Iridium Announces Third-Quarter 2023 Results; Reports Record Operational EBITDA; Updates Guidance

McLean, Va., October 19, 2023 – Iridium Communications Inc. (Nasdaq: IRDM) (“Iridium”), a provider of global voice and data satellite communications, today reported financial results for the third quarter of 2023 and updated its full-year 2023 outlook. Net loss was US $1.6 million, or US$ 0.01 per diluted share, for the third quarter of 2023, as compared to net income of US $2.1 million, or US$ 0.02 per diluted share, for the third quarter of 2022. Operational EBITDA (“OEBITDA”)(1) for the third quarter was US$ 121.3 million, as compared to US$ 107.8 million for the prior-year period, representing a year-over-year increase of 12%. 

The net loss was primarily the result of costs incurred in connection with the successful refinancing of Iridium’s credit facility during the quarter, which extends the maturity to September 2030 and reduces the interest rate. These refinancing costs fully offset strong revenue growth in Iridium’s commercial service lines and an increase in engineering and support revenue.

Iridium reported third-quarter total revenue of US$ 197.6 million, which consisted of US$ 152.0 million of service revenue and US$ 45.6 million of revenue related to equipment sales and engineering and support projects. Total revenue increased 7% versus the comparable period of 2022, while service revenue grew 9% from the year-ago period. Service revenue, which represents primarily recurring revenue from Iridium’s growing subscriber base, was 77% of total revenue for the third quarter of 2023.

The Company ended the quarter with 2,236,000 total billable subscribers, which compares to 1,973,000 for the year-ago period and is up from 2,140,000 for the quarter ended June 30, 2023. Total billable subscribers grew 13% year-over-year, driven by growth in commercial IoT.

“Iridium continues to enjoy strong subscriber momentum and broad-based revenue growth across its commercial business lines, which drove record operational EBITDA,” said Matt Desch, CEO, Iridium. Desch added, “We are generating exceptional cash flow, which should continue well into the future as we projected at our recent Investor Day in September.”

Iridium Business Highlights

Service – Commercial

Commercial service remained the largest part of Iridium’s business, representing 63% of the Company’s total revenue during the third 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 $125.5 million, up 12% from last year’s comparable period due to broad-based growth across all revenue lines.
  • Commercial voice and data: Revenue was $56.2 million, up 12% from the year-ago period. Subscribers grew 2% from the year-ago period to 410,000. Average revenue per user (“ARPU”) was $46 during the third quarter, compared to $42 in the prior-year period, due to higher access fees.
  • Commercial IoT data: Revenue was $38.5 million, up 14% from the year-ago period. Subscribers grew 18% from the year-ago period to 1,667,000 customers, driven by continued growth in consumer personal communications devices. ARPU was $7.90 in the third quarter, compared to $8.24 in last year’s comparable period. The decrease in ARPU resulted primarily from shifting mix of subscribers using lower ARPU plans, including personal communications subscribers.
  • Commercial broadband: Revenue was $15.8 million, up 16% from $13.6 million in the year-ago period on subscriber growth and benefited from a customer arrangement which resulted in revenue recognition of approximately $1.5 million.
  • Iridium’s commercial business ended the quarter with 2,094,000 billable subscribers, which compares to 1,828,000 for the prior-year quarter and is up from 1,999,000 for the quarter ended June 30, 2023. IoT data subscribers represented 80% of billable commercial subscribers at the end of the quarter, an increase from 77% at the end of the prior-year period.
  • Hosted payload and other data service revenue remained consistent at $15.0 million in the third quarter compared to the year-ago 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 third quarter, reflecting the contractual rate in the EMSS Contract.
  • Iridium’s U.S. government business ended the quarter with 142,000 subscribers, which compares to 145,000 for the prior-year quarter and 141,000 for the quarter ended June 30, 2023. Government voice and data subscribers decreased 2% from the year-ago period to 61,000 as of September 30, 2023. Government IoT data subscribers decreased 2% year-over-year and represented 57% of government subscribers at quarter-end.

Equipment

  • Equipment revenue was $20.4 million in the third quarter, down 27% compared to $28.0 million in the prior-year quarter.
  • For full year 2023, the Company expects equipment sales to be lower than 2022’s record level.

Engineering & Support

  • Engineering and support revenue was $25.2 million during the third quarter, compared to $17.1 million in the prior-year quarter, primarily due to a rise in government activity.
  • The Company expects engineering and support revenue in 2023 to be higher than 2022 primarily due to the full year impact of the Space Development Agency contract, which was granted in mid-2022.

Capital expenditures were $12.0 million for the third quarter, including $1.1 million in capitalized interest. The Company ended the third quarter with gross debt of $1.5 billion and a cash and cash equivalents balance of $67.9 million, for a net debt balance of $1.4 billion, representing net leverage of 3.1 times OEBITDA.

Iridium paid its third dividend of $0.13 per common share on September 29, 2023. Dividends through the third quarter of 2023 have resulted in a total of $48.8 million in payments to stockholders.

During the quarter, the Company repurchased approximately 1.4 million shares of its common stock under its previously announced share repurchase program at a total purchase price of $73.8 million. As of September 30, 2023, $385.7 million remained available and authorized for repurchase under this program through December 31, 2025.

In September, Iridium completed the refinance of its credit facility. The new facility extends Iridium’s debt maturity to September 2030 and reduces the interest rate by 10 basis points, which will reduce interest costs by $1.5 million in the first year.

2023 Outlook

The Company updated its full-year 2023 outlook:

  • Total service revenue growth of approximately 10% for full-year 2023. Total service revenue for 2022 was $534.7 million.
  • Full-year 2023 OEBITDA of between $460 million and $465 million. OEBITDA for 2022 was $424.0 million.
  • Negligible cash taxes in 2023. Cash taxes are expected to be negligible through 2024.
  • Net leverage of approximately 3.0 times OEBITDA at the end of 2023, assuming the payment of four quarters of dividends and completion of expected share repurchases. Net leverage was 3.2 times OEBITDA at December 31, 2022.