10-QPeriod: Q2 FY2018

Globalstar, Inc. Quarterly Report for Q2 Ended Jun 30, 2018

Filed August 2, 2018For Securities:GSAT

Summary

Globalstar, Inc. reported a total revenue of $33.7 million for the three months ended June 30, 2018, an increase of 20% compared to the prior year's period. This growth was primarily driven by a 15% increase in service revenue, attributed to higher Average Monthly Revenue Per User (ARPU) across its Duplex, SPOT, and Simplex service lines. Subscriber equipment sales also saw a significant rise, up 50% year-over-year, largely due to strong performance in Simplex products and the recent launch of new devices like Sat-Fi2TM and SPOT XTM. Despite revenue growth, the company reported a net loss of $7.0 million for the quarter, a substantial improvement from the $98.7 million loss in the prior year's comparable period. This improvement is partly due to a significant $20.5 million reduction in operating expenses stemming from a revision to a contract termination charge. The company also highlighted progress in its second-generation ground network upgrades, with new gateways being placed into service. However, liquidity remains a concern, with cash and cash equivalents at $12.8 million and restricted cash at $52.7 million, alongside substantial long-term debt obligations.

Financial Highlights

42 data points
Beta

Revenue

$33.73M

Net Income

-$7.01M

-20.8% Net Margin

EPS (Diluted)

$-0.15

Total Assets

$1.07B

Cash & Equivalents

$12.81M

Free Cash Flow

-$3.85M

Financial Statements
Beta
Revenue$33.73M
SG&A Expenses$15.94M
Operating Expenses$31.78M
Operating Income$1.95M
Net Income-$7.01M
EPS (Basic)$-0.15
EPS (Diluted)$-0.15
Shares Outstanding (Basic)84.22M
Shares Outstanding (Diluted)84.22M

Key Highlights

  • 1Total revenue increased by 20% to $33.7 million for Q2 2018, driven by growth in both service revenue and subscriber equipment sales.
  • 2Service revenue grew 15% year-over-year, primarily due to a 17% increase in Duplex ARPU and strong performance in SPOT and Simplex services.
  • 3Subscriber equipment sales surged by 50% to $5.7 million, boosted by Simplex products and the launch of new devices like Sat-Fi2TM and SPOT XTM.
  • 4Net loss significantly narrowed to $7.0 million from $98.7 million in the prior year's quarter, reflecting improved operational performance and a substantial one-time charge reduction.
  • 5Operating expenses decreased by 22% to $31.8 million, largely due to a $20.5 million revision of a contract termination charge related to Thales.
  • 6The company placed $175.7 million of its next-generation ground infrastructure into service during the quarter.
  • 7Cash and cash equivalents stood at $12.8 million as of June 30, 2018, with significant long-term debt obligations remaining.

Frequently Asked Questions

Globalstar reported a 20% increase in total revenue to $33.7 million for the three months ended June 30, 2018, compared to the same period in 2017. The company also significantly reduced its net loss to $7.0 million from $98.7 million in the prior year's quarter. This improvement was driven by increased service revenue and subscriber equipment sales, coupled with a significant reduction in operating expenses.

Revenue growth was primarily fueled by a 15% increase in service revenue, largely due to higher Average Monthly Revenue Per User (ARPU) across its Duplex, SPOT, and Simplex service lines. Additionally, subscriber equipment sales saw a substantial 50% increase, driven by strong sales of Simplex products and the recent launch of new devices such as Sat-Fi2TM and SPOT XTM.

Globalstar has substantial long-term debt. While the total debt decreased slightly from December 31, 2017, to $400.7 million (net of current portion) as of June 30, 2018, the company anticipates needing an 'Equity Cure Contribution' to maintain compliance with financial covenants under its Facility Agreement for the measurement period ending December 31, 2018. The source of these funds has not yet been fully arranged, indicating potential liquidity challenges.

Globalstar adopted ASC 606 effective January 1, 2018, using a modified retrospective method. This adoption led to a net increase in the retained deficit and impacted revenue recognition, particularly related to contract breakage and deferral of costs to obtain a contract. For example, the adoption resulted in a reduction of Duplex service revenue in Q2 2018, as revenue recognized based on historical usage patterns was lower than what would have been recognized under the previous standard.