Globalstar, Inc.

Good day and thank you for standing by. Welcome to the Global Star second quarter 2025 earnings conference call. At this time, all participants are in a listen-only 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 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Rebecca Cleary, CFO. Please go ahead.

Thank you, Operator, and good afternoon, 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 are described in the risk factors section of GlobalStars SEC filings, including its annual report on Form 10-K for the financial year ending 2024 and its other SEC filings, as well as today's earnings release. Also note that management may reference EBITDA, adjusted EBITDA, free cash flow, or adjusted free cash flow on this call, which are financial measures not recognized under U.S. GAAP. As required by SEC rules and regulations, these non-GAAP financial measures are reconciled to their most comparable GAAP financial measures in the earnings release, which is available on our website. I'll begin with a review of our financials before touching briefly on the expected impact of tariffs and our outlook. I'll then turn it over to Paul to cover key operational updates. Overall, second quarter financial results were strong with solid growth in revenue, cash flows, and profitability. Total revenue increased 11% to $67.1 million for the second quarter compared to the prior year period of $60.4 million. Service revenue increased 10%, driven primarily by wholesale capacity services, which benefited from the timing of services associated with the reimbursement of network-related costs that have increased following recent network expansion. In commercial IoT, we are pleased to see continued growth in the average number of subscribers, propelled by a record number of growth activations over the last 12 months. We expect to see this momentum continue with the adoption of our two-way module, which Paul will cover later. The increase in revenue contributed to the net income generated during the second quarter, as well as higher adjusted EBITDA, which rose to $35.8 million, compared to $32.6 million in the prior year's second quarter. Partially offsetting the benefit of higher revenue were certain cost increases, including expenses incurred to continue developing and enhancing XCOM RAN. Higher cash costs to support XCOM negatively impacted the change in adjusted EBITDA by approximately $1.9 million, and adjusted EBITDA margin by 300 basis points compared to the prior year's quarter. While we expected this upfront investment, we remain confident in the long-term profitability and strategic importance of this product offering. Moving to the balance sheet, we ended the quarter with $308.2 million in cash on hand. Adjusted free cash flow for the six months ended June 30, 2025, with $77.9 million, compared to $51.9 million at the prior year period, primarily reflecting higher service payments received under the updated service agreements during 2025. Before we turn to the outlook, I want to briefly revisit our view on the evolving tariff environment. We've conducted a thorough assessment, and based on what we know today, we believe Global Start is well positioned to minimize any significant financial impact. Our global manufacturing and logistics footprint gives us flexibility to manage through potential headwinds. This includes the ability to shift production, leverage third-party logistics providers, and where necessary, pass through incremental costs without affecting our competitive position. As a result, we continue to expect a relatively immaterial impact in the near term. Given our results to date and expectations for the balance of the year, we are reiterating our full year 2025 outlook and continue to expect revenue in the range of $260 million to $285 million, and we anticipate adjusted EBITDA margin of approximately 50%. With that, I'd like to turn the call over to Paul.

Thank you, Rebecca, and good afternoon, everyone. It's great to be with you today, and I'm Definitely pleased to update you on the progress we call. There has been significant progress in the Global Star Parsons commercial relationship. We successfully completed their proof of concept, integrating our satellite network with their software-defined communications platform. That demonstration, which was conducted across three European ground stations, validated performance and operational readiness for real-world deployments. I'm pleased to announce that following this milestone, we executed a capacity access agreement moving this partnership into the commercial phase, showcasing GlobalSTAR's ability to deliver resilient, low latency mission critical for government and defense applications worldwide. Another important development in the government sector is our growing engagement with U.S. federal agencies. We recently entered into a cooperative research and development agreement with the U.S. Army to evaluate our satellite enabled edge processing solutions. This effort focuses on ultra low size weight and power devices designed for secure autonomous operation in challenging environments. It reflects our expanding presence in defense and government markets and the relevance of our network architecture for high priority mission applications such as covert sensing and unmanned systems support. We are excited about this opportunity and look forward to future phases of work. These recent agreements represent a meaningful expansion of our existing governmental customer relationships, and we expect significant revenue contribution from this area of our business. We continue to see growing demand for our products and services with new customers and emerging use cases steadily coming online. Over the past several quarters, we've been focused on executing a clearly defined strategy and go-to-market plan designed to capture these opportunities and to support long-term sustainable growth. That effort includes investments in core infrastructure, the launch of foundational new assets, and the expansion of strategic partnerships, all of which are enabling innovative solutions that extend the value of our network. To that end, we have made progress on several operational milestones. Global Star has officially kicked off its global infrastructure program in preparation for the next generation extended MSS network, also called our C3 system. Milestone was achieved with the successful installation of a new six-meter tracking antenna at our flagship ground station in Texas, our largest and longest operating site. This installation is part of a sweeping upgrade expected to add roughly 90 antennas across 35 ground stations in 25 countries. This expansion is designed to increase network capacity resiliency and reach, ensuring robust service continuity in mission-critical environments. In fact, recent widespread power outages in Spain and Portugal underscored the reliability of our satellite network, which remained operational while terrestrial networks went offline, demonstrating the vital role our expanding networks of ground stations play in ensuring continuous connectivity, since our constellation is built distributed and multiple redundancies. To complement our ground infrastructure build-out, we also signed a launch services agreement with SpaceX in June 2025 for the deployment of the second batch of nine satellites currently being constructed under our 2022 procurement agreement with MDA. We expect the first launch of these replacement satellites later this year and the second launch in 2026. These satellites are expected to replenish our existing second-generation constellation to ensure continuity of service. Taken together, these milestones mark a period of focused execution across multiple fronts, domestically and internationally, as well as commercial and government sectors. We're delivering on our promise to build a next-generation mobile satellite network that is global, resilient, and scalable, while opening new avenues for growth across our target verticals. And as we look ahead, we remain confident in the strength of our strategic roadmap and our ability to execute against it. We believe the foundational investments we're making today across our space and ground infrastructure, commercial partnerships, and technology innovation are positioning us to serve a growing number of high value applications across industrial, commercial, and government markets. Whether it's enhancing connectivity in hard to reach areas, enabling autonomous platforms at the edge, or supporting mission critical communications, We believe our solutions are increasingly aligned with evolving needs of our customers. Our recently introduced RM200 2A module continues to show a promising trajectory with proof of concepts advancing rapidly and across a broad and diverse customer base. With over 50 partners currently testing the module, we're already seeing strong interest around key applications, including oil and gas operators optimizing remote asset management, military and defense organizations seeking resilient edge communications, through remote control and management, and MVNO's interest in bringing hybrid connectivity to many others. We believe the RM200's easy integration and powerful two-way edge communications are positioning us firmly for growth in multiple high-value sectors. Many of these markets exist today, and we will compete favorably in both price and functionality. In addition to expanding our satellite capabilities, we're actively advancing our XCOM RAN platform which represents a critical entry point into the terrestrial wireless markets. As we continue development of this software-defined end-to-end solution, we're encouraged by the strong technical validation and increasing interest from prospective partners. XCOM RAND is engineered to deliver lower latency, enhanced spectral efficiency, ease of deployment, and dynamic spectrum sharing, and we believe it has the potential to significantly expand our addressable market by enabling future hybrid satellite terrestrial network architectures. We remain committed to bring this differentiated technology to market, necessary near-term investments to support long-term value creation. Our broader go-to-market approach centered on flexibility, interoperability, and resilience position us well to support the convergence of satellite and terrestrial networks. And finally, we're proud to have led the way across multiple satellite services And we're excited about what lies ahead. Our network and architecture are in the right place at the right time, and we think that what's becoming readily apparent in the market is having proprietary spectrum matters most. Our advantage and differentiation from our competitors is our globally harmonized, globally licensed spectrum. With our recently announced agreement to build out and increase engagement with U.S. federal agencies, we believe we're laying the groundwork for meaningful growth across a diverse set of verticals. We anticipate the launch of the satellites under our MDA procurement agreement. That will further enhance our service continuity and performance. Progress we've made reflects the talent and dedication of our global team, and we're energized by the momentum we're building across commercial and government markets alike. So thanks again for joining us today. Thanks for your continued support of GlobalStar, and we look forward to updating you on our progress in the quarters to come. I'll now turn the call back to the operator for Q&A.