Globalstar, Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. This annual filing reports full-year results, not standalone fourth-quarter results. Globalstar provides mobile satellite voice and data, IoT, and wholesale satellite capacity services.
Financial performance and liquidity
| Metric | FY2022 | FY2021 | Change or context |
|---|---|---|---|
| Total revenue | $148.5 million | $124.3 million | Up 19% |
| Service revenue | $132.1 million | $106.5 million | Up 24%; wholesale capacity revenue rose to $34.9 million from $8.9 million, primarily reflecting the Partner agreements |
| Equipment revenue | $16.4 million | $17.8 million | Down 8%; product supply constraints weighed on sales |
| Operating expenses | $369.5 million | $189.8 million | Includes $166.5 million long-lived asset impairment and $8.6 million inventory write-down |
| Operating loss | $221.0 million | $65.5 million | Loss widened substantially, mainly due to impairment charges |
| Net loss | $256.9 million | $112.6 million | Loss per common share was $0.14, versus $0.06 |
| Net cash from operations | $63.8 million | $131.9 million | Down, mainly reflecting a smaller increase in deferred revenue from Partner prepayments and working-capital timing |
| Cash used in investing | $40.0 million | $45.2 million | Primarily network upgrades and satellite construction |
| Cash and cash equivalents | $32.1 million | $14.3 million | At year-end |
| Debt and vendor financing | $203.0 million principal; $191.9 million carrying value | $265.2 million principal; $237.9 million carrying value | Includes $59.8 million vendor financing due within 12 months; 2019 Facility Agreement principal was $143.2 million |
Margins: The filing does not present a single headline gross-margin measure. The substantial impairment charges drove the operating loss; the operating loss was approximately 149% of revenue.
At year-end, current assets were $81.2 million and current liabilities were $197.1 million. Deferred revenue totaled $232.4 million, including amounts related to Partner services. The company reported a $256.9 million retained deficit for the year and $314.8 million in stockholders’ equity at year-end.
Material changes and business developments
- Apple’s satellite-enabled services launched in November 2022. The agreements accounted for 24% of Globalstar’s 2022 revenue; no other customer exceeded 10%. Globalstar says it allocates 85% of network capacity to the services and retains 15% for its own customers and other opportunities.
- Globalstar exchanged $149.4 million of 2019 Facility Agreement debt for Series A preferred stock in November 2022. The preferred stock carries a 7% cumulative dividend, subject to declaration. A $1.3 million dividend for the initial period was declared and paid in January 2023.
- Following the Partner’s announcement, Globalstar discontinued its second-generation Duplex products and wrote down related assets, including gateway assets, licenses and inventory. First-generation Duplex services continue.
- Globalstar contracted with MDA to procure 17 replacement satellites for $327 million, with delivery by 2025 and launches expected by the end of 2025. Partner service payments are expected to cover 95% of approved satellite capital expenditures, subject to the agreements’ terms.
- Subscriber count averaged 768,391 in 2022 versus 756,077 in 2021. Commercial IoT average subscribers increased 7%; average Duplex subscribers fell 11%. The company removed approximately 25,000 Russia gateway subscribers from its count after disconnecting service in response to Russia’s invasion of Ukraine.
Outlook, risks and unusual items
- Subsequent financing development: On February 27, 2023, Globalstar and Partner agreed to a prepayment of up to approximately $252 million, subject to conditions, to fund satellite procurement and related costs. The advance is to be recouped from future Partner service payments, beginning no later than Q3 2025, and carries covenants including a $30 million minimum cash balance. Funding conditions included refinancing or converting the remaining 2019 Facility Agreement loans by March 13, 2023 and granting Partner a first-priority lien. The filing says additional financing had not yet been arranged as of its reporting discussion.
- Management expected liquidity sources—including cash, operating cash flow, Partner prepayments and financing—to cover obligations over the next 12 months and longer term, but cautioned that there is no assurance against a liquidity shortfall. The company also described the capital-intensive satellite program and substantial financing needs.
- Key execution risks include dependence on Partner revenue and performance, termination rights and contractual conditions; satellite reliability, orbital life, launch and space-debris risks; gateway disruptions; regulatory and spectrum approvals; competition from satellite and terrestrial providers; and supply-chain shortages that delayed SPOT and IoT equipment deliveries.
- Unusual FY2022 items included the $166.5 million long-lived asset reduction, $8.6 million inventory write-down, $2.8 million debt-extinguishment gain, $6.6 million foreign-currency loss and $1.5 million pension-settlement loss. The defined benefit pension plan was terminated and fully settled during 2022.
- Ernst & Young issued an unqualified opinion on the financial statements and an unqualified opinion on internal control over financial reporting. Management reported effective disclosure controls and no material weakness in internal control.
Most important facts for investors to verify
- Whether the Partner prepayment’s conditions were satisfied, funds were received as planned, and the remaining 2019 Facility Agreement debt was refinanced or repaid.
- The timing, total cost and funding of the 17-satellite program, including launch and insurance costs, and whether Partner reimbursements and service payments proceed under the contract.
- Partner service performance, revenue concentration, contractual milestones and termination provisions; Partner represented 86% of year-end receivables.
- Whether supply constraints eased and equipment back orders converted into sales and subscriber activations, particularly for SPOT and Commercial IoT.
- The sustainability of operating cash flow and compliance with financing covenants, including the Partner prepayment’s minimum-cash and leverage requirements.
- Potential dilution from Partner warrants to purchase up to 2.64% of common stock, other equity issuance, and the 7% cumulative preferred dividend obligation.