Globalstar, Inc. (AMEX:GSAT) Q1 2024 Earnings Call Transcript

Globalstar, Inc. (AMEX:GSAT) Q1 2024 Earnings Call Transcript May 8, 2024

Globalstar, Inc. reports earnings inline with expectations. Reported EPS is $-0.01 EPS, expectations were $-0.01. GSAT isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good afternoon, ladies and gentlemen. And welcome to the Globalstar 1Q 2024 Earnings Conference Call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. [Operator Instructions] This call is being recorded on Wednesday, May 8th, 2024. I would like to turn the conference over to Rebecca Clary, CFO. Please go ahead.

Rebecca Clary: Thank you, operator. And good afternoon, everyone. After my prepared remarks, Jay Monroe, Executive Chairman; and Kyle Pickens, VP of Strategy, will join the question-and-answer session. Please note that today's call contains forward-looking statements intended to fall within the safe harbor provided under the securities laws. Factors that could cause the results to differ materially are described in the forward-looking statements and Risk Factors section of Globalstar's SEC filings, including its annual report on Form 10-K for the financial year ending 2023 and its other SEC filings, as well as today's earnings release. To start, Paul is not able to join today's call. Unfortunately, his mother passed away yesterday and he is focusing on his family.

We send our condolences to both the Jacob's family and also to the family of Board member, Mike Lovett, who unexpectedly passed away two weeks ago. We are extremely grateful for Mike's valuable contribution to our company during his time served on the Board. While it is a sad time for the Globalstar team on a personal level, business has been encouraging. Today we are announcing our first quarter results and providing operational highlights. We included a substantial update in the earnings release, so we will keep the prepared remarks section of this call brief. First, we achieved two significant milestones during the quarter, one satellite and one terrestrial. We initiated a contract with a government services company to utilize our satellite network for mission critical applications.

The proof of concept phase is now underway. Assuming final go ahead after verification testing, the agreement has a five year term and contains annual minimum revenue commitments escalating to $20 million during the fifth year, with the potential for significant upside through the agreement's revenue share arrangement. This opportunity represents a creative use of our satellite and spectrum assets, which does not materially utilize capacity we will use for our other customers. On the terrestrial side, we shipped the first commercial units of our XCOM RAN last month, an enormous accomplishment for our team. As previously announced, the XCOM RAN was chosen by one of the world's largest retailers for a critical deployment. We are hopeful that this is not only the beginning of a larger relationship with this customer, but also the first of many more deployments for similar fulfillment management use cases.

Also worth noting that the XCOM team has managed to meet the needs of this customer in over the air testing, utilizing a 10 megahertz channel showing gains of four to five times compared to other small cell deployments. We believe Band n53 and XCOM RAN are a powerful combination. Now, turning to our financial results. We reported total revenue of $56.5 million generated primarily from subscriber and wholesale capacity services, with service revenue up slightly from the prior year's first quarter. It's important to remember that the comparable quarter included certain non-recurring service revenue. Excluding this non-recurring item, service revenue would have increased by $3.7 million, or 7%. For subscriber driven revenue sources, commercial IoT continues to grow.

During the first quarter of 2024, IoT service revenue increased 24% due to higher ARPU and a larger subscriber base. Subscriber equipment revenue was down $2.7 million from the prior year's quarter due to the timing of commercial IoT and spot device sales. In 2023, we recovered from inventory shortages and experienced higher sales as a result of product availability. To illustrate this point, the first quarter of 2023 was a record high for any first quarter in the company's history for both spot and commercial IoT. Moving to other areas of our financial performance. The increase in net loss was driven primarily by non-cash items. After adjusting for these and certain non-recurring items that aren't representative of our core operating business, adjusted EBITDA was $29.6 million, representing a margin of 52%.

Importantly, both total revenue and adjusted EBITDA during the first quarter were higher on a sequential basis as well as compared to the quarterly average of 2023, reflecting variability in revenue throughout the year. Based on these results and future expectations, today we are reiterating our full year revenue and adjusted EBITDA guidance issued in February. We are excited about how 2024 has started and even more so about what is yet to come in the balance of the year. Paul Kyle, Jason Bernstein and I will be attending conferences on the East and West Coast in the coming weeks, with one presentation being streamed via webcast. So we look forward to speaking with you again soon. I will now turn the call back to the operator for Q&A.

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