Globalstar, Inc. (GSAT) today announced its financial results for the three-month period ended March 31, 2014.
FIRST QUARTER FINANCIAL REVIEW
Jay Monroe, Chairman and CEO of Globalstar, commented, "Globalstar continues to make progress on its operational and regulatory fronts. Duplex performance continues its resurgence as we start the first full year of quality two-way coverage after a construction and launch period of many years. We expect to accelerate this momentum as we enter the traditional higher selling season in the second and third quarters. Post quarter, listing the Company’s stock on the NYSE MKT was an important milestone as we enter the next stages of the Company’s turnaround. With regard to the regulatory proceeding before the FCC, we are now in the middle of the comment period with initial comments submitted earlier this week and reply comments due in less than one month. We appreciate the support of the many parties that filed comments in favor of the FCC’s proposed rules, and we look forward to working with the Commission to ensure that its proposed rules are adopted this year.”
Revenue
Revenue was $20.5 million for the first quarter of 2014 compared to $19.3 million for the first quarter of 2013, an increase of 6%, which was due to increases in both service revenue and subscriber equipment sales revenue.
Service revenue was $16.2 million for the first quarter of 2014 compared to $15.4 million for the first quarter of 2013, an increase of 6%. The primary driver for this increase was a 21% increase in Duplex revenue. The growth in Duplex service revenue was driven by improved network performance leading to higher minutes of use and an increase in the number of revenue-generating subscribers compared to the first quarter of 2013. Consistent with plans previously disclosed, the Company deactivated approximately 26,000 suspended or non-paying Duplex subscribers during the first quarter of 2014. These deactivations give a clearer picture of active subscribers and ARPU. Deactivating these subscribers increased Duplex ARPU, as most were not producing revenue. The growth in service revenue, coupled with the decrease in average subscribers, contributed to the increase in reported Duplex ARPU. Adjusting for the deactivation of the 26,000 subscribers in both quarters, Duplex ARPU increased 20% in the first quarter of 2014 over the comparable prior year period.
Service revenue for both SPOT and Simplex during the first quarter of 2014 remained relatively flat compared to the first quarter 2013. The increase in Duplex service revenue was offset partially by decreases in other service revenue. Other service revenue decreased to $1.2 million for the first quarter of 2014 compared to $1.4 million for the first quarter of 2013, a decrease of 15%. This decrease was due to a decline in revenue generated from non-core operations.
Subscriber equipment sales revenue was $4.3 million in the first quarter of 2014, an increase of 9% from the first quarter of 2013. Duplex equipment sales revenue increased nearly 22% from the first quarter of 2013, which was driven primarily by the continued success of the SPOT Global Phone. SPOT equipment sales revenue increased 54%, or $0.5 million, due to sales of SPOT Gen 3″ and the newly launched SPOT Trace. Comparing the first quarter of 2014 to the same period in 2013, commercial Simplex equipment sales revenue decreased $0.3 million.
Net Loss
Net loss increased during the first quarter of 2014 reflecting the impact of substantial non-cash charges resulting from an increase in the value of the Company’s derivative instruments, which was driven primarily by a 50% increase in the Company’s stock price during the first quarter of 2014. The Company reported a net loss of $250.5 million for the first quarter of 2014, driven almost entirely from non-cash sources, compared to $25.1 million for the first quarter of 2013. The increased net loss was due also to a loss on extinguishment of debt, which was driven by the value of the equity issued in connection with note conversions during the first quarter of 2014. Higher interest and depreciation expense also contributed to the increase in net loss.
Adjusted EBITDA
Adjusted EBITDA was $3.8 million for the first quarter of 2014 compared to $2.5 million in the first quarter of 2013, an increase of 54%. This increase was due to a $1.2 million increase in revenue coupled with a $0.1 million decrease in total operating expenses (excluding EBITDA adjustments). Adjusted EBITDA growth was primarily driven by substantial increases in our high margin Duplex service revenue and in SPOT equipment revenue. The increase in Duplex service revenue was due to a combination of increased usage and the incremental service revenue from the migration to higher priced service plans across the Duplex subscriber base.
