Globalstar(GSAT) - 2025 Q1 - Quarterly Report

Cautionary Statement About Forward-Looking Statements This section highlights that the report contains forward-looking statements subject to risks and uncertainties that may cause actual results to differ materially - The report contains forward-looking statements that are subject to risks and uncertainties, which may cause actual results to differ materially from those anticipated, expected, projected, or assumed[10] - Important factors that could cause material differences include the ability to meet obligations under Updated Services Agreements, satellite operational performance, commercial acceptance of products/services, technological innovation, competition, geopolitical and economic conditions, capital raising, cost management, spectrum rights, regulatory compliance, financing arrangements, cyberattacks, and tax changes[11] - The company does not undertake any obligation to update forward-looking statements after the report date[11] PART I - FINANCIAL INFORMATION Item 1. Financial Statements. This section presents Globalstar, Inc.'s unaudited condensed consolidated financial statements for Q1 2025 and 2024, including statements of operations, balance sheets, stockholders' equity, and cash flows, prepared in accordance with U.S. GAAP, along with detailed explanatory notes Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Q1 2025 vs. Q1 2024) | Metric (in thousands, except per share) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change (%) | | :------------------------------------ | :-------------------------------- | :-------------------------------- | :--------- | | Total Revenue | $60,032 | $56,480 | 6.3% | | Service Revenue | $57,067 | $53,465 | 6.7% | | Subscriber Equipment Sales | $2,965 | $3,015 | -1.7% | | Total Operating Expenses | $68,533 | $61,192 | 11.9% | | Loss from Operations | $(8,501) | $(4,712) | 80.4% | | Net Loss | $(17,331) | $(13,196) | 31.3% | | Basic Net Loss Per Common Share | $(0.16) | $(0.13) | 23.1% | | Diluted Net Loss Per Common Share | $(0.16) | $(0.13) | 23.1% | | Weighted-Average Shares Outstanding | 126,476 | 125,507 | 0.8% | Consolidated Balance Sheets Consolidated Balance Sheets (March 31, 2025 vs. December 31, 2024) | Metric (in thousands) | March 31, 2025 | December 31, 2024 | Change (%) | | :------------------------------------ | :------------- | :---------------- | :--------- | | Cash and Cash Equivalents | $241,411 | $391,164 | -38.3% | | Total Current Assets | $292,466 | $447,571 | -34.7% | | Property and Equipment, net | $774,206 | $673,632 | 14.9% | | Total Assets | $1,729,151 | $1,710,237 | 1.1% | | Total Current Liabilities | $129,054 | $141,485 | -8.8% | | Total Liabilities | $1,384,807 | $1,351,354 | 2.5% | | Total Stockholders' Equity | $344,344 | $358,883 | -4.0% | Condensed Consolidated Statements of Stockholders' Equity Condensed Consolidated Statements of Stockholders' Equity (Q1 2025) | Metric (in thousands) | Balances – January 1, 2025 | Balances – March 31, 2025 | | :------------------------------------ | :------------------------- | :------------------------ | | Total Stockholders' Equity | $358,883 | $344,344 | | Net issuance of restricted stock awards and employee stock options and recognition of stock based compensation | N/A | $8,220 | | Series A Preferred Stock Dividends | N/A | $(2,615) | | Other comprehensive loss | N/A | $(2,845) | | Net loss | N/A | $(17,331) | - Total stockholders' equity decreased by $14.539 million from January 1, 2025, to March 31, 2025, primarily due to the net loss and other comprehensive loss, partially offset by stock-based compensation[20] Condensed Consolidated Statements of Cash Flows Condensed Consolidated Statements of Cash Flows (Q1 2025 vs. Q1 2024) | Metric (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash provided by operating activities | $51,864 | $29,818 | | Net cash used in investing activities | $(190,582) | $(54,249) | | Net cash (used in) provided by financing activities | $(11,406) | $27,106 | | Net (decrease) increase in cash and cash equivalents | $(149,753) | $2,538 | | Cash and cash equivalents, end of period | $241,411 | $59,282 | Notes to Unaudited Interim Condensed Consolidated Financial Statements 1. Basis of Presentation Globalstar, Inc. provides Mobile Satellite Services (MSS) through its global satellite network, with Thermo Companies as the principal owner; the financial statements are unaudited, prepared under U.S. GAAP, and include consolidated accounts, with a 1-for-15 reverse stock split effective February 10, 2025, and recent ASU adoptions - Globalstar provides Mobile Satellite Services (MSS) including wholesale capacity and voice/data communications services through its global satellite network[26] - The company's financial statements are prepared in accordance with U.S. GAAP and consolidate Globalstar and its subsidiaries, including the Globalstar SPE, of which Globalstar is the primary beneficiary[27][29] - A 1-for-15 reverse stock split was effectuated on February 10, 2025, with all historical share and per share amounts retroactively adjusted[30] - Globalstar adopted ASU 2023-09 (Income Taxes) on January 1, 2025, expecting increased tax disclosures, and plans to adopt ASU 2024-03 (Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures) on January 1, 2027[31][32] 2. Special Purpose Entity Globalstar operates satellite-enabled services for Apple Inc. under Updated Services Agreements, including the development of an Extended MSS Network owned by the Globalstar SPE, a variable interest entity consolidated by Globalstar, which has received significant prepayments from Apple for infrastructure and debt repayment - Globalstar provides services to Apple Inc. (the "Customer") under Updated Services Agreements for Phase 1, Phase 2, and the Extended MSS Network[33][35] - The Extended MSS Network is owned by Globalstar Licensee, LLC (Globalstar SPE), a variable interest entity, which Globalstar consolidates due to its 80% equity ownership and primary beneficiary status[34][38] - The Customer purchased 400,000 Class B Units in Globalstar SPE for $400 million, representing a 20% equity interest[37] - The Customer made significant prepayments: an Infrastructure Prepayment of up to $1.1 billion (with $278 million received in 2024) for network construction, and a $235 million 2024 Debt Repayment to retire outstanding 2023 13% Notes[39][40][41] - Incremental service fees from the Customer include costs tied to the Extended MSS Network, additional related services, incurred expenses, and performance bonuses, with annual service fees of $30 million accelerated starting Q1 2025[42] 3. Revenue Total revenue for Q1 2025 increased by 6% year-over-year to $60.032 million, primarily driven by an 18% increase in wholesale capacity services revenue from Updated Services Agreements with Apple, partially offset by declines in SPOT and Duplex subscriber services revenue, with Apple accounting for 61% of total revenue Revenue Disaggregation (Q1 2025 vs. Q1 2024) | Revenue Type (in thousands) | March 31, 2025 | % of Total Revenue | March 31, 2024 | % of Total Revenue | YoY Change (%) | | :-------------------------- | :------------- | :----------------- | :------------- | :----------------- | :------------- | | Wholesale capacity services | $36,709 | 61% | $31,212 | 55% | 17.6% | | Commercial IoT | $6,580 | 11% | $6,437 | 11% | 2.2% | | SPOT | $9,371 | 16% | $10,243 | 18% | -8.4% | | Duplex | $3,452 | 6% | $4,755 | 8% | -27.4% | | Government and other services | $955 | 1% | $818 | 1% | 16.7% | | Total service revenue | $57,067 | 95% | $53,465 | 93% | 6.7% | | Total subscriber equipment sales | $2,965 | 5% | $3,015 | 7% | -1.7% | | Total revenue | $60,032 | 100% | $56,480 | 100% | 6.3% | - Wholesale capacity services revenue increased 18% due to fees related to expanded services and higher network costs under the Updated Services Agreements[133] - The Customer under the Updated Services Agreements was responsible for 61% of total revenue in Q1 2025, up from 55% in Q1 2024[117] Average Subscribers and ARPU (Q1 2025 vs. Q1 2024) | Subscriber Type | Average Subscribers (2025) | Average Subscribers (2024) | YoY Change (%) | Monthly ARPU (2025) | Monthly ARPU (2024) | | :-------------- | :------------------------- | :------------------------- | :------------- | :------------------ | :------------------ | | Commercial IoT | 523,349 | 502,915 | 4.1% | $4.19 | $4.27 | | SPOT | 229,512 | 249,640 | -8.1% | $13.61 | $13.68 | | Duplex | 23,189 | 29,257 | -20.8% | $49.62 | $54.18 | | Total | 776,299 | 782,126 | -0.7% | N/A | N/A | - Total contract liabilities increased to $380.117 million as of March 31, 2025, from $349.372 million as of December 31, 2024, primarily due to advanced payments under the Infrastructure Prepayment and other Updated Services Agreements[48][51] 4. Property and Equipment Net property and equipment increased to $774.206 million as of March 31, 2025, from $673.632 million at December 31, 2024, driven by significant investments in construction in progress for space and ground components, including new satellites for the HIBLEO-4 replacement and the Extended MSS Network, with a $7.0 million loss on disposal recorded due to an inoperable satellite Property and Equipment, Net (in thousands) | Category | March 31, 2025 | December 31, 2024 | | :------------------------ | :------------- | :---------------- | | Total property and equipment, net | $774,206 | $673,632 | | Construction in progress: | | | | Space component | $479,690 | $357,825 | | Ground component | $25,931 | $20,545 | - The company has agreements with MDA for the purchase of at least 17 HIBLEO-4 replacement satellites ($329.3 million) and over 50 satellites for the Extended MSS Network ($775.0 million)[80][81] - Launch services agreements are in place with SpaceX for both sets of new satellites[82][83] - A $7.0 million loss on disposal of assets was recorded in Q1 2025 due to an inoperable second-generation satellite[53][144] 5. Long-Term Debt and Other Financing Arrangements Globalstar's total debt principal decreased to $408.825 million as of March 31, 2025, from $417.475 million at December 31, 2024, primarily due to scheduled recoupments under the 2021 Funding Agreement, with key financing including the 2024 Debt Repayment, 2023 Funding Agreement, and 2021 Funding Agreement, alongside Series A Preferred Stock with a 7.0% cumulative cash dividend Long-Term Debt (in thousands) | Debt Instrument | Principal Amount (March 31, 2025) | Carrying Value (March 31, 2025) | Principal Amount (December 31, 2024) | Carrying Value (December 31, 2024) | | :--------------------- | :-------------------------------- | :------------------------------ | :----------------------------------- | :----------------------------------- | | 2024 Debt Repayment | $221,625 | $327,241 | $221,625 | $328,801 | | 2023 Funding Agreement | $155,000 | $144,751 | $155,000 | $143,969 | | 2021 Funding Agreement | $32,200 | $30,757 | $40,850 | $38,652 | | Total Debt | $408,825 | $502,749 | $417,475 | $511,422 | - The 2024 Debt Repayment ($221.6 million outstanding) was funded by the Customer to retire 2023 13% Notes and is repaid quarterly via service fee offsets, with fees reduced by meeting Extended MSS Network milestones[59] - The 2023 Funding Agreement ($155.0 million outstanding) is used for satellite construction and launch costs, with repayments by customer offsets starting Q3 2026, subject to financial covenants[61][62][63] - The 2021 Funding Agreement ($32.2 million outstanding) is repaid by service offsets, with $8.7 million recouped in Q1 2025 and the last recoupment expected in Q1 2026[65] - The company has 149,425 shares of 7.0% Series A Preferred Stock outstanding, with $2.6 million in cumulative cash dividends paid in Q1 2025[66][67] 6. Derivatives Globalstar recognizes an embedded derivative on its balance sheet, stemming from an interest reduction mechanism within the 2024 Debt Repayment, which is marked-to-market each reporting period, with changes in fair value reported in the consolidated statements of operations as a non-cash operating activity - An embedded derivative, arising from an interest reduction mechanism in the 2024 Debt Repayment, is recorded as a derivative asset on the balance sheet[68][70] - The fair value of the embedded derivative was $110.9 million as of March 31, 2025, and $108.8 million as of December 31, 2024[71] - Changes in the fair value of the derivative are reported in the consolidated statements of operations as a non-cash operating activity[68][71] 7. Fair Value Measurements The company categorizes assets and liabilities measured at fair value into three levels based on input observability, with the embedded derivative within the 2024 Debt Repayment classified as a Level 3 asset, valued using a discounted cash flow model with significant unobservable inputs related to project milestone completion - Fair value measurements are categorized into Level 1 (quoted prices in active markets), Level 2 (observable inputs), and Level 3 (significant unobservable inputs)[72][73] - The embedded derivative within the 2024 Debt Repayment is a Level 3 asset, valued using a discounted cash flow model[75] - Significant inputs include the discount yield (7.95% at March 31, 2025) and estimated timing of project milestones for the interest fee reduction mechanism[75][76] Rollforward of Recurring Level 3 Assets (in thousands) | Metric | Three Months Ended March 31, 2025 | Twelve Months Ended December 31, 2024 | | :-------------------- | :-------------------------------- | :------------------------------------ | | Balance at beginning of period | $108,799 | $1,295 | | Issuance of embedded derivative within the 2024 Debt Repayment | $2,480 | $109,601 | | Unrealized loss, included in other | $(427) | $(2,097) | | Balance at end of period | $110,852 | $108,799 | 8. Commitments and Contingencies Globalstar has significant commitments under its Updated Services Agreements with Apple, including the construction of the Extended MSS Network, involving satellite procurement agreements with MDA for over 67 new satellites totaling over $1.1 billion and launch services agreements with SpaceX, with the Customer providing prepayments for these capital expenditures, and outstanding purchase orders for the Extended MSS Network totaling $744.0 million as of March 31, 2025 - The Updated Services Agreements have an indefinite term but are terminable by the Customer or either party upon certain events[79] - Satellite procurement agreements with MDA include acquiring at least 17 satellites for HIBLEO-4 replacement ($329.3 million) and over 50 satellites for the Extended MSS Network ($775.0 million)[80][81] - Launch services agreements are in place with SpaceX for both the HIBLEO-4 replacement and Extended MSS Network satellites[82][83] - The Customer is expected to provide payments for 95% of approved capital expenditures for Phase 2 Service Period assets and prepayments for Extended MSS Network assets[84][85] - As of March 31, 2025, outstanding purchase orders for the Extended MSS Network totaled $744.0 million, expected to be paid with Customer funds[86] 9. Related Party Transactions Thermo Companies, controlled by Globalstar's Executive Chairman, is the principal owner and largest stockholder, with transactions including lease agreements, ownership of Series A Preferred Stock, and a guarantee for certain obligations, while Globalstar also has agreements with XCOM Labs, Inc., whose Executive Chairman is also Globalstar's CEO, for intellectual property licensing and support services - Thermo Companies, controlled by Globalstar's Executive Chairman, is the principal owner and largest stockholder[87] - Payables to Thermo were $0.2 million as of March 31, 2025, and the company has a lease agreement with Thermo Covington, LLC for its headquarters ($1.7 million in 2025 payments)[87][89] - Thermo owns $136.7 million of Series A Preferred Stock and received $2.4 million in dividends in Q1 2025[90] - Thermo guaranteed certain obligations under the 2023 Funding Agreement and Service Agreements, receiving a warrant to purchase 666,668 shares of common stock[92] - Globalstar's CEO, Dr. Paul E. Jacobs, is also the Executive Chairman and controlling stockholder of XCOM Labs, Inc. (Virewirx, Inc.)[95] - Globalstar issued 4.0 million shares of common stock (approx. $68.7 million) to XCOM for an exclusive intellectual property license, including 1.1 million shares to Dr. Jacobs[95] - A Support Services Agreement (SSA) with XCOM requires XCOM to provide services, with fees based on costs plus a 15% margin for Q1 2025[96] 10. Net Income (Loss) Per Share Globalstar reported a basic and diluted net loss per common share of $(0.16) for Q1 2025, an increase from $(0.13) in the prior year, with 1.4 million potential common shares excluded due to their anti-dilutive effect Net Loss Per Common Share (Q1 2025 vs. Q1 2024) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :----- | :-------------------------------- | :-------------------------------- | | Basic | $(0.16) | $(0.13) | | Diluted | $(0.16) | $(0.13) | - Net loss attributable to common shareholders was $(19.946) million for Q1 2025, compared to $(15.840) million for Q1 2024[98] - 1.4 million shares of potential common stock, including warrants issued to the Customer and Thermo, were excluded from diluted EPS calculations due to their anti-dilutive effect[98] 11. Segment Reporting Globalstar operates as a single reportable segment, its Mobile Satellite Services (MSS) business, with CEO Dr. Paul E. Jacobs serving as the Chief Operating Decision Maker (CODM) who assesses performance and allocates resources based on net income (loss) and disaggregated revenue and operating expenses - Globalstar's only reportable segment is its Mobile Satellite Services (MSS) business[99] - Dr. Paul E. Jacobs, CEO, is the Chief Operating Decision Maker (CODM), who manages the consolidated entity and uses net income (loss) to assess performance and allocate resources[99] - The CODM reviews revenue at a disaggregated level and expenses by nature (Cost of Services, Marketing, General and Administrative, Cost of Subscriber Equipment Sales)[99] 12. Common Stock Effective February 10, 2025, Globalstar completed a 1-for-15 reverse stock split, reducing outstanding common shares from 1.897 billion to 126.443 million and authorized shares from 2.150 billion to 143.333 million, concurrently moving its common stock listing from NYSE American to Nasdaq Stock Market LLC under the symbol "GSAT", with fractional shares rounded up except for awards - A 1-for-15 reverse stock split was effectuated on February 10, 2025[100] - Outstanding common stock reduced from 1,896,635,805 to 126,442,583 shares, and authorized shares reduced from 2,150,000,000 to 143,333,334 shares[100] - The company's common stock began trading on Nasdaq Stock Market LLC under the symbol "GSAT" on February 11, 2025, after voluntarily withdrawing its listing from NYSE American[100] - Fractional shares resulting from the reverse stock split were rounded up, except for outstanding awards which were rounded down[101] 13. Income Taxes Income tax expense increased by $4.6 million in Q1 2025 compared to Q1 2024, primarily due to higher current state tax expense resulting from increased forecasted taxable income, net operating loss utilization, and an increased provision for uncertain tax positions, with the company maintaining a valuation allowance on most of its U.S. federal, state, and foreign deferred tax assets - Income tax expense increased by $4.6 million in Q1 2025 compared to Q1 2024[102][148] - The increase was driven by current state tax expense due to increased forecasted taxable income, net operating loss utilization in various states, and an increased provision for uncertain tax positions[102][148] - The company maintains a valuation allowance on the majority of its U.S. federal, state, and foreign deferred tax assets[103] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. This section provides management's perspective on Globalstar's financial condition and results of operations for the three months ended March 31, 2025, compared to the same period in 2024, covering the company's MSS business, strategic initiatives, performance indicators, and detailed analysis of revenue, operating expenses, other income/expense, and liquidity Overview Mobile Satellite Services Business Globalstar provides Mobile Satellite Services (MSS), including wholesale capacity and voice/data communications, through its global satellite network, offering reliable connectivity in unserved areas and supporting IoT data transmissions - Globalstar provides Mobile Satellite Services (MSS), including wholesale capacity and voice/data communications, through its global satellite network[105] - Services are offered over a network of in-orbit satellites and ground stations (gateways) under spectrum licenses, collectively known as the Globalstar System[105] - The company provides reliable connectivity in areas unserved by terrestrial networks and supports Internet of Things (IoT) data transmissions[105] Globalstar System The Globalstar System utilizes a constellation of Low Earth Orbit (LEO) satellites for global coverage, designed for faster and more cost-effective maintenance and upgrades, with agreements in place for new satellites and launch services with MDA and SpaceX - The Globalstar System utilizes a constellation of Low Earth Orbit (LEO) satellites for global coverage between 70° north and 70° south latitudes[106] - The system's design allows for faster and more cost-effective maintenance and upgrades, with multiple gateways enabling quick reconfiguration for coverage or capacity needs[108] - Agreements are in place with MDA for at least 17 HIBLEO-4 replacement satellites and over 50 satellites for the Extended MSS Network, with SpaceX providing launch services[109][110] Spectrum and Regulatory Structure Globalstar benefits from a worldwide allocation of radio frequency spectrum by the ITU, enabling cost-effective global deployment of products and services, and is authorized to provide terrestrial broadband services over 11.5 MHz of its licensed MSS spectrum (Band 53/n53) in the U.S., holding terrestrial licenses in 12 countries representing approximately 11.9 billion MHz-POPs - Globalstar benefits from a worldwide allocation of radio frequency spectrum by the ITU, enabling cost-effective global deployment of products and services[111] - The company is authorized to provide terrestrial broadband services over 11.5 MHz of its licensed MSS spectrum (2483.5 to 2495 MHz) in the U.S., designated as Band 53/n53[122] - Globalstar holds terrestrial licenses in 12 countries, representing approximately 11.9 billion MHz-POPs, enhancing its ability to capitalize on wireless and broadband applications[111][123] Business Strategy Wholesale Satellite Capacity Globalstar provides wholesale satellite capacity services primarily to Apple Inc. under Updated Services Agreements, which involve allocating network capacity and enabling Band 53/n53 in cellular devices, with payments including fixed service fees, reimbursements, additional fees, and potential performance bonuses, while retaining 15% of its network capacity for other customers and wholesale opportunities - Globalstar provides wholesale satellite capacity services, primarily to Apple Inc. (the "Customer") under Updated Services Agreements, which involve allocating network capacity and enabling Band 53/n53 in cellular devices[114] - Payments from the Customer include fixed service fees, reimbursements for operating expenses and capital expenditures, additional fees for expanded services, and potential performance bonuses[114][115] - The company retains 15% of its current and future network capacity to support other customers (Commercial IoT, SPOT, Duplex) and additional wholesale opportunities[116] Communications Products and Services As of March 31, 2025, Globalstar had approximately 778,000 MSS subscribers worldwide, offering Commercial IoT, SPOT, and Duplex services, with a focus on developing new two-way Commercial IoT-enabled devices to meet customer needs and enhance competitiveness - As of March 31, 2025, Globalstar had approximately 778,000 MSS subscribers worldwide[118] - Service offerings include Commercial IoT (data transmissions), SPOT (messages and location), and Duplex (voice and data communications)[121] - The company focuses on developing new products, particularly two-way Commercial IoT-enabled devices, to meet customer needs and compete effectively[119] Terrestrial Spectrum and Network Solutions Globalstar is authorized to provide terrestrial broadband services over 11.5 MHz of its licensed MSS spectrum (Band 53/n53) in the U.S. and holds terrestrial licenses in 12 countries, with Updated Services Agreements enhancing the device ecosystem for Band 53/n53 and an Intellectual Property License Agreement with XCOM Labs providing exclusive rights to wireless spectrum innovations for private networks - Globalstar is authorized to provide terrestrial broadband services over 11.5 MHz of its licensed MSS spectrum (Band 53/n53) in the U.S. and holds terrestrial licenses in 12 countries[122][123] - The Updated Services Agreements enhance the device ecosystem for Band 53/n53 by enabling access in certain Customer devices[123] - Through an Intellectual Property License Agreement with XCOM Labs, Globalstar acquired exclusive rights to XCOM's wireless spectrum innovations, including XCOM RAN systems and peer-to-peer connectivity technologies, aiming to deliver private networks for mission-critical customer needs[124] Reverse Stock Split and Nasdaq Listing A 1-for-15 reverse stock split was effective February 10, 2025, reducing outstanding common shares and authorized shares, followed by the company's common stock beginning trading on Nasdaq Stock Market LLC under the symbol "GSAT" on February 11, 2025 - A 1-for-15 reverse stock split was effective February 10, 2025, reducing outstanding common shares and authorized shares[125] - The company's common stock began trading on Nasdaq Stock Market LLC under the symbol "GSAT" on February 11, 2025, following delisting from NYSE American[125] Performance Indicators Management reviews key performance indicators including total revenue, subscriber growth and churn rate, average monthly revenue per user (ARPU) for Commercial IoT, SPOT, and Duplex services, operating income, adjusted EBITDA, and capital expenditures - Management reviews key performance indicators including total revenue, subscriber growth and churn rate, average monthly revenue per user (ARPU) for Commercial IoT, SPOT, and Duplex services, operating income, adjusted EBITDA, and capital expenditures[128] Comparison of the Results of Operations for the three months ended March 31, 2025 and 2024 Revenue Service Revenue Total revenue increased 6% to $60.0 million in Q1 2025, driven by an 18% rise in wholesale capacity services revenue from expanded services and higher network costs under Updated Services Agreements, partially offset by a 9% decline in SPOT service revenue and a 27% decrease in Duplex service revenue due to fewer subscribers and lower ARPU, while Commercial IoT service revenue increased 2% and Government and other services revenue rose 17% - Total revenue increased 6% to $60.0 million in Q1 2025, driven by higher wholesale capacity services revenue, partially offset by a decline in subscriber services revenue[127] - Wholesale capacity services revenue increased 18% due to fees related to expanded services and higher network costs under the Updated Services Agreements[133] - Commercial IoT service revenue increased 2% with average subscribers up 4%, while SPOT service revenue decreased 9% due to fewer subscribers and competitive pressure[134][135] - Duplex service revenue decreased 27% due to fewer subscribers (strategic decision to discontinue device manufacturing) and lower ARPU from foreign exchange rate changes[136] - Government and other services revenue increased 17% from governmental service contracts and XCOM RAN sales[137] Operating Expenses Cost of Services Cost of services increased $1.9 million (11%) in Q1 2025, primarily due to $1.7 million in expenses for the Support Services Agreement (SSA) with XCOM and other ancillary costs for XCOM technology development and new MSS product development, alongside a $0.8 million increase in personnel costs, partially offset by a $1.4 million reduction from an employee retention credit - Cost of services increased $1.9 million (11%) in Q1 2025, primarily due to $1.7 million in expenses for the Support Services Agreement (SSA) with XCOM and other ancillary costs for XCOM technology development, as well as new MSS product development[139] - Personnel costs supporting the Globalstar System increased $0.8 million, including $0.3 million related to annual cash bonuses[140] - Operating expenses were reduced by $1.4 million from an employee retention credit received in Q1 2025[141] Marketing, General and Administrative Marketing, general and administrative costs increased $0.9 million (9%) in Q1 2025, mainly due to higher professional fees ($0.6 million) for accounting, tax, and legal services related to the Globalstar SPE, with other contributing factors including personnel costs, XCOM support costs, and occupancy/tax expense, partially offset by a portion of the employee retention credit - Marketing, general and administrative costs increased $0.9 million (9%) in Q1 2025, mainly due to higher professional fees ($0.6 million) for accounting, tax, and legal services related to the Globalstar SPE[142] - Other contributing factors included personnel costs, XCOM support costs, and occupancy/tax expense, partially offset by a portion of the employee retention credit[142] Stock-Based Compensation Stock-based compensation expense decreased $2.3 million in Q1 2025, primarily because the majority of costs for restricted stock units (RSUs) granted in August 2023 were recognized in 2024 - Stock-based compensation expense decreased $2.3 million in Q1 2025, primarily because the majority of costs for restricted stock units (RSUs) granted in August 2023 were recognized in 2024[143] Reduction in Value and Loss on Disposal of Assets A $7.0 million loss on disposal of assets was recorded in Q1 2025, representing the net book value of a second-generation satellite rendered inoperable due to a power control anomaly - A $7.0 million loss on disposal of assets was recorded in Q1 2025, representing the net book value of a second-generation satellite rendered inoperable due to a power control anomaly[144] Other (Expense) Income Interest Income and Expense Net interest income and expense increased $4.2 million in Q1 2025, primarily due to higher interest costs associated with the 2024 Prepayment Agreement ($11.5 million), partially offset by a $7.3 million reduction in interest expense from paying down the 2023 13% Notes and a $2.7 million increase in interest income due to a higher cash balance, with capitalized interest also decreasing by $3.4 million - Net interest income and expense increased $4.2 million in Q1 2025, primarily due to higher interest costs associated with the 2024 Prepayment Agreement ($11.5 million, including a non-cash significant financing component and accrued fees)[145] - This increase was partially offset by a $7.3 million reduction in interest expense from paying down the 2023 13% Notes and a $2.7 million increase in interest income due to a higher cash balance[145] - Capitalized interest decreased $3.4 million, further impacting net interest expense[145] Foreign Currency Gain (Loss) Globalstar recorded a foreign currency gain of $4.1 million in Q1 2025, a significant improvement from a $3.8 million loss in Q1 2024, attributed to the remeasurement of USD-denominated intercompany payable balances in foreign subsidiaries where other currencies strengthened relative to the U.S. dollar - Globalstar recorded a foreign currency gain of $4.1 million in Q1 2025, a significant improvement from a $3.8 million loss in Q1 2024[147] - This change is attributed to the remeasurement of USD-denominated intercompany payable balances in foreign subsidiaries, where other currencies strengthened relative to the U.S. dollar[147] Income Tax Expense Income tax expense increased $4.6 million in Q1 2025 compared to Q1 2024, driven by current state tax expense due to increased forecasted taxable income, net operating loss utilization, and a higher provision for uncertain tax positions - Income tax expense increased $4.6 million in Q1 2025 compared to Q1 2024[148] - The increase was driven by current state tax expense due to increased forecasted taxable income, net operating loss utilization, and a higher provision for uncertain tax positions[148] Liquidity and Capital Resources Overview Globalstar's principal liquidity sources include cash on hand, cash flows from operations, and proceeds from the 2023 Funding Agreement and Infrastructure Prepayment, with cash and cash equivalents decreasing to $241.4 million at March 31, 2025, from $391.2 million at December 31, 2024, primarily due to capital expenditures, and total debt principal outstanding at $408.8 million - Principal liquidity sources include cash on hand, cash flows from operations, and proceeds from the 2023 Funding Agreement and Infrastructure Prepayment[149] - Cash and cash equivalents decreased to $241.4 million at March 31, 2025, from $391.2 million at December 31, 2024, primarily due to capital expenditures for the Updated Services Agreements[150] - The principal amount of debt outstanding was $408.8 million at March 31, 2025, down from $417.5 million at December 31, 2024[151] Cash Flows for the three months ended March 31, 2025 and 2024 Cash Flows Provided by Operating Activities Net cash provided by operating activities increased to $51.9 million in Q1 2025 from $29.8 million in Q1 2024, primarily driven by favorable working capital changes, including $22.5 million in accelerated service fees from the Updated Services Agreements - Net cash provided by operating activities increased to $51.9 million in Q1 2025 from $29.8 million in Q1 2024[154] - This improvement was primarily driven by favorable working capital changes, including $22.5 million in accelerated service fees from the Updated Services Agreements[154] Cash Flows Used in Investing Activities Net cash used in investing activities increased substantially to $190.6 million in Q1 2025 from $54.2 million in Q1 2024, primarily due to $143.6 million in milestone payments to MDA for network upgrades related to the Extended MSS Network - Net cash used in investing activities increased substantially to $190.6 million in Q1 2025 from $54.2 million in Q1 2024[155] - The increase was primarily due to $143.6 million in milestone payments to MDA for network upgrades related to the Extended MSS Network[155] Cash Flows (Used in) Provided by Financing Activities Net cash used in financing activities was $11.4 million in Q1 2025, a shift from $27.1 million provided in Q1 2024, mainly due to the absence of $37.7 million proceeds from the 2023 Funding Agreement received in Q1 2024 - Net cash used in financing activities was $11.4 million in Q1 2025, a shift from $27.1 million provided in Q1 2024[156] - This change was mainly due to the absence of $37.7 million proceeds from the 2023 Funding Agreement received in Q1 2024[156] Indebtedness and Other Financing Arrangements As of March 31, 2025, total debt principal was $408.8 million, with fees accruing at a weighted average stated rate up to 9%, and deferred revenue, net, totaled $380.1 million, with the majority expected to be earned over five years from services supporting the Updated Services Agreements, while the company paid $2.6 million in dividends on its 7.0% Series A Preferred Stock in Q1 2025 - As of March 31, 2025, total debt principal was $408.8 million, with fees accruing at a weighted average stated rate up to 9%[157] - Deferred revenue, net, totaled $380.1 million, with the majority expected to be earned over five years from services supporting the Updated Services Agreements[157] - The company paid $2.6 million in dividends on its 7.0% Series A Preferred Stock in Q1 2025[158] Off-Balance Sheet Transactions Globalstar reported no material off-balance sheet transactions for the period - Globalstar reported no material off-balance sheet transactions for the period[160] Recently Issued Accounting Pronouncements Discussion of recently issued accounting guidance and its expected impact is referenced in Note 1: Basis of Presentation - Discussion of recently issued accounting guidance and its expected impact is referenced in Note 1: Basis of Presentation[161] Critical Accounting Policies and Estimates There have been no material changes to Globalstar's critical accounting policies and estimates from those disclosed in its 2024 Annual Report - There have been no material changes to Globalstar's critical accounting policies and estimates from those disclosed in its 2024 Annual Report[162] Item 3. Quantitative and Qualitative Disclosures About Market Risk. Globalstar reported no material changes to its market risk exposure during the quarter ended March 31, 2025, referring to its 2024 Annual Report for a detailed discussion - No material changes to market risk occurred during the quarter ended March 31, 2025[163] - For a discussion of market risk exposure, refer to Part II, Item 7A of the 2024 Annual Report[163] Item 4. Controls and Procedures. Globalstar's management concluded that disclosure controls and procedures were effective as of March 31, 2025, providing reasonable assurance for timely and accurate reporting, with no material changes in internal control over financial reporting during the quarter - Management concluded that disclosure controls and procedures were effective as of March 31, 2025, providing reasonable assurance for timely and accurate reporting[165] - No changes in internal control over financial reporting occurred during Q1 2025 that materially affected or are reasonably likely to materially affect it[167] PART II - OTHER INFORMATION Item 1. Legal Proceedings. Globalstar reported no legal proceedings for the period - No legal proceedings were reported[168] Item 1A. Risk Factors. Globalstar reported no material changes to its risk factors disclosed in its 2024 Annual Report - There have been no material changes to the risk factors disclosed in Part I, Item 1A of the 2024 Annual Report[169] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. Globalstar reported no unregistered sales of equity securities or use of proceeds for the period - No unregistered sales of equity securities or use of proceeds were reported[170] Item 3. Defaults Upon Senior Securities. Globalstar reported no defaults upon senior securities for the period - No defaults upon senior securities were reported[171] Item 4. Mine Safety Disclosures. This item is not applicable to Globalstar - Item 4, Mine Safety Disclosures, is not applicable to Globalstar[172] Item 5. Other Information. This section details other information, including the absence of Rule 10b5-1 trading plans by directors or executive officers during the quarter and the Board's adoption of the Sixth Amended and Restated Bylaws, which were amended to clarify stockholder proposal and director nomination requirements, align with Delaware General Corporation Law, and modify provisions related to corporate governance and stock administration Rule 10b5-1 Trading Plans No directors or executive officers adopted or terminated Rule 10b5-1 trading plans during the fiscal quarter ended March 31, 2025 - No directors or executive officers adopted or terminated Rule 10b5-1 trading plans during the fiscal quarter ended March 31, 2025[173] Sixth Amended and Restated Bylaws Effective May 6, 2025, the Board amended and restated the Company's Fifth Amended and Restated Bylaws to clarify procedural and disclosure requirements for stockholder proposals and director nominations, align with the Delaware General Corporation Law, and modify provisions related to corporate governance and stock administration - Effective May 6, 2025, the Board amended and restated the Company's Fifth Amended and Restated Bylaws[174] - Amendments primarily clarify procedural and disclosure requirements for stockholder proposals and director nominations, align with the Delaware General Corporation Law (DGCL), and modify provisions related to corporate governance and stock administration[175][176] Item 6. Exhibits. This section lists the exhibits filed with the Form 10-Q, including the Composite Certificate of Incorporation, Sixth Amended and Restated Bylaws, Section 302 and 906 Certifications, and Inline XBRL financial statements - Exhibits filed include the Composite Certificate of Incorporation, Sixth Amended and Restated Bylaws, Section 302 and 906 Certifications, and Inline XBRL formatted financial statements[177] Signatures The report was signed on May 8, 2025, by Dr. Paul E. Jacobs (Chief Executive Officer) and Rebecca S. Clary (Chief Financial Officer) - The report was signed on May 8, 2025, by Dr. Paul E. Jacobs (Chief Executive Officer) and Rebecca S. Clary (Chief Financial Officer)[182]