Q2 2023 Globalstar Inc Earnings Call

Yeah.

Good morning, everyone, just letting everyone know that the call will begin in just a few brief minutes.

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Yeah.

Good morning, and welcome to the Globalstar second quarter 2023 earnings Conference call I will now turn the call over to Jay Monroe.

Okay.

Thanks, everybody for joining today's global stores second quarter 2023 investor call.

In keeping with recent practice I will make very brief opening remarks, and then we'll move straight to Q&A.

But first 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 SEC filings, including its annual report on form.

10-K, and for the financial year ending 2022.

As well as this mornings earnings release.

As outlined in the release Globalstar continued to see robust growth and a significant improvement in profitability, resulting in a 50% increase in revenue over the prior year's quarter adjusted EBITDA was up 86% over the same period.

And for the first half of 2023, our revenue was up more than 60% to $113 million and EBITDA was almost $60 million an increase of over 140%.

Our liquidity ended the quarter with $65 million more than double our cash balance at year end.

Service revenue unrelated to our wholesale business increased reflecting organic growth in our commercial Iot business. We expect this to continue propelled by the launch of new two way device platform and services later this year.

Average revenue per subscriber is expected to increase meaningfully after that introduction.

As a result of these factors we are increasing the low end of our 2023 revenue guidance from 185 million to $200 million and reiterating a forecasted adjustment of the adjusted EBITDA margin of approximately 55% not including spectrum revenue.

Yeah.

A brief update on our band 53 efforts.

We're working on many fronts and engaged an engineering efforts with a wide range of companies, which are working on band 53 deployments.

Our opportunity set is truly unique given among other things the installed base of devices capable of using band 53 continues to grow.

We expect it to be in the one hundreds of millions of devices by this time next year.

And we're also making great progress with the strategic collaboration agreement, we signed with Qualcomm earlier this year.

Disagreement increases the range of infrastructure available for band 53 deployments and further drives device adoption.

With Qualcomm and their system integrator partners, we are simplifying private wireless deployments. So band 53 can be rolled out ubiquitously around the world.

Industrial and security of critical infrastructure or macro trends.

Driving private wireless today, and Theyre driving it on a global basis, we are a great resource with the right ecosystem to deliver for this growing demand.

Specifically regarding the opportunities that we discussed during the first quarter call. We are in the midst of final engineering validation and are looking forward to sharing more detail about these shortly we hope you understand that timing is not within our control.

The engineering is driven by the technical demands of the individual projects not by our public company reporting calendar.

Finally.

I want to reiterate my sentiment from last quarter.

I do not believe the current market price of our stock reflects the company's value.

When participating in multiple investment conferences. This past quarter, we heard questions about whether our transformation and growth as sustainable My simple answer is yes, globalstar has invested over $1 billion during the past decade rebuilding our satellite and ground network innovating to bring band 53 to market.

Delivering revolutionary satellite services went operate which went operational in November and putting other resources in place to prepare for this moment.

EBITDA and shareholder value.

Now we will open the call up to Q&A, we have today available to answer questions, Dave Rebecca Kyle and Tim It would be helpful. If you would direct your questions to whomever you prefer.

As a reminder, we are still not able to answer questions related to our wholesale partners activities or future plans in the direct to handset market.

And we thank you in advance for focusing your questions on other parts of our business and of course, our financial results.

Operator, we can begin Q&A.

Okay. Our first question comes from Simon Flannery with Morgan Stanley .

Your line is <unk>. Thanks.

Thanks, very much good morning.

Maybe for you Jay but I just wanted to get an update on the construction of the new satellite constellation.

Any sense on.

Where you are on the milestone may ultimate launch timing and how do we think about payments and cash flows through the balance of the year and then maybe just if you could just comment on the spot.

Look on the supply chain and how that should normalize. Thanks.

Sure. Thanks, Simon why don't we break that into three different people to answer the questions that you've asked Tim If you would talk first just about the status of the contract. Rebecca then about the cash flow implications to us and the funding sources and Dave hopefully you can tell.

The question on spot Thanks, Simon thank.

Thank you.

MBA has been working tirelessly as.

As the prime on the contract and the developer of the payload.

Rocket lab has been delivering credit schedule.

And it's clear that the benefits of their years' long acquisition and integration.

Leading critical subsystem developers.

Proving successful on this program.

We're just about to enter a critical design review will take place through the large part of August .

And we're still on pace to complete satellite acceptance scheduled originally on the contract.

And to launch the satellites.

In two years during that 2025.

Side of things.

We have incurred.

$166 million roughly under the $327 million contract with MDA.

Of the 166, we've paid about one O H.

The balance will be paid one window.

So we're on track there and Tim just mentioned in and under that 2023 funding agreement with our partner at 50% milestone until they pay by and funded through that agreement and the remaining 50% will be paid through our operating cash flow.

Milestones are completed and payments are daily we will pay them in line with that with that agreement.

So the critical design review if that one stops.

Done venue.

Could you and other payments that picture to make another payment.

That's right yes.

Yes.

Thank you.

And Simon this is Dave.

As of.

Mid April all of the supply chain issues are now behind US we are in full production and in fact, we're building safety stock. Our goal is to build six months the safety stock for each of the main products, we're well on the path of doing that.

Fill up the retail chain, which that is also underway and our big box retailers.

Rei bass pro Cabela's West Marine Theyre ordering helpful healthy and we see continued success on the spot business.

We're pretty satisfied where we are at this point.

We should see a reacceleration in Q3 Q4.

Yes, <unk> already starting to see that pick up we see the orders in advance of course and so.

They are all there.

And we're also seeing given the summer period.

And say is that we're making with our spot products as well. So everything has been normalized and we feel good about where we are.

Great and maybe just one clarification.

I think you said the low end of the guidance you are raising them.

Thank you said because you were confident on the trajectory of service revenues.

And Dave maybe you can tackle the two way as well for shrimp.

Absolutely, yes, so on the two way side, we are making great progress this is not.

Just a product launched this is also an entire infrastructure platform launch.

The half of the infrastructure is already at every gateway that we needed to be and that has proven to be very successful, we're seeing a significant uptick in the unique messages processed as much as 30%.

The second half of the infrastructure is being worked on as we speak and we're getting a lot of good tests hitting all the milestones that we need to to come.

Into beta by the end of the year with the product we have.

Also just received what's known as the X one build which is the first initial board.

And those boards are able to be brought up on the network.

And so again, we're hitting the milestones there as well so we do believe will be in beta with key customers by the end of the year with the product and the entire ecosystem.

Great. Thanks for the color.

Our next question comes from George Sutton with Craig Hallum.

Thank you all addressed this question a J.

Your I O T activation growth was effectively double what we had modeled and I'm curious if you can give us a sense of the breadth of of where that growth is coming from was that a specifically large implementation or are you seeing a broader demand curve change.

George I think the best one to answer that is Dave <unk> CEO . He's involved in those discussions all the way down to the sales funnel. So Dave can you answer George's question. Please.

Sure absolutely yes. It is.

I mean, any one in particular significant customer demand it's across the broad breadth of all of our customers.

And obviously some of it is.

And all the different verticals that we're seeing transportation oil and gas all of those all of those markets seem to be rebounding with others.

Other folks dealing with the end of their supply chain issues as well because a lot of our customers build our modules into their products and so I think it's broad.

We're glad about.

And we just see a very robust and strong pipeline as we continue to go through the year.

Got you and I think that helps address jay's point on sustainability of the growth. So one other question I'm not sure who to address it to but on the country updates for band 53 can you just give us a sense of how many opportunities. We are focused on right now and any sort of timeframe of where expectations.

Sure Youre asking about.

New countries or developments within the countries, we already have licenses in.

New countries to expand our presence.

Okay very good.

That is continuing.

We're in discussions with a number of regulators right now and on a global basis.

They put things out for notices and those notices.

We have started to come in a couple of different countries.

In Europe .

And we expect more of those in the near term we also have a.

Couple of other countries that are very far along in the process.

Never identify which one until it until it comes through and I apologize for that kind of an advance.

But we have other countries that are deep into their process.

And we hope that we'll be able to announce something.

In the coming months.

Or at least at least one but there are a few others and of course the ones that happened in Europe .

We believe we will happen more frequently now.

After we receive Spain.

And went through the broad EU technical process.

Now to be implemented.

In each country that you have to do that country by country.

Is that a complete answer for you.

And our next question comes from Mike Crawford at B Riley Securities.

Thank you I'm not sure. If this is gonna be fairer for Kyle.

Jay but.

On your last call.

It seems that you went into more detail on specific.

Engineering.

Henry.

And licensing opportunities for band 53, including one deal that was signed and expected to generate $30 million of NRT over like maybe 18 months period I'm wondering if that timeframe has changed and they said there was another rep.

Replicable deal related to private LTE for critical infrastructure that was near being signed and others in the works but.

Can you just maybe fill in the brakes on.

On those issues.

Sure I can end count.

<unk> as well, but yes.

Mike the ones that we talked about last quarter are the ones I was referring to a moment ago.

When I said that they are in.

In the final throes of the technical work that needs to be done. We had hoped of course that it would have been done in 90 days, but it looks like it's just going to take a little bit longer that applies to both the project that you referred to that had the $30 million of NRI associated with it.

And the other critical infrastructure project that we talked about.

Both are.

I mean, we look at them every single day as you might imagine and working every single day.

But it is one of these deals where the technical work is just taking a little bit longer than we wanted.

And hope to have an announcement on one or both of those that.

We won't have to wait another 90 days to announce.

That's most of it the other thing to think about Mike I mean these are.

A very very long term deal.

And so.

It's very important that we get them exactly right going into them because once we.

Once we deploy these there they are in place for 15 to 30 years.

Yes.

Mike one other thing that I'll add to Kyle's point.

That we're talking about these two because.

Feel like we can push these through quick.

Quickly, but we do have.

As I mentioned in my short prepared remarks, a lot of additional discussions that are ongoing either through.

That are testing or starting to test the band and in part they're doing that because the ecosystem.

For both the infrastructure, which is the Qualcomm component of it.

That Qualcomm cells.

Where where people are testing.

Critical infrastructure, which benefits from having totally license spectrum.

That it's it's a whole lot easier to entertain these conversations with companies that want to have them now.

Okay. Thank you Jay and then just the final question is.

What would have to happen for.

Globalstar to only recognize $86 million of revenue in the second half of the year to hit the the raised lower end of your guidance.

Hi, yes, thanks for the question, Mike and so.

If you just take the run rate, where we are right now.

Get to the lower end of the guidance on that.

I'm not sure exactly if I followed the question but.

Just based on the result year to date and midway through the year as we sit here in early August that it make sense.

Enough about the balance of the year to tighten that range.

Okay.

I thought the company had $113 7 million of revenue in the first half of the year.

Some of that is nonrecurring as we talked about last quarter is about six or 7 million recognized.

We recognized in the first quarter.

We also talked about just kind of the variability in that.

The Lumpiness I guess that results from that and the revenue recognized under the contract and that's just one example, so while that particular item might not be recurring there might be stepping out that replaces that but.

It's a little too soon to be precise on that.

Alright.

Any of that in the run rate you get to the numbers that we're that we're forecasting is that helpful.

A little bit alright, thank you very much.

Thanks, Mike.

Yeah.

If there are no further questions I will turn the call back over to Jay Monroe for closing remarks.

Thanks, everyone for joining the call today, whether you were on the phone or on the webcast. We appreciate the attention.

And are obviously very very pleased with the financial results.

And anticipate those results continuing and growing.

And look forward to an opportunity to just talk to any of you.

Who would like to from time to time, otherwise, we'll reconvene again in 90 days have a great day. Thank you.

Okay.

This meeting is now concluded you may now disconnect.

Yeah.

Okay.

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