Iridium Communications Inc.
Feb 22, 2018

Iridium Announces Fourth-Quarter and Full-Year 2017 Results; Company Issues 2018 Outlook

MCLEAN, Va., Feb. 22, 2018 (GLOBE NEWSWIRE) -- Iridium Communications Inc. (Nasdaq:IRDM) ("Iridium") today reported financial results for the fourth quarter of 2017, issued its full-year 2018 guidance and updated its long-range outlook.  Net income was $141.9 million, or $1.10 per diluted share, for the fourth quarter of 2017, as compared to net income of $24.1 million, or $0.19 per diluted share, for the fourth quarter of 2016.  Operational EBITDA ("OEBITDA")(1) for the fourth quarter was $63.7 million, as compared to $61.3 million for the prior-year period, representing a year-over-year increase of 4% and an OEBITDA margin(1) of 55%.  OEBITDA benefitted from continued growth in the Company's Internet of Things ("IoT") data business and from higher equipment sales.

Iridium reported fourth-quarter total revenue of $115.5 million, which consisted of $91.4 million of service revenue and $24.0 million of revenue related to equipment sales and engineering and support projects.  Total revenue increased 7% versus the comparable period of 2016, while service revenue grew 9% from the year-ago period.  Service revenue, which represents primarily recurring revenue from Iridium's growing subscriber base, was 79% of total revenue for the fourth quarter of 2017.

The Company ended the quarter with 969,000 total billable subscribers, which compares to 850,000 for the year-ago period and is up from 949,000 for the quarter ended September 30, 2017.  Total billable subscribers grew 14% year-over-year, driven by growth in commercial IoT and government customers.

Full-Year 2017 Iridium Business Highlights

For the full year, Iridium reported net income of $233.9 million, or $1.82 per diluted share attributable to common stockholders, as compared to net income of $111.0 million, or $0.89 per diluted share attributable to common stockholders for 2016.  The Company reported 2017 total revenue of $448.0 million, which was up 3% from the year-ago period.  Total revenue included $349.7 million of service revenue and $98.3 million of revenue related to equipment sales and engineering and support projects.  OEBITDA for 2017 was $265.6 million, a 4% increase from $254.2 million in the prior-year, representing an OEBITDA margin of 59%.  Capital expenditures were $400.1 million for the full-year 2017.

"Iridium is executing well as we continue to move into the Iridium® NEXT era.  IoT remains a strong catalyst for subscriber growth, and Iridium's unique offering continues to attract large, new business partners with growing satellite requirements," said Matt Desch, CEO, Iridium.  Desch continued, "The Company delivered 9% total service revenue growth in the latest quarter and exceeded our full-year guidance for Operational EBITDA in 2017.  Momentum for services enabled by the Iridium network, including personal tracking and real-time asset telemetry, helped to fuel a 23% rise in commercial IoT subscribers and drive total billable subscribers to a record 969,000 at year end."

Commenting on Iridium NEXT, Desch said, "We made great progress in 2017 on our next generation constellation, with four launches and 40 satellites in orbit, including our most recent launch in December.  Thirty-two satellites are now in operation with eight more drifting toward their intended orbital slots."

Desch concluded, "Today, we issued 2018 full-year guidance and updated our long-term outlook.  We expect continued demand for Iridium's one-of-a-kind global solutions and new services available with Iridium NEXT satellites will drive significant revenue and subscriber growth for our Company."

Fourth-Quarter Iridium Business Highlights

Service — Commercial

Commercial service remained the largest part of Iridium's business, representing 60% 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.

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.  The Company operates through two Defense Information Systems Agency ("DISA") contracts, which include a $400 million, five-year, fixed-price agreement for satellite communications services and a $38 million multi-year contract to support and maintain the Department of Defense's ("DoD") dedicated gateway.   

Equipment

Engineering & Support

Capital expenditures were $109.4 million for the fourth quarter and primarily related to spending for the Company's next-generation satellite constellation, Iridium NEXT.  The Company ended the fourth quarter with a cash and marketable securities balance of $297.6 million and credit facility gross debt of $1.8 billion.  Net debt was $1.5 billion, calculated as $1.8 billion of credit facility gross debt and $55.6 million of Thales bills of exchange, less $297.6 million of cash and marketable securities, as well as $102.4 million in restricted cash.

2018 Outlook

The Company issued its full-year 2018 outlook for total service revenue growth and OEBITDA.    Based on expectations that approximately $14 million in hosting revenues from Aireon will be recognized, the Company expects:

The Company also announced that it believes it has reached an agreement in principle with its credit facility lenders to solidify its liquidity position.  Pursuant to this agreement, the Company would be required to raise additional debt by July 2018, and the lenders would delay a portion of the principal repayments.  The proceeds of this capital raising and delayed principal payment schedule would provide the Company with sufficient cash to meet its needs, including principal and interest payments under its credit facility, for the next several years, even in the absence of any hosting fee payments from Aireon.

Long-Range Outlook

The Company updated its long-range outlook for total service revenue growth and peak net leverage, while affirming its guidance for OEBITDA margin, cash taxes, and 2019 net leverage.  Given our expected completion of the Iridium NEXT system in 2018, the Company expects:

Non-GAAP Financial Measures & Definitions

  1. In addition to disclosing financial results that are determined in accordance with U.S. GAAP, the Company provides Operational EBITDA and Operational EBITDA margin, which are non-GAAP financial measures, as supplemental measures to help investors evaluate the Company's fundamental operational performance.  Operational EBITDA represents earnings before interest, income taxes, depreciation and amortization, Iridium NEXT revenue and expenses (for periods prior to the deployment of Iridium NEXT only), loss from investment in Aireon, share-based compensation expenses, the impact of purchase accounting, and non-cash gain from the Boeing transaction.  Iridium NEXT revenue and expenses were excluded from Operational EBITDA through 2017.  In 2018, Iridium NEXT revenues and recurring Iridium NEXT expenses (recurring Iridium NEXT expenses are not part of the approximately $3 billion construction cost of Iridium NEXT (the "Construction Costs")) will no longer be excluded in calculating Operational EBITDA.  U.S. GAAP requires that certain of the Construction Costs be expensed.  These certain Construction Costs, which beginning in 2018 will principally consist of in-orbit insurance, will continue to be excluded from the calculation of Operational EBITDA through 2019.  The Company also presents Operational EBITDA expressed as a percentage of GAAP revenue, or Operational EBITDA margin.  Operational EBITDA, along with its related measure, Operational EBITDA margin, does not represent, and should not be considered, an alternative to U.S. GAAP measurements such as net income or loss, and the Company's calculations thereof may not be comparable to similarly titled measures reported by other companies.  By eliminating interest, income taxes, depreciation and amortization, Iridium NEXT revenue and expenses (for periods prior to the deployment of Iridium NEXT only), loss from investment in Aireon, share-based compensation expenses, the impact of purchase accounting, and non-cash gain from the Boeing transaction, the Company believes the result is a useful measure across time in evaluating its fundamental core operating performance.  Management also uses Operational EBITDA to manage the business, including in preparing its annual operating budget, debt covenant compliance, financial projections and compensation plans.  The Company believes that Operational EBITDA is also useful to investors because similar measures are frequently used by securities analysts, investors and other interested parties in their evaluation of companies in similar industries.  However, there is no standardized measurement of Operational EBITDA, and Operational EBITDA as the Company presents it may not be comparable with similarly titled non-GAAP financial measures used by other companies.  As indicated, Operational EBITDA does not include interest expense on borrowed money, the payment of income taxes, amortization of the Company's definite-lived intangible assets, or depreciation expense on the Company's capital assets, which are necessary elements of the Company's operations.  It also excludes expenses in connection with the development, deployment and financing of Iridium NEXT and the loss from investment in Aireon.  Since Operational EBITDA does not account for these and other expenses, its utility as a measure of the Company's operating performance has material limitations.  Due to these limitations, the Company's management does not view Operational EBITDA in isolation, but also uses other measurements, such as net income, revenues and operating profit, to measure operating performance.  Please refer to the schedule below for a reconciliation of consolidated GAAP net income to Operational EBITDA and Iridium's Investor Relations webpage at www.iridium.com for a discussion and reconciliation of this and other non-GAAP financial measures. We do not provide a forward-looking reconciliation of expected full-year 2018 Operational EBITDA guidance as the amount and significance of special items required to develop meaningful comparable GAAP financial measures cannot be estimated at this time without unreasonable efforts.
        
 Iridium Communications Inc.
 Supplemental Reconciliation of GAAP Net Income to Operational EBITDA
 (In thousands)
        
 Three Months Ended December 31, Year Ended December 31,
 2017 2016 2017 2016
GAAP net income$141,877  $24,103  $233,856  $111,032 
Interest income, net (1,417)  (676)  (4,328)  (2,934)
Income taxes (154,479)  17,846   (114,284)  67,133 
Depreciation and amortization 65,615   11,806   122,266   49,394 
Iridium NEXT expenses, net 7,965   4,614   23,316   16,732 
Share-based compensation 4,119   3,806   15,806   13,689 
Non-cash purchase accounting -   (204)  -   (825)
Non-cash gain on Boeing transaction -   -   (11,003)  - 
Operational EBITDA$63,680  $61,295  $265,629  $254,221 
        

Conference Call Information

As previously announced, the Company will host a conference call to discuss its results at 8:30 a.m. ET on Thursday, February 22, 2018.  Callers should dial (877) 334-1964 (U.S. only) or (631) 291-4574 (from outside the U.S.) to access the call.  The conference call ID is 2659408.  The conference call will also be simultaneously webcast on Iridium's Investor Relations webpage at www.iridium.com.  An archive of the webcast will be available following the live conference call.

About Iridium Communications Inc.

Iridium® is the only mobile voice and data satellite communications network that spans the entire globe.  Iridium enables connections between people, organizations and assets to and from anywhere, in real time.  Together with its ecosystem of partner companies, Iridium delivers an innovative and rich portfolio of reliable solutions for markets that require truly global communications.  The company has a major development program underway for its next-generation network — Iridium NEXT.  Iridium Communications Inc. is headquartered in McLean, Va., U.S.A., and its common stock trades on the NASDAQ Global Select Market under the ticker symbol IRDM.  For more information about Iridium products, services and partner solutions, visit www.iridium.com.  IRDM-F

Forward-Looking Statements 

Statements in this press release that are not purely historical facts may constitute forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements regarding Iridium's expectations with respect to total service revenue growth, OEBITDA and hosted payload revenues, including from Aireon, for 2018; service revenue, OEBITDA margin, cash taxes and leverage over the longer-term; the timing of Iridium NEXT launches and the prospects for related services, including IoT; anticipated equipment revenue, and its agreement in principle with its credit facility lenders to solidify its liquidity position.  Forward-looking statements can be identified by the words "anticipates," "may," "can," "believes," "expects," "projects," "intends," "likely," "will," "to be" and other expressions that are predictions or indicate future events, trends or prospects. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of Iridium to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to, uncertainties regarding customer demand for Iridium's products and services, including demand from the U.S. Government; Iridium's ability to maintain the health, capacity and content of its current satellite constellation; the manufacture and launch of and transition to Iridium NEXT; Iridium's ability to finalize its agreements with its credit facility lenders and to raise additional debt, and the development of and market for Iridium's products and services, as well as general industry and economic conditions, and competitive, legal, governmental and technological factors. Other factors that could cause actual results to differ materially from those indicated by the forward-looking statements include those factors listed under the caption "Risk Factors" in the Company's Form 10-K for the year ended December 31, 2017, filed with the Securities and Exchange Commission ("SEC") on February 22, 2018, as well as other filings Iridium makes with the SEC from time to time.  There is no assurance that Iridium's expectations will be realized. If one or more of these risks or uncertainties materialize, or if Iridium's underlying assumptions prove incorrect, actual results may vary materially from those expected, estimated or projected. Iridium's forward-looking statements are based on information available to it as of the date of this press release and speak only as of the date of this press release, and Iridium undertakes no obligation to update forward-looking statements. 


   
   
Iridium Communications Inc.
Condensed Consolidated Statements of Operations
(In thousands)
  
 Three Months Ended December 31,
 2017 2016
Revenue       
Service revenue       
Commercial$69,437  $62,197 
Government 22,000   22,000 
Total service revenue 91,437   84,197 
Subscriber equipment 19,377   16,389 
Engineering and support service 4,655   6,863 
Total revenue 115,469   107,449 
      
Operating expenses     
Cost of services (exclusive of depreciation and amortization) 21,187   16,671 
Cost of subscriber equipment sales 11,287   10,488 
Research and development 5,025   4,469 
Selling, general and administrative 26,306   22,419 
Depreciation and amortization 65,614   11,806 
Total operating expenses 129,419   65,853 
        
Gain on Boeing transaction -   - 
        
Operating income (loss) (13,950)  41,596 
        
Other income (expense)       
Interest income, net 1,417   676 
Undrawn credit facility fees -   (170)
Other expense, net (69)  (153)
Total other income, net 1,348   353 
        
Income (loss) before income taxes (12,602)  41,949 
Benefit (provision) for income taxes 154,479   (17,846)
Net income 141,877   24,103 
Series A preferred stock dividends, declared and paid -   1,750 
Series B preferred stock dividends, declared and paid -   2,109 
Series A preferred stock dividends, undeclared 1,750   - 
Series B preferred stock dividends, undeclared 2,109   - 
Net income attributable to common stockholders$138,018  $20,244 
        
Operational EBITDA$63,680  $61,295 
        

 

    
Iridium Communications Inc.
Condensed Consolidated Statements of Operations   
(In thousands)   
  
 Year Ended December 31,
 2017 2016
Revenue   
Service revenue   
Commercial$261,735  $246,822 
Government 88,000   88,000 
Total service revenue 349,735   334,822 
Subscriber equipment 77,119   74,211 
Engineering and support service 21,192   24,607 
Total revenue 448,046   433,640 
    
Operating expenses   
Cost of services (exclusive of depreciation and amortization) 80,396   64,958 
Cost of subscriber equipment sales 44,445   44,286 
Research and development 15,247   16,079 
Selling, general and administrative 84,405   82,552 
Depreciation and amortization 122,266   49,394 
Total operating expenses 346,759   257,269 
    
Gain on Boeing transaction 14,189   - 
    
Operating income 115,476   176,371 
    
Other income (expense)   
Interest income, net 4,328   2,934 
Undrawn credit facility fees (25)  (1,346)
Other income (expense), net (207)  206 
Total other income, net 4,096   1,794 
    
Income before income taxes 119,572   178,165 
Benefit (provision) for income taxes 114,284   (67,133)
Net income 233,856   111,032 
Series A preferred stock dividends, declared and paid 1,750   7,000 
Series B preferred stock dividends, declared and paid 2,109   8,436 
Series A preferred stock dividends, undeclared 5,250   - 
Series B preferred stock dividends, undeclared 6,327   - 
Net income attributable to common stockholders$218,420  $95,596 
    
Operational EBITDA$265,629  $254,221 
    

 

              
Iridium Communications Inc. 
Summary Revenue and OEBITDA Highlights 
(In thousands) 
               
 Three Months Ended December 31,    Year Ended December 31,    
 2017 2016 % Change  2017 2016 % Change  
Revenue              
Service revenue(1)              
Commercial              
Voice and data and IoT data service              
Voice and data$45,353  $44,189  3% $177,686 $177,666 0% 
IoT data(2) 19,525   16,750  17%  74,142  65,523 13% 
Hosted payload and other data service (3) 4,558   1,258  262%  9,908  3,633 173% 
Total commercial data service 69,437   62,197  12%  261,735  246,822 6% 
               
Government service revenue(4) 22,000   22,000  0%  88,000  88,000 0% 
               
Total service revenue 91,437   84,197  9%  349,735  334,822 4% 
               
Subscriber equipment 19,377   16,389  18%  77,119  74,211 4 
               
Engineering and support(5)              
Commercial 1,119   377  197%  3,109  2,245 38% 
Government 3,536   6,486  -45%  18,083  22,362 -19% 
Total engineering and support 4,655   6,863  -32%  21,192  24,607 -14% 
               
Total revenue$115,469  $107,449  7% $448,046 $433,640 3% 
               
               
Operational EBITDA              
Operational EBITDA$63,680  $61,295  4% $265,629 $254,221 4% 
               
Other              
Capital expenditures (6)$109,395  $173,896     $400,107 $405,687    
               
Net debt (7)$1,455,591  $1,254,294            
              
Cash, cash equivalents, and marketable securities$297,626  $410,495           
              
Credit facility$1,800,000  $1,777,789           
Deferred financing costs (96,445)  (120,644)          
Credit facility, net$1,703,555  $1,657,145           
               
(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) Hosted payload and other services consist primarily of services that do not have traditional billable subscribers, but are based on capacity. 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.
 
               
(4) Government service revenue consists of voice and M2M data subscription-based services provided to agencies of the U.S. government through prime contracts or subcontracts.
 
               
(5) Engineering and support includes maintenance services to the U.S. government's dedicated gateway in Hawaii and engineering services to assist customers in developing new technologies for use on Iridium Communications Inc.'s satellite system.
 
               
(6) Capital expenditures based on cash spent in the respective period.
 
               
(7) Net debt is calculated by taking the sum of the gross credit facility and Thales bills of exchange, less cash and cash equivalents, marketable securities, and the debt service reserve for the credit facility.
 
               

 

Iridium Communications Inc.             
Subscriber Highlights             
(In thousands, except ARPU)             
              
              
 As of December 31,          
 2017 2016 % Change        
Billable Subscribers (1)(2)             
Commercial             
Voice and data and IoT data service             
Voice and data 359   353  2%       
IoT data 510   413  23%       
Total commercial voice and data and IoT data service 869   766  13%       
              
Government             
Voice and data and IoT data service             
Voice and data 52   44  18%       
IoT data 48   40  20%       
Total government voice and data and IoT data service 100   84  19%       
Total billable subscribers 969   850  14%       
              
              
              
 Three Months Ended December 31,    Year Ended December 31,   
 2017 2016 % Change  2017 2016 % Change 
Net Billable Subscriber Additions             
Commercial             
Voice and data and IoT data service             
Voice and data (9)  (5) -80%  6  2 200%
IoT data 24   15  60%  97  54 80%
Total commercial voice and data and IoT data service 15   10  50%  103  56 84%
              
Government             
Voice and data and IoT data service             
Voice and data 3   1  200%  8  4 100%
IoT data 2   1  100%  8  8 0%
Total government voice and data and IoT data service 5   2  150%  16  12 33%
Total net billable subscriber additions 20   12  67%  119  68 75%
              
              
 Three Months Ended December 31,    Year Ended December 31,   
 2017 2016 % Change  2017 2016 % Change 
 ARPU(2)(3)             
Commercial             
Voice and data$42  $41  2% $42 $42 0%
IoT data$13  $14  -7% $13 $14 -7%
              
              
(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. 
 

Investor Contact:

Kenneth Levy
Iridium Communications Inc.
+1 (703) 287-7570
ken.levy@iridium.com

Press Contact:

Jordan Hassin
Iridium Communications Inc.
+1 (703) 287-7421
jordan.hassin@iridium.com