Iridium Announces 2022 Results, Issues 2023 Outlook

MCLEAN, Va. February 16, 2023 – Iridium Communications Inc. (Nasdaq: IRDM)  today reported financial results for the fourth quarter and full-year 2022 and issued its full-year 2023 guidance. Net loss was US$ 0.8 million, or US$ 0.01 per diluted share, for the fourth quarter of 2022, as compared to net loss of US$ 5.9 million, or $0.04 per diluted share, for the fourth quarter of 2021. Operational EBITDA (“OEBITDA”)(1) for the fourth quarter was US$ 107.0 million, as compared to US$ 93.4 million for the prior-year period, representing a year-over-year increase of 15%. These results benefitted from gains in subscriber equipment and engineering and support, in addition to broad-based growth in commercial service revenues.

Iridium reported fourth-quarter total revenue of US$ 193.8 million, which consisted of US$ 136.8 million of service revenue and US$ 57.0 million of revenue related to equipment sales and engineering and support projects. Total revenue increased 24% versus the comparable period of 2021, while service revenue grew 8% from the year-ago period. Service revenue, which represents primarily recurring revenue from Iridium’s growing subscriber base, was 71% of total revenue for the fourth quarter of 2022. (Note: all subsequent amounts in US$).

The company ended the quarter with 1,999,000 total billable subscribers, which compares to 1,723,000 for the year-ago period and is up from 1,973,000 for the quarter ended September 30, 2022. Total billable subscribers grew 16% year-over-year, driven by growth in commercial IoT.

Full-Year 2022 Iridium Business Highlights

For the full year, Iridium reported net income of $8.7 million, or $0.07 per diluted share, as compared to net loss of $9.3 million, or $0.07 per diluted share, for 2021. This improvement resulted primarily from higher service revenue and record equipment sales, which more than offset rising operational expenses. The Company reported record total revenue in 2022 of $721.0 million, which was up 17% from the year-ago period. Total revenue included $534.7 million of service revenue and $186.3 million of revenue related to equipment sales and engineering and support projects. OEBITDA for 2022 was $424.0 million, a 12% increase from $378.2 million in the prior year. Capital expenditures were $71.3 million for the full-year 2022.

“2022 was another strong year for Iridium, driven by continued strong subscriber growth and revenue gains across all business lines,” said Matt Desch, CEO, Iridium. Desch added, “Our strong liquidity position and growth in free cash flow supported ongoing return of capital to shareholders, including the initiation of dividends in 2023.”

Commenting on Iridium’s expanding market opportunities, Desch said, “It’s exciting to unveil our partnership with Qualcomm that can dramatically expand the reach of our network to new consumer smartphones using the Snapdragon Satellite platform. This should be available starting later this year and cement Iridium as a big player in the emerging satellite direct-to-device market, as well as offer a path to connect other consumer applications in the future.”

Fourth-Quarter Iridium Business Highlights

Service – Commercial

Commercial service remained the largest part of Iridium’s business, representing 57% of the Company’s total revenue during the fourth quarter. The Company’s commercial customer base is diverse and includes markets such as maritime, aviation, oil and gas, mining, recreation, forestry, construction, transportation and emergency services. These customers rely on Iridium’s products and services as critical to their daily operations and integral to their communications and business infrastructure.

  • Commercial service revenue was $110.3 million, up 10% from last year’s comparable period due to broad-based growth across all revenue lines.
  • Commercial voice and data: Revenue was $49.5 million, up 10% from the year-ago period. Subscribers grew 7% from the year-ago period to 397,000. Average revenue per user (“ARPU”) was $41 during the fourth quarter, flat compared to last year’s comparable period.
  • Commercial IoT data: Revenue was $32.2 million, up 11% from the year-ago period. Subscribers grew 21% from the year-ago period to 1,448,000 customers, driven by continued growth in consumer personal communications devices. ARPU was $7.50 in the fourth quarter, compared to $8.20 in last year’s comparable period. The decrease in ARPU resulted primarily from customer mix, including the effect of the growing proportion of personal communications subscribers, who typically utilize lower ARPU plans.
  • Commercial broadband: Revenue was $13.9 million, up 22% from $11.5 million in the year-ago period on increasing activations of Iridium Certus® broadband service. ARPU was $313 during the fourth quarter, compared to $292 in last year’s comparable period, reflecting an increasing mix of broadband subscribers using Iridium Certus.
  • Iridium’s commercial business ended the quarter with 1,860,000 billable subscribers, which compares to 1,576,000 for the prior-year quarter and is up from 1,828,000 for the quarter ended September 30, 2022. IoT data subscribers represented 78% of billable commercial subscribers at the end of the quarter, an increase from 76% at the end of the prior-year period.
  • Hosted payload and other data service: Revenue was $14.7 million in the fourth quarter, essentially unchanged from the prior-year period.

Service – U.S. Government

Iridium’s voice and data solutions improve situational awareness for military personnel and track critical assets in tough environments around the globe, providing a unique value proposition that is not easily duplicated.

Under Iridium’s Enhanced Mobile Satellite Services contract (the “EMSS Contract”), a seven-year, $738.5 million fixed-price airtime contract with the U.S. Space Force signed in September 2019, Iridium provides specified satellite airtime services, including unlimited global standard and secure voice, paging, fax, Short Burst Data®, Iridium Burst®, RUDICS and Distributed Tactical Communications System services for an unlimited number of Department of Defense and other federal government subscribers. Iridium also provides maintenance and support work for the U.S. government’s dedicated Iridium gateway under two other contracts with the U.S. Space Force. Iridium Certus airtime services are not included under these contracts and may be procured separately for an additional fee.

  • Government service revenue remained flat at $26.5 million in the fourth quarter reflecting the contractual rate in the EMSS Contract.
  • Iridium’s U.S. government business ended the quarter with 139,000 subscribers, which compares to 147,000 for the prior-year quarter and 145,000 for the quarter ended September 30, 2022. Government voice and data subscribers decreased 8% from the year-ago period to 60,000 as of December 31, 2022. Government IoT data subscribers decreased 4% year-over-year and represented 57% of government subscribers at year-end. The number of subscribers continues to be negatively affected by the government’s shift in contract administration between agencies.

Equipment

  • Equipment revenue was $39.3 million in the fourth quarter compared to $19.5 million in the prior-year quarter.
  • Equipment revenue totaled a record $134.7 million in 2022, compared to $92.1 million in 2021. In 2023, the Company expects equipment sales in line with 2022’s record level.

Engineering & Support

  • Engineering and support revenue was $17.8 million during the fourth quarter, compared to $9.7 million in the prior-year quarter, primarily due to a rise in activity with the U.S. government.
  • The Company expects Engineering and Support revenue in 2023 to be higher than 2022 due to the full year impact of the Space Development Agency contract which was granted in mid-2022.

Capital expenditures were $26.5 million for the fourth quarter, including $1.0 million in capitalized interest. The Company elected to prepay $100 million of principal on its Term Loan in the fourth quarter of 2022 and ended the fourth quarter with gross debt of $1.5 billion and a cash and cash equivalents balance of $168.8 million, for a net debt balance of $1.3 billion.

During the quarter ended December 31, 2022, the Company repurchased approximately 0.2 million shares of its common stock under its previously announced share repurchase program at a total purchase price of $7.7 million. As of December 31, 2022, $179.6 million remained available and authorized for repurchase under this program.

2023 Outlook

The Company issued its full-year 2023 outlook and updated other elements of long-term guidance:

  • Total service revenue growth between 9% and 11% for full-year 2023. Total service revenue for 2022 was $534.7 million.
  • Full-year 2023 OEBITDA between $455 million and $465 million. OEBITDA for 2022 was $424.0 million.
  • Negligible cash taxes in 2023. Cash taxes are expected to be negligible through approximately 2024.
  • Net leverage of between 2.5 and 3.5 times OEBITDA at the end of 2023, assuming the completion of the Company’s total $600.0 million share repurchase authorization and the payment of four quarters of dividends. Net leverage was 3.2 times OEBITDA at December 31, 2022.

Iridium Communications Inc.
Condensed Consolidated Statements of Operations
(In thousands)

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Iridium Communications Inc.
Condensed Consolidated Statements of Operations
(In thousands)
 

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Iridium Communications Inc.
Summary Revenue and OEBITDA Highlights
(In thousands)

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(1) Service revenue consists of primarily subscription-based services which often generate a long-term recurring revenue stream from subscribers.

(2) IoT data service provides a two-way short burst data transmission between Iridium Communications Inc.’s network and a telemetry unit, which may be located, for example, on a container in transit or a buoy monitoring oceanographic conditions.

(3) Broadband is comprised of Iridium OpenPort® and Iridium Certus.

(4) Hosted payload and other services consist primarily of services that do not have traditional billable subscribers. Hosted payload services consist of hosting and data services to our payload customers, Aireon and Harris. Other services include primarily Iridium Communications Inc.’s one-way satellite timing, location, and authentication services (STL) which provides position, navigation and timing technology.

(5) Government service revenue consists of voice and IoT data subscription-based services provided to agencies of the U.S. government through prime contracts.

(6) Engineering and support includes maintenance services to the U.S. government’s dedicated gateway and engineering services to assist customers in developing new technologies for use on Iridium Communications Inc.’s satellite system.

(7) Capital expenditures based on cash spent in the respective period.

(8) Net debt is calculated by taking the sum of the gross Term Loan B and gross drawn Revolving Facility, less cash, cash equivalents and marketable securities.

Iridium Communications Inc.
Subscriber Highlights
(In thousands, except ARPU)

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(1) Subscribers as of the end of the respective period.

(2) Billable subscriber and ARPU data is not applicable for Hosted payload and other data service revenue items and is excluded from presentation above.

(3) Average monthly revenue per unit, or ARPU, is calculated by dividing revenue in the respective period by the average of the number of billable subscribers at the beginning of the period and the number of billable subscribers at the end of the period and then dividing the result by the number of months in the period.

(4) Broadband is comprised of Iridium OpenPort® and Iridium Certus.