10-QPeriod: Q1 FY2020

Globalstar, Inc. Quarterly Report for Q1 Ended Mar 31, 2020

Filed May 7, 2020For Securities:GSAT

Summary

Globalstar, Inc.'s first-quarter 2020 filing (period ending March 31, 2020) reveals a mixed financial performance. Total revenue saw a modest increase to $32.2 million from $30.1 million in the prior year's first quarter, primarily driven by growth in service revenue from engineering services and Commercial IoT. However, this top-line growth was overshadowed by a significant net loss of $38.2 million, a stark contrast to the $25.8 million net income reported in Q1 2019. This loss was heavily influenced by a substantial derivative loss of $57.0 million in the prior year being absent, replaced by a derivative loss of $0.8 million in the current quarter, but more critically, a large increase in interest expense and foreign currency losses contributed to the negative bottom line. The company's balance sheet shows a reduction in total assets to $939.1 million from $965.6 million, largely due to a significant decrease in property and equipment, net. Long-term debt also saw a substantial reduction, falling to $356.0 million from $464.2 million, primarily due to the conversion of a significant loan from Thermo into common stock. The company ended the quarter with $10.5 million in cash and cash equivalents, alongside $51.1 million in restricted cash, and management stated it expects liquidity to be sufficient over the next twelve months. The report also highlights the nascent impacts of the COVID-19 pandemic, with expected continued lower demand, particularly from oil and gas customers, and increased loss rates for certain receivables.

Financial Highlights

39 data points
Beta

Revenue

$32.19M

Net Income

-$38.22M

-118.7% Net Margin

EPS (Diluted)

$-0.30

Total Assets

$939.14M

Cash & Equivalents

$10.46M

Free Cash Flow

$4.61M

Financial Statements
Beta
Revenue$32.19M
SG&A Expenses$11.09M
Operating Expenses$46.28M
Operating Income-$14.09M
Net Income-$38.22M
EPS (Basic)$-0.30
EPS (Diluted)$-0.30
Shares Outstanding (Basic)103.86M
Shares Outstanding (Diluted)103.86M

Key Highlights

  • 1Total revenue increased by 7% to $32.2 million in Q1 2020 compared to $30.1 million in Q1 2019, driven by service revenue from engineering services and Commercial IoT.
  • 2The company reported a net loss of $38.2 million for Q1 2020, a significant deterioration from a net income of $25.8 million in Q1 2019.
  • 3Long-term debt significantly decreased from $464.2 million at the end of 2019 to $356.0 million at the end of Q1 2020, primarily due to the conversion of the Thermo loan into equity.
  • 4Cash and cash equivalents stood at $10.5 million, with an additional $51.1 million in restricted cash as of March 31, 2020.
  • 5Operating expenses decreased by 4% to $46.3 million in Q1 2020 compared to $48.4 million in Q1 2019.
  • 6The company experienced a significant foreign currency loss of $9.0 million in Q1 2020, compared to a gain of $0.1 million in Q1 2019.
  • 7Management anticipates sufficient liquidity for the next twelve months, despite acknowledging potential ongoing impacts from COVID-19 on demand and receivable collections.

Frequently Asked Questions

The significant shift from a net income of $25.8 million in Q1 2019 to a net loss of $38.2 million in Q1 2020 was primarily driven by a combination of factors. While the prior year benefited from a large derivative gain ($57.0 million), the current quarter saw a smaller derivative loss ($0.8 million). More critically, the current quarter experienced a substantial increase in interest expense, partly due to the new Second Lien Term Loan Facility, and a significant foreign currency loss of $9.0 million, which were not present to the same extent in the prior year.

Globalstar has significantly reduced its long-term debt. The principal factor was the conversion of the Loan Agreement with Thermo in February 2020, which converted $137.4 million (including accrued interest) into common stock. This conversion led to a substantial decrease in long-term debt from $464.2 million at the end of 2019 to $356.0 million at the end of Q1 2020.

As of March 31, 2020, Globalstar had $10.5 million in cash and cash equivalents and $51.1 million in restricted cash. Management stated that they currently expect their sources of liquidity to be sufficient to cover obligations over the next twelve months. This outlook considers potential negative impacts from COVID-19 on demand and receivable collections, as well as relief received under the CARES Act, including a $5.0 million payroll protection program loan.

Total revenue increased by 7% year-over-year to $32.2 million. Service revenue was the main driver, growing due to increased engineering services revenue and Commercial IoT subscribers. However, Duplex and SPOT service revenue declined due to fewer subscribers and lower ARPU in SPOT. Subscriber equipment sales decreased overall, primarily impacted by lower Commercial IoT equipment sales, although Duplex equipment sales saw some improvement.