Iridium Communications Inc.
Mar 16, 2010

Iridium Reports Fourth Quarter and Full Year 2009 Results

Strong Growth in Subscribers and Commercial Service Revenues in 2009; Detailed 2010 Guidance

BETHESDA, Md., March 16, 2010 (GLOBE NEWSWIRE) -- Iridium Communications Inc. (Nasdaq:IRDM) today reported financial results for the period ended December 31, 2009. To facilitate the presentation of the fourth quarter and full year 2009, the following reflects the results of Iridium Communications Inc. for the fourth quarter of 2009 combined with those of Iridium Holdings LLC for the remainder (the first three quarters of 2009) compared to the results of Iridium Holdings LLC for 2008. The full year GAAP results of Iridium Communications Inc. are attached as well. For a more complete discussion of this presentation, please see the attached combined results along with the appropriate explanatory footnotes in the attachments to this press release.

Iridium Operating Highlights – 4Q and Full Year 2009

The following financial results demonstrate Iridium's operating strength despite the global economic downturn:

"We're very pleased by these results, particularly in the face of the global economic slowdown," said Matt Desch, CEO of Iridium. "Our full year Operational EBITDA -- a key metric by which we measure our business performance -- was stronger than expected. Growth in our customer base, which generates high margin and recurring service revenues, more than offset a sharp decline in lower-margin equipment sales that were heavily impacted by the global recession. With only two weeks to go in the first quarter, I am encouraged that the trends in our business continue to be positive. We anticipate that we will add more subscribers in this quarter than we have in each of the prior two quarters. The recent earthquakes in Haiti and Chile, where Iridium provided a critical communication lifeline for citizens and more than 65 emergency response organizations, have also contributed to that growth. For example, the Haiti earthquake demonstrated our ability to handle large traffic surges in a very condensed area. At its peak, we saw as much traffic in Haiti as we typically see in the entirety of our highest traffic-generating national region."

Desch added, "Finally, we are pleased to report that we also continue to make progress toward developing and launching our next-generation satellite constellation, Iridium NEXT. We continue to work toward final proposals from our two prime contractor candidates, and we are now actively engaged in seeking attractive financing from export credit agencies with a plan to finalize our prime contractor selection and related financing this summer."

2010 Outlook

Desch continued, "With encouraging signs that the business climate is improving somewhat for 2010, we anticipate strengthening equipment sales and stronger subscriber growth. Earlier this year, we provided an outlook for Operational EBITDA in the range of $145-155 million. We expect the key drivers for 2010 growth to be M2M subscriber equipment sales and service revenues, driven in part by the commercial availability in June of our new, smaller, lower-priced data transceiver, the Iridium 9602. We anticipate that another driver will be continued expansion in our customer base of Iridium OpenPort maritime terminals and related service revenues. We also expect continued strength in government voice and M2M data services, including increased usage of the Distributed Tactical Communications System (DTCS), also known as 'Netted Iridium.'"

Based on this outlook, the company is issuing the following more-detailed guidance ranges for the full year 2010:

Corporate Highlights

In addition to continuing its strong financial performance during 2009, Iridium is also pleased to note the following key milestones for the year:

In Iridium's pursuit to remain a leader in the rapidly growing M2M market, Iridium unveiled the Iridium 9602 in January 2010. The Iridium 9602 combines an extremely small package, lower power consumption, greater design flexibility and a substantially lower price than its predecessor. More than 90 Iridium service partners are planning to embed the Iridium 9602 into their products for personal two-way navigation, safety and mapping, remote asset tracking and monitoring, employee safety, telemetry, enterprise logistics and supply-chain visibility. The product is the culmination of a two-year R&D program that sets the bar for global, real-time, two-way data service performance.

Full Year 2009 Calculation

For comparison purposes, we have presented the operating results of Iridium Holdings LLC and Iridium Communications Inc. on a combined basis for the year ended December 31, 2009 along with the Iridium Holdings LLC operating results for 2008. The combined 2009 presentation is a simple mathematical addition of the pre-acquisition results of operations of Iridium Holdings LLC for the period from January 1, 2009 to September 29, 2009 and the post-acquisition results of operations of Iridium Communications Inc. for the three months ended December 31, 2009. Please note that this presentation is different from the "combined" presentation that we include in the 'Management's Discussion and Analysis' section of our Form 10-K, which combines the pre-acquisition results of operations of Iridium Holdings LLC for the period from January 1, 2009 to September 29, 2009, with the full year 2009 results of operations of Iridium Communications Inc., both pre- and post-acquisition. Iridium Communications Inc. had no material operating activities from the date of formation of GHL Acquisition Corp. until the acquisition. There are no other adjustments made in the combined presentation. This presentation is intended to facilitate the evaluation and understanding of the financial performance of the Iridium business on a year-to-year basis. Management believes this presentation is useful in providing the users of our financial information with an understanding of our results of operations because there were no material changes to the operations or customer relationships of Iridium as a result of the acquisition of Iridium Holdings LLC by GHL Acquisition Corp.

Non-GAAP Financial Measures

In addition to disclosing financial results that are determined in accordance with U.S. GAAP, we disclose Operational EBITDA, which is a non-GAAP financial measure, as a supplemental measure to help investors evaluate our 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), stock-based compensation expenses, transaction expenses associated with the acquisition, impact of purchase accounting adjustments, and change in the fair value of warrants. Operational EBITDA does not represent and should not be considered an alternative to GAAP measurements, such as net income and our calculations thereof may not be comparable to similarly entitled measures reported by other companies. A reconciliation of Operational EBITDA to net (loss) income, its comparable GAAP financial measure, is in the attached table. By eliminating interest, income taxes, depreciation and amortization, Iridium NEXT revenue and expenses (for periods prior to the deployment of Iridium NEXT only), stock-based compensation expenses, transaction expenses associated with the acquisition, purchase accounting adjustments and the change in fair value of the warrants, we believe the result is a useful measure across time in evaluating our fundamental core operating performance. Management also uses Operational EBITDA to manage our business, including in preparing its annual operating budget, financial projections and compensation plans. We believe 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. As indicated, Operational EBITDA does not include interest expense on borrowed money or the payment of income taxes or depreciation expense on our capital assets, which are necessary elements of our operations. It also excludes expenses in connection with the development, deployment and financing of Iridium NEXT. Because Operational EBITDA does not account for these and other expenses, its utility as a measure of our operating performance has material limitations. Because of these limitations, our management does not view Operational EBITDA in isolation and also uses other measurements, such as net income, revenues and operating profit, to measure operating performance.

Conference Call Information

Iridium will host a conference call on Tuesday, March 16, 2010 at 8:30 a.m. Eastern Daylight Time (EDT) to discuss the company's fourth quarter and full year 2009 results. To participate in the teleconference, callers can dial the toll-free number 1-888-427-9414 (U.S. callers only) or 1-719-325-2213 (from outside the U.S.). For those unable to participate in the live call, a replay of the call will be available toll free for seven days at 1-888-203-1112 (U.S. callers only) or at 1-719-457-0820 (callers outside the U.S.). The passcode for the replay is 1896343. To help ensure the conference begins in a timely manner, please dial in five minutes prior to the scheduled start time. 

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 expected equipment sales and subscriber growth, growth in the sale of Iridium OpenPort terminals and services, expected Operational EBITDA for 2010, revenue growth, Iridium NEXT, expected growth in demand for M2M services and the availability of the Iridium 9602. Other 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 of 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 levels of demand for MSS, expected Operational EBITDA growth, growth in subscribers and revenue, the development and availability of financing for Iridium NEXT, and our ability to maintain the health, capacity and content of our satellite constellation,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, 2009, filed with the Securities and Exchange Commission on March 16, 2010. 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 speak only as of the date of this press release and Iridium undertakes no obligation to update forward-looking statements.

About Iridium Communications Inc.

Iridium Communications Inc. (www.iridium.com) is the only mobile satellite service (MSS) company offering coverage over the entire globe. The Iridium constellation of low-earth orbiting (LEO) cross-linked satellites provides critical voice and data services for areas not served by terrestrial communication networks. Iridium serves commercial markets through a worldwide network of distributors, and provides services to the U.S. Department of Defense and other U.S. and international government agencies. The company's customers represent a broad spectrum of industry, including maritime, aeronautical, government/defense, public safety, utilities, oil/gas, mining, forestry, heavy equipment and transportation. Iridium has launched a major development program for its next-generation satellite constellation, Iridium NEXT. The company is headquartered in Bethesda, MD., U.S.A. and trades on the NASDAQ Global Market under the ticker symbols IRDM (common stock), IRDMW ($7.00 warrants), IRDMZ ($11.50 warrants) and IRDMU (units).

Iridium Communications Inc. and Iridium Holdings LLC
Consolidated Statements of Operations
(In thousands)
    
  Iridium Holdings LLC Iridium Communications Inc. 
  For the Three Months Ended December 31, 
 



2008




2009
Impact of
Purchase Accounting
Adjustments on
2009 results(1)
    
Revenue:   
Services:   
Government $ 18,933 $ 19,159 $ -- 
Commercial 35,706 39,537 (1,675)
Subscriber equipment 22,114 17,293 -- 
Total revenue 76,753 75,989 (1,675)
    
Operating expenses:   
Cost of subscriber equipment sales 12,309 18,657 8,899
Cost of services (exclusive of depreciation and amortization) 20,027 18,965 (1,020)
Research and development 11,679 5,974 -- 
Depreciation and amortization 3,576 21,513 17,758
Selling, general and administrative 14,514 16,307 -- 
Transaction costs 5,583 --  -- 
Total operating expenses 67,688 81,416 25,637
    
Operating profit (loss) 9,065 (5,427) (27,312)
    
Other (expense) income:   
Interest expense, net of capitalized interest (6,770) (351) (78)
Interest income and other income (expense), net (751) 324 -- 
Total other (expense) income (7,521) (27) (78)
    
Earnings (loss) before provision (benefit) for taxes 1,544 (5,454) (27,390)
Income tax (benefit) provision --  (705) (10,437)
Net income (loss) $ 1,544 $ (4,749) $ (16,953)
    
Operational EBITDA $ 25,755 $ 30,211 $ -- 
(1) As a result of the impact of the purchase accounting adjustments in connection with the GHQ transaction, the carrying value of inventory, property and equipment, intangible assets and accruals, increased by approximately $19.8 million, $332.5 million, $91.9 million and $9.6 million, respectively, compared to Iridium Holdings LLC's balance sheet as of September 29, 2009. Similarly, deferred revenue decreased by $7.4 million. As a result of the purchase accounting adjustments our cost of subscriber equipment sales increased as compared to those costs and expenses of Iridium Holdings LLC in prior periods and the decrease in the carrying value of deferred revenue also resulted in a decrease in revenue. In addition, the increase in accruals resulted in a reduction in cost of services (exclusive of depreciation and amortization). The increase in property and equipment and intangible assets resulted in an increase to depreciation and amortization expense. These impacts of the purchase accounting adjustments will continue during 2010 and future periods.
Iridium Communications Inc. and Iridium Holdings LLC
Consolidated Statements of Operations
(In thousands)
      
  Iridium
Holdings
LLC
Iridium Communications Inc. Iridium
Holdings
LLC
Combined
Year (1)
 
  For the Year Ended December 31,
2008
For the Three
Months Ended December 31,
2009
For the Period January 1, 2009 to September 29,
2009
For the Year Ended December 31,
2009
Impact of Purchase Accounting Adjustments on
2009 results(1)
      
Revenue:     
Services:     
Government $ 67,759 $ 19,159 $ 56,039 $ 75,198 $ -- 
Commercial 133,247 39,537 120,706 160,243 (1,675)
Subscriber equipment 119,938 17,293 66,206 83,499 -- 
Total revenue 320,944 75,989 242,951 318,940 (1,675)
      
Operating expenses:     
Cost of subscriber equipment sales 67,570 18,657 33,265 51,922 8,899
Cost of services (exclusive of depreciation and amortization) 69,882 18,965 58,978 77,943 (1,020)
Research and development 32,774 5,974 17,432 23,406 -- 
Depreciation and amortization 12,535 21,513 10,850 32,363 17,758
Selling, general and administrative 55,105 16,307 44,505 60,812 -- 
Transaction costs 7,959 --  12,478 12,478 -- 
Total operating expenses 245,825 81,416 177,508 258,924 25,637
      
Operating profit 75,119 (5,427) 65,443 60,016 (27,312)
      
Other (expense) income:     
Interest expense, net of capitalized interest (21,094) (351) (12,829) (13,180) (78)
Interest income and other income (expense), net (146) 324 670 994 -- 
Total other income (expense)  (21,240) (27) (12,159) (12,186) (78)
      
Earnings before provision (benefit) for taxes 53,879 (5,454) 53,284 47,830 (27,390)
Income tax provision (benefit)  --  (705) --  (705) (10,437)
Net income $ 53,879 $ (4,749) $ 53,284 $ 48,535 $ (16,953)
      
Operational EBITDA $ 111,103 $ 30,211 $ 103,718 $ 133,929 $ -- 
(1) The combined presentation is a simple mathematical addition of the pre-Acquisition results of operations of Iridium Holdings LLC for the period from January 1, 2009 to September, 29 2009 and the post-Acquisition results of operations of Iridium Communications Inc. for the three months ended December 31, 2009. Iridium Communications Inc. had no material operating activities from the date of formation of GHL Acquisition Corp. until the Acquisition. There are no other adjustments made in the combined presentation.
      
(2) As a result of the impact of the purchase accounting adjustments in connection with the GHQ transaction, the carrying value of inventory, property and equipment, intangible assets and accruals, increased by approximately $19.8 million, $332.5 million, $91.9 million and $9.6 million, respectively, compared to Iridium Holdings LLC's balance sheet as of September 29, 2009. Similarly, deferred revenue decreased by $7.4 million. As a result of the purchase accounting adjustments our cost of subscriber equipment sales increased as compared to those costs and expenses of Iridium Holdings LLC in prior periods and the decrease in the carrying value of deferred revenue also resulted in a decrease in revenue. In addition, the increase in accruals resulted in a reduction in cost of services (exclusive of depreciation and amortization). The increase in property and equipment and intangible assets resulted in an increase to depreciation and amortization expense. These impacts of the purchase accounting adjustments will continue during 2010 and future periods.
    
Iridium Communications Inc. and Iridium Holdings LLC   
Summary Highlights      
       
  Iridium Holdings
LLC
Iridium Communications Inc.  Iridium Holdings LLC Combined
Year
 
(In thousands, except for subscriber data) For the Three Months Ended
December 31,
2008
For the Three Months Ended
December 31,
2009


% Change
For the Year
Ended
December 31, 2008
For the Year
Ended
December 31, 2009


% Change
       
Subscribers (at end of period) (1)    320,000 369,000 15.3%
       
Revenue      
Commercial revenue      
Voice and M2M data service revenue      
Voice $ 31,765 $ 35,074 10.4% $ 121,183 $ 143,133 18.1%
M2M data 3,686 4,309 16.9% 11,288 16,462 45.8%
Total voice and M2M data service revenue 35,451 39,383 11.1% 132,471 159,595 20.5%
Other revenue 255 154 -39.6% 776 648 -16.5%
Total commercial revenue 35,706 39,537 10.7% 133,247 160,243 20.3%
       
Government revenue      
Voice and M2M data service revenue      
Voice 13,033 13,383 2.7% 52,172 52,956 1.5%
M2M data 105 258 145.7% 277 770 178.0%
Total voice and M2M data service revenue 13,138 13,641 3.8% 52,449 53,726 2.4%
Other revenue 5,795 5,518 -4.8% 15,310 21,472 40.2%
Total government revenue 18,933 19,159 1.2% 67,759 75,198 11.0%
       
Equipment 22,114 17,293 -21.8% 119,938 83,499 -30.4%
Total revenue 76,753 75,989 -1.0% 320,944 318,940 -0.6%
       
(1) Of the 369,000 subscribers at December 31, 2009 and 320,000 subscribers at December 31, 2008, respectively, 7.2% and 3.8% maintained a suspended account.
 
Iridium Communications Inc. and Iridium Holdings LLC
Supplemental Reconciliation of Operational EBITDA
(In thousands)
 
  Iridium Holdings
LLC
Iridium Communications
Inc.
  
  Three Months Ended December 31, 2008  Three Months Ended December 31, 2009  
     
Net (loss) income $ 1,544 $ (4,749)  
Interest expense 6,769 351  
Interest income (329) (298)  
Income taxes --  (705)  
Depreciation and amortization 3,576 21,513  
Iridium Next expenses, net 7,848 4,109  
Share-based compensation 764 436  
Transaction expenses 5,583 --   
Purchase accounting adjustments  --  9,554  
Operational EBITDA $ 25,755 $ 30,211  
     
     
  Iridium Holdings
LLC
Iridium Communications
Inc.
Iridium Holdings
LLC
Combined
Year
  For the Year
Ended December
31, 2008
Three Months
Ended December
31, 2009
For the Period January 1, 2009 to September 29,
2009
For the Year Ended December 31,
2009
     
Net income $ 53,879 $ (4,749) $ 53,284 $ 48,535
Interest expense 21,094 351 12,829 13,180
Interest income (1,345) (298) (287) (585)
Income taxes --  (705) --  (705)
Depreciation and amortization 12,535 21,513 10,850 32,363
Iridium Next expenses, net 14,113 4,109 9,159 13,268
Stock-based compensation 2,868 436 5,405 5,841
Transaction expenses 7,959 --  12,478 12,478
Purchase accounting adjustments  --  9,554 --  9,554
Operational EBITDA $ 111,103 $ 30,211 $ 103,718 $ 133,929
 
Iridium Communications Inc.
Consolidated Statements of Operations
(In thousands, except per share amounts)
  
  For the Year Ended December 31,
  2008 2009
   
Revenue:  
Services:  
Government $ --  $ 19,159
Commercial --  39,537
Subscriber equipment --  17,293
Total revenue --  75,989
   
Operating expenses:  
Cost of subscriber equipment sales --  18,657
   
Cost of services (exclusive of depreciation and amortization) --  18,965
Research and development --  5,974
Depreciation and amortization --  21,513
Selling, general and administrative 490 17,029
Transaction costs 2,102 6,163
Total operating expenses 2,592 88,301
   
Operating loss (2,592) (12,312)
   
Other (expense) income:  
Change in fair value of warrants --  (34,117)
Interest expense --  (355)
Interest income and other income (expense), net 5,604 1,303
Total other (expense) income 5,604 (33,169)
   
Earnings (loss) before provision (benefit) for taxes 3,012 (45,481)
Income tax provision (benefit) 1,356 (1,321)
Net income (loss) $ 1,656 $ (44,160)
   
Weighted average shares outstanding - basic and diluted 43,268 53,964
Earnings per share - basic and diluted $ 0.04 $ (0.82)
 
Iridium Communications Inc.
Consolidated Balance Sheet
(In thousands, except per share and per data)
  
  December 31, 2009
Assets 
Current Assets: 
Cash and cash equivalents $ 147,178
Accounts receivable, net of allowance for doubtful accounts of $1,462 41,189
Inventory 25,656
Deferred tax assets 2,600
Prepaid expenses and other current assets 4,433
 Total current assets 221,056
  
Property and equipment, net 386,737
Restricted cash 15,520
Intangible assets, net 88,953
Other assets 1,127
Goodwill 95,439
Total assets $ 808,832
  
Liabilities and stockholders' equity 
Current liabilities 
Accounts payable $ 7,865
Accrued expenses and other current liabilities 30,893
Accrued compensation and employee benefits 6,489
Deferred revenue  20,027
Deferred acquisition consideration 4,636
 Total current liabilities 69,910
  
Accrued satellite operations and maintenance expense, net of current portion 15,300
Deferred tax liabilities 94,999
Other long-term liabilities 923
Total liabilities 181,132
  
Commitments and contingencies 
  
Stockholders' equity: 
Preferred stock, $0.0001 par value, 2,000,000 shares authorized and none issued or outstanding -- 
Common stock, $0.001 par value 300,000,000 shares authorized and 70,247,701
issued and outstanding
 70
Additional paid-in capital 670,116
Retained (deficit) earnings (42,508)
Accumulated other comprehensive income 22
 Total stockholders' equity 627,700
Total liabilities and stockholders' equity $ 808,832
CONTACT:  Iridium Communications Inc.
          Press Contact:
          + 1 (301) 571-6257
          liz.decastro@iridium.com

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