Iridium Communications Inc.
Apr 30, 2015

Iridium Announces First-Quarter 2015 Results; Company Affirms 2015 and Long-Range Outlook

MCLEAN, Va., April 30, 2015 (GLOBE NEWSWIRE) -- Iridium Communications Inc. (Nasdaq:IRDM) ("Iridium") today reported financial results for the first quarter of 2015 and affirmed its full-year 2015 and long-range outlook. Net income was $21.0 million, or $0.17 per diluted share, for the first quarter of 2015, as compared to $16.5 million, or $0.19 per diluted share, for the first quarter of 2014. Operational EBITDA ("OEBITDA")(1) for the first quarter was $52.5 million, as compared to $51.6 million for the prior-year period, representing a year-over-year increase of 2 percent and an OEBITDA margin(1) of 54 percent. OEBITDA grew largely due to higher government service revenue and lower product warranty costs.

Iridium reported first-quarter total revenue of $97.0 million, which consisted of $75.4 million of service revenue and $21.6 million of equipment, engineering and support revenue. Total revenue declined 1 percent versus the comparable period of 2014, while service revenue grew 3 percent from the year-ago period. Service revenue, which represents primarily recurring revenue from Iridium's growing subscriber base, was 78 percent of total revenue for the first quarter of 2015.

The Company ended the quarter with 748,000 total billable subscribers, which compares to 674,000 for the year-ago period and is up from 739,000 for the quarter ended December 31, 2014. Total billable subscribers grew 11 percent year-over-year, driven by strength in machine-to-machine ("M2M") customers.

"We affirmed our 2015 and long-range guidance across the board today and kicked off the year with solid growth in our government and M2M lines of business," said Matt Desch, CEO, Iridium. "We're excited that the Iridium NEXT era is rapidly approaching, with a flurry of satellite testing activity underway as we prepare for the first scheduled launch in October. SpaceX is now 18 for 18 with their Falcon 9 missions and we look forward to starting our primary launch campaign with them in early 2016."             

Desch continued, "Our Aireon joint venture continues to build momentum, having recently signed agreements to collaborate on the potential deployment of space-based global aviation monitoring with the air traffic management agency of India and the Blue Med Functional Airspace Block, a cooperative of Air Navigation Service Providers that control the airspace over the Mediterranean. These agreements lay the groundwork for future data services contracts and expand the planned deployment of the AireonSM service in Asia and Europe. With each milestone that Aireon passes, it confirms our belief that it will become the global standard for space-based air traffic surveillance."    

Desch concluded, "When thinking about how our 2015 financial results shape up, we see gains in our M2M, maritime and aviation businesses, but still expect our voice market to be pressured by a strong dollar. The step-up in our fixed-price airtime contract with the U.S. government will also boost service revenue, as will contributions from new products. Overall, we have excellent long-term growth prospects and continue to build to 2018 and the transformational change we expect in our cash flow profile."   

Iridium Business Highlights

Service - Commercial

Commercial service remained the largest part of Iridium's business, representing 59 percent of the Company's total revenue during the first 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 contracts, which include a $400 million, five-year, fixed-price agreement for satellite communications services and a $38 million contract to support and maintain the Department of Defense's ("DoD") dedicated gateway.  

Equipment

Engineering & Support

Capital expenditures were $50.1 million for the first quarter and primarily related to spending for the Company's next-generation satellite constellation, Iridium NEXT. The Company ended the first quarter with a cash and marketable securities balance of $488.2 million and gross debt of $1.3 billion. Net debt was $737.1 million. 

2015 Outlook

The Company affirmed its full-year 2015 outlook for total service revenue growth and OEBITDA. The Company continues to expect: 

 2015 Outlook
(February 2015)
2015 Outlook
(April 2015)
Total Service 3% to 6% Affirmed
Revenue Growth    
2015 Operational $230 million to $240 million Affirmed
EBITDA (OEBITDA)    

Long-Range Outlook

The Company affirmed its long-range outlook for total service revenue growth, OEBITDA margin, cash taxes, peak net leverage and 2018 net leverage. The Company continues to expect:

     
 Long-Range Outlook
(February 2015)
Long-Range Outlook
(April 2015)
Total Service Revenue $420 million to $485 million Affirmed
  for the full-year 2018  
Operational EBITDA Approximately 60% in 2018 Affirmed
 (OEBITDA) Margin    
Cash Taxes Negligible cash taxes from Affirmed
  2015 to approximately 2020  
Peak Net Leverage 6.0x - 6.5x OEBITDA in 2016 Affirmed
2018 Net Leverage Approximately 4x OEBITDA Affirmed
  in 2018  

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, and the impact of purchase accounting. 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, 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, 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.

 Supplemental Reconciliation of GAAP Net Income to Operational EBITDA
   
  Iridium Communications Inc.
  For the Three Months Ended March 31,
  2015 2014
  (In thousands)
GAAP net income  $21,019  $16,543
Interest expense  344  100
Interest income  (1,581) (737)
Income taxes  12,560  10,589
Depreciation and amortization  13,355  20,266
Iridium NEXT expenses, net  4,582  3,140
Loss from investment in Aireon  --   309
Share-based compensation  2,444  1,669
Non-cash purchase accounting  (250)  (250)
Operational EBITDA  $52,473  $51,629

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, April 30, 2015. 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 6425004. 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 Thursday, April 30, 2015 through Thursday, May 7, 2015 at Iridium's Investor Relations webpage. Callers can also dial (855) 859-2056 (U.S. only) or (404) 537-3406, Access Code 6425004, 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 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 and OEBITDA for the full-year 2015; compound annual service revenue growth, OEBITDA margin, cash taxes and leverage over the longer-term; the adequacy of funding for, development of and timing for launch of Iridium NEXT; anticipated equipment revenue; expected revenue from Iridium's contracts with the U.S. Department of Defense; and prospects for Aireon, Iridium's maritime, M2M, aviation and commercial handset businesses, and Iridium's long-term growth prospects and cash flow profile in 2018 .  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, including demand from the U.S. Government; Iridium's ability to maintain the health, capacity and content of its current satellite constellation; the development of and transition to Iridium NEXT, 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, 2014, filed with the Securities and Exchange Commission on February 26, 2015, 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 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 March 31, (1)
  2015 2014
     
Revenue:    
Service revenue    
Commercial  $ 57,424  $ 57,430
Government  18,000  16,000
Total service revenue  75,424  73,430
Subscriber equipment  16,540  20,157
Engineering and support service  5,043  4,445
Total revenue  97,007  98,032
     
Operating expenses:    
Cost of services (exclusive of depreciation and amortization)  14,882  14,203
Cost of subscriber equipment sales  10,647  13,912
Research and development  4,126  2,121
Selling, general and administrative  20,524  19,186
Depreciation and amortization  13,355  20,266
Total operating expenses  63,534  69,688
     
Operating profit  33,473  28,344
     
Other (expense) income:    
Interest income (expense), net   1,237  637
Undrawn credit facility fees  (917)  (1,499)
Other (expense) income, net  (214)  (350)
Total other (expense) income  106  (1,212)
     
Income before income taxes  33,579  27,132
Provision for income taxes  (12,560)  (10,589)
Net income  21,019  16,543
Series A Preferred Stock dividends  1,750  1,750
Series B Preferred Stock dividends  2,109  -- 
Net income attributable to common stockholders  $ 17,160  $ 14,793
     
Operational EBITDA  $ 52,473  $ 51,629
     
(1) The Non-cash purchase accounting table has been removed due to the immaterial nature of the remaining items.
       
       
Iridium Communications Inc.      
Summary Revenue and OEBITDA Highlights      
       
     
  Three Months Ended March 31, % Change
  2015 2014  
  (In thousands)  
Revenue       
Service revenue(1)      
Commercial      
Voice and M2M data service      
Voice and data  $ 42,759  $ 43,936 -3%
M2M data(2)  14,665  13,494 9%
Total commercial voice and M2M data service  57,424  57,430 0%
       
Government service revenue(3)  18,000  16,000 13%
       
Total service revenue  75,424  73,430 3%
       
Subscriber equipment  16,540  20,157 -18%
       
Engineering and support(4)      
Government   4,509  3,866 17%
Commercial  534  579 -8%
Total engineering and support  5,043  4,445 13%
       
Total Revenue  $ 97,007  $ 98,032 -1%
       
       
Operational EBITDA      
Operational EBITDA  $ 52,473  $ 51,629 2%
       
Other      
Capital expenditures (5)  $ 50,053  $ 58,519  
       
Net debt (6)  $ 737,071  $ 714,779  
       
Cash, cash equivalents, and marketable securities  $ 488,198  $ 255,208  
       
Credit Facility   $ 1,313,769  $ 1,064,487  
       
(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) Capital expenditures based on cash spent in the respective period.
       
(6) Net debt is calculated by taking the sum of the short term and long term debt less cash and cash equivalents, marketable securities, and the debt service reserve for the credit facility.
       
       
Iridium Communications Inc.      
Subscriber Highlights      
       
     
Billable Subscribers (1) As of March 31, % Change
  2015 2014  
  (In thousands, except ARPU)  
Commercial      
Voice and M2M data service      
Voice and data  351  338 4%
M2M data  334  283 18%
Total commercial voice and M2M data service  685  621 10%
       
Government      
Voice and M2M data service      
Voice and data  36  32 13%
M2M data  27  21 29%
Total government voice and M2M data service  63  53 19%
Total billable subscribers  748  674 11%
       
       
     
  Three Months Ended March 31, % Change
  2015 2014  
  (In thousands, except ARPU)  
Net Subscriber Additions      
Commercial      
Voice and M2M data service      
Voice and data  (3)  (2) -50%
M2M data  9  10 -10%
Total commercial voice and M2M data service  6  8 -25%
       
Government      
Voice and M2M data service      
Voice and data  1  1 0%
M2M data  2  1 100%
Total government voice and M2M data service  3  2 50%
Total billable subscribers  9  10 -10%
       
     
 ARPU(2) Three Months Ended March 31, % Change
Commercial 2015 2014  
Voice and data  $ 40  $ 43 -7%
M2M data  $ 15  $ 16 -6%
       
       
(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. Historically, government service revenue was driven by changes in subscriber count or ARPU, however under the terms of the new EMSS contract, government service revenue is a fixed-price for unlimited subscribers. For this and future comparative periods, ARPU will not be presented, as it is no longer a relevant government service revenue metric. 
CONTACT: Investor Contact:

         Steve Kunszabo

         Iridium Communications Inc.

         +1 (703) 287-7570

         steve.kunszabo@iridium.com

         

         Press Contact:

         Diane Hockenberry

         Iridium Communications Inc.

         +1 (703) 287-7421

         diane.hockenberry@iridium.com