Iridium Communications Inc.
Aug 9, 2010

Iridium Reports Strong Growth in the Second Quarter and Raises All Elements of Guidance for 2010

MCLEAN, Va., Aug. 9, 2010 (GLOBE NEWSWIRE) -- Iridium Communications Inc. (Nasdaq:IRDM) today reported financial results for the quarter ended June 30, 2010. The following reflects the results of Iridium Communications Inc. (the Company) for the second quarter of 2010 compared to those of Iridium Holdings LLC (predecessor) for the second quarter of 2009. Please see the combined results, along with the appropriate related footnotes, in the attachments to this press release.

Operating Highlights – Second Quarter 2010

The following are highlights of Iridium's second quarter 2010 financial performance:

"The last few months have been the most transformative ever in the life of Iridium," said Matt Desch, CEO of Iridium. "We are near completing our financing through a very attractive $1.8 billion Coface-backed facility, and we are pleased that we cleared a critical hurdle by receiving preliminary commitments from banks in excess of that amount. We selected Thales Alenia Space as our prime contractor and they are already underway with developing our satellites. We announced a very favorably-priced launch services contract with SpaceX and witnessed their inaugural Falcon 9 launch. And, we lowered our operational costs through new contracts with Boeing. Achieving these milestones firmly places Iridium on the path that we have charted with world- class partners to support us going forward."

Speaking to second quarter revenue growth, Don Thoma, Iridium's executive vice president of marketing, commented, "We experienced strong second quarter subscriber additions, and increased commercial and government recurring revenues, again reflecting healthy demand for our diversified portfolio of services. Data continues to be a primary driver of growth. We added approximately 7,000 commercial data subscribers in the quarter, with growth of 25.8% over this period last year. One reason for this growth is the new, lower- cost Iridium 9602™ M2M transceiver, which we brought to market in May. In addition to the impressive growth of our M2M data services, we continue to be pleased with the growth and average revenue per unit (ARPU) of Iridium OpenPort® high- speed maritime terminal activations. Finally, our handsets continue to set the standard for voice service quality, reliability, mobility and global reach, evidenced by continued worldwide demand for the Iridium 9555™ satellite phone."

Speaking to second quarter financial results, Tom Fitzpatrick, Iridium's CFO, stated, "Operationally, we are off to a robust start in the first half of 2010 with strong subscriber additions as well as on-target revenue and Operational EBITDA. Our decreased subscriber equipment revenue was primarily due to lower unit pricing, as we have emphasized subscriber growth to increase recurring service revenue, in addition to a change in the mix of equipment sales to lower-cost M2M devices. We were able to minimize the impact of lower equipment pricing by reducing our cost as a result of R&D investments that we made in the last few years. Also, sales in the quarter would have been greater except a parts supply issue delayed some shipments to customers, a problem that device manufacturers experienced globally during the second quarter. I am pleased to say, however, that we are working with our parts suppliers to remedy this delay and to fulfill our backlog, and we expect equipment sales to completely catch up and be on track for the full year."

Fitzpatrick continued, "Based on our strong second quarter results, we are increasing our guidance for the full year 2010:

Recent Highlights

In addition to continued strong financial performance, Iridium noted the following second quarter key milestones:

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 commencement of operations of Iridium NEXT), stock-based compensation expenses, transaction expenses associated with GHL Acquisition Corp.'s acquisition of Iridium Holdings LLC (the "Acquisition"), the impact of purchase accounting adjustments, and changes 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, the impact of purchase accounting adjustments and changes 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. However, there is no standardized measurement of Operational EBITDA, and Operational EBITDA as we present 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 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. Since Operational EBITDA does not account for these and other expenses, its utility as a measure of our operating performance has material limitations. Due to 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 Monday, August 9, 2010 at 4:30 p.m. Eastern Daylight Time (EDT) to discuss the Company's second quarter 2010 results. To participate in the teleconference, callers can dial the toll-free number 1-877-334-1964 (U.S. callers only) or 1-631-291-4574 (from outside the U.S.). A conference ID is required – 89922709. For those unable to participate in the live call, a replay of the call will be available toll free for seven days at 1-800-642-1687 (U.S. callers only) or at 1-706-645-9291 (callers outside the U.S.). The passcode for the replay is 89922709. To help ensure the conference begins in a timely manner, please dial in five minutes prior to the scheduled start time.

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 McLean, Va., 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).

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 the Company's ability to secure financing for Iridium NEXT, anticipated growth in the sale of data services and Iridium OpenPort services, the Company's ability to address parts supply issues, expected equipment sales, and anticipated subscriber growth, revenue, and Operational EBITDA for 2010. 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 mobile satellite services (MSS), expected Operational EBITDA growth, growth in subscribers and revenue, the finalization of financing for Iridium NEXT, and Iridium's ability to maintain the health, capacity and content of its 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 ("SEC") on March 16, 2010 and the Company's Form 10-Q for the quarter ended June 30, 2010 filed with the SEC on August 9, 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.

Iridium Communications Inc. and Iridium Holdings LLC
Consolidated Statements of Operations
(In thousands)
    
    
  Iridium
Holdings LLC
Iridium Communications Inc.
  For the Three Months Ended June 30,
  2009 2010 Purchase
Accounting
Adjustments (1)
    
Revenue:   
Services:   
Government $ 18,160 $ 18,230 $ -- 
Commercial 39,959 45,480 (964)
Subscriber equipment 24,586 20,264 -- 
Total revenue 82,705 83,974 (964)
    
Operating expenses:   
Cost of subscriber equipment sales 11,601 11,711 -- 
Cost of services (exclusive of depreciation and amortization) 19,185 19,021 (1,020)
Research and development 1,175 8,132 -- 
Depreciation and amortization 3,574 22,449 19,243
Selling, general and administrative 13,232 16,703 -- 
Transaction costs 1,275 --  -- 
Total operating expenses 50,042 78,016 18,223
    
Operating profit (loss) 32,663 5,958 (19,187)
    
Other (expense) income:   
Interest (expense) income, net of capitalized interest (4,465) 228 -- 
Other income (expense), net 402 (22) 
Total other (expense) income (4,063) 206 -- 
    
Earnings (loss) before income taxes 28,600 6,164 (19,187)
Income tax provision (benefit) --  2,964 (7,417)
Net income (loss) $ 28,600 $ 3,200 $ (11,770)
    
Operational EBITDA $ 37,091 $ 36,165 $ -- 
    
    
(1) When comparing Iridium Communications Inc.'s results of operations to that of Iridium Holdings LLC, the impact of the purchase accounting on the carrying value of inventory, property and equipment, intangible assets and accruals, was an increase of approximately $19.8 million, $348.2 million, $95.5 million and $29.0 million, respectively, compared to Iridium Holdings LLC's balance sheet as of September 29, 2009. Similarly, Iridium Holdings LLC's deferred revenue decreased by $7.4 million. As a result of the purchase accounting, the cost of subscriber equipment sales increased in the first quarter of 2010 as compared to those costs and expenses of Iridium Holdings LLC in prior periods and the decrease in the carrying value of deferred revenue is expected to result in a decrease in revenue through first quarter of 2011. In addition, the increase in accruals will result in a reduction in cost of services (exclusive of depreciation and amortization) during 2010. The increase in property and equipment and intangible assets will result in an increase to depreciation and amortization expense during 2010 and future periods.

Iridium Communications Inc. and Iridium Holdings LLC
Consolidated Statements of Operations
(In thousands)
    
    
    
  Iridium
Holdings LLC
Iridium Communications Inc.
  For the Six Months Ended June 30,
  2009 2010 Purchase
Accounting
Adjustments (1)
    
Revenue:   
Services:   
Government $ 36,628 $ 37,243 $ -- 
Commercial 76,777 86,366 (2,020)
Subscriber equipment 45,089 42,107 -- 
Total revenue 158,494 165,716 (2,020)
    
Operating expenses:   
Cost of subscriber equipment sales 22,917 34,856 10,873
Cost of services (exclusive of depreciation and amortization) 38,882 39,382 (2,040)
Research and development 13,269 12,397 -- 
Depreciation and amortization 7,249 44,960 38,296
Selling, general and administrative 27,171 32,633 -- 
Transaction costs 1,918 --  -- 
Total operating expenses 111,406 164,228 47,129
    
Operating profit (loss) 47,088 1,488 (49,149)
    
Other (expense) income:   
Interest (expense) income, net of capitalized interest (9,104) 334 -- 
Other income (expense), net 334 95 
Total other (expense) income (8,770) 429 -- 
    
Earnings (loss) before income taxes 38,318 1,917 (49,149)
Income tax provision (benefit)  --  34 (19,000)
Net income (loss) $ 38,318 $ 1,883 $ (30,149)
    
Operational EBITDA $ 65,208 $ 69,777 $ -- 
    
    
(1) When comparing Iridium Communications Inc.'s results of operations to that of Iridium Holdings LLC, the impact of the purchase accounting on the carrying value of inventory, property and equipment, intangible assets and accruals, was an increase of approximately $19.8 million, $348.2 million, $95.5 million and $29.0 million, respectively compared to Iridium Holdings LLC's balance sheet as of September 29, 2009. Similarly, Iridium Holdings LLC's deferred revenue decreased by $7.4 million. As a result of the purchase accounting, the cost of subscriber equipment sales increased in the first quarter of 2010 as compared to those costs and expenses of Iridium Holdings LLC in prior periods and the decrease in the carrying value of deferred revenue is expected to result in a decrease in revenue through first quarter of 2011. In addition, the increase in accruals will result in a reduction in cost of services (exclusive of depreciation and amortization) during 2010. The increase in property and equipment and intangible assets will result in an increase to depreciation and amortization expense during 2010 and future periods.

Iridium Communications Inc. and Iridium Holdings LLC
     
Summary Highlights      
       
  Iridium Holdings LLC Iridium Communications Inc.
(In thousands) For the Three Months Ended
June 30, 2009
For the Three Months Ended
June 30, 2010
% Change
       
  Revenue Subscribers(1) Revenue Subscribers(1) Revenue Subscribers
Commercial      
Voice and M2M data service      
Voice $ 35,804 230 $ 38,806 262 8.4% 13.9%
M2M data 4,031 66 6,032 83 49.6% 25.8%
Total voice and M2M data service 39,835 296 44,838 345 12.6% 16.6%
Other 124 --  642 --  417.7% NM
Total commercial 39,959 296 45,480 345 13.8% 16.6%
       
Government      
Voice and M2M data service      
Voice 13,101 29 13,887 32 6.0% 10.3%
M2M data 181 3 340 6 87.8% 100.0%
Total voice and M2M data service 13,282 32 14,227 38 7.1% 18.8%
Engineering and support 4,878 --  4,003 --  -17.9% NM
Total government 18,160 32 18,230 38 0.4% 18.8%
       
Equipment 24,586 --  20,264 --  -17.6% NM
Total revenue and billable subscribers $ 82,705 328 $ 83,974 383 1.5% 16.8%
       
(1) Subscribers as of the end of the period      
NM= Not Meaningful      

Iridium Communications Inc. and Iridium Holdings LLC
     
Summary Highlights      
       
  Iridium Holdings LLC Iridium Communications Inc.
(In thousands) For the Six Months Ended
June 30, 2009
For the Six Months Ended
June 30, 2010
% Change
       
  Revenue Subscribers(1) Revenue Subscribers(1) Revenue Subscribers
Commercial      
Voice and M2M data service      
Voice $ 68,642 230 $ 75,413 262 9.9% 13.9%
M2M data 7,813 66 10,082 83 29.0% 25.8%
Total voice and M2M data service 76,455 296 85,495 345 11.8% 16.6%
Other 322 --  871 --  170.5% NM
Total commercial 76,777 296 86,366 345 12.5% 16.6%
       
Government      
Voice and M2M data service      
Voice 26,320 29 27,380 32 4.0% 10.3%
M2M data 310 3 604 6 94.8% 100.0%
Total voice and M2M data service 26,630 32 27,984 38 5.1% 18.8%
Engineering and support 9,998 --  9,259 --  -7.4% NM
Total government 36,628 32 37,243 38 1.7% 18.8%
       
Equipment 45,089 --  42,107 --  -6.6% NM
Total revenue and billable subscribers $ 158,494 328 $ 165,716 383 4.6% 16.8%
       
(1) Subscribers as of the end of the period      
NM= Not Meaningful      

Iridium Communications Inc. and Iridium Holdings LLC
Supplemental Reconciliation of Operational EBITDA
(In thousands)
     
     
  Iridium Holdings
LLC
Iridium
Communications
Inc.
Iridium Holdings
LLC
Iridium
Communications
Inc.
  Three Months
Ended June 30,
2009 
Three Months
Ended June 30,
2010
Six Months
Ended June 30,
2009 
Six Months
Ended June 30,
2010
     
Net income $ 28,600 $ 3,200 $ 38,318 $ 1,883
Interest expense 4,597 11 9,219 23
Interest income (132) (239) (115) (357)
Income taxes --  2,964 --  34
Depreciation and amortization 3,574 22,449 7,249 44,960
Iridium NEXT expenses, net (1,216) 6,575 7,633 9,938
Share-based compensation 393 1,261 986 2,443
Transaction expenses 1,275 --  1,918 -- 
Purchase accounting adjustments  --  (56) --  10,853
Operational EBITDA $ 37,091 $ 36,165 $ 65,208 $ 69,777
CONTACT:  Iridium Communications Inc.
          Press Contact
          Liz DeCastro
          +1 (703) 287-7421
          liz.decastro@iridium.com

(C) Copyright 2010 GlobeNewswire, Inc. All rights reserved.