Globalstar, Inc. — Q3 2021 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2021. Globalstar provides global mobile satellite voice and data services, including Duplex, SPOT, Commercial IoT, and engineering services. Amounts below are in millions of dollars unless noted.
Financial performance
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Total revenue | $32.6 | $32.8 | $89.8 | $95.3 |
| Service revenue | $27.8 | $28.4 | $76.6 | $84.4 |
| Equipment sales | $4.8 | $4.4 | $13.3 | $10.9 |
| Operating loss | $(14.7) | $(14.6) | $(50.0) | $(44.1) |
| Net loss | $(30.9) | $(24.9) | $(88.7) | $(87.9) |
| Loss per share, basic and diluted | $(0.02) | $(0.01) | $(0.05) | $(0.05) |
Q3 revenue was down less than 1% year over year; nine-month revenue declined 6%. Q3 net loss widened, while the nine-month net loss was broadly unchanged. The filing does not present a gross margin measure.
- Revenue mix and subscribers: Q3 service revenue declined 2%, with Duplex down 3%, while SPOT rose 4% and Commercial IoT rose 1%. Nine-month service revenue fell 9%; engineering and other revenue declined $4.5 million, primarily due to contract milestone timing. Average subscribers were 754,325 in Q3 versus 751,096 a year earlier. Duplex subscribers continued to decline; Commercial IoT demand showed signs of recovery.
- Costs and unusual items: Operating expenses were nearly flat in Q3 and slightly higher for the nine months. Nine-month results included $0.9 million of inventory write-downs, $0.2 million of long-lived asset impairment, and a $5.0 million PPP-loan forgiveness gain, partly offset by $3.1 million of First Lien debt-financing cost write-offs. Q3 foreign-currency loss was $4.8 million versus a $0.3 million gain in Q3 2020.
- Cash flow: Nine-month operating cash flow was $107.2 million versus $23.7 million in 2020. The increase was primarily driven by customer prepayments recorded as deferred revenue and a recoupment liability; it should not be viewed as recurring operating cash generation without considering those advances. Investing cash outflow was $30.0 million, mainly for network upgrades; financing cash outflow was $82.7 million, largely reflecting debt repayments.
Balance sheet, debt, and liquidity
- At September 30, cash and cash equivalents were $11.3 million; restricted cash was $51.1 million, pledged to the First Lien facility. Total current assets were $75.0 million and current liabilities $81.0 million.
- Debt carrying value was $286.9 million, down from $385.4 million at December 31, 2020; principal outstanding was $316.7 million. The decrease mainly reflected $126.7 million of First Lien principal payments and PPP-loan forgiveness, partly offset by paid-in-kind interest and debt-cost accretion. No debt was classified as current at quarter-end.
- The Second Lien facility had $255.0 million principal outstanding and a 13.5% blended paid-in-kind rate, with maturity in November 2025. The First Lien facility had $60.3 million principal outstanding, a floating LIBOR-based rate, and scheduled maturity in December 2022.
- Stockholders’ equity was $385.1 million, down from $423.1 million at year-end 2020. Shares outstanding increased to 1.793 billion from 1.675 billion, principally reflecting exercise of lender warrants.
Outlook, risks, and other developments
- Management said liquidity sources were expected to cover obligations over the next 12 months and intended to pay off the remaining First Lien principal during Q4 2021, with a partial refund of previously paid premiums expected. This was an intention, not a completed transaction as of quarter-end.
- Network investment included gateway expansion and preparation of an on-ground spare satellite, whose launch was expected in 2022. The company also expected its new ERP system to go live in Q1 2022.
- Management expected the component-chip shortage to extend into 2022; shortages delayed some SPOT orders into Q4 2021. COVID-19 effects, supply-chain availability, foreign-exchange movements, customer demand and collection risk, and the shift from Duplex toward IoT remain relevant uncertainties.
- Globalstar is pursuing terrestrial use of its licensed spectrum, including Band 53/n53, and additional international regulatory approvals. The filing provides no quantified revenue or earnings guidance for this opportunity.
- The company was in compliance with debt covenants at September 30, 2021 and received a lender waiver increasing permitted capital expenditure limits. It reported no material change to previously disclosed risk factors and no material off-balance-sheet transactions.
Important facts for investors to verify
- Whether the planned Q4 2021 First Lien payoff occurred, its funding source, and the impact on restricted cash and liquidity.
- How much customer advance-payment cash is attributable to ongoing or future service obligations, repayment provisions, and the Terms Agreement.
- Progress, cost, and timing of gateway upgrades and the expected 2022 spare-satellite launch.
- Whether Commercial IoT growth offsets continuing Duplex subscriber and service-revenue declines, and whether supply constraints persist.
- The trajectory of high-cost Second Lien debt, paid-in-kind interest, covenant requirements, and potential dilution from convertible securities or future equity issuance.