Iridium Communications Inc.
Mar 6, 2012

Iridium Announces Fourth-Quarter and Full-Year 2011 Results; Company Delivers 20% Operational EBITDA Growth in 2011 and Issues 2012 Outlook

MCLEAN, Va., March 6, 2012 (GLOBE NEWSWIRE) -- Iridium Communications Inc. (Nasdaq:IRDM) ("Iridium") today reported solid financial results for the fourth quarter of 2011 and issued its outlook for the full-year 2012. Net income was $8.4 million, or $0.11 per diluted share, for the fourth quarter of 2011, as compared to $10.1 million, or $0.14 per diluted share, for the fourth quarter of 2010. Operational EBITDA ("OEBITDA")(1) for the fourth quarter was $44.3 million, as compared to $42.3 million for the prior-year period, representing year-over-year growth of 5 percent and an OEBITDA margin(1) of 47 percent. OEBITDA benefited from solid growth in commercial service and government service revenue.

Iridium reported fourth-quarter total revenue of $95.0 million, which consisted of $66.6 million of service revenue and $28.4 million of equipment, engineering and support revenue. Total revenue grew 8 percent versus the comparable period of 2010, while service revenue increased 11 percent from the year-ago period. Service revenue, which represents primarily recurring revenue from Iridium's growing subscriber base, was 70 percent of total revenue for the fourth quarter of 2011.

The Company ended the quarter with 523,000 total billable subscribers, which compares to 427,000 for the year-ago period and 508,000 for the quarter ended September 30, 2011. Total billable subscribers grew 22 percent year-over-year, driven by strength across all primary product lines.

Capital expenditures were $119.1 million for the fourth quarter and primarily related to spending for the Company's next-generation satellite constellation, Iridium NEXT, and upgraded ground network infrastructure at its commercial gateway. The Company ended the fourth quarter with a cash and cash equivalents balance of $136.4 million and gross debt of $417.1 million.  Net debt was $253.8 million.

"2011 was a record year for Iridium as we reached important milestones for subscriber, service revenue and cash flow growth," said Matt Desch, CEO, Iridium. "Our ongoing success is rooted in having a superior network, unmatched capabilities in the highest growth segments of our market and a sustainable set of product-related competitive advantages anchored by a motivated partner channel. 2012 is shaping up to be another year of growth as we expect to cross the $200 million Operational EBITDA threshold on our way to launching Iridium NEXT."

Desch continued, "We're obsessive innovators, and we'll continue to expand and improve our service portfolio in 2012 and beyond. With the recent launch of Iridium PilotTM, our second-generation maritime broadband platform, we're bringing enhanced voice and broadband data capabilities to our customers all over the world at a low cost. We'll also deliver a new, 70 percent smaller M2M device in the next few months, building on the success of a market that has grown subscribers at least 50 percent year-over-year for five consecutive quarters. Iridium remains healthy and strong, and we continue to make the right decisions to support recurring service revenue growth and operating cash flow expansion."  

Full-Year 2011 Iridium Business Highlights

For the full year, Iridium reported net income of $39.7 million, or $0.54 per diluted share, as compared to net income of $22.7 million, or $0.31 per diluted share, for 2010. The Company reported 2011 total revenue of $384.3 million, which included $262.3 million of service revenue and $122.0 million of equipment, engineering and support revenue. OEBITDA for 2011 was $190.4 million, as compared to $158.9 million for the prior-year, representing year-over-year growth of 20 percent and an OEBITDA margin of 49 percent. Capital expenditures were $359.4 million for the full-year 2011. 

Fourth-Quarter Iridium Business Highlights

Service — Commercial

Commercial service remained the largest part of Iridium's business, representing 53 percent 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 has grown in the last several years from a niche supplier to an integral element in the U.S. Government communications infrastructure. 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.

Equipment

Engineering & Support

Iridium NEXT and Hosted Payloads Update

2012 Outlook

The Company issued its full-year 2012 outlook for total billable subscriber growth, service revenue and OEBITDA. The Company expects: 

   
 2012 Outlook
(March 2012)
Total Billable Subscriber Growth 20% to 25%
Total Service Revenue Growth 8% to 11%
Operational EBITDA (OEBITDA) $210 million to $220 million

Long-Range Outlook

The Company affirmed its previously issued long-range outlook for service revenue, OEBITDA margin, cash taxes, net leverage and rate of deleveraging. The Company expects:

     
 Prior Long-Range Outlook
(December 2010/November 2011)
Revised Long-Range Outlook
(March 2012)
Average Service Revenue Growth 9% to 13% per year between 2011 and 2015 Affirmed
Operational EBITDA (OEBITDA) Margin Approximately 60% in 2015 Affirmed
Cash Taxes Negligible cash taxes from 2011 to approximately 2020 Affirmed
Net Leverage Approximately 3x at year-end 2012; 4x-5x at year-end 2015 Affirmed
Rate of Deleveraging 0.5 to 1.0 multiple of OEBITDA per year beginning in 2016 Affirmed

Non-GAAP Financial Measures & Definitions

(1)   In addition to disclosing financial results that are determined in accordance with U.S. GAAP, the Company discloses 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), share-based compensation expenses, and the impact of purchase accounting. The Company also presents Operational EBITDA expressed as a percentage of adjusted revenue, or Operational EBITDA margin. Adjusted revenue excludes the impact of purchase accounting and Iridium NEXT revenue. Operational EBITDA 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), share-based compensation expenses, and the impact of purchase accounting, 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 or the payment of income taxes 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. 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 and 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 Operational EBITDA to consolidated GAAP net income and Iridium's Investor Relations webpage at www.iridium.com for a discussion and reconciliation of this and other non-GAAP financial measures.

  Supplemental Reconciliation of GAAP Net Income to Operational EBITDA
   
  Iridium Communications Inc.
  For the Three Months Ended December 31, For the Year Ended December 31,
  2011 2010 2011 2010
  (In thousands)
GAAP net income  $8,362  $10,122  $39,681  $22,691
         
Interest expense  31  --   42  23
 
Interest income
(405) (222) (1,242) (660)
         
Income taxes  4,776  2,662  24,900  12,921
Depreciation and amortization  23,867  23,050  97,646  90,667
Iridium NEXT expenses, net  6,155  5,260  23,284  16,697
Share-based compensation  1,572  1,307  5,895  4,875
Non-cash purchase accounting  (93)  106  163  11,666
Operational EBITDA  $44,265  $42,285  $190,369  $158,880

Conference Call Information

As previously announced, the Company will host a conference call to discuss results at 8:30 a.m. ET on Tuesday, March 6, 2012. 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 will also be simultaneously webcast on Iridium's Investor Relations webpage at www.iridium.com. A replay of the conference call will be available beginning Tuesday, March 6, 2012 through Tuesday, March 13, 2012 at Iridium's Investor Relations webpage. Callers can also dial (855) 859-2056 (U.S. only) or (404) 537-3406, Access Code 32117251, for an audio replay of the 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 ever-expanding 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

The Iridium Communications Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=10426

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 development of Iridium NEXT; anticipated hosted payload arrangements; the development of the product portfolio and the size of the addressable market; anticipated growth in subscribers, data services and total service revenue; anticipated equipment revenue; anticipated growth in Operational EBITDA and OEBITDA margin; leveraging and deleveraging and anticipated cash taxes. 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 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 increases in customer demand for Iridium's products and services, Iridium's ability to maintain the health, capacity and content of its satellite constellation, and the development of and transition to Iridium NEXT, including expanded capacity and features, and the development of and market for hosted payloads, 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, 2011, filed with the Securities and Exchange Commission ("SEC") on March 6, 2012. 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.
Consolidated Statements of Operations
(In thousands)
     
  Three Months Ended December 31, Non-Cash Purchase Accounting for the
Three Months Ended December 31, (1)
  2011 2010 2011 2010
         
Revenue:        
Service revenue        
Commercial  $ 50,590  $ 44,501  $ (166)  $ (366)
Government  16,045  15,635  --   -- 
Total service revenue  66,635  60,136  (166)  (366)
Subscriber equipment  22,477  21,002  --   -- 
Engineering and support service  5,865  6,792  --   -- 
Total revenue  94,977  87,930  (166)  (366)
         
Operating expenses:        
Cost of subscriber equipment sales  15,212  12,007  --   -- 
Cost of services (exclusive of depreciation and amortization)  16,714  15,584  (259)  (260)
Research and development  7,916  4,470  --   -- 
Selling, general and administrative  15,510  17,783  --   -- 
Depreciation and amortization  23,867  23,050  19,508  19,278
Total operating expenses  79,219  72,894  19,249  19,018
         
Operating profit (loss)  15,758  15,036  (19,415)  (19,384)
         
Other (expense) income:        
Interest income, net   374  222  --   -- 
Undrawn credit facility fees  (2,958)  (2,368)  --   -- 
Other (expense) income, net  (36)  (106)  --   -- 
Total other (expense) income  (2,620)  (2,252)  --   -- 
         
Earnings (loss) before income taxes  13,138  12,784  (19,415)  (19,384)
Income tax provision  (4,776)  (2,662)  7,484  7,496
Net income (loss)  $ 8,362  $ 10,122  $ (11,931)  $ (11,888)
         
Operational EBITDA  $ 44,265  $ 42,285  $ --   $ -- 
         
(1) The impact of purchase accounting on the carrying value of inventory, property and equipment, intangible assets and accruals of Iridium Communications Inc., 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 effect of the purchase accounting, the decrease in the carrying value of deferred revenue caused a decrease in revenue. In addition, the increase in accruals had the effect of reducing cost of services (exclusive of depreciation and amortization) during 2011 and 2010, which we expect will continue into future periods. The increase in property and equipment and intangible assets had the effect of increasing depreciation and amortization expense during 2011 and 2010, which we expect will continue into future periods.  
 
 
Iridium Communications Inc.
Consolidated Statements of Operations
(In thousands)
     
  Year Ended December 31, Non-Cash Purchase Accounting for the
Year Ended December 31, (1)
  2011 2010 2011 2010
         
Revenue:        
Service revenue        
Commercial  $ 197,954  $ 177,359  $ (1,200)  $ (3,315)
Government  64,368  58,992  --   -- 
Total service revenue  262,322  236,351  (1,200)  (3,315)
Subscriber equipment  94,709  90,184  --   -- 
Engineering and support service  27,276  21,638  --   -- 
Total revenue  384,307  348,173  (1,200)  (3,315)
         
Operating expenses:        
Cost of subscriber equipment sales  54,113  61,661  --   10,873
Cost of services (exclusive of depreciation and amortization)  71,181  72,579  (1,037)  (2,522)
Research and development  18,684  19,178  --   -- 
Selling, general and administrative  65,682  66,728  --   -- 
Depreciation and amortization  97,646  90,667  80,741  76,983
Total operating expenses  307,306  310,813  79,704  85,334
         
Operating profit (loss)  77,001  37,360  (80,904)  (88,649)
         
Other (expense) income:        
Interest income, net   1,200  637  --   -- 
Undrawn credit facility fees  (13,524)  (2,368)  --   -- 
Other (expense) income, net  (96)  (17)  --   -- 
Total other (expense) income  (12,420)  (1,748)  --   -- 
         
Earnings (loss) before income taxes  64,581  35,612  (80,904)  (88,649)
Income tax provision  (24,900)  (12,921)  31,188  34,281
Net income (loss)  $ 39,681  $ 22,691  $ (49,716)  $ (54,368)
         
Operational EBITDA  $ 190,369  $ 158,880  $ --   $ -- 
         
(1) The impact of purchase accounting on the carrying value of inventory, property and equipment, intangible assets and accruals of Iridium Communications Inc., 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 effect of the purchase accounting, the cost of subscriber equipment sales increased in 2010 and the decrease in the carrying value of deferred revenue caused a decrease in revenue. In addition, the increase in accruals had the effect of reducing cost of services (exclusive of depreciation and amortization) during 2011 and 2010, which we expect will continue into future periods. The increase in property and equipment and intangible assets had the effect of increasing depreciation and amortization expense during 2011 and 2010, which we expect will continue into future periods.
 
 
Iridium Communications Inc.
Summary Revenue and OEBITDA Highlights
         
  Three Months Ended December 31, % Change Year Ended December 31, % Change
  2011 2010   2011 2010  
  (In thousands)   (In thousands)  
Revenue             
Service revenue(1)            
Commercial            
Voice and M2M data service            
Voice  $ 41,927  $ 38,638 9%  $ 167,482  $ 155,597 8%
M2M data(2)  8,663  5,863 48%  30,472  21,762 40%
Total commercial voice and M2M data service  50,590  44,501 14%  197,954  177,359 12%
             
Government(3)            
Voice and M2M data service            
Voice  15,420  15,186 2%  61,999  57,535 8%
M2M data  625  449 39%  2,369  1,457 63%
Total government voice and M2M data service  16,045  15,635 3%  64,368  58,992 9%
Total service revenue  66,635  60,136 11%  262,322  236,351 11%
             
Subscriber equipment  22,477  21,002 7%  94,709  90,184 5%
             
Engineering and support(4)            
Government   5,371  6,295 -15%  25,924  19,699 32%
Commercial  494  497 -1%  1,352  1,939 -30%
Total engineering and support  5,865  6,792 -14%  27,276  21,638 26%
             
Total Revenue  $ 94,977  $ 87,930 8%  $ 384,307  $ 348,173 10%
             
             
Operational EBITDA Margin Reconciliation            
Total revenue  $ 94,977  $ 87,930    $ 384,307  $ 348,173  
Operational EBITDA adjustments that impact revenue:            
Non-cash purchase accounting   166  366    1,200  3,315  
Iridium NEXT revenue  (5)  (31)    (49)  (89)  
Adjusted revenue(5)  $ 95,138  $ 88,265    $ 385,458  $ 351,399  
             
Operational EBITDA  $ 44,265  $ 42,285 5%  $ 190,369  $ 158,880 20%
Operational EBITDA margin(6) 47% 48% -1% 49% 45% 4%
             
Other            
Capital expenditures (7)  $ 119,060  $ 103,191    $ 359,404  $ 237,450  
             
Net debt (8)  $ 253,765  $ 37,436        
             
(1) Service revenue consists of primarily subscription-based services which often generate a long-term recurring revenue stream from subscribers.
(2) M2M 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) 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.
(4) 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.
(5) Adjusted revenue is total revenue adjusted for the impact of Operational EBITDA adjustments.      
(6) Operational EBITDA margin is calculated by dividing Operational EBITDA by adjusted revenue.      
(7) Capital expenditures based on cash spent in the respective period.
(8) Net debt is calculated by taking the sum of the short term and long term debt less cash and cash equivalents and the debt service reserve for the credit facility.
             
             
Iridium Communications Inc.            
Subscriber Highlights            
             
         
Billable Subscribers (1) As of December 31, % Change    
  2011 2010        
  (In thousands, except ARPU)      
Commercial            
Voice and M2M data service            
Voice  307  272 13%      
M2M data  168  112 50%      
Total commercial voice and M2M data service  475  384 24%      
             
Government            
Voice and M2M data service            
Voice  37  36 3%      
M2M data  11  7 57%      
Total government voice and M2M data service  48  43 12%      
Total billable subscribers  523  427 22%      
             
         
  Three Months Ended December 31, % Change Year Ended December 31, % Change
  2011 2010   2011 2010  
  (In thousands, except ARPU)   (In thousands, except ARPU)  
Net Subscriber Additions            
Commercial            
Voice and M2M data service            
Voice  2  8 -75%  35  40 -13%
M2M data  14  18 -22%  56  49 14%
Total commercial voice and M2M data service  16  26 -38%  91  89 2%
             
Government            
Voice and M2M data service            
Voice  (1)  4 -125%  1  10 -90%
M2M data  --   --  0%  4  2 100%
Total government voice and M2M data service  (1)  4 -125%  5  12 -58%
Total billable subscribers  15  30 -50%  96  101 -5%
             
         
ARPU(2) Three Months Ended December 31,   Year Ended December 31,  
Commercial 2011 2010   2011 2010  
Voice  $ 46  $ 47 -2%  $ 48  $ 51 -6%
M2M data  $ 18  $ 18 0%  $ 18  $ 20 -10%
Government            
Voice  $ 138  $ 141 -2%  $ 141  $ 146 -3%
M2M data  $ 19  $ 22 -14%  $ 21  $ 21 0%
             
(1) Subscribers as of the end of the respective period.
(2) ARPU is calculated by dividing the revenue in the respective period by the average of billable subscribers at the beginning of the period and billable subscribers at the end of the period and then dividing the results by the months in the period.
NM - not meaningful
CONTACT: Investor Contact:

         

         Steve Kunszabo

         Iridium Communications Inc.

         +1 (703) 287-7570

         steve.kunszabo@iridium.com



         Press Contact:



         Liz DeCastro

         Iridium Communications Inc.

         +1 (703) 287-7421

         liz.decastro@iridium.com