Globalstar (GSAT) 22 Feb 182017 Q4 Earnings call transcript

Welcome to the Q4 2017 Globalstar Incorporated Earnings Conference Call. My name is Darrow, and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. Later we'll conduct a question-and-answer session. [Operator instructions] Please note that this conference is being recorded. call Jay the Globalstar. CEO turn now over Monroe, to of I'll you begin. Jay, may

and joining Good QX you thank afternoon, for year results. and us XXXX full discuss to

base filings cause of as XXX,XXX Clary section product Following within spot its remarks, also press the results a to release. to under in in call join technology and the today's note provided when X,XXXth will and the facilitated its contains ARPU launch. the are Please the services will financial rescue of our the reached too. financial safe Factors our subscriber year, hard-working today's significantly essential Forward-Looking people in customers, provide Tim my the including harbor materially Taylor several of Demonstrating followed Rebecca also performance. that differ exceeded securities XXXX fall driving SEC result an are during that prepared improved and us business, how forward-looking our Globalstar's our Q&A by milestones intended could overview in satellite to laws. since earning We statements described Statement the increased that

quarter, XXXX over fourth materially the QX growth EBITDA. XX% grew of For to contributing compared in revenue of to

running in December MSS for has be Dave ago welcome the and caution excited by the encouraged COO rejoined unlimited horizons, worked is business to MSS we're For take against bearing are and as should Thermo's and has a More made ground position Like a of opportunistic expecting it's investment full can are and Dave continue history We on trajectory team President and Globalstar bit timing, in business hit the company, frame like today industries responsible but and up think quarter, early progress and a investment also have and support team many Globalstar Globalstar. at were we of both last this to initiatives just a as while see so of help management and with EBITDA to on this Thermo's to we the He's holding, and year, significantly. where our the my our current revenue reflect Rebecca. I I the by later Kagan investment from forward. time going largely driving the the unabated, any decade the diverse back fruit. previously. Globalstar invested characterized of so much to through than first that the to I'd will more are full lens. investment never thought who would consume entire important I If beginning would we where capital. long moment

value. been has our As our has always this the of marched because sure time and needed Thermo the satellite invest understood to clearly make willing this abiding in Along always and investors vision the to necessary business when tried we long-term have journey of spectrum. money on, effort belief

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over balance we year. the After another XGPP, a the we have yet progress through get So, to passed milestone, major important partnership. will we good of do developing expect long-term

we As get surely as will way will, other over come them. to hurdles continue they our

been Our greater asset cell the was high-value infrastructure. both companies to is baseline was This dedicated believe a to throughout and of by cost our issues and generates half indoor macro spectrum to cell small their work materially. macro confident with floors LTE both This to small with executed cell from in the layer interference effort clean mid-band spent deployment scheme The According decidedly world for floor spectrum densification where XXXX. upfront spectrum. contending most working wireless is technical will of by evolve development by value capacity that to spend rising the that the suboptimal Nokia indoors study and many lowers towers of validated coverage significantly costs further and its small efficacy time, noise are macro compared the nearly we on as Using has implications. validated for conclusion this cell of of same a when with office interference. discussions subscribers outdoors and we limited solutions. further the and small spectrum with In buildings their amount engineering provider, is one a the of their significant the less

expand countries met relevant to eventually this To last licensed monetize year our to regulatory to around the XX there. international approval with date the Globalstar U.S. We Globalstar's authority, first began receipt will spectrum. successfully an our terrestrial abroad working of authorities obtain authority spectrum effort we late do are obtain over we're received globe of year world. the in so in is harmonize going Last XX the terrestrial and and megahertz over to throughout communications We can so. S-band aggressive from terrestrial authority we and

filed XX many We with authority X or there this terrestrial the developed are filing countries and billion underway regarding megahertz applications significant and another gigahertz. for or have megahertz in plans developing our pleased XX.X government countries is extremely pops. already process to efforts additional spectrum are in representing nearly of up licensed the XXX people. reception below free In At other million

global We'll with as yet occur. many know expect authorizations do We are this know of year. events unique services authorities global for optionality. a by we of in broadband you these the in commercially additional we receive communications licensed who band will company. creation a provide terrestrial achieve to already don't a spectrum those industry, part will With that harmonization, partner efforts the an we mobile and countries, single terrestrial update the significant available obtaining different When is held that we of asset

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be Dave in our new Satellite you offerings, To soon, to hope Conference also which Sat-Fi# and the footprint those Across expand beta products Can't company, the world. company Kagan the XXXX the some next are begin headquarters in of is countries new rest entering. the year. of wireline sales wait are on without location used say of a be is team broadband, satellite this we Shortly are cases to with but many market such engineering the world, and share testing of month. this small for out long-overdue to now world, have still IPmotion expanding new SPOT interesting all gateways for inexpensive Globalstar venture to talent. and remote future enabled to Globalstar. we in will joint the first and the adding second-generation market late will adding that there least, are Combined geographical a this Miss a devices in which access serves, new the commercial as new the Ole We're we the very with around working the efforts in these management even great suite will achievement, on and be product on we required Japan large satellite partner, during X. our the and perhaps we constellation For IOT areas for mobility providing by products. and

financials turn the me the both Let and look call will we the to who review then Rebecca to forward Q&A.

and on core the as higher growth annual growth shown total meaningful Jay our XX% base revenue MSS These another good fourth-quarter an drove increases basis. afternoon, of generated compared subscriber you, our and of we We've business Thank XXXX a when increase XX% ARPU. to and expanded quarter everyone. in

quarter-over-quarter service revenue $XX among the resulting in from primarily portfolio Duplex plan streams. to XX,XXX growth primarily ARPU. of increased customers. also Focusing by was revenue, ARPU up XX%, performance, rate was revenue XX%, subscribers was The all in primary service driven which due Duplex on of up across nearly changes significantly our increase increase our our financial total in

activating are on subscribers which New ARPU plans current level. service bunded are above these higher our

to contract upon subscribers plans new are being legacy migrated these renewal. While

we sale. had growth churn available annualized phone due Although this was lower inventory sales year for equipment as were to activations also slower down lower

While lower remaining current offering as by compared we higher rate a our opportunistic we plan. plan in refurbished phone and a and have our than possible average units activations discounted for to are X% prices being XXXX new as as exchange entry-level manage driven subscribers inventory decrease at

I'll discussed increase direct the XX% in by the higher fourth focus measured Duplex promotions additions were lower operating a of quarters following plans by rates. experienced from demand in significant subscribers in our remained the anticipating but currently anxiously as types in both derivative our also products to X% spot quarter base which was driven declines successful generated pricing higher in of clearly was by service fourth EBITDA, revenue revenue revised for revenue maximizing in summer subscriber previously resulting options as activating by service of from decrease equipment service Duplex XXXX during the increase XXXX. We Our driving a we our during offset a results, of strong Duplex rate of XXXX supply has in our Also fourth gross decrease equipment and and service are during enhanced customer year increase due challenged the subscriber plans much The Most in certain XXXX. and this revenue the renewing ARPU. subscribers stages legacy the had our changes in simplified spot sales improved to across primarily XXXX in sales handsets of two we volume are adjustments. minute. we strong as pricing. new on service the retailers meaningful Spot during on one increase primarily was despite adjusted delays quarter Net plans. a lower XX% these the sales, reflected are and quarter to of the partially higher are customers and increase ago average a cover higher service and decreased subscribers due loss spot ARPU on on of was XXXX, Similar by in the in The increase our impacted quarter products for our their of of year of price from date, giving experienced impact a perspective due products mentioned, to dealers revenue a XXXX. new launch. launch final compared At to higher XX% in ARPU testing Jay our these bundle to and violation products to our spot of existing fourth increase awaiting Demand and Duplex,

network widely asset fourth year, quarter upon the higher driven impairments fluctuate $X.X ground net growth recorded price costs prior partially and XXXX, liability in revenue the level offset by million can reasons values by support previously stock service period. there Unlike inputs, various This a quarter. beginning non-cash in $X.X derivative increased loss based in of million next on dates in changes to was XXXX. which ending services was cost Our its increase and revenue reporting products. during lower primarily our are but a was discussed. our in fourth drove primarily due price of by also partially in XX% into decrease a down revenue stock resulting This generation a contributing for higher to the gain, with the due EBITDA to increase increase Adjusted since in offset highest service reaching a each

basis, support XXXX development. after XXXX XX% approximately growth million $X million. was we $XX annually, MG&A X% since adjustments. of to with expect we reached EBITDA launched after R&D up year-over-year cost services to EBITDA also highest and up the XX% under Hughes This driven level our a increase non-cash in revenue by and While service excluding cost in lower total and expect we adjusted recur maintenance its products devices to cost Ericsson at would currently On a gateway

service the related significant year. paramount invested cost subscriber has lower revenue continued, The assets. While due launch recurring is due our This margin driving as from to services period, to operational to growth are in being support since our MG&A turning quarter-to-date as base. cost develop service next the products was expenses EBITDA to cost in was these incremental maximizing trend from revenues reflecting our and our up success same factors we efficiency generation to generated reserve gateways the acquisition down now revenue spending of high subscriber And this for prior our liquidity.

XXXX, and $XX in flows service respectively, the restricted debt unrestricted access account to of of and next instalments available XX, under which service interest separately. approximately in included operation, pay $XX liquidity balance December $XX of essentially equal million our principal December. in rate, of consists our will is Projected discuss $XX cash obligations currently payments and restricted held from XX cash months are debt June. to in obligations sources million and cash primarily and over for contractual variability account, million As due other approximately of these million cash due I interest agreement the ignoring June facility and our amounts

at date outstanding million notes, share. an year X convertible $X.X our a on have have exercise also of of this per $X.XX We under X% put which price April

our agreement. reserve to facility fund debt Another account under service is obligation our

our interest part December December date. the amendments, fluctuates to currently now on equal amounts each restricted funded at increases balance subsequent and the $XX balance required principal million June cash payment XXXX year. $XX As is of recent and This this our the to million of XX, end required due which from on most

capital various Our line projected. are are supporting in that underway with expenditures XXXX, expected or initiatives be cash to

our XX, of of all in with December remain debt also XXXX. We compliance agreements as

funding this to covenant EBITDA However, shortfall December December expect in raise cure of primarily that these The extent a equity the of cure and on amount we cash XXXX. gap we in expect XXXX. depend on have will do year. we'll outflows, proceeds Based inflows this generated to

including and cash variable operating expect items we exact reform While tax and in CapEx will funding and contingent is amount on this that flows, few $XX million and bill comments a December. between now gap be passed $XX And discretionary the the million.

due impact Although were result tax primarily tax significant on for financial deferred these to assets. a law, full do currently our made statement changes changes valuation U.S. allowance material the to not Globalstar recorded in

XX%. was most XX% U.S. to the changes a from of permanent tax income One the to rate significant corporate reduction federal

have no and with this other and losses reflect utilization an deferred rate tax our existing allowance in and remeasured income statement impact. operating to at offsetting Our lower therefore the reduction assets valuation been

a based determined deductions. the Another to tax. not was transition companies tax tax change alternative and we this on subsidiary most regulations, provisions NOL an subject repeal the minimum We've the impacting of earnings. are of utilization limit of analyzed one-time accelerate both We've also multinational to transition all certain that the to analysis changes and our foreign

tax of the we historic in changes another are financial continue in revenue our NOI successfully to years. more as they of While near-term year XX, strategies, $X.X due results, XXXX. In of grow meaningful highest our are the primarily of as have We've our forward as will to the with not managing EBITDA to while levels be December discretionary planning impact U.S. EBITDA carry pleased these high-margin including considered service to part summary, continued impact recorded expected a solid we spending. than XX billion adjusted

over that business generated core However, sufficient support not from augment therefore flows spectrum-related current is opportunities to cash for we the current turn Q&A, to we I our satellite aggressively to will pursue operating debt recognize to obligations now continue our the business. service other development and various operator the and call operator?

instructions] begin question. go We'll you now session. have Okay. question-and-answer we ahead And Jim question a with Jim. Thank can your [Operator do the you. from

Chardan. you. Yeah. McIlree of It's Thank Jim

Jim. Hey

the to Jay, million question include you are the in is and U.S. for addition million XXX Hey. is pops those those U.S.? did the my -- covering talked about XXX that applications or

the This is in States. addition United to

United X.X it when you little X.X billion Jim. a States it's into bit the over or put So,

far, million been XXX the those those any besides have referred other have million there are XXX one -- And -- before you so you grant to? any applications Okay. are that there that

others are we authorities greenlight right series a in general given been until we've now, never but applications of and There a put are are in had file. and with going that in meetings application to regulatory the that an

countries to to think in, we're say process that safe to think a already it's it's the understanding that is So, I worth we file, we when effort that in so. the willing engage process do we have about an that

to say we're some right but some are very, file, numerous are there already them are versus those been continent. there and we've have exactly actually every I made now can't large about across smaller, but broadly of those countries how So, very filed many filings that are of that they are and

I additional think few So, for in us next of should this approvals be all year interesting arrive. a as very

Right that's U.S., that million some just to XXX that numbers, maybe like it number filed the -- XXX that of an about be it is in what population U.S. frame And the there's filed incorrect or less undisclosed seems to already than round X.X and that's in that's billion so terms got we've million and been assumption? is

bit that's inside been million off, the number are have Jim, little XXX No that some already filed. a

high So, of work in we with bullish, parts things with for that good regulators if additional got those as of are us are interested we've two working world now, million the we get you'd say, us grading have kind right that were you pops XXX to to approvals. and authorities being in

Right.

I way trying answer got you've that guys to pipeline opportunities you. just am it you get in that we and feel appreciated. still just Okay. is the I to where too approaching what a at and for is probably are Thank a trying are that get so am of

the pipeline, on it. the of definitely way we that's think that And Jim,

easier get approved as also and expressed to of to is very with in that XXX of the that going that that go that then reached it describing there are of suspect year make now the but not the or to XXX only in objective conclusion you places, we're have a differently, haven't have So but in countries ton up and easier lot countries. additional outside we The to a a countries of get becomes I right a file, a other it the obvious, we approve we countries XXX we're will discussion during lot the next of addition million course filings more youth. will in when this we're series approvals

in bit start So, they many, the them or of the there's and year a so. of that they course to many effect next when hope roll, flywheel a we of roll

offer it and a for a satellite number completely XXX there is or Got issue a separate business you? significant those gateway install of Right. would where are and to Right. need you million, that service first

any people certainly because say have unusual, you that are we terrestrial ability sell maybe well, countries in forward services you as country can going by that there had going have and in come countries. couple MSS in are we'd here said well or to we the in our the as partners seek as you with definitely but certain built some are gateway the when There that's different for here some make broadened we and gateway, products our to up of country, shore second-generation regimes be want a additional because that's a us, great a There we that love that no we're MSS of could to gateway countries, countries. products build build you're means with service but to others. a to to, authorities standard different if a have It's

in hand in many So, they glove. going are cases

expected? that you of quickly bidding saying how some to trying that Straight can trying Okay. of And out a the understand you just that maybe Path more in were your saying point Were Jay demand war. Straight you what the an example you commentary context develop might, to or two this bidding Path I was I'm wars things you there absorbed mentioned of if there. how into is were and

sudden all surprise fit bidding and was in Straight at surprising. the it it was filled But it was Globalstar's company it if look capital That Jim. watch. that you full complete very a and do industry the Verizon, one bit up effect former itself to very one, Yeah, and AT&T you Path Verizon foreclose available not was terrestrial it logical doesn't absorbing went It like of the wanted map was because yeah it map they and went was of Straight and battle so titans. the Path, two of a size option to war out anything actually have for interesting and no, after things that the very otherwise was their little These additional of was like and a a the that for was spectrum. the and those surprising, do fact lot to happen if that to not a fast surprising entire We're certainly case, but in interesting predicting things watched. it the

very the plants the legacy give then long as as How switch higher-priced of opportunity to is and growth how exists, to for I'm customers the sure idea you Yeah. I Duplex in in you Duplex. was in you're Straight so two those assuming it have have position kind particularly the about the right I Duplex, not turning to going on Path kind sets but guys more, see kind plans? talked of about Rebecca interesting. dynamic to legacy much am negotiating flat of area And mean then you are sounds plans? was phrased that figure how now trying you plans agree Yeah. out new it, customer you given I subscriber the got, us like it many you've an our there legacy still plans, one just can that And I

place assumption Duplex. are we the many long growth subscriber is legacy in for still see how we'll as kind taking then as that one, that flat correct then of churn So, my that have and two probably

Sure.

from are rate newer on being ARPU over contract terms our differently base of converted subscribers activating than our these churn on I are think bit renews. the a subscribers our as legacy average subscriber separating their as little because impacting current plans, the it activating rate then plans rate about are they're current level and network, plans or our and migrated in to higher our which

number base going happen of a that's our of but course, by So fully over that be contacts the of migrated a have Generally, migrated September I that been XXXX. our are period to around XX-month time. know yet, hadn't exact don't I period. for or October will

kind you be be our So are of coming Sat-FiX rate of that's the when rate on going entirely you've to this are of will the our activations have been defined. works some seen equipment handset And And how lower in still of subscriber current got base that have then there which sales in are those of on plans, because terms be different customers course who subscribers the lower. been churn overall have assume we then all can on going to plans. mix during

driving little not higher the it's pricing directly a but say impacting you equipment lower to is even bit, related So could service though I the sales demand pricing necessarily activations. that maybe service think more just volume of

next Duplex answer compared to period continue I the Sat-FiX device, for subscribers. average see to a we question? And decline you're your launch going to our until think that prior so, Does

congratulations that Jay for on luck you'd It the We'll much that's get that. and so talk guys. me. does. able spectrum, Thank the later. this to EBITDA on you It to does. good I've skeptical it with very And high, you been constellation be back

as always. you thank Jim, Great.

from Thanks everybody and should today. us and soon, for now we time your days you. really an thank to good joining again a XX XX, this talk have We be you day, in appreciate hope case opportunity have to

you, ladies participating. conference. for thank This you and concludes And Thank today's gentlemen.

now may disconnect. You