Globalstar teases 'unique terrestrial service' with its Band 53 spectrum

COVINGTON, La. – Globalstar, Inc. (NYSE American: GSAT) today announced its operating and financial results for the quarter ended March 31, 2023.

OPERATIONAL HIGHLIGHTS

Balance Sheet Improvements
During the quarter, we paid off the remaining balances due under the 2019 Facility Agreement and the vendor financing arrangement with MDA, using proceeds from the sale of $200.0 million in aggregate principal amount of non-convertible notes, which were issued net of a 5% OID and financing costs. This final step in a series of achievements completed our balance sheet improvements.

Commercial IoT
We recently announced the Realm enablement suite, which is expected to drive efficiency and time to market for the millions of IoT devices in our active sales pipeline. This technology is expected to continue the growth in Commercial IoT, which we discuss further in the Financial Review section below.

Recent accomplishments include:

FINANCIAL REVIEW

Total Revenue
Total revenue increased $25.9 million, or 79%, to $58.6 million during the first quarter of 2023 due to increases in both service revenue and revenue generated from subscriber equipment sales compared to the first quarter of 2022.

Service Revenue
Service revenue increased $23.6 million or 80% during the first quarter of 2023 due primarily to higher wholesale capacity service revenue. This category of revenue includes fees earned under the previously disclosed Service Agreements. The increase from the prior year quarter resulted primarily from the launch of Phase 1 service in November 2022. Additionally, in connection with the amendment of the Service Agreements in February 2023, Partner agreed to pay us $6.5 million as consideration related to performance obligations completed in prior periods. Accordingly, we recognized this revenue during the first quarter of 2023.

Our subscriber service revenue also increased as a category led by Commercial IoT, an important area of growth for our business.

Commercial IoT service revenue increased 11% from the first quarter of 2022 due to positive variances in both our average subscriber base and ARPU. Contrary to the headwinds that we experienced last year due to production delays, we are now seeing steady growth in net subscriber additions, resulting from a 74% increase in gross activations over the last twelve months compared to the preceding twelve-month period. We have now fulfilled the back orders that accumulated in 2022 following production delays for certain of our Commercial IoT products and expect to continue this momentum as we place manufacturing orders in volumes significantly above our historical levels in an effort to keep up with growing demand.

Looking to legacy services, SPOT increased modestly due to an increase in average pricing, offset partially by lower average subscribers. Gross activations over the last twelve months were slower following several months without equipment sales of two of our core SPOT products. We are now in full production of these devices and, importantly, saw gross adds in the month of March that were nearly double the prior month. Duplex service revenue declined at an expected rate due to attrition in that subscriber base, offset partially by an ARPU increase.

Subscriber Equipment Sales
Subscriber equipment sales increased $2.3 million or 66% in the first quarter of 2023 compared to the first quarter of 2022 reaching its highest level in several years. Device sales have improved significantly in 2023, following resolution of the supply chain disruptions that negatively impacted sales during 2022.

Commercial IoT equipment sales revenue increased more than 100% from the prior year's quarter for the second consecutive quarter. While this trend is driven partially by the fulfillment of sales orders placed in a previous period, much of it results from overall higher demand of our IoT products and services. This demand is accelerating as our VARs experience continued success across various verticals and applications.

SPOT equipment revenue increased 31% from the prior year's first quarter as we resumed production of one of our core devices. Today, all SPOT products are being manufactured in the ordinary course of business; therefore, we expect equipment sales to continue to increase as we move through 2023.

Income (Loss) from Operations
Income from operations was $7.2 million during the first quarter of 2023 compared to loss from operations of $13.7 million during the first quarter of 2022. This improvement was due predominantly to an increase in revenue (discussed above) offset partially by an increase in operating expenses due primarily to higher cost of services, cost of subscriber equipment sales, and management, general and administrative costs (MG&A).

Cost of services was higher due primarily to lease and related occupancy costs associated with new gateway sites as we expanded and upgraded our global ground network to support wholesale capacity services. A significant portion of these costs are reimbursed to us in connection with the Service Agreements, and this consideration is being recognized as revenue.

The increase in cost of subscriber equipment sales is in line with the increase in equipment revenue, yielding consistent margin percentages in both periods.

MG&A costs were higher during the first quarter of 2023 due primarily to stock-based compensation costs incurred from certain performance-based restricted stock awards that vested upon the achievement of specific targets, including EBITDA and execution of terrestrial spectrum agreements. The increase was also attributable to the release of a $1.0 million accrual for professional services that we determined was no longer owed in the first quarter of 2022.

Net Loss
Net loss decreased to $3.5 million for the first quarter of 2023 compared to $20.5 million for the first quarter of 2022. The net loss during the first three months of 2023 was due primarily to a $10.4 million non-cash loss on extinguishment of debt following the payoff of the 2019 Facility Agreement. This extinguishment loss offset higher income from operations of $20.9 million and lower interest expense of $7.5 million compared to the prior year's first quarter. The decrease in interest expense resulted from: (i) higher capitalized interest of $4.3 million (which decreases interest expense) due to an increase in capital expenditures as we complete work related to our new satellites, and (ii) lower gross interest costs totaling $3.2 million following the payoff of roughly half of the 2019 Facility Agreement in November 2022.

Adjusted EBITDA
Adjusted EBITDA was $32.6 million during the first quarter of 2023 up $22.3 million, or 216%, compared to the prior year's quarter due to higher revenue offset partially by higher operating expenses (excluding EBITDA adjustments) for the reasons previously discussed. Adjusted EBITDA is a non-GAAP financial measure. For more information on its usage and presentation, as well as a reconciliation to GAAP net income (loss), refer to "Reconciliation of GAAP Net Income (Loss) to Non-GAAP Adjusted EBITDA."

Liquidity
As of March 31, 2023, we held cash and cash equivalents of $20.5 million compared to $32.1 million as of December 31, 2022. Over the next twelve months, our sources of cash are expected to include primarily operating cash flows generated from the business as well as service prepayments from our Partner under the Service Agreements that will be used to fund capital expenditures associated with the new satellites. Other uses of cash will include the operating costs of the business.

FINANCIAL OUTLOOK

We reiterate our previously issued financial guidance for full year 2023 (excluding revenue from terrestrial spectrum opportunities) with anticipated results included below.

We expect these financial metrics to continue to improve significantly by 2026, which is expected to be the first full year in which the new satellites are operational, with total revenue expected to increase by approximately 35% compared to the 2023 forecast.

Read the full press release here.

Globalstar