Globalstar, Inc. — FY 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This is an annual filing, not a standalone fourth-quarter report. Globalstar provides mobile satellite voice and data services, including SPOT and Commercial IoT, and holds spectrum rights for potential terrestrial use.
Financial results and liquidity
| Metric | FY 2021 | FY 2020 |
|---|---|---|
| Total revenue | $124.3 million | $128.5 million |
| Service revenue | $106.5 million | $113.2 million |
| Equipment revenue | $17.8 million | $15.3 million |
| Operating expenses | $189.8 million | $187.7 million |
| Loss from operations | $(65.5) million | $(59.2) million |
| Net loss | $(112.6) million | $(109.6) million |
| Net loss per share, basic | $(0.06) | $(0.07) |
| Net cash from operating activities | $131.9 million | $22.2 million |
| Capital expenditures and other investing cash outflows | $45.2 million | $14.5 million |
- Revenue declined 3.3%. Duplex service revenue fell 8%; SPOT service revenue was down 1%; Commercial IoT service revenue rose 5%. Equipment revenue increased 16.6%, including a 39% increase in Commercial IoT equipment sales.
- Operating expenses increased 1.1%, and the operating loss widened. Net loss also widened, despite a $3.1 million gain on debt extinguishment and lower net interest expense.
- Operating cash flow was lifted substantially by $111.4 million of customer advances under the Terms Agreement, recorded as deferred revenue. It should not be viewed as equivalent to recurring operating cash generation.
- Cash and cash equivalents were $14.3 million at year-end, with no restricted cash. Current assets were $68.9 million and current liabilities $61.6 million. Management said available liquidity sources were expected to cover obligations over the next 12 months.
- Debt principal was $265.2 million at year-end, primarily $263.8 million under the 2019 Facility Agreement; the debt carrying amount, net of financing costs and discounts, was $237.9 million. The facility bears 13.5% blended interest, generally paid in kind, and matures in November 2025. The 2009 facility was fully repaid in November 2021.
- The filing does not provide a clear standalone gross-margin or adjusted EBITDA result for FY 2021.
Material changes versus FY 2020
- Globalstar reported lower total and service revenue, while equipment revenue recovered. Average subscriber count was approximately 756,000, versus 760,000; SPOT and Commercial IoT averages were broadly flat, while Duplex declined.
- Operating cash flow increased sharply, primarily because of customer advances. Investing cash outflows also rose, reflecting gateway upgrades, new antennas and preparation of an on-ground spare satellite.
- The company used equity warrant exercise proceeds and customer advances, among other funds, to repay the 2009 facility; it also received forgiveness of the $5.0 million PPP loan.
- Gateway operations expanded, including acquisition of the remaining South Korean joint-venture interest and assumption of three Australian gateways previously operated by an independent operator.
Outlook, risks and unusual items
- Management expects to prioritize IoT-enabled products as demand shifts away from full Duplex services; it expects Duplex subscribers to continue declining. Commercial IoT equipment demand and activations improved, but supply constraints delayed some orders.
- In February 2022, Globalstar agreed to buy 17 satellites for $327.0 million, with delivery expected by 2025. The Terms Agreement counterparty is required, subject to conditions, to reimburse 95% of related capital expenditures and certain other costs. Globalstar planned separate launch and insurance contracts and expected to arrange senior secured financing by August 2022, with an intended refinancing of its 2019 facility.
- The Terms Agreement may be terminated by the customer at its discretion. If Globalstar does not provide the contracted services, it may have to refund advance payments. The $112.4 million long-term deferred revenue balance associated with the customer makes performance, reimbursement conditions and cash-flow timing important to monitor.
- Key risks include satellite or gateway failures, satellite replacement and launch execution, high leverage and restrictive debt covenants, the need for new financing, supply-chain and chip shortages, competition, regulatory and spectrum approvals, and currency volatility. The company reported a $6.3 million foreign-currency transaction loss in 2021.
- Other notable items: $1.0 million of inventory write-downs, including Sat-Fi2 materials; a $1.0 million tariff accrual reversal; and a $1.0 million derivative loss. Management reported compliance with 2019 facility covenants at year-end, but future covenant compliance and financing remain significant considerations.
- Auditors issued an unqualified opinion on the financial statements and an unqualified opinion on internal control over financial reporting. The useful life of space-component assets, recorded at $1.2 billion gross, was identified as a critical audit matter.
Most important facts for investors to verify
- Whether customer advances translate into completed services and reimbursements, and whether any refund obligations arise.
- Satellite procurement, launch and financing milestones, including the conditions and timing of the 95% reimbursement.
- Cash generation excluding customer advances, capital spending needs and compliance with debt covenants.
- Execution of gateway upgrades and the effects of equipment shortages on sales, costs and margins.
- Subscriber trends and monetization progress for Commercial IoT and terrestrial spectrum, alongside ongoing Duplex declines.