Globalstar, Inc. · NASDAQ:GSAT
Globalstar — Investor Presentation (October 2014)
42 slides from Globalstar's investor presentation, Oct 9, 2014
Slide 1: Globalstar Value Proposition
GLOBALSTAR VALUE PROPOSITION October 9, 2014
Slide 2: Safe Harbor Language
Safe Harbor Language This presentation contains certain statements that are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current expectations and assumptions that are subject to risks and uncert
Slide 3: Speakers
Speakers 3 • Founder and Managing Director of Jarvinian; a recognized expert on RF spectrum • Established a spectrum advisory practice through Jarvinian Advisors • Developed regulatory and technological solutions for the reformation of previously unusable RF spectrum • Assisted Globalstar in develop
Slide 4: Agenda
Agenda ● About Globalstar ● Underlying Facts of Kerrisdale Thesis Are Wrong ● Spectrum Overview, Capabilities and Facts ● Creating Value from TLPS ● Financial, Operational and Business Overview 4
Slide 5: About Globalstar
About Globalstar 5
Slide 6: Globalstar and its Principle Investor
Globalstar and its Principle Investor 6 ● Globalstar is a leading provider of mobile satellite services with a full product suite supporting communications beyond the range of traditional cellular services ● The Thermo Companies, controlled by Jay Monroe, Chairman and CEO of Globalstar, purchased th
Slide 7: Underlying Facts of Kerrisdale Thesis Are Wrong
Underlying Facts of Kerrisdale Thesis Are Wrong 7
Slide 8: Wi-Fi and TLPS Facts
Wi-Fi and TLPS Facts 8 Wi-Fi Congestion is Real and Must be Addressed Wi-Fi Congestion Will Continue to Intensify 2.4 GHz Will Continue to be the Primary Band for Wi-Fi -- 5 GHz is not a Panacea TLPS is a Premium Service for a Carrier-Grade Experience at Lower Costs TLPS is an Immediate Solu
Slide 9: Wi-Fi Congestion is Real and Must be Addressed
Wi-Fi Congestion is Real and Must be Addressed Regulators, major industry players agree: current Wi-Fi capacity is at or near exhaustion – and is already carrying substantial portion of mobile-originated data 9 “[T]he 2.4 GHz band will continue to be an important source of unlicensed spectrum for th
Slide 10: Industry quotes on unlicensed spectrum congestion
“The Nation’s demand for unlicensed services has increased so dramatically that we need more spectrum to support these services. The 2.4 GHz band, while critical to the success of Wi-Fi and other unlicensed technologies, is increasingly congested particularly in major cities. Densely populated cente
Slide 11: Wi-Fi Congestion Will Continue to Intensify
Wi-Fi Congestion Will Continue to Intensify 11 Industry forecasts substantial future growth in mobile data traffic, averaging between 50 -100% annual compound growth “As the volume of wireless data traffic increases, the risk of congestion in the airwaves is increasing as well. Wireless broadband ne
Slide 12: 2.4 GHz Will Continue to be Primary Band for Wi-Fi
2.4 GHz Will Continue to be Primary Band for Wi-Fi – 5 GHz is not a Panacea 12 The industry is expanding into 5 GHz out of need, not want – there is no other spectrum available for immediate use “2.4 GHz band involves better propagation than the 5 GHz band by a factor of 4.3X… 5 GHz may suit some, b
Slide 13: 2.4 GHz Will Continue to be Primary Band for Wi-Fi (cont'd)
2.4 GHz Will Continue to be Primary Band for Wi-Fi – 5 GHz is not a Panacea (cont’d) 13 “…2.4 GHz is usually the better choice for home and other wireless local networks...Some people mistakenly believe 5 GHz network technology is newer or somehow more innovative than 2.4 GHz. In fact, both types of
Slide 14: TLPS is a Premium Service for a Carrier-Grade Experience
TLPS is a Premium Service for a Carrier-Grade Experience at Lower Costs 14 TLPS offers clear public and commercial benefits that the industry wants Enterprises in every industry and individuals will pay for superior service, and Wi-Fi industry is no different “By permitting Globalstar to offer a ter
Slide 15: TLPS: Immediate Solution that can be Efficiently Deployed
TLPS: Immediate Solution that can be Efficiently Deployed 15 Compared to alternatives, TLPS is an immediate solution, successfully deployable within months “Given that Channel 14 is already available in Wi-Fi chipsets at the hardware level, the time to deployment is vastly shorter in comparison to a
Slide 16: Spectrum Overview, Capabilities and Facts
Spectrum Overview, Capabilities and Facts 16
Slide 17: Principal Technical Foundation of Kerrisdale Thesis
Principal Technical Foundation of Kerrisdale Thesis 17 ● There is no congestion in Wi-Fi generally or 2.4 GHz specifically – any problems can be solved through initial network design and other post-rollout improvements ● 5 GHz with 22 channels deeply undermines a single 2.4 GHz TLPS channel – 802.11
Slide 18: RF Spectrum Bands
RF Spectrum Bands 18 Globally, commercial spectrum bands are allocated between approximately 400 MHz and 2700 MHz. TLPS sits between AT&T controlled WCS and Sprint controlled EBS spectrum. Frequency (MHz) Source: Federal Communications Commission filings, company filings and Deutsche Bank analyst re
Slide 19: Propagation Characteristics and Capacity
Propagation Characteristics and Capacity 19 As carrier spectrum demands escalate, there is increasing need for low-power / high-reuse small cellular architectures. Central S-Band (2-3 GHz) spectrum provides ideal physical characteristics for this application. Frequency (MHz) 400 2700 HIGH Coverage L
Slide 20: The 2.4 GHz Band Commons Dilemma
The 2.4 GHz Band Commons Dilemma 20 The advantageous physical characteristics of S-Band are the reason for both the success and exhaustion of 2.4 GHz Wi-Fi. TLPS creates a carrier resource that secures 2.4 GHz performance indefinitely. The move to 5 GHz is driven by the lack of supply and interferen
Slide 21: 5 GHz Channelization and 802.11ac Standard
5 GHz Channelization and 802.11ac Standard 21 Kerrisdale attempts to both skew the impact of (i) number of available channels in 5 GHz and (ii) the fact that 802.11ac is limited to 5 GHz 802.11ac Channel Allocation in North America 802.11ac Channel Allocation in North America (1) ● 5 GHz is not a ca
Slide 22: Limitations on Effective 5 GHz Capacity
Limitations on Effective 5 GHz Capacity 22 While 5 GHz offers a large number of 802.11 channels, the resource is encumbered by fundamental physical limitations. The total number of MHz / channels may be material, but when factoring in propagation, a variable disregarded by Kerrisdale, 2.4 GHz is hig
Slide 23: 2.4 GHz vs. 5 GHz Propagation
2.4 GHz vs. 5 GHz Propagation 23 Even in simple environments, the propagation of 5 GHz is meaningfully less attractive than its 2.4 GHz counterpart. The influence of building materials magnify this inherent disadvantage. SIMPLE FREE SPACE LOSS (Free Space) FREE SPACE + 1.5 dB AVERAGE MATERIAL LOSS (
Slide 24: 5 GHz 802.11ac Speed and Range
5 GHz 802.11ac Speed and Range 24 Large channels and complex modulation mean that 5 GHz 802.11ac can achieve increased data speeds. However, in the field, these speeds are dependent upon high SNRs, which degrade quickly over short distances. Signal Noise Floor Signal to Noise Ratio (SNR) Low BER / V
Slide 25: 5 GHz Coverage and Speed Gradients
5 GHz Coverage and Speed Gradients 25 With the relatively small coverage zone of a 5 GHz 802.11ac access point, speed and quality of service will decline steeply with distance. “Spotlight” coverage zones near the AP offer the best user experience. FREE SPACE + 1.5 dB AVERAGE MATERIAL LOSS (Typical O
Slide 26: The Global Three Channel System
The Global Three Channel System 26 In the US, limitation to 11 2.4 GHz 802.11 channels pushes most use to three non-overlapping channels (1, 6,11). Even where Ch. 12+13 is officially authorized, practical channel widths keep the three 1, 6 and 11 channel system intact and, as in the US, there is min
Slide 27: Overlapping Channel Use is Not Common
Overlapping Channel Use is Not Common 27 Field studies of 2.4 GHz operation clearly demonstrate a preference for the three channel system. Despite congestion, use of non-overlapping channels allows devices to best adapt to co-channel interference. Cambridge, MA Survey Area 0 100 200 300 1 2 3 4 5 6
Slide 28: Managing a 22 MHz TLPS Service
Managing a 22 MHz TLPS Service 28 As a licensed and managed resource, TLPS will benefit from infrastructure elements that are governed by an advanced and standard Network Operating System (NOS). A NOS can ensure maximum co-channel reuse efficiency. TLPS Network with 22 MHz Resource ● Managed, licens
Slide 29: A Single License for TLPS
A Single License for TLPS 29 Most commercial spectrum is today licensed by EA or CMA blocks. This frustrates the formation of contiguous holdings and discourages tech companies and MSO’s from spectrum ownership. 176 EA Licenses (A1, B1, H, I, J Blocks) 734 CMA Licenses (G Block) Upcoming AWS-3 Aucti
Slide 30: A Rapid and Low-Cost Device Ecosystem
A Rapid and Low-Cost Device Ecosystem 30 For the next FCC auction, years will elapse and massive CapEx will occur between when bidding concludes and services are available to consumers. TLPS offers a singularly rapid and cost-effective ecosystem. TYPICAL SPECTRUM Submit to Standards Body Transceiver
Slide 31: Creating Value from TLPS
Creating Value from TLPS
Slide 32: We Are Actively Engaging With Ecosystem Partners
We Are Actively Engaging With Ecosystem Partners Device Service Providers New Entrants Infrastructure Network Management Channel 14’s Ecosystem 32 ● Leveraging extensive knowledge of industry and operational expertise ‒ Strong track record of strategically building businesses and creating value for
Slide 33: Financial, Operational and Business Overview
Financial, Operational and Business Overview 33
Slide 34: Underlying Business Fundamentals are Strong
Underlying Business Fundamentals are Strong 34 Globalstar’s network is unique because: ● Network can transmit up to 30 billion SMS, M2M and other small messages each day ● Network can provide 19 million data and voice minutes a day ● The service is available in more than 100 countries ● Network offe
Slide 35: Financial Performance Overview
($6.4) $9.8 $11.9 $17.6 ($10.0) ($5.0) $0.0 $5.0 $10.0 $15.0 $20.0 $25.0 2011 2012 2013 Financial Performance Overview (1) 2014 annualized figures represent the run-rates through Q2 2014. (2) Adjusted EBITDA for 2014 run-rate as presented in Company’s earnings releases ($17.6 million). (3) Quarterly
Slide 36: Financial Strength and Flexibility
Financial Strength and Flexibility 36 ● Since completing refinancings following launch of the second-generation constellation, Globalstar has met all bank covenants ● In the event of financial underperformance, Company maintains unlimited equity cures through 2017, which is not expected to be materi
Slide 37: FCC NPRM Highlights and Timing
FCC NPRM Highlights and Timing Globalstar’s NPRM Process Overview November 13, 2012 Globalstar Files Petition for Rulemaking January 20, 2013 Initial & Reply Comments Filed September 5, 2013 FCC Circulates NPRM Internally November 1, 2013 FCC Unanimously Votes For and Releases NPRM February 19, 2014
Slide 38: The Facts Support Our Compelling Prospects for Growth
The Facts Support Our Compelling Prospects for Growth 38 Wi-Fi Congestion is Real and Must be Addressed Wi-Fi Congestion will Continue to Intensify 2.4 GHz will Continue to be the Primary Band for Wi-Fi -- 5 GHz is not a Panacea TLPS is a Premium Service for a Carrier-Grade Experience at Lower
Slide 39: Appendix
Appendix 39
Slide 40: Annex A – Reconciliation of Management Adjusted EBITDA
Annex A – Reconciliation of Management Adjusted EBITDA 40 ($ in millions) 2011 2012 2013 Q1 2014 Q2 2014 1H 2014 2014RR Net loss ($54.9) ($112.2) ($591.1) ($250.5) ($433.7) ($684.3) ($1,368.5) Interest income and expense, net 4.8 21.5 67.8 10.9 13.9 24.8 49.6 Derivative (gain) loss (23.8) (7.0) 306.
Slide 41: Annex B – Reconciliation of COFACE Adjusted EBITDA
Annex B – Reconciliation of COFACE Adjusted EBITDA 41 ($ in millions) 2H 2013 1H 2014 Net Loss ($439.8) ($684.3) Income and franchise tax expense $0.9 $1.2 Consolidated interest expense 44.9 24.8 Depreciation, amortization, accretion 48.2 45.3 Derivative loss 276.6 585.7 Foreign currency transaction
Slide 42: Annex C – Reconciliation of Quarterly Management Adjusted EBITDA
Annex C – Reconciliation of Quarterly Management Adjusted EBITDA 42 ($ in millions) Q2 2011 Q2 2012 Q2 2013 Q2 2014 Net loss ($14.1) ($27.5) ($126.3) ($433.7) Interest income and expense, net 1.2 3.8 15.2 13.9 Derivative (gain) loss (3.9) (20.4) 29.9 376.3 Income tax expense 0.1 0.1 0.1 1.0 Deprecia