility in Globalstar's stock price during the most recent quarter.

Globalstar has a significant amount of long-term debt, totaling $555 million as of March 31, 2016. The company is managing this through existing credit facilities, including the Facility Agreement and the Thermo Loan Agreement. It also has access to equity financing through its common stock purchase agreement with Terrapin, and Thermo has a committed equity financing arrangement. The company's ability to make payments and comply with covenants is crucial, and it utilized equity contributions for covenant compliance in the past.

The SPOT service segment is showing strong growth, with revenues increasing by 21% year-over-year, driven by higher annual rate plans for newer devices like the SPOT Gen3™. Duplex service revenue also saw a modest increase of 3%. However, subscriber equipment sales across the board have declined, particularly for Duplex phones due to a price reduction and Simplex devices due to weakness in the oil and gas industry.

Key risks include the substantial debt burden, the contingent liabilities related to the dispute with Thales Alenia Space over satellite components, potential acceleration of debt if covenants are breached, and reliance on ongoing equity financing. The company's ability to generate sufficient cash flow from operations to service its debt and fund its ongoing operations remains a critical factor.