Q4 2023 Globalstar Inc Earnings Call
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Okay.
Good day and thank you for standing by welcome to the Globalstar Q4, 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, Paul Jacobs CEO. Please go ahead.
Thank you good morning, everyone and thanks for joining us today.
Before we begin please note that today's call contains forward looking statements titled tended to fall within the Safe Harbor provided under the securities laws.
Factors that could cause results to differ materially are described in the forward looking statements and risk factors section.
We started that SEC filing.
Including in the annual report on Form 10-K for the financial year, ending 2023, which we will file in due course following this call as well as this mornings earnings release.
Before we review our financial performance, some operational highlights and our outlook I'd like to recognize globalstar as employees and partners.
In 2020.
We had a very successful year. So thanks to all of you.
Last time, we spoke I was barely 50 days in the job.
Since then I've gotten to know the organization and the expertise that was already in place a global Saar and now augmented by axon labs person, it's quite impressive.
Or each group has its own areas of expertise the cross fertilization of knowledge transfer between the team is already bearing fruit with new innovations that will bring.
In our existing businesses and create new ones.
This talent combined with our execution and improved financial performance.
To fund growth initiatives, which we expect to create a virtuous cycle of innovation and differentiation.
I'm excited to say that the cycle has started and we are already gaining traction on a number of our new initiatives.
Since my arrival, we already have a new partnership with the government services company, a new terrestrial spectrum lease.
First commercial order from a major U S peak hour for multiple ex Com ran wireless.
Even at this early stage.
Initial victories are responsible for roughly $5 million of new revenue in 2024.
And we look forward to nurturing these green shoots into new pillars of growth.
The magnitude of the impact with much greater in the years ahead.
On 2023 was a successful and transformative year I'm, even more excited about 2020 for globalstar.
I spent the last few months developing our strategic goal I'd like to spend a few minutes sharing with you my views around each part.
So let's start with wholesale satellite.
Our decades long experience in running satellite constellation.
For us in an excellent position with our systems continuing to operate well.
And we are excited about the new satellites that we have under construction to enhance our constellation.
More satellites means more power on orbit that we can use to create more capacity.
The total addressable market for your capacity increase.
It is driven by demand for our host.
New consumer capabilities as well as the creativity.
And the ecosystem of Iot applications, leveraging our expensive in your bedroom and satellite connectivity.
Our advantages in broadband wholesale connectivity to our network architecture and our stockpile.
The flexibility of our benchmark satellites global LNR spans background and worldwide network of gateways enable us to deploy new services to existing systems.
Many other industry players have to alpha launch expensive new satellite to enable new services.
Or in some cases simply been unable to make the jump to new technologies.
Might be a bit at the early days of Qualcomm and launched our omni Trax business using existing satellite transponders, while our competitors have been quite tremendous capex to launch new satellites.
Yeah.
Of course, we never underestimate our competition and that's what we're trying to work with partners on applications, where we can create differentiation.
And today, we're excited to share with you.
With the new government services company, who is expected to utilize our satellite network for a mission critical service.
This agreement has been over five years in the making.
And leverages, our constellation in new and innovative.
Following a one year proof of concept phase.
Which began this month the agreement contains minimum revenue.
S trade into a minimum of $20 million annualized during the final year of its five year term with additional growth opportunities through a revenue share component. So.
So we feel confident that we can deal with that.
Quickly and grow our wholesale business.
Turning to our legacy products.
Same time driven.
Significant emphasis on supporting our wholesale partners, we are operating and investing in our legacy consumer businesses and they continue to save lives and provide peace of mind with consumers worldwide.
Creating sustainable competitive differentiation over the long term and something our teams continue to aspire to.
As our existing one way in two ways service platforms continue to serve our customers, we are evaluating or developing multiple future technologies for services over our network by GNC.
I would remind you again that unlike most of our competition are bent pipe architecture to upgrade.
Upgrade technologies on the ground without the economic and environmental impact of having a big satellites.
Satellites. This fundamental flexibility will allow us to be ready to move more quickly to respond to changes in the market.
Next commercial Iot.
With a record year for our commercial Iot business in 2020 with revenues up over 17%.
Today, the average revenue per commercial Iot subscriber much lower than our consumer businesses, while we're looking at ways to both scale more easily and create higher value solutions. The total addressable market or Tam for commercial Iot is very different and possibly even bigger than consumer according to GSM intelligence.
EBIT is expected to grow to $10 billion annually by 2035, So we see there's an opportunity here.
Before coming to Globalstar I underestimated the benefits of our one way system priority. It turns out that there are benefits and device cost size and power of the open up opportunities that might not otherwise be served.
One of these devices is the genes that are offered in partnership with global satellite engineering or GSE.
The small rugged low cost tracking device enabled value added resellers and customers to maximize the value.
Boucher tool tracking software tools by increasing the number of comparable assets in near real time.
We can also leverage the same efforts that we have underway on these new technologies to serve our consumer customers and to benefit our commercial Iot customers.
Pressure of wireless and the band 53, IGN and ex comp we give you an update on those.
As I mentioned on our last call. We were reviewing the band 53, each restaurant initiatives that were underway prior to my right with a focus on trying to make sure that we use our spectrum assets in a way that gives us.
Most optionality for the future.
During 2023 is supported deployment opportunity our band 53 spectrum through our partnership with Nokia.
The end user for this multiyear deployment as yet to deploy the network, but due to the mission critical nature of their operations and a scarcity of available assets licensed spectrum. They are paying to reserve their band and their designated geography.
Deal is expected to convert into a long term lease arrangements on deployment.
As we announced last week, we have received the first customer order for delivery of multiple <unk> systems.
Initial systems were sold because of the game changing performance advantage of our technology over competing more traditional system.
Have to congratulate our extremely talented development team I'm really proud of it.
Third believes and perseverance in addition to world class talent and sheer hard work.
Mentioned, having to deal with the pandemic.
One reason, we can succeed was by leveraging the open ran architecture to enable us to focus our main efforts on enforcement system, where innovations can make the most impact.
I may be biased, but I think it's fair to say that this deal represents the most innovative achievement that has been enabled by open ramp of wireless industry in the U S. Government initiative that until now have yet to deliver a fundamental advance in wireless technology.
This agreement validates how valuable the Exxon ran wireless technology is for demanding applications, such as disappointment, which supports warehouse automation situations, where the reliability of the communications channel.
Very complex and continually changing environment is mission critical.
The initial million and a half dollar customer orders from a large U S based retailer is it.
Spectrum to be fulfilled largely in 2024 and this opportunity has the potential for a material commercial scale.
The systems currently run on CBR spectrum due to the development work prior to last year's Globalstar.
We look forward to the additional differentiation of band 53 support in our <unk> portfolio.
So we have a lot going on at Globalstar.
Great 2023 of our existing initiatives continue to bear fruit.
And our new initiatives are gaining real traction.
So stay tuned.
Now I'd like to hand, it over to Rebecca to walk through the financial results.
Thank you Paul and good morning, everyone today, I'll recap and provide color on our 2020 for yourself in 2024.
To start last year was an exceptional year for globalstar in so many respects.
From a financial perspective, we hit records for almost every case.
John.
We have had many first over the last few quarters starting in late 2022, when we held our first Investor Conference and provided financial guidance for the Investor and analyst community.
We have experienced a significant increase from Deutsche Bank.
Anthony.
And we thank you all for your support.
Now turning to a review of our financial performance.
Airport a total revenue.
For.
Shannon fourth quarter, bringing our total revenue.
On a full year basis, and 51% increase over the prior year and reaching a net claims.
The revenue increase is due primarily to higher wholesale.
Service revenue following advisory service.
Excellent. Thank you.
Our subscriber revenue story continues.
Commercial Iot service revenue.
17% in the fourth quarter and full year periods.
Generally equal, Greg and Pat subscribers and are now and reaching a record high service revenue for the year.
We have experienced steady growth in Iot.
Drivers with great subscriber activations up 8% over the last 12 months.
Our to increase quarterly and full year basis as compared to 2022.
Favorable mix of earnings among our subscribers as more customers elected unlimited plans otherwise have higher usage.
We also continue to pursue.
Brian a sales opportunity NIH.
And are working to expand the capabilities of our devices.
The context for our retailers.
Right.
Beyond wholesale subscriber surfaces are 2020 revenue also reflected recognition for terrestrial networks.
While not material from a financial perspective trying to raise money.
Chuck has significant presidential barrier.
Look forward to continuing to support our customer and our plan.
It's critical.
Moving to other areas of our financial performance.
The increase in net loss was due primarily to the impairment of long lived assets.
Sure.
Decrease this also impacted our capital structure changes during the last few years, which resulted in the market.
Englishman have debt and issuance of equity in their respective periods.
After adjusting for these non cash items and other nonrecurring items that aren't representative of our core operating business adjusted EBITDA was $117 million.
Sure.
Great.
Eric.
The margin of 15%.
Its margin is generally in line with our guidance.
Illustrates the significant improvement in our profitability compared to 2022.
Each period our EBA.
<unk> margin was 39%.
With our license of the ex Comm technology, our operating cost base.
Great.
Enrichment or on target right.
We believe that our assets, particularly the NRG is enabled by the SEC.
And generate profitability beyond our current revenue sources.
A critical part exploiting this potentially investing in our product technology.
With that kind of a short term margin impact over time, we believe will drive new and complimentary revenue sources, making the investment.
From a balance sheet perspective, we ended the year with cash.
One 7 million or 77% year over year increase.
And net leverage of just under three times, reflecting our favorable capital structure. Following the macro changes announced early last year.
Our record financial performance and balance sheet strength are giving us the ability to invest in new initiatives to drive take care.
Switching to our financial outlook our guidance for 2024 includes total revenue between 220 <unk> hundred.
$150 million.
And adjusted EBITDA margin of approximately 60%.
Yes.
This forecast reflects our confidence in our ability to continue to execute this plan, while positioning the company for future growth.
In conclusion, we have fundamentally changed the company.
Corners, and we continue to build on that.
Strategic business.
Elaborates the financial health of our company.
The license fee.
<unk> Com technology on the executive changes at <unk>.
It builds on the transformative changes we launched in 2022.
Our key initiatives for 2024.
Designed to then support.
And our revenue streams, while also exploiting the company's assets and new and innovative ways.
It's truly engaged and dedicated team of technology.
Innovation.
Thank you Shannon.
With that I will now turn the call back to the operator for Q&A.
Thank you at this time, we will conduct a question and answer session. As a reminder to ask a question you will need to press star one on your telephone and wait for your name to be announced.
To withdraw your question. Please press star one again.
Please stand by while we compile the Q&A roster.
And our first question comes from the line of bike Crawford of B Riley Securities. Your line is now open.
Thank you.
We could start with this initial deployment for the major U S based retailer.
So.
Back in 2022 here you talked about.
<unk> I think youre exactly with spectrum that was super great to have but you needed anchor spectrum to really make that that worked so well.
Yes.
<unk> kind of alluded to band 53, potentially becoming part of this deployment in the future can you just elaborate on that and what that would entail for globalstar.
Yes.
It's not a big technical lift.
Really just that we have to get the radio unit.
Multi band.
And.
Werent developing that yet.
Our next Com labs, so we have.
<unk> made that initiative for this year.
And so we'll have that capability and support for the band. So it's super important because CVA RF like I said it is great, but when you have a mission critical application, where the communications link can't go down you don't want to be at the Mercy of.
SaaS telling you.
Server, telling you that.
To move your band or something while you're robots driving around so knowing that we have the band 53 anchor is a great opportunity.
As we bring that capability on board I'm sure we'll be in a good position.
<unk> private network customers.
And then.
How.
How would you sell the spectrum.
And broadly people look as kind of the.
Back of the envelope.
Some value mechanism as you know.
The value per megahertz pop, but when you're talking about.
<unk> targeted deployment.
But.
Analogy kind of breaks down a little bit so how should we think about the value.
Of your spectrum and the value that you will be creating funding of terrestrial spectrum.
Yes, I think there's multiple ways that we will be able to monetize and then there are cases, where it will be a more broad.
Deployment across a large geography the.
The one that we're talking about.
Nokia is very targeted.
And probably not a lot of pumps in that areas because it's an application for a very specific geographies. So the way that we end up doing it for particular customers I think will you're subject to negotiation, but there are many different ways that we can do it whether it's.
You see it's a fee based on the number.
Base stations with fee based on time.
There is a number of ways that it can be done it. So we don't have we're.
We're not locked into any one particular way and I think that we will show the value of having that spectrum.
And the fact that its also a competitive differentiator that brings one other.
Other sales like the ex Com brand sales that we have so.
It's not just about.
The spectrum, but it's the spectrum plus other capabilities that we can bring to bear on that I think gets us really excited about the opportunity to create a lot of value.
Maybe if I just try it one more time on that.
<unk>.
$1 5 billion of hardware sales for a couple of warehouses is one thing, but like what is there any way to tell.
Yeah.
Size, the opportunity with that customer or overall.
Yes that customer has a lot of sites.
This one 5 million, obviously is not a large number it's just was intended to say that.
We are making real traction here. These are just a very very initial system deployment.
That's why that number is what it is but of course.
That's not our aspiration to.
To build a large business around us.
And.
Having the band 53 as part of the portfolio, it's going to be a significant competitive differentiator, but we won this deal without having that I mean, even without that the game changing performance that we have.
From the technology that we licensed over from Exxon Labs.
That was it really showed itself really worked better than the competitor systems. So.
There is a synergy between the two.
Having the spectrum and having this incredible technology and that was really the industrial logic behind the deal that we did a combination of the technology.
With the spectrum that globalstar has.
Okay. Thank you I'll hop out just to just two quick financial questions.
One as if.
Spectrum.
Lease revenue become significant how are you going to report that and then two.
Just what.
The outsized stock comp in Q4, how should we think about stock comp.
2024 and kind of.
S. G N a thank you.
Sure Mike Thanks.
Thanks for the question so on your first.
How we report that I assume you mean, how old they are reflected in our financial statements.
At this point.
It's not material that will be in other service revenues.
And then it makes sense it becomes material to break out on its own line item that's required under <unk>.
In your presentation.
Is that answered your question totally out.
The stock comp question.
Yes.
Okay great.
Stock comp is elevated in 2023, we broke it out.
These are set of financial statements to see kind of that analysis.
David recorded in G&A in that area, but it's an important non cash and it is like I said elevated in 2023 and will be for the next two years as we recognize the compensation cost associated with the restricted stock units.
Certain economic decadent.
Performance base as you know tied to stock price.
The way the accounting works is that that will be recognized over kind of a weighted average during a period.
Okay. Thank you.
Okay.
Alright. Thank you for your question.
As a reminder to ask a question you will need to press star one on one on your telephone.
One moment for our next question.
Our next question comes from the line of Walter Piecyk of flight should partners. Your line is now open.
Thanks.
Paul on the terrestrial thing.
Sundar using Nokia radio is not.
About the ex comm stuff or is there any ex comm equipment in there.
Also I know you've termed it as mission critical.
<unk>.
Can you give any more color in terms of.
Type of bandwidth is getting delivered are you using the full depth and that limited geographic area, where this particular you said just happening.
So when you're talking about the terrestrial spectrum lease yet.
As we were doing that through Nokia Nokia will be deploying there.
Thinking about the retailer Thats our stock.
The Nokia one Nokia one yes.
No just customer.
And then on the mission critical side, yes, we're not we haven't.
Is it is not a bandwidth.
Constrained environment, So we're not.
Pushing for massive throughput.
Definitely the case, where there can be uplink data video coming off the robots.
And there's lots of them so that could end up being a future.
Way that we would expand the system.
More and more capacity.
She.
Benefit of it is actually the fact that it's super reliable that there was no hand off region.
In an environment, where.
It's in our metals three dimensional metal structure with metal robots, securing stuff around so the RF environment is quite complex and changing all the time and so our system handles that extremely well.
Really doesn't grow that much in robots for moving in and out of things like Chillers in freezers.
<unk> structures.
That's where the technology is shy of a lot. So we're not as focused on.
<unk>.
Petrol efficiency, there, although like I said, I mean in the future as more and more data at <unk> coming off the robots, then we will start to push.
Throughput even higher.
Got it and then.
You talked about the network services agreement that you were that you announced today.
$20 million minimum fifth year significant upside.
Probably a dumb question, but given kind of the allocation of capacity within the constellation, including the new satellites are going up.
The first customer.
If 20, if it ends up being a huge success 20 turns into whatever 100.
Is there any incremental capex satellites whatever associated with growing.
That network services agreement to larger numbers.
No. It's the way that it's set up.
It can be served from the satellite constellation and the way that we haven't.
Ask me that.
So we're not we're not pushing the limits on capacity and we're not pushing the limits on the on the system and it's great as a perfect example of how we've been pipe architecture and the constellation we have we can launch new services that are super impactful.
Without having to make big Capex.
So really nice example.
The four pillars of value wholesale legacy Iot terrestrial 10 years from now five years from now I'll pick a time.
Are they equally weighted or you just like one of these may be huge just don't now or is there a sense right now having been there a while which is your largest opportunity obviously things can change over the upcoming years, but what are you most optimistic about among those four pillars.
I'm pretty excited about obviously the threshold side, that's where we came from so super excited about that opportunity both on the leasing and the and the.
Equipment side and services side, but the other existing businesses.
Commercial Iot we've seen good growth on it we have ideas of how we can make that.
Better kind of work our way up the stack to provide solutions.
It's something that we've done before you probably remember we did a similar kind of path and.
That omni tracks, where we went from selling bits to selling services and solution and you can generate significant value Atlantis.
We're excited about that and there's lots of new technologies, we can apply.
To create value there so I think that's going to be great.
The company has got a great platform now our wholesale business has been.
<unk> formative for the company.
Created a great platform and I think we will continue to grow there but.
What we've shown but I think the one that scaled a lot is the one where theres just so many devices.
Iot business, where we can where we can drive.
So it's a business and then I can sense. The spectrum is a super valuable and we're not going to make.
Good value out of that one two so those are I think areas like.
The legacy business obviously.
We've been working on that for a long time it continues to truck along and save People's lives.
We are.
Vesting some image, but I would say that's not the place where I'm the most focused.
Just going back to terrestrial I might be Mr. Memory in this but I think you have the opportunity perhaps to get additional terrestrial rights outside of.
The U S and correct me, if I'm wrong, but I guess the question, though if that's true.
These trials not trials with these initial deployments I guess provide an opportunity to convince global regulators to.
Perhaps move that along or is that a completely separate process.
Yes.
It's a great point that if you can show proof points to why having a terrestrial rights are valuable and will create new economic opportunity regulators are always interested in that kind of.
Outcome, so I think Thats Dan.
Our proof points is super valuable.
And then just a last question the FCC came out.
Documents about.
Whatever sat to ground.
It looks like Theres, some exclusion zones as everyone certainly would've expected in terms of using existing cellular spectrum. Just any thoughts you have on on at least the original or the initial proposal by the FCC in that in that market.
On the on the using the terrestrial spectrum.
Using the.
The cellular license spectrum.
Yes, Eli and Asps and others would hope to use I guess.
Yes, I mean, obviously.
Going to provide new services.
Don.
And so we're watching that and obviously you have great relationships with the seller.
Cellular operator, so we've talked a lot about.
Where the opportunities are and also what the competitive.
Responses are going to be but one of the one of the things that we liked the most is really shows the support of.
Using spectrum and satellites to go direct to devices obviously.
And we've been in the forefront of.
Doing that so far so.
Yes, I think it's going to be interesting to see how that plays out obviously, if youre doing network around.
Mobile network operators spectrum, you got to go around the world.
Basically federate, all those different things, whereas one nice thing is with globalstar, we havent spectrum around the world and it's.
It's kind of a one stop shop so.
There's definitely pluses and minuses to it and obviously them go in and talk to the FCC. While they are also interested in mobile networks spectrum. There is a lot of support already for the existing.
Mobile satellite service operators as well.
See that theres going to be a good competition set up in the marketplace.
And Thats, what <unk>, all about creating great opportunities for innovators to do well so we expect to innovate.
Roger that thank you.
Yes.
Alright, thank you.
I'm showing no further questions at this time I would now like to turn it back to Paul Jacobs for closing remarks.
Thanks, Thanks, everybody and once again.
Great 2023.
Said, it really sets us up well for the future and have the company in such good position financials, better we're looking forward to launching new satellites as well.
Yes, we are investing in some new initiatives.
Hopefully you can see that.
Artful about that and those new initiatives are already bearing fruit, so along with where we've been going on the existing initiatives.
B is built to date, we're excited about what's coming for the future and we look forward to sharing more about that in the coming.
Weeks and months and years ahead. So thanks, everybody for your support and we look forward to talking to you.
Next time.
Alright. Thank you for your participation in today's conference. This does conclude the program you may now disconnect.
Okay.
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Yeah.
Okay.
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