Zinger Key Points
- Globalstar’s stock surges nearly 30% after expanding its partnership with Apple.
- The deal provides Globalstar with new service fees and relaxed debt terms, boosting its financial flexibility.
Globalstar Inc. GSAT shares are trading higher Monday after the company on Friday announced an extended services agreement with Apple Inc. AAPL, which includes plans to build and launch a new mobile satellite services (MSS) network.
What To Know: Under the new terms of the updated services agreement, Apple will prepay up to $1.1 billion to Globalstar, funding the construction, launch and operation of the new MSS network.
The funding will cover costs for new satellites, expanded ground facilities and broader MSS licensing globally. Apple will also invest $400 million to acquire a 20% stake in Globalstar's newly created subsidiary, Globalstar Licensee, which will own and operate the MSS network.
The partnership includes provisions for Globalstar to earn incremental service fees from Apple, which will increase based on performance milestones, regulatory achievements and other service conditions. Apple also agreed to pay Globalstar an annual service fee of $30 million, which will increase over time as the new network becomes operational.
Apple's equity in the MSS network will be structured to allow quarterly redemptions once the full prepayment has been repaid. Additionally, Globalstar can repurchase Apple's stake under certain conditions, while Apple has the option to redeem its shares if specific contract terms are not met by Globalstar.
In an effort to support Globalstar's financial stability, the revised agreement also adjusts Globalstar’s 2023 funding terms. These adjustments include removing cash sweeps, deferring repayment dates to 2026 and easing certain loan conditions.
In the second quarter of 2024, Globalstar reported revenue growth of 10% as sales climbed to $60.4 million. The company's adjusted EBITDA for the quarter was $32.6 million. Globalstar projected its revenue for the year to come in between $235 million and $250 million, versus consensus estimates of $237.5 million.
Globalstar is scheduled to report third-quarter financial results after the market close on Thursday. Analysts expect the company to report quarterly revenue of $60.34 million, according to estimates from Benzinga Pro.
GSAT Price Action: Globalstar shares were up 30.4% at $1.80 at the time of writing, according to Benzinga Pro.
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