Globalstar, Inc.

Good day, and thank you for standing by. Welcome to the Global Star second quarter 2024 earnings conference call. At this time, all participants are in a listening mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference call is being recorded. I would now like to turn the conference over to Rebecca DeFoe. You may begin.

Thank you, Operator, and good morning, everyone. Before we begin, please note that today's call contains forward-looking statements intended to fall within the safe harbor provided under the securities laws. Factors that could cause the results to differ materially include are described in the forward-looking statements and risk factors section of GlobalStar's SEC filings, including its annual report on Form 10-K for the financial year ending 2023 and its other SEC filings, as well as today's earnings release. I will first cover our financial performance and outlook, then Paul will review operational highlights. GlobalStar had a strong second quarter, driven by a 10% year-over-year increase in total revenue, reaching a record high of $60.4 million. Service revenue increased 18%, offsetting a decline in equipment revenue, which was impacted by the timing of IoT sales. As we have discussed in the past, the operating leverage of our business leads to a much greater corresponding increase in EBITDA as service revenue grows. Supporting this point, adjusted EBITDA grew by 20% this quarter, with a margin of 54%, up from 49% in the prior year's second quarter. Turning to the balance sheet, we ended the quarter with $64 million of cash on hand as we continued to build liquidity ahead of milestone payments due to our next-generation satellite vendors in the coming months. 95% of these costs are recovered over the lifetime of the satellites via contractual service fees. Importantly, these satellites remain on schedule with an expected first launch in 2025. Rounding out other balance sheet metrics, our leverage ratio remains healthy at three times. Our blended annual cash interest rate is favorable at around 6%, and we expect to pay minimal cash taxes due to our $1.9 billion NOL carry forward. As a reminder, our debt stack is comprised primarily of balances that are expected to be recouped from future service fees. We believe that we have a fully funded business plan and a solid foundation of contractual cash flows that are expected to grow, and we are as strong as we have ever been financially. Based on the continued momentum across our key growth categories, we are raising the low end of our revenue guidance to $235 million. At the midpoint of the range, our anticipated results indicate an 8% increase over 2023 total revenue. We are also raising our guidance for adjusted EBITDA margin to 53%, an increase from our previous forecast of 50%. During our last Investor Day two years ago, we guided towards 2024 being a flat year financially. We are pleased to report that is no longer the case. Expansion in our existing revenue streams and the introduction of new ones have continued to increase our profitability, and we're excited about what is to come in the balance of the year. Before handing the call to Paul, one clarification on some trading activity that we have received questions about. Specifically, some of you have seen a Form 4 filing with what may have looked like a sale of Paul's personal GlobalStar shares. It was not. Because Paul is the controlling stockholder of Vireworks, SEC rules require that when Vireworks sells shares, that sale must be attributed to him. In this case, the shares Vireworks was selling were shares we issued to it to support the continued development of XCOM RAN, as supported by the support services agreement we entered into with Vireworks last year. Fireworks then sold some of these shares to Thermo, which demonstrates Thermo's continued commitment to invest in GlobalStar. With that, I'd like to turn the call over to Paul.

Thanks, Rebecca, and it's great to be with everyone today. I have to say I'm very proud of our strong second quarter performance. We exceeded expectations, and the continued momentum is feeling very positive. This quarter really highlighted GlobalStar's ability to enable new capabilities through our decades of operating experience and the flexibility of our network to reliably and rapidly support and deploy new technologies and services. It's been almost a year since I became CEO, so I thought it would be good to take the opportunity to discuss and update you on some of our strategic and organizational initiatives. I had hoped to provide some of those contacts last quarter, but of course I wasn't able to be with you, and I appreciate all those who sent kind thoughts and wishes to me. We've organized ourselves now into a few categories of business, all of which leverage the core asset of our spectrum position. And these categories are consumer wholesale, consumer retail, government, commercial IoT, XCOM RAN, and N53 licensing. We've really added some great new talent to augment the team that's built and operated the satellite business for so many years and We're starting to ramp up our team in India even more to support the development and testing of new technologies and products. We're very pleased that our wholesale services are growing in both the government and consumer sectors. We're making good progress through this proof of concept that commenced this year for a government services company. Strongly believe we'll be able to generate growth from government customers and have identified a bunch of different opportunities for doing so. We are making targeted investments in our consumer retail offerings, really recognizing that there's a window of opportunity to still generate some reasonable economic returns there. While this is a mature part of our business, we've been very proud of our ability to provide consumers with safety, security, and general connectivity through those consumer products. Look at the consumer IoT business. It continues to grow. And what's really nice about the way our system works is we can make very substantial progress testing new technologies that really improves our capabilities. And we're engaging with our existing customer base to shape how we'll roll out these capabilities. And frankly, we've been slower to deploy some of these new capabilities than we would have liked. With that, we've made significant additions now to our product development organization, both on the commercial and engineering sites. And that's really to ensure that going forward, we bring products and technologies to market in a more streamlined fashion. Our in-house engineering talent is excellent and gives us a really competitive advantage going forward. I also want to express the appreciation to our product team, which has now successfully transitioned our manufacturing into Vietnam, which should remove the impact of tariffs on our bottom line going forward. And then we've also added new channel partners that we're engaging with to expand geographic reach of our sales team. So that'll be a nice opportunity as well. We are definitely looking forward to the completion and launch of the next group of satellites, and we expect those to improve capacity and add longevity to enhance our space business. Turning to the terrestrial side, we've been installing and validating XCOM RAN in our customers' micro-fulfillment centers, really demonstrating XCOM RAN's ability to uniquely support their mission-critical requirements. We're also in the midst of a government study of use cases for our XCOM technology. If all goes well, we believe the XCOM RAN deployments could represent a material opportunity to grow the company's revenue. We also continue to see interest in the use of our N53 spectrum, both in conjunction with our own XCOM RAN product and independently, and we intend to demonstrate the synergies at an upcoming investor day, which we expect to hold before the end of the year. absolutely understand that many investors highly value our terrestrial spectrum asset. I want to assure you that we do as well, and we're very careful not to encumber that spectrum without appropriate compensation. Globostar has been an innovator in the connectivity industry, and this team is driven to continue to innovate new technologies and services that are synergistic with the existing assets and businesses. We remain focused on building on our quite strong customer relationships to create value, and we do this by leveraging our differentiated assets of the Low Earth Orbiting Satellite Network, our Band 53 spectrum, and the XCOM RAN technology. And as our new services ramp, we expect shareholders will be rewarded by the significant operating leverage and limited CapEx requirements, which we expect will drive increasing margins and cash flow. So I will now turn the call back to the operator for Q&A. Thanks, everybody.