Globalstar, Inc. (NYSE:GSAT) Q2 2024 Earnings Conference Call August 8, 2024 9:00 AM ET

Company Participants

Paul Jacobs - CEO
Rebecca Clary - VP and CFO

Conference Call Participants

Mike Crawford - B. Riley Securities
Logan Lillehaug - Craig-Hallum

Operator

Good day, and thank you for standing by. Welcome to the Globalstar Second Quarter 2024 Earnings Conference Call. [Operator Instructions] Please be advised, that today's conference call is being recorded.

I would now like to turn the conference over to Rebecca Clary, CFO. You may begin.

Rebecca Clary

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 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 our 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 continue 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.