Iridium Reports Net Loss of US$ 18.0 million in 3Q 2019

McLean, Va., Oct. 29, 2019 --Iridium Communications Inc. (Nasdaq: IRDM) ("Iridium") today reported financial results for the third quarter of 2019 and updated its full-year 2019 outlook.  Net loss was $18.0 million, or $0.14 per diluted share, for the third quarter of 2019, as compared to net loss of $12.9 million, or $0.13 per diluted share, for the third quarter of 2018.  This increase in net loss was primarily the result of a $12.4 million increase in depreciation and amortization expense compared to the year-ago period.  Operational EBITDA ("OEBITDA")(1) for the third quarter was $88.5 million, as compared to $79.4 million for the prior-year period, representing a year-over-year increase of 11% and an OEBITDA margin(1) of 61%.  OEBITDA primarily benefitted from higher government service revenue and strong growth in commercial IoT and hosted payload.

Iridium reported third-quarter total revenue of $144.8 million, which consisted of $115.9 million of service revenue and $28.9 million of revenue related to equipment sales and engineering and support projects.  Total revenue increased 6% versus the comparable period of 2018, while service revenue grew by 10%.  Service revenue, which represents primarily recurring revenue from Iridium's growing subscriber base, was 80% of total revenue for the third quarter of 2019, up from 77% in the year-ago period.

The company ended the quarter with 1,269,000 total billable subscribers, which compares to 1,092,000 for the year-ago period and is up from 1,213,000 for the quarter ended June 30, 2019.  Total billable subscribers grew 16% year-over-year, driven by growth in commercial and government IoT customers.

"Continued momentum in service revenue and IoT subscriber growth through the third quarter gives us confidence in raising our full-year service revenue guidance," said Matt Desch, CEO, Iridium.  Desch continued, "Having finalized a new Enhanced Mobile Satellite Services ("EMSS") contract with the U.S. government in September, we look forward to closing very soon on a new credit facility, which will provide Iridium with more flexibility in leveraging its growing free cash flow and simplify its capital structure."

Commenting on Iridium's pending refinancing, Desch said, "The Company has priced a new $1.45 billion term loan on attractive terms, which it expects to close on November 4.  The new 7-year facility replaces the export bank financing that funded the Iridium® NEXT mission and was instrumental in the construction and launch of Iridium's upgraded satellite constellation."

Iridium Business Highlights

Service – Commercial

Commercial service remains the largest part of Iridium's business, representing 62% 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 $90.2 million, up 8% from last year's comparable period due primarily to increased revenues from IoT and hosted payload and other data services.
  • Commercial voice and data subscribers were up 1% from the year-ago period to 371,000 subscribers.  Commercial voice and data average revenue per user ("ARPU") was $48 during the third quarter, compared to $47 in last year's comparable period, as a result of growing usage associated with new activations of Iridium Certus™ terminals.  Commercial IoT data subscribers grew 25% from the year-ago period to 767,000 customers, driven by continued strength in consumer personal communications devices.  Commercial IoT data ARPU was down 11% from the prior year to $11.36 in the third quarter based upon the higher volume of new personal communications subscribers utilizing lower ARPU plans.
  • Iridium's commercial business ended the quarter with 1,138,000 billable subscribers, which compares to 979,000 for the year-ago period and is up from 1,088,000 for the quarter ended June 30, 2019.  IoT data subscribers represented 67% of billable commercial subscribers at the end of the quarter, an increase from 63% at the end of the prior-year period.
  • Hosted payload and other data service revenue was $12.0 million in the third quarter.  This represented a 25% increase from the prior-year period, primarily due to increased hosting and data services.

Service – 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.

Iridium signed three new contracts in 2019 that support the use of Iridium satellite technology and services by the U.S. government.  Most significantly, effective September 15, 2019, the Company entered into a 7-year, $738.5 million fixed-price airtime contract with the U.S. Air Force Space Command for Enhanced Mobile Satellite Services (the "EMSS Contract").  Under the EMSS Contract, Iridium provides 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.  The other two of these contracts provide for maintenance and support work for the U.S. government's dedicated Iridium gateway.  Iridium Certus® airtime services are not included under these contracts and may be procured separately for an additional fee.

  • Government service revenue was $25.6 million and reflects increased revenue from short-term extensions to the Company's previous EMSS contract with the U.S. government through September 14 and the new EMSS Contract thereafter.
  • Iridium's government business ended the quarter with 131,000 subscribers, which compares to 113,000 for the year-ago period and is up from 125,000 for the quarter ended June 30, 2019.  Government voice and data subscribers was unchanged from the year-ago period at 56,000 as of September 30, 2019.  Government IoT data subscribers increased 32% year-over-year to 75,000 and represented 57% of total government subscribers, an increase from 50% at the end of the prior-year period.

Equipment

  • Equipment revenue was $21.4 million during the third quarter, compared to $26.1 million in the prior-year's quarter.
  • The Company continues to forecast lower equipment sales in 2019.

Engineering & Support

  • Engineering and support revenue was $7.6 million during the third quarter, compared to $4.9 million in the prior-year's quarter, primarily driven by increased government activities.

Capital expenditures were $10.2 million for the third quarter.  The Company ended the third quarter with credit facility gross debt of $1.6 billion and a cash and cash equivalents balance of $171.6 million.  Net debt was $1.6 billion, calculated as $1.6 billion of credit facility gross debt and $360.0 million of unsecured notes, less $171.6 million of cash and cash equivalents, as well as $195.1 million in restricted cash.

2019 Outlook

The Company updated its full-year 2019 outlook for total service revenue, OEBITDA and net leverage.  The Company now expects:

  • Total service revenue between $445 and $450 million for the full-year 2019 (previous outlook was for total service revenue of approximately $440 million).
  • OEBITDA of approximately $330 million in 2019 (previous outlook was for OEBITDA between $325 and $335 million). OEBITDA for 2018 was $302.0 million.
  • Negligible cash taxes in 2019. Cash taxes are expected to be negligible through approximately 2023.
  • Net leverage of approximately 4.8x OEBITDA at the end of 2019, reflecting costs associated with the Company's debt refinancing (previous outlook was for net leverage of approximately 4.5x OEBITDA and did not reflect costs associated with debt refinancing).