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Stratos Announces Third Quarter 2007 Financial Results

BETHESDA, MD (November 7, 2007) - Stratos Global Corp. (TSX: SGB), the world's trusted leader in delivering vital voice, data, and IP communication services today announced financial results for the third quarter ended September 30, 2007.

Third Quarter Highlights

  • Revenue up 11 percent to US$154.3 million from the same quarter a year ago and 3 percent on a sequential quarterly basis.
  • Segment earnings* reach US$32.9 million, up 46 percent from the third quarter of 2006 and 38 percent compared with the second quarter of this year.
  • Net earnings total US$9.5 million in the quarter driven by strong operating results in the Mobile Satellite Services (MSS) business, certain commercial settlements and a gain on sale of certain aeronautical equipment. Adjusted net earnings (as described below) total US$10.3 million, or US$0.25 per common share, compared with adjusted net earnings of US$3.7 million, or US$0.09 per share, in the same quarter of 2006.

Third Quarter Results
For the quarter, the Corporation reported revenue of US$154.3 million and segment earnings of US$32.9 million, representing increases of 11 percent and 46 percent, respectively, compared with US$138.6 million of revenue and US$22.6 million of segment earnings in the same quarter a year ago. The strong growth in revenue and significant improvement in segment earnings, compared with the third quarter of 2006, primarily reflect revenue growth in newer generation Inmarsat services, higher volume discounts earned from Inmarsat, cost reductions related to the integration of Xantic and other initiatives, and certain commercial settlements.

Net earnings for the third quarter totaled US$9.5 million, or US$0.23 basic earnings per common share, compared with net earnings of US$0.5 million, or US$0.01 per share, in the third quarter of 2006. Results in the third quarter of 2007 were positively influenced by an after-tax gain of US$1.0 million, or US$0.02 per share, from the sale of certain aeronautical assets. This gain was offset by US$1.1 million of after-tax costs, or US$0.03 per share, primarily related to the completion of the pending arrangement transaction with CIP Canada Investment Inc. (CIP Canada).

Excluding these items and the non-cash amortization of customer relationship intangibles related to the Xantic and Plenexis acquisitions, adjusted net earnings (a non-GAAP measure) for the quarter were US$10.3 million, or US$0.25 per share, compared with adjusted net earnings of US$3.7 million, or US$0.09 per share, in the third quarter a year ago.

In the MSS business, revenue increased by 14 percent to US$122.6 million in the third quarter of 2007, compared with the same quarter in 2006, and by 2 percent on a sequential quarterly basis. The growth in revenue compared with the third quarter of 2006 was driven primarily by increased demand for newer generation Inmarsat services and increased sales of mobile terminals and equipment. MSS segment earnings were up 36 percent compared with the same quarter a year ago, reaching US$27.7 million in the third quarter of 2007, and up 22 percent compared with the second quarter of 2007. Segment earnings as a percent of revenue reached 23 percent in the third quarter compared with 19 percent in the prior year third quarter. The substantial improvement in segment earnings compared with the third quarter of 2006 reflects the increased revenue, higher volume discounts earned from Inmarsat, cost reductions related to the Xantic integration and other initiatives to improve operating efficiencies as well as a third party expense reimbursement arising from a commercial settlement.

Revenue and segment earnings in the Broadband division were US$31.7 million and US$5.2 million, respectively, in the third quarter of 2007, compared with US$30.9 million and US$2.3 million in the same quarter a year ago. Results in the third quarter of 2007 were positively impacted by cost reductions, increased revenues from engineering projects, a favorable commercial settlement with a customer and a one-time contract cancellation fee.

"We are pleased with the continued improvement in our financial performance," said Jim Parm, Stratos president and chief executive officer. "The MSS business continued its strong operational performance in the third quarter," said Parm. "Our growth in revenue from new services, including BGAN, together with the synergies from the Xantic integration and our improvements in operating efficiency, has increased profitability in the MSS segment. Additionally, in the Broadband division we have increased profitability through improvements in our engineering services and general cost reductions."

"We look forward to the completion of the transaction with CIP Canada in the fourth quarter of this year after we receive the U.S. Federal Communications Commission approval," concluded Parm.

Nine Month Results
For the first nine months of 2007, the Corporation achieved revenue of US$448.9 million, a 13 percent increase compared with US$397.2 million in the first nine months of 2006. This improvement reflects the growth in newer generation Inmarsat products and the acquisition of Xantic, which was completed on February 14, 2006. Segment earnings for the first nine months of 2007 increased by 45 percent to US$75.3 million compared with $52.0 million for the same period of 2006. The significant improvement in segment earnings was driven by the increased revenue, higher volume discounts earned from Inmarsat and cost reductions resulting from the integration of Xantic and other initiatives to improve operating efficiencies.

Net earnings for the first nine months of 2007 were US$11.9 million, or US$0.28 per share, compared with a net loss of US$28.5 million, or US$0.68 per share, in the comparable period of 2006. The results for the first nine months of 2007 were negatively impacted by US$8.2 million, or US$0.20 per share, of after-tax financial advisory, legal, and other costs primarily related to the pending transaction with CIP Canada, which were partially offset by an after-tax gain of US$3.8 million, or US$0.09 per share, related to the previously described insurance settlement during the second quarter and an after-tax gain on sale of certain aeronautical assets of US$1.0 million, or US$0.02 per share. Results for the nine months ended September 30, 2006 were adversely influenced by after-tax write-offs of US$23.3 million, US$0.55 per share, related primarily to the acquisition of Xantic.

Cash flow from operations (including working capital changes) in the first nine months of 2007 totaled US$25.2 million, compared with US$17.3 million generated in the same period of 2006. The improvement primarily reflects higher segment earnings, partially offset by increased investment in working capital, increased interest costs related to the Xantic acquisition financing and costs related to the pending transaction with CIP Canada.

Capital expenditures totaled US$14.0 million, or 3 percent of revenue, in the first nine months of 2007 compared with US$20.9 million, or 5 percent of revenue, in the prior year's first nine months. In February 2007, a final purchase-price adjustment of US$20.0 million was paid to the sellers of Xantic. The Corporation's financial statements for the three and nine month periods ended September 30, 2007, and related notes, together with management's discussion and analysis of such results, are attached.

A conference call with analysts to discuss these results will be held at 8:30 a.m. EST, Thursday, November 8, 2007. To access the conference call, please dial 1-800-732-9303. A live audio webcast of the call will be available at: http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2030600. A replay of the conference call also will be available through Wednesday, November 14. To access the replay, please call 1-877-289-8525 and use access code 21249273 followed by the number sign.

About Stratos
Stratos is the world's trusted leader for vital communications. Stratos offers the most powerful and extensive portfolio of remote communications solutions including mobile and fixed satellite and microwave services. More than 20,000 customers use Stratos products and industry-leading value-added services to optimize communications performance. Stratos serves U.S. and international government, military, first responder, NGO, oil and gas, industrial, maritime, aeronautical, enterprise, and media users on seven continents and across the world's oceans. Stratos is a wholly-owned subsidiary of Inmarsat plc. For more information, visit www.stratosglobal.com.

Caution Concerning Forward-Looking Statements
Documents related to this release contain statements and information about potential future circumstances and developments. Such statements and information are qualified by the inherent risks and uncertainties surrounding future expectations generally and may differ materially from Stratos Global Corporation's actual future results. For additional information with respect to these risks and uncertainties, reference should be made to the Corporation's continuous disclosure materials filed with the Canadian Securities Administrators. Stratos Global Corporation disclaims any intention or obligation to update or revise any forward-looking statements or information, whether as a result of new information, future events, or otherwise.



* Segment earnings is defined by the Corporation as earnings before interest expense, depreciation and amortization, other costs (income), non-controlling interest, equity in earnings of investee, and income taxes.

For additional information :
Paula McDonald, FCA
Executive Vice President and Chief Financial Officer
709.724.5227
paula.mcdonald@stratosglobal.com