Q3 2023 Globalstar Inc Earnings Call
Yeah.
Okay.
Good day, and thank you for standing by welcome to the Globalstar <unk> 2023 earnings conference call.
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Please be advised that today's conference is being recorded.
I would now like to hand, the conference over to your first speaker today Globalstar CEO Paul Jacobs. Please go ahead.
Thank you very much and welcome everyone to my first quarterly call as CEO of Globalstar.
I'm joined today by Rebecca Clary, our CFO Tim.
Tim Taylor, our VP of finance business operations and strategy and Kyle Perkins, our VP of strategy.
I'll start by making some brief comments and then we'll spend the bulk of our time getting to your questions.
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.
So most of you who know me from Qualcomm will remember my basic approach here to shareholders analysts and the investment community is to keep the lines of communication open.
I'm looking forward to getting to know more of our stakeholders and to that end, we'll be getting out to more events and we posted several upcoming conferences earlier this week.
For those who I haven't had a chance to meet or speak with yet.
A little background might be helpful.
I have a long history with cold will start going back over 20 years and that Qualcomm is also involved in other satellite businesses such as omni tracks in one way.
Globalstar actually started life as a Qualcomm and morale joint venture in fact that was 25 years ago yesterday that the first satellite call was placed on the network with a nice father to them CEO Boral Bernard Schwartz.
More recently I've had a ongoing working relationship with Jay Monroe County.
So when they come back to Globalstar I took the CEO job because I feel costar has the right sized platform resources and a great team and one that fits with my vision of where connectivity is heading.
The strategic business logic of combining X com labs technology with Golden Star's terrestrial spectrum assets provide significant differentiation as we address mission critical wireless applications.
And many of you know that ex Comm labs is already working with goalposts on spectral efficiency hence.
Hence throughput upper band 53.
You might have seen me at the last Investor Day in New York City discussing those initiatives.
They've had a front row seat to a lot of transformation over the last year.
And the conversations that ensued earlier this summer concluded successfully.
So bottom line a number of us at <unk> Com labs, New global starts history, and along with the other folks who've joined Goldstrike, we're really energized to be here for the next chapters.
So my first 60 days were spent meeting with customers and partners and reviewing our ongoing initiatives in areas such as enhancing our satellite constellation evolving our legacy products growing our Iot business deploying private <unk> networks and others.
We've been reviewing spectrum related opportunities that costar has been considering and how they align with initiatives at both globalstar and XCOM labs with the goal of determining how best to capitalize on our spectrum assets.
The team and I have experience in monetizing spectrum assets, including prior transactions at Qualcomm, which led to multiple billions of dollars of value creation.
The.
Ships that globalstar has created many new opportunities and I'm excited by the scale of those partnerships and our ability to provide services to a large and ever increasing number of people around the world.
Amidst all of the current wireless industry hype around satellite services Globalstar has run at satellites for decades, and it's humbling to see how well our network plays a key role in saving lives stories, we're seeing on almost a weekly basis.
A quick high level on our excellent performance last quarter.
Outlined in the release Globalstar continued to sustain its record growth this year with a significant improvement in profitability.
The third quarter drill.
Driven by results from <unk> 53.
53% increase in total revenue.
Service revenue increased 61%, we saw growth in commercial Iot and adjusted EBITDA was up 125%.
As a result, we're increasing the low end of our 2023 times.
So my focus will be on differentiating our offerings through innovation.
Selling the whole portfolio and investing in R&D to preserve that position us for success all of which we can do strategically and opportunistically.
The current capacity to deliver solutions to customers globally at scale and at competitive cost.
In conclusion, I believe the transformation over the last year and performance to date flex just the beginning of our efforts.
Back to elevate globalstar and conversations with customers around the world, we have new satellites underway and expanding down 53 capable ecosystem and new products coming online.
So looking forward our plan is to leverage these unique assets, our proprietary technologies and our teams industry leadership.
To differentiate ourselves and create value in the space and terrestrial markets.
And now I'd like to hand, it back to the operator for Q&A.
Yeah.
Thank you.
This time, we will conduct a Q&A session.
As a reminder to ask a question you will need to press star one one on your telephone and wait for your name to be announced.
To withdraw your question. Please press star one one again.
Please standby, while we compile the Q&A roster.
And our first question comes from Simon Flannery with Morgan Stanley.
Great. Good morning, Thanks, Paul for the update.
Wonder if you could just touch on the latest on the constellation.
Where are we in the build process and how does the timeline look from here and then secondly, just give us a little bit more color on the pipeline because I think even before you came on board the management team was talking about.
Some pretty large deals in pipeline that that had the potential to be pretty significant.
It's great to get a sense of timing and how are we expecting to see some of these hit in the next few quarters or is this more of a longer term opportunity. Thanks.
Yeah.
Okay.
Okay, I'm going to take the timing of the new constellation.
I'm not sure if Robyn thank you for the question.
I can hear you yes.
Okay perfect I'm, sorry can you guys not hear me.
You weren't able to hear me.
Okay, I'm, sorry, I answered the question, but only to myself correctly.
Did you hear my my speech.
Okay.
So yes.
Yes, sorry.
I'm going to answer the question I apologize for that.
Okay. So for.
For the.
For the constellation where.
Process and design.
And you.
Do you guys actually helped me, whether we have announced publicly anything on the timing.
Okay.
We have.
R R.
Our expectations for 2025 launches, particularly where we talk about the timing.
MBIA and most recently.
Contract.
Milestones are on track.
Okay, and then in terms of the spectrum deal so when I came in.
Started too.
Look at all of the initiatives that <unk> had underway, including the spectrum assets. So they don't have any update at this point.
Okay and any.
Any more color on this point about investing more in R&D.
Is that something that youre going to allocate.
A few million dollars of Opex next year as your revenues continue to ramp or how should we think about that opportunity.
Yes, so we're already investing in additional R&D associated with it.
Evolution of the ex Com labs technology, which was licensed.
And then we also have other initiatives underway too.
Build new products and we're looking at ways that these things can be done to minimize the impact on the opex.
Great. Thanks, a lot.
And one moment for our next question.
And our next question comes from Mike Crawford with B Riley Securities.
Thank you.
Back to potential terrestrial spectrum.
License monetization by Globalstar previously the company.
About two deals that apparently.
Were thought to be near the end of a pipeline.
One of which.
May have included some substantial <unk> before even.
<unk>, what I think the company characterized as tens of millions of annual license revenue and I'm wondering if those sentiments are statements remain consistent or have changed.
So we are in the process like I said of looking at sort of all the initiatives that globalstar had underway before I got here.
And so that would include spectrum assets and how we'll use those.
Obviously, we have a lot more focus today on.
Terrestrial private networks with the licensing of the axon labs technology and with my team joining so we're really trying to make sure that we use.
Use our spectrum assets in an optimal fashion and.
And we have a lot of experience as I said in my reading comments and monetizing spectrum assets. So I don't have anything to update you on at this point, but we are working on that and we'll go next.
Period of time, we'll we'll make our decisions on that as well.
As a follow up Paul would it be fair to say that.
I was.
My understanding was that at least one of these deals was.
Uh huh.
For someone.
<unk> potentially with high value assets that need to be tracked five prime.
Cellular site that wouldn't necessarily.
Fear.
The company's ability to maintain.
<unk> bye.
About holistic.
Global spectrum asset that could be used in another fashion is that is that not the case.
Yes, there is a number of initiatives that were underway when I when I came and.
So we're looking at all of those and obviously.
Whether or not they can coexist with existing services, both on the satellite and terrestrial side.
Those are the kinds of things that we're looking at.
Okay and then.
Given the five four.
Increase in potential.
How do you say utilization of spectrum with <unk> IP.
That ought to be a good and important differentiator. When you are talking to companies about private networks, but to actually integrate that external might be into.
A solution that you can go to market with is that something that that is still maybe like.
12 months out or is there a timeframe on when we might see not just a deal but a deal including.
Let's call it extra that might be.
Yes, so axon labs was working on.
Prioritizing and working on pilots with customers.
Using the technology that wasn't that was in CBR spectrum and one of the reasons for the combination.
Globalstar and the licensing of the <unk>.
Technology.
Was that.
People, who want to use cellular private networks are interested in mission critical applications. If they werent they'd use Wi Fi. So we've been using Cvs, but <unk> can come and go also so it's extremely differentiating to have.
<unk> 53.
Asset and that spectrum, which we can guarantee the availability of two customer who wants a private network for mission critical applications. So that is underway now the timing of the deals and I saw this in my life at Qualcomm.
When you're introducing new technology to start date is a little hard to predict because it's when some customer is willing to press the button to go on that new technology, we're very happy with that.
Uh huh.
How are we been proceeding with customer trials.
But we don't have somebody who has pushed the button to say go and our desire and expectation is that that will happen within the.
For next year, but as I said, it's always difficult to know when people are adopting new technology exactly when the start date is going to be.
Okay. Thank you and then I just have one final question.
Given.
That guidance excludes any potential spectrum licensing revenue why is there a $50 million range.
Quarterly revenue to what would be $44 million of $59 million.
Alright, Rebecca.
Yes sure Paul Thanks for the question, Mike So the range as we've talked about before is repeated the variability in our revenue predominantly.
We do not have a fixed revenue source bears equipment sale timing or seasonality.
Variable component.
Ft contracts that may in certain quarters as we've seen in the past three quarters.
Feed.
Kind of a core element of that fee arrangement and the <unk>.
I mean of the IP.
I can see your milestone completion dates of our bonus achievement Dave.
And it's just unknown.
Very precise.
We've closed the gap throughout the year.
And now it's at a range that we feel like is appropriate given the balance of the year.
Okay. Rebecca just maybe just a follow on I mean, even if there were zero equipment sales and service revenue would have to drop.
Pretty drastic really get down to just 44 million for the quarter.
What.
What would have to happen.
Sure.
And that.
Somewhat Jack loaded scenario.
Well I think youre, probably looking at a run rate and yes, I mean, if you take our revenue.
Year to date through September divided by $9 12 that gets you to that answer but as we've said before there is.
Variable component nonrecurring component, let's say in the first nine months and the nature of some of those items are necessarily expected to recur in the fourth quarter right and so after you make those kinds of adjustments.
It is perceivable that we do see a decline in fourth quarter revenue right from the first nine months. So it is just allowing for some of that variability that is inherent in our service revenue.
Okay. Thank you very much.
Youre welcome.
As a reminder, if you'd like to ask a question. Please press star one one on your phone.
One moment for our next question.
And our next question comes from George Sutton with Craig Hallum Capital.
Thank you.
Paul You mentioned, you joined global Saar, because it fits with your vision of where connectivity is headed I wondered if you could put that in the context of.
More of what you mean is that a directed device statement is that a satellite plus terrestrial connectivity statement just curious what you meant by that.
Yes.
We're excited by the combination of space assets and the terrestrial and some of the opportunities that we see on the terrestrial side, which we were focused on at XCOM labs can.
Can be enhanced by the the opportunities to have space based tracking.
So logistics and transportation is a great example of that.
So that's that's what I what I was.
And to say, it's both about the private network and the convergence between satellite and terrestrial networks.
Got you.
Could you give us an update on where the two way device sits in terms of potential beta customers. When you might expect to have general availability there.
Yes, we don't have an update on that at this point, but that process is underway in the development of that technology is underway and that's one of the things that had been highly focused on and as I came in with.
Some other engineering resources from Exxon Labs is to review the those projects as well. So we don't have an update on that at this point.
Okay. Thank you.
One moment for our next question.
Our next question comes from Jo Malone with light shed.
Hi, Paul its actually Walt Piecyk from widespread.
Hey, Walt.
Hey, How's it going.
Last 30 years has been clear.
Clearly dramatic change in the wireless industry, you've been kind of right along there.
A key guy in terms of affecting some of that change I'm just curious in terms of spin.
Specifically this direct device market like what is.
The end game here what is that.
The ultimate.
Market opportunity.
In terms of functionality, given what we're seeing with Leo and some of the other technology.
It has existed what are we going to be capable of doing you can put a timeframe on it if you want but just.
Where are we going to get to and it would be great. If you gave a timeframe as does that happen in the next five years 10 years, because it seems like a lot of people have.
Perhaps undersized the functionality that can that can be accomplished and obviously that the revenue that they can fall off of that.
Yes, I think theres a lot of expectation that.
More and more traffic will go to space based technologies.
That was the original idea of Globalstar, obviously way back when and then as cellular technologies sort of rolled out across the world that that market became.
More and more of a niche market. The question is and Theres a lot of people focused on direct to device.
And may be pitching it as if the.
That's going to be the main way that people get access I don't necessarily believe that but there's certainly plenty of places in the world, where even when you have cellular coverage.
Youre not in coverage Youre in an area that says that has coverage back for whatever reason yipe shadowing or are there. Other reasons why you don't have access.
I think the satellite technologies can be good for that kind of an infill as well as obviously for just providing geographical coverage. We have cellular networks at very great pop population coverage, but there's plenty of parts of the world, where we don't have geographical coverage. Nevertheless in that we had an omni tracks at Qualcomm was even when you.
We had a satellite system for long haul trucks there.
And even the main roads. They started out you didnt have a lot of coverage, but by the end that business moved pretty much the terrestrial cellular or satellite system didn't provide enough.
Incremental value. So these things where people are saying that youre going to have a lot of the traffic going over satellite that I don't necessarily believe at this point, but I do believe that and we're already seeing that director device is there. It has excellent use cases already and people will continue to.
And improved functionality there so that.
It can even get to the point, where we might do cellular himself.
I happen to live in a metro market.
Far out of it.
Yes lots of gaps of coverage based on what I've heard telco say in terms of their capex plans and what my neighbors are trying to do to hold back any type of development I don't think we're ever going to see coverage on certain locations. So.
I can understand I think the initial target in terms of messaging will I will.
Be able in these locations to get more than just messaging and hence obviously expand that revenue opportunity is that yes.
Reasonable roadmap.
Yes.
So I agree with you it's cellular infill sorts of areas, where you might be in what would normally be coverage of our network, but you don't actually have coverage for whatever reason.
So, yes, and then in terms of being able to do voice.
For sure. The Globalstar system. Originally was set up to do voice. The question is how much space resources required per call that you're that you.
Connecting as you're connected at higher and higher data rates now voice, we can do over fairly low data rates, but that isn't really what people are using their phones for these cases people are using their phones for things that consume.
Lot more bandwidth and bandwidth from space right now is.
Relatively expensive to provide.
And so.
As we know people are looking to build these mega constellations that are obviously lived through some of that with with one web as well as well and then you see.
People that are providing high speed right now are providing it using very large antennas. So questionnaires.
What's the affordability of that and what's the viability of that for mobile use and so on and so forth. So.
These things are going to play out over the next few years will understand those better and better but I would just say that it takes a lot of space resources to serve a phone at high bandwidth high throughput and so so that's just going to that.
That will turn into cost and then I would believe that operators will make those cost tradeoffs versus whether it's better to build out.
Hi.
Terrestrial based device or whether its better to connect to a satellite when that when those services become more widespread.
So on that last point, assuming that they can get a return on what the cost is to pay.
Constellation for that capacity, obviously, they're they're charging their customers more every year everyone's guiding for higher ARPA.
If you need that capacity.
Is the end game here, one constellation or does that mean that there's going to be multiple constellations that are going to have to service the demand that could exist again, assuming that the cost of that capacity.
Works for the operator, and again I would look at that in the context of the value of that picture then I'm uploading in that location.
In my town, where I can't get anything right now is significantly higher than.
Whatever data cost me in the areas, where I do have coverage given that the operators doesn't seemingly ever going to get any coverage there because either my neighbor or their own Capex plan.
So I guess the root question areas.
Ken one constellation is there going to be a one winner in this is there going to be two three like what is the end game in terms of number of constellations.
That can service that ultimate demand.
Yes, I think look there's plenty of.
Companies that are trying to compete in this mega constellations space, obviously theres one thats.
Providing fixed wireless access right now.
Yes, I think people are going to try for it. The question is and as we've seen in the past that.
Whether the economics actually work out and that is remains to be proven because kind of goes to what you said, which is what incremental value as that created for a consumer or an enterprise to be willing to pay the cost of providing that kind of capability to our space.
Okay.
System, what we've been focused on at Globalstar is.
The low end of the market like what can we do that's cheap and ubiquitous very widespread conserve a lot of users in and one of the ways that serving a lot of users because users don't necessarily need to use the system. All the time and so that just providing that connectivity not necessarily bad.
The throughput, but the connectivity is what's important so that information can get back and then if you need to focus in on some given device and get more data out of it that would be kind of the next step of it so.
So in summary, I think it's going to depend on consumer willingness to pay for.
Having very high data rate connections through a satellite.
Connection and that I think remains to be seen.
So just one last question on that.
Do you foresee that being achieved through.
The terrestrial spectrum being placed in satellites.
The stuff that's already in the cell phones or the satellite spectrum being better utilized in the devices themselves.
I mean, it depends on the frequency band I mean, obviously globalstar has a good frequency band for mobile devices. Some.
Some of the other ones are a little harder but.
So I think most of what you've seen.
<unk> has been some combination, but it's been low band spectrum. Some people are trying.
Spectrum Thats already been licensed for cellular technology and others like us are using spectrum that was allocated for satellite. So it's not really what the license regime is so much as with the bands are and how conducive.
T mobile us.
Which is which prefers low band is what youre, saying.
Yes, I mean, the bands where we are seeing.
Quite good.
Understood. Thank you very much for the multiple questions.
Sure I appreciate the questions.
Okay.
I am showing no further questions at this time I would now like to turn it back to Paul for closing remarks.
Great. Thanks, everybody for joining us and for the great questions and the interest in global Saar.
Like I said, there's a lot underway at globalstar right now.
We're working on the on the new satellites and we're working on a new new products and expanding the capabilities of the band 53.
And obviously, we've got a lot of work.
To build out new revenues, both in the Iot space and the private network space on our legacy systems in on it.
So.
So all the pillars of the company, we're excited by and I'm really happy to be here at Globalstar and also just wanted to thank all the team members at Globalstar for their hard work this quarter.
It's a great results. So thank you very much and look forward to talking to you at the next earnings call.
Thank you for your participation in today's conference. This does conclude the program you may now disconnect.
Okay.
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