Globalstar(GSAT) - 2024 Q4 - Annual Report

Part I Business Overview Globalstar provides Mobile Satellite Services, including wholesale capacity to a major customer and voice/data services, while investing heavily in network expansion and facing intense competition Business Strategy Globalstar's strategy focuses on wholesale satellite capacity, terrestrial spectrum monetization, communication product sales, and government services - Globalstar's primary wholesale satellite capacity services are provided to Apple Inc. (the "Customer") under Updated Services Agreements, which involve delivering expanded services over a new MSS network, including a new satellite constellation and expanded ground infrastructure[22][24] - The company retains 15% of its network capacity to support its other customers, including Commercial IoT, SPOT, and Duplex subscribers, and for potential new wholesale opportunities[25] - Globalstar is leveraging its terrestrial spectrum licenses (Band 53/n53) and an exclusive license for XCOM's wireless technologies to develop private network solutions for mission-critical needs[26][27] - The company provides engineering services and has a partnership with Parsons Corporation to offer innovative solutions for government customers[31] Globalstar System The Globalstar System, comprising LEO satellites and ground gateways, is undergoing significant upgrades with new satellite acquisitions and launch services contracted from MDA and SpaceX - The company has agreements with Macdonald, Dettwiler and Associates Corporation (MDA) to acquire at least 17 new satellites by 2025 and another agreement for over 50 additional satellites for the Extended MSS Network[33] - Launch services for both sets of new satellites have been contracted with Space Exploration Technologies Corp. (SpaceX)[34] - The system's design, with software and hardware located on the ground, is believed to enable faster and more cost-effective maintenance and upgrades[37] Customers and Revenue Concentration Globalstar serves a diverse customer base, but a single major customer (Apple Inc.) accounts for a significant and growing portion of its total revenue Revenue Concentration from Major Customer | Year | Percentage of Total Revenue | | :--- | :--- | | 2024 | 58% | | 2023 | 49% | | 2022 | 24% | - As of December 31, 2024, the company had approximately 774,000 MSS subscribers worldwide, which includes users of Commercial IoT, SPOT, and Duplex devices[41] - The loss of the major customer under the Updated Services Agreements could have an adverse impact on the company's financial condition, results of operations, and cash flows[42] Communications Products and Services Globalstar offers Commercial IoT services for asset tracking, the SPOT family for personal safety and tracking, and Duplex services for two-way satellite voice and data - Commercial IoT services are used for asset tracking and monitoring in industries like government, transportation, and energy, with customers including FEMA, the U.S. Army, and BP[43] - The company is developing two-way Commercial IoT products, which would significantly expand market opportunities by adding command, control, and acknowledgment capabilities[50] - The SPOT product family (Gen4, X, Trace) provides personal tracking, messaging, and emergency services, and has been credited with initiating thousands of rescues since 2007[52][54] Competition Globalstar faces intense competition in the MSS market from established players and new direct-to-cellular entrants, as well as in terrestrial spectrum from licensed and unlicensed alternatives - Direct competition in the MSS business comes from global providers Viasat, Iridium, and ORBCOMM, competing on coverage, quality, and price[75] - In the direct-to-cellular market, the company faces competition from new providers, including SpaceX's Starlink, which has partnered with a major U.S. wireless operator[74][117] - Terrestrial spectrum competition comes from other licensed holders like Anterix and Nextwave, as well as unlicensed spectrum (Wi-Fi) and lightly licensed bands (CBRS)[71][82][122] Human Capital Globalstar employed 389 people across fifteen countries as of December 31, 2024, focusing on talent retention through competitive compensation, development, and a diverse, inclusive culture - As of December 31, 2024, the company had 389 employees in fifteen countries, with 23 employees in Brazil covered by collective bargaining agreements[89] - Compensation packages are designed to be competitive and include base salary, long-term stock-based incentives, health insurance, a retirement plan, and an employee stock purchase plan[90] - The company fosters employee engagement through training programs, a wellness program, and surveys, with 'Diversity and Inclusion' being a highly-rated culture category[91] Risk Factors Globalstar faces significant risks related to its business operations, including heavy customer reliance and capital intensity, regulatory compliance, and common stock volatility due to majority shareholder control Risks Related to Our Business Key business risks include heavy reliance on a single customer, operational disruptions, capital intensity, supplier dependence, intense competition, cybersecurity threats, and restrictive financing covenants - Revenue from the Updated Services Agreements with a single customer constituted approximately 58% of total revenue for the year ended December 31, 2024 Failure to meet obligations or termination of these agreements would materially and adversely affect business and results[101] - The business is capital intensive and relies on funding arrangements to finance satellite construction and launch The company may require additional capital for other initiatives, and turmoil in capital markets could impact its ability to raise financing on favorable terms[127][128] - The company faces intense competition from other MSS operators like Iridium and Viasat, and its direct-to-cellular service faces competition from providers like SpaceX's Starlink[116][117] - The company's networks are vulnerable to cyber-attacks, which could lead to service interruptions, theft of confidential information, and an inability to meet service requirements under customer agreements, including the Updated Services Agreements[144] Risks Related to Government Regulations Globalstar's operations are subject to complex government regulations, posing risks related to license acquisition and renewal, compliance with trade and export control laws, and potential adverse changes in spectrum allocation - The company's MSS system is subject to significant regulation by the FCC in the U.S., ARCEP/CNES/ANFR in France, and other foreign authorities These approvals require periodic renewal and are not guaranteed[157] - The company must obtain additional licenses and authorizations from multiple regulators to operate the new Extended MSS Network, and there is no assurance that all required authorizations will be obtained[159] - Global operations expose the company to trade sanctions, export control laws (e.g., FCPA, OFAC), and other restrictions Violations can lead to severe criminal or civil sanctions and damage to reputation[162][163] - The business plan to use MSS spectrum for terrestrial services depends on maintaining and expanding terrestrial authority globally, which is not guaranteed[164] Risks Related to Our Common Stock Risks related to common stock include control by majority shareholder Thermo, stock price volatility, potential dilution from future issuances, and restrictions on common stock dividends due to financing arrangements - As of December 31, 2024, Thermo owned approximately 58% of outstanding common stock, giving it control over shareholder votes, including the election of a majority of the board[189][190] - The company completed a 1-for-15 reverse stock split and transferred its listing to Nasdaq in February 2025 There is no assurance this will lead to a proportionate increase in stock price or long-term market capitalization[182][183] - Financing arrangements restrict the ability to pay cash dividends on common stock, and the company does not expect to pay any in the foreseeable future[178] - Future issuance of authorized but unissued common stock (9.6 million shares available as of Dec 31, 2024) or preferred stock (99.9 million shares available) could cause dilution and adversely affect the stock price[186][187] Cybersecurity Globalstar manages cybersecurity risks through an enterprise-wide information security program aligned with the NIST framework, with oversight from executive management and the Board of Directors - The company has an enterprise-wide information security program based on the NIST Cybersecurity Framework, which is audited annually by independent third parties[198][199] - Cybersecurity oversight is managed by the Data Protection Officer (VP of Network IT and Applications) and the executive team, with the Board of Directors receiving at least an annual presentation on the program[201] - As of the report date, the company is not aware of any material risks from cybersecurity threats that have materially affected or are likely to materially affect the company[202] Properties Globalstar's principal headquarters is in Covington, Louisiana, with a global network of owned or leased facilities, including gateways and Network Operations Control Centers across multiple continents - The company's principal headquarters is located in Covington, Louisiana[203] - Globalstar operates a global network of gateways with locations in the Americas, Europe, Africa, Asia, and Australia to provide service coverage[203][204] - Network Operations Control Centers, which monitor satellite and ground network operations, are located in the United States (California and Louisiana) and France[203][204] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Globalstar's common stock trades on Nasdaq under "GSAT" following a 1-for-15 reverse stock split in February 2025, with no common stock dividends expected due to retained earnings and financing restrictions - The company's common stock trades on the Nasdaq Stock Market LLC under the symbol "GSAT"[206] - A 1-for-15 reverse stock split of common stock was effectuated on February 10, 2025[206] - The company pays a 7.00% annual cash dividend on its Series A Preferred Stock but has never paid a cash dividend on its common stock and does not expect to in the foreseeable future[207][208] Management's Discussion and Analysis of Financial Condition and Results of Operations Globalstar's 2024 revenue grew 12% to $250.3 million, driven by wholesale capacity services, while operating expenses also rose 12% to $251.3 million, resulting in a net loss of $63.2 million, with liquidity significantly enhanced by customer funding Comparison of Results of Operations (2024 vs 2023) In 2024, total revenue increased 12% to $250.3 million, driven by wholesale capacity services, while operating expenses rose 12% to $251.3 million, leading to a net loss of $63.2 million, impacted by a $27.4 million loss on debt extinguishment Revenue by Type (in millions) | Revenue Type | 2024 | 2023 | % Change | | :--- | :--- | :--- | :--- | | Wholesale capacity services | $145.3 | $109.1 | 33.2% | | Commercial IoT | $26.2 | $22.9 | 14.8% | | SPOT | $41.1 | $44.2 | -6.9% | | Duplex | $20.2 | $25.9 | -22.3% | | Government and other services | $4.8 | $2.1 | 125.9% | | Total service revenue | $237.7 | $204.2 | 16.4% | | Subscriber equipment sales | $12.7 | $19.6 | -35.4% | | Total revenue | $250.3 | $223.8 | 11.9% | - The increase in wholesale capacity service revenue was primarily due to fees for expanded services and performance bonuses under the Updated Services Agreements[222] - Total operating expenses increased by 12% to $251.3 million, mainly from a $19.7 million (37%) increase in cost of services related to network expansion and a $13.0 million increase in stock-based compensation[228][230][234] - The company recorded a loss on extinguishment of debt of $27.4 million in 2024 from refinancing the 2023 13% Notes, compared to a $10.4 million loss in 2023[235] Liquidity and Capital Resources Globalstar's liquidity significantly improved in 2024, with cash and cash equivalents rising to $391.2 million, driven by $439.2 million in operating cash flow, including a $278 million customer prepayment Cash and Cash Equivalents (in millions) | Date | Amount | | :--- | :--- | | Dec 31, 2024 | $391.2 | | Dec 31, 2023 | $56.7 | Cash Flow Summary (in millions) | Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $439.2 | $74.3 | | Net cash used in investing activities | ($260.6) | ($175.6) | | Net cash provided by financing activities | $157.2 | $125.8 | - The increase in operating cash flow was primarily due to a $278 million Infrastructure Prepayment received from the Customer under the Updated Services Agreements[247] - As of Dec 31, 2024, the principal balance of debt was $417.5 million, consisting mainly of the Current Debt Repayment ($222 million), 2023 Funding Agreement ($155 million), and 2021 Funding Agreement ($40.9 million)[139][245] Contractual Obligations and Commitments Globalstar has significant contractual commitments for satellite network expansion, including agreements with MDA for $329.3 million and $775.0 million for new satellites, and Launch Services Agreements with SpaceX - The company has an agreement with MDA to acquire at least 17 satellites for $329.3 million, expected for delivery in 2025[265] - A second agreement was made with MDA in February 2025 to acquire over 50 additional satellites for the Extended MSS Network at a total contract price of $775.0 million[267] - The company has multiple Launch Services Agreements with SpaceX to launch both sets of new satellites[268][269] - As of December 31, 2024, the company had outstanding purchase orders of $290 million for the Extended MSS Network and $4.7 million in inventory purchase commitments[497][498] Financial Statements and Supplementary Data The 2024 consolidated financial statements, audited by Ernst & Young LLP with an unqualified opinion, reflect the company's financial position and operations, with critical audit matters including asset useful life and complex accounting for Updated Services Agreements Financial Highlights In fiscal year 2024, Globalstar reported $250.3 million in revenue and a $63.2 million net loss, with total assets increasing to $1.71 billion and total liabilities to $1.35 billion due to new network arrangements Consolidated Statement of Operations Highlights (in millions) | Metric | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Total Revenue | $250.3 | $223.8 | $148.5 | | Loss from Operations | $(0.9) | $(0.2) | $(221.0) | | Net Loss | $(63.2) | $(24.7) | $(256.9) | | Net Loss per Share (Diluted) | $(0.59) | $(0.29) | $(2.15) | Consolidated Balance Sheet Highlights (in millions) | Metric | Dec 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $391.2 | $56.7 | | Total Assets | $1,710.2 | $924.3 | | Long-term debt | $476.8 | $325.7 | | Total Liabilities | $1,351.4 | $545.3 | | Total Stockholders' Equity | $358.9 | $379.0 | Note 2: Special Purpose Entity Globalstar and Apple Inc. entered Updated Services Agreements in November 2024 for an Extended MSS Network, involving the customer's 20% equity interest in a consolidated VIE for $400 million, an Infrastructure Prepayment of up to $1.1 billion, and a $235 million Current Debt Repayment - The Extended MSS Network will be owned by Globalstar SPE, a consolidated VIE in which the Customer holds a 20% passive equity interest via Customer Class B Units, purchased for $400 million[408][412] - The Customer will provide an Infrastructure Prepayment of up to $1.1 billion to fund the construction of the new network[414] - The Customer funded a Current Debt Repayment of $235 million, which was used to fully retire the Company's 2023 13% Notes in November 2024[414][417] Note 7: Long-Term Debt and Other Financing Arrangements As of December 31, 2024, Globalstar's total debt carrying value was $511.4 million, primarily from the Current Debt Repayment, 2023, and 2021 Funding Agreements, with financing secured by a first-priority lien on assets Debt Structure as of Dec 31, 2024 (in millions) | Debt Instrument | Principal Amount | Carrying Value | | :--- | :--- | :--- | | Current Debt Repayment | $221.6 | $328.8 | | 2023 Funding Agreement | $155.0 | $144.0 | | 2021 Funding Agreement | $40.9 | $38.7 | | Total Debt | $417.5 | $511.4 | - In November 2024, the company fully paid off its 2023 13% Notes using funds from the Current Debt Repayment provided by its major customer[463] - The company's obligations under the Funding Agreements are secured by a first-priority lien on substantially all of its assets[457][461] Note 13: Taxes Globalstar recorded a $2.1 million income tax expense on a $61.0 million pre-tax loss in 2024, maintaining a full valuation allowance against $1.8 billion in NOL carryforwards, while facing audits from the Canada Revenue Agency - As of December 31, 2024, the company had cumulative U.S., state, and foreign net operating loss (NOL) carryforwards of approximately $1.8 billion[518] - A valuation allowance of $421.9 million is recorded against deferred tax assets, indicating it is more likely than not that these assets will not be realized[519] - The Canada Revenue Agency (CRA) is conducting audits of the Canadian subsidiary, resulting in the company recording unrecognized tax benefits and appealing certain assessments[527] Note 17: Common Stock Effective February 10, 2025, Globalstar completed a 1-for-15 reverse stock split, reducing authorized shares to 143.3 million and transferring its listing to Nasdaq under "GSAT" - A 1-for-15 reverse stock split was effected on February 10, 2025[547] - The number of authorized common shares was reduced to 143,333,334[547] - The common stock listing was transferred to the Nasdaq Stock Market LLC, effective February 11, 2025[547][548] Controls and Procedures As of December 31, 2024, management concluded that disclosure controls and internal control over financial reporting were effective, a conclusion affirmed by Ernst & Young LLP's unqualified opinion - Management concluded that as of December 31, 2024, the company's disclosure controls and procedures were effective at providing reasonable assurance[554] - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2024, based on the COSO framework[558] - The independent registered public accounting firm, Ernst & Young LLP, also audited and expressed an unqualified opinion on the effectiveness of the company's internal control over financial reporting[559] Part III Directors, Executive Officers and Corporate Governance Information regarding directors, executive officers, and corporate governance is incorporated by reference from the company's 2025 Annual Meeting of Stockholders Proxy Statement - The information required by this item is incorporated by reference from the Registrant's Proxy Statement for the 2025 Annual Meeting of Stockholders[12][563] Executive Compensation Information regarding executive and director compensation is incorporated by reference from the company's 2025 Annual Meeting of Stockholders Proxy Statement - The information required by this item is incorporated by reference from the Registrant's Proxy Statement for the 2025 Annual Meeting of Stockholders[12][564] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information regarding security ownership of principal stockholders, management, and equity compensation plans is incorporated by reference from the company's 2025 Annual Meeting of Stockholders Proxy Statement - The information required by this item is incorporated by reference from the Registrant's Proxy Statement for the 2025 Annual Meeting of Stockholders[12][565] Certain Relationships and Related Transactions, and Director Independence Information regarding related person transactions and director independence is incorporated by reference from the company's 2025 Annual Meeting of Stockholders Proxy Statement - The information required by this item is incorporated by reference from the Registrant's Proxy Statement for the 2025 Annual Meeting of Stockholders[12][566] Principal Accountant Fees and Services Information regarding fees and services of the principal accountant is incorporated by reference from the company's 2025 Annual Meeting of Stockholders Proxy Statement - The information required by this item is incorporated by reference from the Registrant's Proxy Statement for the 2025 Annual Meeting of Stockholders[12][567] Part IV Exhibits and Financial Statement Schedules This section lists the audited consolidated financial statements and the independent auditor's report, with all financial statement schedules omitted as the information is included elsewhere - This section files the Consolidated Financial Statements and the Report of Independent Registered Public Accounting Firm[568] - All financial statement schedules are omitted because they are not applicable or the required information is already present in the financial statements or notes[569] Form 10-K Summary This item indicates that no Form 10-K summary is provided in this report - No Form 10-K summary is provided[570]