Globalstar(GSAT) - 2022 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION Financial Statements Globalstar reported increased Q1 2022 revenue of $32.8 million, a reduced net loss, and positive operating cash flow Condensed Consolidated Statements of Operations Globalstar's Q1 2022 total revenue increased to $32.8 million, driven by service revenue, narrowing the net loss to $20.5 million Q1 2022 vs Q1 2021 Statement of Operations (In thousands) | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Total Revenue | $32,772 | $26,929 | | Service Revenue | $29,344 | $23,086 | | Subscriber Equipment Sales | $3,428 | $3,843 | | Loss from Operations | ($13,712) | ($19,260) | | Total Operating Expenses | $46,484 | $46,189 | | Net Loss | ($20,462) | ($36,333) | | Net Loss per Share (Basic & Diluted) | ($0.01) | ($0.02) | Condensed Consolidated Balance Sheets As of March 31, 2022, total assets increased to $850.4 million, while total liabilities rose, leading to a decrease in stockholders' equity Balance Sheet Overview (In thousands) | Metric | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total Assets | $850,426 | $814,106 | | Cash and cash equivalents | $11,519 | $14,304 | | Property and equipment, net | $680,167 | $672,156 | | Total Liabilities | $501,194 | $448,675 | | Total current liabilities | $103,682 | $61,565 | | Long-term debt | $246,756 | $237,932 | | Total Stockholders' Equity | $349,232 | $365,431 | Condensed Consolidated Statements of Cash Flows Q1 2022 net cash from operations was $7.6 million, while investing activities increased, resulting in a net cash decrease of $2.8 million Cash Flow Summary (In thousands) | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $7,569 | $4,512 | | Net cash used in investing activities | ($10,451) | ($4,974) | | Net cash provided by financing activities | $8 | $39,245 | | Net (decrease) increase in cash | ($2,785) | $38,717 | Notes to Financial Statements Notes detail satellite procurement, debt conversion, and significant revenue recognition from the 'Terms Agreement' - In February 2022, the company entered into a satellite procurement agreement to acquire 17 new satellites for $327.0 million to replenish its constellation. A customer under the 'Terms Agreement' is required to reimburse 95% of these capital expenditures[68] - During Q1 2022, the remaining $1.4 million principal of the 8.00% Convertible Senior Notes from 2013 was converted into 2.3 million shares of common stock, fully extinguishing this debt[49] - The company recognized $6.8 million in 'Engineering and other' service revenue in Q1 2022 related to cost reimbursements from a customer under the 'Terms Agreement' for services rendered[28] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) MD&A discusses Q1 2022 revenue growth, strategic shift to IoT, new satellite procurement, and liquidity plans Overview Globalstar focuses on MSS and IoT, with a new $327 million satellite agreement and terrestrial spectrum advancements - Entered into a $327.0 million agreement in February 2022 to acquire 17 new satellites to replenish its constellation, with delivery expected by 2025[86] - A customer under the 'Terms Agreement' is required to reimburse 95% of the capital expenditures for the new satellites[86] - The company's terrestrial spectrum band, n53, is now supported in Qualcomm Technologies' Snapdragon X65 5G modem, expanding the potential device ecosystem[95] Results of Operations Q1 2022 total revenue increased 22% to $32.8 million, driven by engineering service revenue, reducing operating loss Revenue by Type (In thousands) | Revenue Type | Q1 2022 | Q1 2021 | % Change | | :--- | :--- | :--- | :--- | | Total Revenue | $32,772 | $26,929 | 21.7% | | Total Service Revenue | $29,344 | $23,086 | 27.1% | | Engineering and other | $7,273 | $966 | 652.9% | | Total Equipment Revenue | $3,428 | $3,843 | -10.8% | - The significant increase in Engineering and other service revenue was due to the timing and amount of revenue recognized under the Terms Agreement, including work to expand and upgrade gateways[111] - SPOT and Commercial IoT equipment sales were constrained by inventory shortages and supply chain disruptions, with several products on back order[113][114] - MG&A expenses decreased by $0.8 million, primarily due to the reversal of a $1.0 million accrual related to 2018 shareholder litigation[119] Liquidity and Capital Resources Globalstar's Q1 2022 cash was $11.5 million, with plans for senior secured financing to fund new satellites and refinance debt Key Liquidity Metrics (As of March 31, 2022) | Metric | Amount (in millions) | | :--- | :--- | | Cash and cash equivalents | $11.5 | | Total Debt (Carrying Amount) | $246.8 | | Q1 2022 Cash from Operations | $7.6 | - The company has a vendor financing agreement for its new satellites which provides for payment deferrals through August 2022, at which point deferred payments will become due[136] - The company intends to complete a senior secured financing to provide proceeds for the satellite construction and launch, and also expects to refinance its 2019 Facility Agreement[136] Quantitative and Qualitative Disclosures About Market Risk Globalstar faces foreign currency and interest rate risks but does not currently use hedging instruments - The company's primary market risks are foreign currency exchange fluctuations (Canadian dollar, Brazilian real, euro) and potential interest rate increases on future debt[140][141] - The company does not currently use hedging instruments for foreign currency risk but is obligated to do so under certain conditions of its 2019 Facility Agreement[140] Controls and Procedures Management confirmed effective disclosure controls, with a new ERP system implemented without material impact on internal controls - Management concluded that disclosure controls and procedures were effective as of March 31, 2022[144] - A new ERP system was implemented in Q1 2022, leading to changes in internal controls, but these changes were not deemed to have a material adverse effect[146] PART II - OTHER INFORMATION Legal Proceedings The company reported no material legal proceedings - None[147] Risk Factors Uncertain global macro-economic and political conditions, including the Ukraine conflict, pose significant risks - Uncertain global macro-economic and political conditions, including inflation and interest rates, pose a risk to operations and financial condition[148] - The invasion of Ukraine by Russia and related sanctions could lead to market disruptions, supply chain interruptions, and significant volatility, adversely impacting the business[149][150] Exhibits This section lists key exhibits including the Satellite Procurement Agreement and certifications - Key exhibits filed include the Satellite Procurement Agreement dated February 21, 2022, and Section 302 and 906 certifications[154]