Globalstar Inc. Q1 2023 Earnings Call
Yeah.
Good day, and thank you for standing by and welcome to the Globalstar first quarter 2023 earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question. During this session you will need to press star one one on your telephone you will then hear no.
Automated message advising your hand is raised to withdraw your question. Please press star. One again, please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today Jay Monroe.
Good morning, everyone. Thanks for joining globalstar as first quarter 2023.
My very brief opening up and then we will move directly to Q&A.
Please note that today's call contains forward looking statements intended to fall within the Safe Harbor provided securities laws.
Factors that could cause results to differ materially are described in the forward looking statements and risk factors section of globalstar.
Our SEC filings, including its annual report on Form 10-K.
Full year 2022.
It's 10-Q filed for the first quarter of 2023, and this week's earnings release.
Okay.
As outlined in the release global store had record gross and revenue this quarter led by an 80% decrease in total revenue for the first quarter of 2020.
Net loss decreased eight 3% from the first quarter of 2020, which gets us to a net loss for the quarter.
Three 5 million close to breakeven.
Even this modest loss was largely driven by a 10 million nonrecurring noncash charge related to the repayment of our 2019 credit facility. So we have real cause for optimism.
Consistent with this adjusted EBITDA was up a robust 216% versus Q1 of 2000 $22 million to $32 million and we expect growth to continue for the foreseeable future.
This quarter reflects the beginning of our next chapter we spent years repositioning the platform, both our space and terrestrial assets to support sustainable growth.
You have to get cash flow generation.
We have endured many years with a capital structure overhang that was removed with the conclusion of our recent financings.
As we drive many significant near term opportunity East will close we have the runway to execute our business plans across our four pillars wholesale legacy Iot and terrestrial spectrum, creating a market disruptor, which will maximize the overall value.
Today, we can deliver cost effective solutions that few of our competitors can.
Furthermore, we plan to launch innovative products. This year like her to weight module that will build on our competitive advantages in our one way Iot March and allow us to support end user applications. We couldnt have addressed previously.
We have capacity in the sales.
Essentially millions of devices utilizing our satellite network.
Simply put we are in deal mode.
Just this week, we signed an agreement for a unique service utilizing band 53, which is initially in the United States and Canada.
Expected to generate significant milestone payments as he engineering analysis is completed.
Obligated after which the agreement will convert to a long term lease.
The service is attitude and entirely incremental to our revenue model.
It does not affect our other terrestrial satellite opportunities.
And we believe this deal represents good value for our spectrum, while maintaining the flexibility to pursue all.
Other public and private wireless deployment.
We also expect to close and receive a nonrefundable deposit or a separate private network.
Canada in the next few weeks this deployment will be for the utilization of band 53 by critical infrastructure.
We expect to be able to replicate this exact opportunity and many other geographies so stay tuned.
The point is our.
Our efforts are ramping up and while not the Holy Grail. These deals represent but two examples type of ongoing discussions we are having and closing.
While we are still unable to discuss the specifics of our direct handset services. The investments we have made in the ground network over the past few years and the ongoing new satellite investments will support our Iot and legacy businesses and are already yielding significant opportunities.
For us there.
Our next Gen satellite capacity, we are bringing to market is driving discussions that we're having now. Furthermore, the ecosystem leverage we gained from the incorporation of <unk> 53 in the Qualcomm's chipsets for major handset vendors and separately our infrastructure partnership with Qualcomm will ease.
Yield significant opportunities on the terrestrial side.
We have plenty more to share with you shortly.
Hi.
While we've seen a big disruptive nature of our combined assets now coming into focus and there are a few management teams that ever feel that air business are properly reflected in their share price. This is especially true for us today. Despite substantial quantifiable improvements we've made to our operations.
Our financial results and our balance sheet.
To this end we are planning a series of Roadshows in select cities over the coming months in order to tell our story more directly.
We will be out with specifics about these meetings have locations shortly.
We will now open the call up to Q&A, David Rebecca.
Are available along with me please direct questions to a specific person given that we are remote.
Thank you in advance for focusing your questions on the non direct handset parts of our business as well as our financial results.
Okay.
Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.
Our first question comes from Mike Crawford with B Riley Securities You May proceed.
Thanks. Thank you first just earn that band 53 leases. So initially the revenue for this first deal in the U S and Canada is gonna be recorded in what engineering services and then are you going to.
The other lines in the income statement or once you actually start.
Not.
Is that going to show up.
Here, our GAAP financials.
Mike.
A step ahead of me, but yes, I would think that it's exactly going to play out.
It'll be within engineering service or other and then has it becomes material to the P&L, we'll break it out.
Adam.
Oh, okay.
And.
Just further to that you thought Jay you talked about these two deals back at the Investor Day in New York last year.
There were minor.
I mean in other entities in Africa and elsewhere.
That seemed like they were using the spectrum, but are they not.
Leasing band 53.
Yes.
In fact, some of those are and when I was talking about it.
And back at the Investor Day, we were talking about a long pipeline.
Projects that were that we had.
Correct.
Over the next years.
The ones that we've talked about today.
<unk> totally additive.
So what we were talking about that and particularly the first one.
The nature of these things are that they are private LTE.
And as such.
They really don't impair our ability to do anything on a public network basis four four band 53.
But we would expect.
The mining area and several other areas will be important to our long term future in private LTE.
The critical infrastructure and when people have critical infrastructure. They are starting to prefer to operate that in a private LTE or a private <unk> network instead of doing it over Wifi.
So we think these will continue to add up over the next years.
More and more meaningful quarter by quarter.
Okay. Thank you and just one last one for me.
And your schedule. The service revenue you reported this quarter included 30.411 million wholesale capacity.
Service revenue is there any reason why that number would decline.
In future quarters.
This year or next.
Yes, Mike good question.
We have explained before the service agreement.
Federation under the surface and then conclude.
Components and variable component.
So you will aid volatility.
On a quarter to quarter.
We also called out a number in the earnings release and a half.
Maryann.
<unk> to prior periods.
That we determine that we would receive in the first quarter.
So that piece.
Can be carved out.
Marine in nature.
Right.
Our other area welcome.
Great.
Recognize.
Next quarter, the following quarter right. So it's a little bit challenging to break out the exact amount every quarter, but absent that $6 5 million call. It nonrecurring item I think otherwise I think good baseline run rate.
Excellent. Thank you very much.
Thank you for the question.
Thank you.
Our next question comes from Simon Flannery with Morgan Stanley You May proceed.
Good morning. This is Landon park on for Simon Thanks for taking the questions everyone.
Maybe Jamie can just start with you are you able to talk anymore about that unique service in terms of.
Not sure if I missed this did you talk about what industry relates to or is there any more details you can provide and maybe it sounds like there is still good.
New associated with it so.
Is that something that is going to fall outside of 2023 or is it just not enough to drive you to increase.
Oh end of your guidance or the high end in any way.
Just anything you can comment on that.
Sure sure first of all this is very novel implementation.
And over time, it can be tens of millions of dollars per year.
It is as we said 100% incremental.
This was not even in the discussion.
When we when we carried on at the Investor Day, Although we have been working on it.
So.
It is not something that we can explain more completely today.
I do think that the engineering.
Process that we will go through will.
We will be one that will last 12 to 18 months and will yield this $30 million worth of payments that are described.
That will become clearer.
As we get through that.
The engineering work that I was describing.
We're not very concerned about the engineering.
We're comfortable with how it should all play out, but there's always work that you have to do.
And we are doing.
So.
Please.
Hold tight for a little while and I think that will become very clear during the next quarter or so exactly what it is.
And why it's so meaningful to us.
Entirely additive to the business model it doesn't take anything away from anything else that we're doing.
Great. Okay. That's all right that sounds very exciting. So we'll look for more details there and maybe maybe you could update us on where things stand with Qualcomm in the discussions you are having with Simon.
They are having with their customers.
Terms of private <unk> networks.
What what that can really look like for you.
<unk> 53 is sort of embedded it's what is presumably a portion of that offering.
How that ultimately got relationship cannot connect from a financial standpoint.
Okay.
Jamie would you yes.
I'm pleased to yes.
So Linda.
Blended it's still pretty early days.
That agreement they are doing they are finishing some technical work.
We expect that work to be done in the coming quarters.
Have you started to have discussions with their system integrator group and we have.
Series of other meeting coming up in the next few weeks.
With them to start just to make sure that the world knows that this is coming and this is will be a platform that the system integrators can deploy so.
Still very early in the process, but we're excited about it and I believe Qualcomm is very excited about it as well.
Okay. Thanks, very much pile and then just last one for me maybe Rebecca can you just talk about.
Where you guys are at with MDA and rocket lab in terms of are there any additional catch up payments that you still owe diamond than maybe what how should we think about capex for the balance of the year in 2004.
So as we sit here today, we have eight NDA everything that we owned them.
Which is about $110 million approximately.
Touching on the $327 million drawn so everything is on track.
And progressing nicely.
And then capex for the balance of the year.
And on the milestone completion are outlined in the contract, but given that we are on track for 2025.
Yeah.
Okay project based on the current run rate.
How that will play out over the balance of the year.
Just to clarify the 110 is that.
Third quarter anchors that through now.
That being said I have no payments after the quarter, Yeah, that's right I'm sorry, yes. So we received our first funding under the prepay agreement in April and a portion of that went to.
Pay the most recent envoys Davidson MDI, which is about $40 million.
Renee.
Great.
Balance sheet.
And the prepay for an Apple to 252.
You'll receive that in portions or was that all.
Alongside how should we think about the cash impact from that.
Yes, I think about the funding quarterly based on the subsequent quarter and funding need based on our projected milestone completion.
Does that MDA or other satellite vendors. So during April we received.
<unk>.
Thanks, John .
We are encouraged that the mandate.
Okay. So that's more of a match funding etcetera.
That's right.
And in theory, it's one quarter ahead April just got a little bit.
Because of.
The payoff of the facility agreement and the last day of the first quarter and now being released Darin just administrative.
And prior to that first of all I mean, bankruptcies, but otherwise think about it as one quarter in advance of the Capex.
Great and I don't know, who the right person to direct this to you would be back maybe Jay where are you guys out with the launch contract and provider.
Tim.
Sure. So we have been working through that process for the past.
Six to eight months.
And we're down selecting to two a few potential.
Our partners on that front and working through the contract terms.
Negotiating final pricing and major structural items at the launch services agreements with it with a couple of parties.
I think we'll be down selecting to that.
Final party.
In the coming months and that will give us.
Availability in the manifest to complete the launches in 'twenty five.
Great. Thanks, everyone for taking the questions.
Thanks, Adam.
Thank you.
Our next question comes from George Sutton with Craig Hallum, You May proceed.
Thank you nice results.
Jay relatively unique terrestrial service.
I'm curious given that its network architecture that doesn't.
<unk> two <unk>.
Impact your existing capacity is is this the kind of.
Thing that you could have additional customer opportunities whatever incremental network architecture is.
We haven't had discussions with anybody else that would do a similar thing, but if we did we could do it in other parts of the world without a problem.
But.
But we haven't had those discussions yet George.
Got you, Okay and relative to the two way device I just wondered if we could get a little more specific about the expectation for the timing of that and I'm curious are we at the point, where we can begin to market to customers with those use cases.
Yes. This is Dave we are in fact talking to customers now we fully expect the two way module to come out by the end of the year and we will likely be in beta at that point with customers. Obviously, we're talking to our core.
Value added service providers.
At resellers.
With time.
We will do will also launching.
New one way device that has all the software capabilities that will also be in the two way device. So they were already seeing the edge computing capabilities.
We'll be launching with the two way already today with the latest SD 150 product integrity 150 that we're launching as we speak.
Perfect and I am not sure to address this to you, but this is on the regulatory side.
It was nice to see Spain move forward and my belief is and correct me if I'm wrong, they tend to be a forward thinking regulatory body.
Can you talk about how that might influence the timing of other regulatory approvals.
Sure.
The original process that we went through in Europe .
<unk> was a.
Substantial engineering effort, which can underpin the filings in any number of countries.
We are going forward with the process in several places right now.
And yes, the Spanish we're forward thinking.
And did provide.
Did provide a model for others to use so we anticipate that we will get.
Traction in Europe .
Just the way that others have in the past when they similarly went through for these kinds of approvals.
There so.
It's an exciting time for us.
And we hope that during the course of the balance of the year. There is a lot of news flow out of Europe on these opportunities.
Great. Thank you that's all for me.
Thank you Jason.
Thank you and as a reminder to ask a question you will need to press star one on your telephone.
Okay.
Our next question comes from Lyman Delano with Beckman and Oliver LLC.
If your line is on mute please UN mute.
Is that can you hear me now.
Hello, Yes.
Great.
Earlier. This week there was an article in the Wall Street Journal.
And the fact that Deere is seeking a satellite network too.
<unk> connectivity and remote rural areas, specifically mentioning the U S.
In Brazil.
Note that <unk>.
Mobile star has full coverage.
I was wondering if if globalstar is eligible to provide this type of service to someone like John Deere and and if so.
Do you have the capacity.
<unk> to do that given the.
You have to your major partner to provide a fairly large percentage of your <unk>.
Satellite capacity.
That's a great question alignment. So yes, we were involved in the early days of that process, we continue to push our capabilities.
John Deere and other agricultural focus.
Companies.
They are looking for is more.
Band type of service.
And a two way service, which most of it most of the issue.
<unk> would be the broadband capabilities that they are looking for video live video streams and the right and so we're probably not likely to win that bid.
And we're of course going after other aspects of what they what they do in others.
In that marketplace with what we can do for them.
Water management.
Tank monitoring and all the other typical.
One way.
Most of the data rate type solutions, we can provide.
It's not applicable to what we do from a broadband perspective.
We'll have a bigger part of the pie as we go forward without two way product late in the year as we talked about already.
Yes, clearly there is a lot of activity in the smart AG market and we are playing in the planning process that we can plan.
Yes. Thank you.
This is Kyle I think there's also some opportunities for band 53 to play a part in some of those types of deployment. So.
If they need a high bandwidth services you could imagine them.
It's a big farm you could put a single tower and cover.
Large part of the farmer or maybe multiple towers. These.
The backhaul it in some other way so there could be some combination of satellite and band 53 type services.
Great. Thank you.
Thank you and this concludes the Q&A session I would now like to turn the call back over to Jay Monroe for any closing remarks.
Great couple of things.
First on a truly qualitative basis, there is not a room that we walk into today, where the conversation hasnt changed radically.
As a result of everything that we've been doing in the last couple of years, whether it's direct to handset with a truly transformative transformative partner.
Or our relationship with Qualcomm, which finalize the vantage 53 infrastructure picture for us as well as made the chipset available to all handset manufacturers.
They currently work with.
Between.
And Samsung alone they control, 86% of the U S handset market.
And there of course large qualcomm customers. So our ecosystem continues to expand.
We appreciate everybody's questions. Today, obviously this has been a record quarter for us and it starts a new chapter.
The platform in the ecosystem I was just talking about are in place and with a clean balance sheet, providing us unconstrained runway. It's now our entire focus to drive the utilization of the space and terrestrial assets.
Our solutions are absolutely at the forefront of the market.
We're talking about driving significant revenue and cash generating opportunities.
At Globalstar, we never lose sight of the fact that our technology is ultimately saving lives. This is a big reason why our partners have selected us and it drives our mission every day.
Look forward to engaging with all of you in the future months.
Thank you. This concludes today's conference call. Thank you for participating you may now disconnect.
Sure.
Yeah.
Good morning.
Okay.
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Bill.
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