Globalstar Officials Remain Optimistic Despite Rocky Second Quarter

Globalstar saw a rocky second quarter including declining revenues and a net loss increase of $27.5 million. Image credit: Globalstar

[Satellite TODAY 08-15-13] Globalstar reported a decrease in revenue and an increase of net loss for the second quarter of 2013. Revenue during this period was $19.8 million compared to $20.0 million for the previous year, and net loss increased from $27.5 million in 2012 to $126.3 million in the second quarter of 2013, according to Rebecca Clary, Globalstar’s chief accounting officer and corporate controller.

“This [loss] increase was driven by non-cash items, including a $47 million loss on the extinguishment of debt in connection with the refinancing of the 5.75 note announced in May as well as the $50 million fluctuation and derivative valuation adjustments from a gain in the second quarter of 2012 to a loss in the second quarter of 2013,” Clary said.

Clary also noted that equipment revenue decreased $1.4 million to $4.4 million over the same Q2 period and total revenue was $19.8 million in the second quarter of 2013, compared to $20 million in the second quarter of 2012, she said.

Despite the negative numbers, Globalstar officials remain optimistic. “We expect equipment sales to rebound with the launch of SPOT Gen 3 and other products over the coming months,” Clary said. She also noted that SPOT and Simplex equipment revenue during the second quarter of 2012 was elevated due to the several large sales that did not recur in 2013, including the sale of 6,000 SPOT units to the United States Forest Service. But even so, she said subscriber equipment sales were only at $4.4 million for the second quarter of 2013, as compared to $5.8 million for the second quarter of 2012.

James Monroe, Globalstar’s CEO, is also confident that his company’s new products, including the SPOT global phone, which is awaiting FCC approval, will serve as a boon to Globalstar’s bottom line. He said service restoration and new product development were major drivers of growth during 2013’s second quarter. “On the enterprise customer front we are penetrating deeper into priority industry sectors like marine and oil and gas, educating existing users and new prospects. We plan to release the universal maritime kit, a feature-rich duplex device designed specifically as a cost effective solution for the marine market,” he said.

According to Globalstar officials, Duplex service coverage has continued to improve materially with the final satellite from Launch 4 (satellite) to be placed into service shortly. Duplex minutes of use increased 41 percent over the prior year Q2 period. Monroe pointed out that with three new satellites placed into service during the quarter, “network availability has improved materially which has not gone unnoticed by the marketplace.”

While Globalstar’s 2013 Q2 results were mixed, Monroe noted that demand in the United States for mobile spectrum is increasing, which is a positive indicator for the satellite industry. “Last year alone, mobile data traffic in the country increased 70 percent and will lead to a gap in spectrum availability in the very near future. … Those [users] in densely populated areas will continue to experience reduced coverage and speed and their dissatisfaction with this once great service will grow. Globalstar is uniquely positioned to offer an immediate solution to help relieve the industry’s issues,” he said.

Monroe is also optimistic since the company recently welcomed back a number of prominent law enforcement customers, including the New York Police Department (NYPD) and the Royal Canadian Mounted Police (RCMP). Monroe credits the return of these and other customers such as Disney, FedEx, Health Canada and Environmental Canada, to the development of new products and an increased confidence in Globalstar’s network reliability.