Globalstar Inc (GSAT)

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4th Q and annual results:

Globalstar Announces 2014 Fourth Quarter and Annual Results

Globalstar, Inc. (NYSE:GSAT) today announced its financial and operating results for the fourth quarter and year ended December 31, 2014.

Jay Monroe, Chairman and CEO of Globalstar, commented, "2014 represents an important year for Globalstar as it was the first full year of service restoration after the launch of our second-generation constellation. We have been able to not only gain market share in our core markets, but also invest and expand in additional territories including South and Central America and now Africa. Revenue for the year grew 9% while Adjusted EBITDA increased 47%. Our core business is on the right growth path as we expand our international footprint, introduce new consumer and enterprise-focused products and materially upgrade our service offerings with the near-term completion of our next generation ground infrastructure. We also are focused on concluding the Federal Communications Commission's approval process for our spectrum in the 2.4 GHz band. We look forward to the successful completion of the proceeding, which will provide the nation with an additional 22 MHz of terrestrial spectrum for mobile broadband."

Revenue

Revenue for the fourth quarter of 2014 was $22.1 million compared to $21.0 million for the fourth quarter of 2013, an increase of 5%, which was driven by increases in both service revenue and subscriber equipment revenue.

Service revenue was $17.2 million for the fourth quarter of 2014 compared to $16.8 million for the fourth quarter of 2013. The primary driver of this increase was growth in SPOT service revenue, which increased 7%. The growth in SPOT service revenue was due to an 8% increase in subscribers from December 31, 2013 to December 31, 2014. The increase in the SPOT subscriber base was driven predominantly by the market introduction of the SPOT Trace product in late 2013. Net quarterly subscriber additions increased 40% from approximately 13,600 to approximately 19,000. Fourth quarter 2014 service revenue growth also reflected both Duplex and Simplex revenue growth, which increased 2% and 14%, respectively, due primarily to increases in subscribers. The increases in Duplex, SPOT and Simplex service revenue were offset partially by a decrease in other service revenue. Driving the majority of the decrease in other service revenue for the fourth quarter of 2014 as compared to 2013 was a decrease in third-party revenue of $0.2 million, as well as a non-cash, out of period adjustment to revenue related to an international subsidiary of $0.4 million.

Subscriber equipment sales revenue was $4.9 million in the fourth quarter of 2014, an increase of 17% from the fourth quarter of 2013. Simplex equipment sales revenue, which was the largest contributor of the total increase, grew 48% due to higher priced units being sold in the fourth quarter of 2014 as compared to the same period in 2013. Also contributing to the total increase in equipment sales revenue was a 9% increase in SPOT equipment sales revenue.

Net Income (Loss)

Net income was $92.0 million for the fourth quarter of 2014 as compared to a net loss of $234.8 million for the fourth quarter of 2013. This fluctuation results primarily from the impact of non-cash gains in the fourth quarter of 2014 due to a decrease in the value of the Company's derivative liabilities. This decrease in value was driven primarily by the decrease in the Company's stock price during the fourth quarter of 2014. Conversely, the impact of non-cash losses during the fourth quarter of 2013 was due to an increase in the value of the Company's net derivative liabilities during the fourth quarter of 2013, which was driven primarily by the increase in the Company's stock price during the fourth quarter of 2013. The fourth quarter of 2014 was also favorably impacted by lower interest expense of $9.4 million as compared to $28.0 million in the 2013 quarter driven primarily by conversions of our 5% Notes during 2013 that did not recur in 2014. Depreciation expense declined 19% to $19.8 million in the fourth quarter of 2014 as compared to $24.5 million in the 2013 quarter due to the depreciable lives of certain first-generation assets coming to an end in 2014.

Offsetting these reductions in expenses was an $8.6 million increase in the reduction of carrying value of inventory from $5.8 million recorded during the fourth quarter of 2013 to $14.4 million during the fourth quarter of 2014. The inventory impairment charge recorded during the fourth quarter of 2014 related primarily to a reduction in the carrying value of Duplex phones, antennas, ancillary parts and car kit bases.

Adjusted EBITDA

Adjusted EBITDA for the three-month periods ended December 31, 2014 and 2013 was $3.8 million and $3.9 million, respectively. This decrease in Adjusted EBITDA was due to a $1.5 million increase in revenue offset by a $1.6 million increase in expenses (both excluding EBITDA adjustments). The increase in expenses in the fourth quarter of 2014 was driven primarily by the higher cost of subscriber equipment sales, which grew in line with equipment revenue. Additionally, a rebate program introduced during 2014 impacted revenue generated from Duplex equipment sales and increased subscriber acquisition costs.


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