Iridium Communications Inc.
Iridium Communications Inc. (Form: 8-K, Received: 07/27/2017 07:02:01)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) July 26, 2017

 

 

Iridium Communications Inc.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   001-33963   26-1344998
(State or other jurisdiction of
incorporation)
  (Commission File Number)   (I.R.S. Employer
Identification No.)

1750 Tysons Boulevard

Suite 1400

McLean, VA 22102

(Address of principal executive offices)

703-287-7400

(Registrant’s telephone number, including area code)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below):

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

 

 

 


Item 1.01 Entry into a Material Definitive Agreement.

On July 26, 2017, we entered into a supplemental agreement with Société Générale, as BPIAE Agent, under our BPIAE Facility Agreement (formerly our COFACE Facility Agreement) dated October 4, 2010, as amended and restated on August 1, 2012 and May 2, 2014, and as further amended on May 7, 2015, November 24, 2015, December 31, 2015, February 24, 2016, July 18, 2016 and February 10, 2017, which we refer to as the Original Credit Facility.

The Original Credit Facility, as amended and restated by the supplemental agreement, which we collectively refer to as our Credit Facility, delays the contributions that we were scheduled to make during 2017 to the debt service reserve account, or DSRA, that we are required to maintain under the Credit Facility and provides for a refund of a portion of the contributions we have made to date. The Credit Facility delays $54 million of our 2017 DSRA contributions, provides a refund of $33 million in contributions made to date, and provides for a refund of an additional $11 million in contributions made to date in the event that our projected Available Cash (as defined in the Credit Facility) falls below $35 million on a three-month forward-looking basis between now and March 2019. The delay and refunds are effective through the end of March 2019, at which time the DSRA must be fully funded to the previously agreed amount of $189.0 million. The Credit Facility also requires that we establish a new restricted account to receive payment of hosting fees from Aireon LLC. Hosting fees up to $50 million would be kept in the account and could be drawn by us based on the same $35 million three-month forward-looking Available Cash threshold described above. Hosting fees in excess of $50 million would be distributed pro rata to replenish the DSRA and secure the payment of the bills of exchange to Thales for milestone payments as described below.

The Credit Facility also requires that we suspend the payment of dividends on our 7% Series A Cumulative Perpetual Convertible Preferred Stock and our 6.75% Series B Cumulative Perpetual Convertible Preferred Stock for five quarters. As previously announced, in anticipation of this requirement, we began this suspension with the dividend payments payable on June 15, 2017. The Credit Facility also includes revised financial covenant levels to reflect changing business conditions and makes immaterial changes to certain definitions and other terms of the Original Credit Facility.

Also on July 26, 2017, we entered into Amendments 28 and 29 to our Full Scale Development Contract with Thales Alenia Space France SAS, or Thales, for the Iridium NEXT System, dated June 1, 2010, which we refer to as the FSD. We signed Amendment 28 on May 18, 2017, but effectiveness was conditioned on the effectiveness of Amendment 29. Amendment 28 revises the liquidated damages and other cost provisions regarding delays to the Iridium NEXT program. Under Amendment 28, we agreed with Thales that liquidated damages for Thales production delays to date would be set at $30 million, with this amount to be used only to offset costs otherwise payable by us to Thales under the FSD with respect to past and future delays to the launch schedule from causes other than Thales, at agreed upon rates. Any portion of the $30 million remaining at the completion of the launch campaign will be forgiven. Liquidated damages owed to us from any future delays caused by Thales would remain payable in cash. Similarly, costs payable by us to Thales for non-Thales delays exceeding the $30 million would be payable in cash. Unless there are substantial future delays to the Iridium NEXT program, we expect this arrangement will result in no cash payments by either party due to delays.

Amendment 29 provides for the deferral of payment by us of approximately $100 million in milestones under the FSD that we expect to be completed in 2017 and 2018. Under Amendment 29, we will pay these milestones using bills of exchange (a French law debt instrument similar to a promissory note) due in March 2019, with interest at a specified base rate (LIBOR or SWAP, depending on the term of the bill of exchange), plus 1.4%, with the bills of exchange guaranteed by Bpifrance Assurance Export S.A.S., which we refer to as BPIAE. Amendment 29 also requires that we pay Thales for the BPIAE premium on the guarantee in the amount of $1 million in cash at signing plus 1.62%, to be paid by bills of exchange on the same terms as stated above, on each bill of exchange issued.

The descriptions of the Credit Facility and Amendments 28 and 29 to the FSD contained herein are summaries of certain material terms of those agreements, do not purport to be complete, and are qualified in their entirety by reference to the full text of the agreements, which will be filed as exhibits to the Company’s Quarterly Report on Form 10-Q for the quarter ending September 30, 2017.

Item 2.02. Results of Operations and Financial Condition.

On July 27, 2017, Iridium Communications Inc. issued a press release announcing its financial results for the quarter ended June 30, 2017. The text of the press release is included as an exhibit to this Form 8-K. Pursuant to the rules and regulations of the Securities and Exchange Commission, such exhibit and the information set forth therein and herein are deemed to be furnished and shall not be deemed to be filed.


Item 9.01. Financial Statements and Exhibits.

(d) Exhibits.

 

Exhibit Number

  

Description

99.1    Press release dated July 27, 2017


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

      IRIDIUM COMMUNICATIONS INC.
Date: July 27, 2017     By:   /s/ Thomas J. Fitzpatrick
      Name:  Thomas J. Fitzpatrick
      Title:    Chief Financial Officer

Exhibit 99.1

 

LOGO

FOR RELEASE THURSDAY, JULY 27, 2017

 

Investor Contact:

  Press Contact:

Kenneth Levy

  Jordan Hassin

Iridium Communications Inc.

  Iridium Communications Inc.

+1 (703) 287-7570

  +1 (703) 287-7421

ken.levy@iridium.com

  jordan.hassin@iridium.com

IRIDIUM ANNOUNCES SECOND-QUARTER 2017 RESULTS;

COMPANY AFFIRMS 2017 OUTLOOK

MCLEAN, Va. – July 27, 2017 – Iridium Communications Inc. (Nasdaq:IRDM) (“Iridium”) today reported financial results for the second quarter of 2017 and affirmed its full-year 2017 outlook. Net income was $24.8 million, or $0.20 per diluted share, for the second quarter of 2017, as compared to $26.9 million, or $0.22 per diluted share, for the second quarter of 2016. Operational EBITDA (“OEBITDA”) (1) for the second quarter was $65.8 million, as compared to $62.5 million for the prior-year period, representing a year-over-year increase of 5% and an OEBITDA margin (1) of 59%. OEBITDA grew primarily due to higher commercial service revenue from the Company’s machine-to-machine (“M2M”) business.

Iridium reported second-quarter total revenue of $111.6 million, which consisted of $86.6 million of service revenue and $25.0 million of revenue related to equipment sales and engineering and support projects. Total revenue increased 2% versus the comparable period of 2016, while service revenue grew by 4% from the year-ago period. Service revenue, which represents primarily recurring revenue from Iridium’s growing subscriber base, was 78% of total revenue for the second quarter of 2017.

The Company ended the quarter with 913,000 total billable subscribers, which compares to 823,000 for the year-ago period and is up from 869,000 for the quarter ended March 31, 2017. Total billable subscribers grew 11% year-over-year, driven by growth in M2M and government customers.


“Iridium continued to benefit from its long-term relationships with growth-oriented partners, particularly in commercial M2M, where subscriber growth of 20% helped to fuel recurring service revenue during the second quarter. We expect strong demand for satellite IoT services will drive momentum in our commercial business, especially as we introduce new solutions like Iridium Edge TM ,” said Matt Desch, CEO, Iridium.

Commenting on Iridium ® NEXT, Desch said, “Our second batch of Iridium NEXT satellites successfully launched in late June and are now completing validation testing. All of these new satellites are working well and we’re already looking forward to the next batch.” Desch continued, “SpaceX has scheduled the third launch of Iridium NEXT satellites for September 30 at 6:30 a.m. PDT from Vandenberg Air Force Base.”

Iridium Business Highlights

Service – Commercial

Commercial service remained the largest part of Iridium’s business, representing 58% of the Company’s total revenue during the second 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.

 

    Commercial service revenue was $64.6 million, up 5% from last year’s comparable period.

 

    Commercial voice and data subscribers were up slightly from the year-ago period to 360,000 customers. Commercial voice and data average revenue per user (“ARPU”) was unchanged during the second quarter at $41. Commercial M2M data subscribers grew 20% from the year-ago period to 461,000 customers. Commercial M2M data ARPU was down slightly during the second quarter to $14.

 

    Iridium’s commercial business ended the quarter with 821,000 billable subscribers, which compares to 743,000 for the year-ago period and is up from 783,000 for the quarter ended March 31, 2017. M2M data subscribers represented 56% of billable commercial subscribers at the end of the quarter, an increase from 52% at the end of the prior-year period.


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 under 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.

 

    Government service revenue was $22 million, consistent with the prior-year period, as the final step up in the fixed fee under the Company’s airtime services contract with DISA occurred in 2015.

 

    Iridium’s government business ended the quarter with 92,000 subscribers, which compares to 80,000 for the year-ago period and is up from 86,000 for the quarter ended March 31, 2017. Government voice and data subscribers increased 12% from the year-ago period to 48,000 as of June 30, 2017. M2M data subscribers increased 19% year-over-year and represented 48% of government subscribers, an increase from 46% at the end of the prior-year period.

Equipment

 

    Equipment revenue was $18.8 million during the second quarter, down 7% from the prior-year period.

 

    As previously indicated, the Company expects lower equipment sales in 2017.


Engineering & Support

 

    Engineering and support revenue was $6.1 million during the second quarter, compared to $5.3 million in the prior-year’s quarter, primarily due to the episodic nature of government-sponsored projects.

Capital expenditures were $119.2 million for the second quarter and primarily related to spending for the Company’s next-generation satellite constellation, Iridium NEXT. The Company ended the second quarter with a cash and marketable securities balance of $356.5 million and gross debt of $1.8 billion. Net debt was $1.3 billion, calculated as $1.8 billion of gross debt, less $0.36 billion of cash and marketable securities, as well as $0.14 billion in restricted cash.

2017 Outlook

The Company affirmed its full-year 2017 outlook for total service revenue growth and OEBITDA. The Company continues to expect:

 

    Total service revenue growth between 3% and 5% for the full-year 2017.

 

    Full-year 2017 OEBITDA between $255 million and $265 million. OEBITDA for 2016 was $254.2 million.

Long-Range Outlook

The Company also affirmed its long-range outlook for total service revenue growth, OEBITDA margin, cash taxes and peak net leverage, while updating its outlook for net leverage in 2019. Based on the expected 2018 Iridium NEXT system completion, the Company expects:

 

    Total service revenue between $440 million and $465 million for the full-year 2019.

 

    OEBITDA margin of approximately 60% in 2019.


    Negligible cash taxes from 2017 to approximately 2020.

 

    Peak net leverage of 6.0x to 6.5x OEBITDA in 2017.

 

    Net leverage of approximately 4.5x OEBITDA in 2019.

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 are expected to be excluded from Operational EBITDA through late 2017. In late 2017, Iridium NEXT revenues are expected to exceed recurring Iridium NEXT expenses (recurring Iridium NEXT expenses are not part of the approximately $3 billion construction cost of Iridium NEXT (the “Construction Costs”)). Accordingly, the Company expects that beginning in late 2017, Iridium NEXT revenues and these recurring expenses 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 late 2017 will principally consist of in-orbit insurance, will continue to be excluded from the calculation of Operational EBITDA through 2018. 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.


     Iridium Communications Inc.  
     Supplemental Reconciliation of GAAP Net Income to Operational EBITDA  
     (In thousands)  
     Three Months Ended June 30,      Six Months Ended June 30,  
     2017      2016      2017      2016  

GAAP net income

   $ 24,778      $ 26,854      $ 62,726      $ 55,374  

Interest expense

     88        294        184        777  

Interest income

     (919      (1,094      (1,848      (2,335

Income taxes

     11,740        15,640        30,140        30,640  

Depreciation and amortization

     20,201        12,843        33,708        25,779  

Iridium NEXT expenses, net

     5,687        4,320        8,527        7,343  

Share-based compensation

     4,257        3,887        7,738        6,080  

Non-cash purchase accounting

     —          (198      —          (406

Non-cash gain on Boeing transaction

     —          —          (11,003      —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Operational EBITDA

   $ 65,832      $ 62,546      $ 130,172      $ 123,252  
  

 

 

    

 

 

    

 

 

    

 

 

 

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, July 27, 2017. 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 43003425. 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 and OEBITDA for 2017; service revenue, OEBITDA margin, cash taxes and leverage over the longer-term; the development of and timing for launch and completion of Iridium NEXT; anticipated equipment revenue; and expected revenue from Iridium’s contracts with the U.S. Department of Defense . 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, 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, 2016, filed with the Securities and Exchange Commission (“SEC”) on February 23, 2017, 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.

Consolidated Statements of Operations

(In thousands)

 

     Three Months Ended June 30,  
     2017     2016  

Revenue

    

Service revenue

    

Commercial

   $ 64,623     $ 61,486  

Government

     22,000       22,000  
  

 

 

   

 

 

 

Total service revenue

     86,623       83,486  

Subscriber equipment

     18,844       20,362  

Engineering and support service

     6,137       5,347  
  

 

 

   

 

 

 

Total revenue

     111,604       109,195  

Operating expenses

    

Cost of services (exclusive of depreciation and amortization)

     21,368       16,448  

Cost of subscriber equipment sales

     10,868       11,859  

Research and development

     3,014       4,013  

Selling, general and administrative

     20,411       22,303  

Depreciation and amortization

     20,201       12,843  
  

 

 

   

 

 

 

Total operating expenses

     75,862       67,466  
  

 

 

   

 

 

 

Operating income (expense)

     35,742       41,729  
  

 

 

   

 

 

 

Other income (expense)

    

Interest income, net

     832       800  

Undrawn credit facility fees

     —         (368

Other expense, net

     (56     333  
  

 

 

   

 

 

 

Total other income (expense)

     776       765  
  

 

 

   

 

 

 

Income (loss) before income taxes

     36,518       42,494  

Provision for income taxes

     (11,740     (15,640
  

 

 

   

 

 

 

Net income (loss)

     24,778       26,854  

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 (loss) attributable to common stockholders

   $ 20,919     $ 22,995  
  

 

 

   

 

 

 

Operational EBITDA

   $ 65,832     $ 62,546  


Iridium Communications Inc.

Consolidated Statements of Operations

(In thousands)

 

     Six Months Ended June 30,  
     2017     2016  

Revenue

    

Service revenue

    

Commercial

   $ 124,396     $ 119,309  

Government

     44,000       44,000  
  

 

 

   

 

 

 

Total service revenue

     168,396       163,309  

Subscriber equipment

     35,958       37,922  

Engineering and support service

     11,676       12,166  
  

 

 

   

 

 

 

Total revenue

     216,030       213,397  

Operating expenses

    

Cost of services (exclusive of depreciation and amortization)

     38,326       32,351  

Cost of subscriber equipment sales

     20,972       22,322  

Research and development

     6,241       6,572  

Selling, general and administrative

     39,628       41,366  

Depreciation and amortization

     33,708       25,779  
  

 

 

   

 

 

 

Total operating expenses

     138,875       128,390  
  

 

 

   

 

 

 

Gain on Boeing transaction

     14,189       —    
  

 

 

   

 

 

 

Operating income

     91,344       85,007  
  

 

 

   

 

 

 

Other income (expense)

    

Interest income, net

     1,665       1,558  

Undrawn credit facility fees

     (25     (871

Other income (expense), net

     (118     320  
  

 

 

   

 

 

 

Total other income (expense)

     1,522       1,007  
  

 

 

   

 

 

 

Income before income taxes

     92,866       86,014  

Provision for income taxes

     (30,140     (30,640
  

 

 

   

 

 

 

Net income

     62,726       55,374  

Series A Preferred Stock dividends, declared and paid

     1,750       3,500  

Series B Preferred Stock dividends, declared and paid

     2,109       4,218  

Series A Preferred Stock dividends, undeclared

     1,750       —    

Series B Preferred Stock dividends, undeclared

     2,109       —    
  

 

 

   

 

 

 

Net income (loss) attributable to common stockholders

   $ 55,008     $ 47,656  
  

 

 

   

 

 

 

Operational EBITDA

   $ 130,172     $ 123,252  


Iridium Communications Inc.

Summary Revenue and OEBITDA Highlights

(In thousands)

 

     Three Months Ended June 30,     % Change     Six Months Ended June 30,      % Change  
     2017     2016           2017      2016         

Revenue

              

Service revenue (1)

              

Commercial

              

Voice and M2M data service

              

Voice and data

   $ 45,629     $ 45,000       1   $ 88,173      $ 87,747        0

M2M data (2)

     18,994       16,486       15     36,223        31,562        15
  

 

 

   

 

 

     

 

 

    

 

 

    

Total commercial voice and M2M data service

     64,623       61,486       5     124,396        119,309        4

Government service revenue (3)

     22,000       22,000       0     44,000        44,000        0
  

 

 

   

 

 

     

 

 

    

 

 

    

Total service revenue

     86,623       83,486       4     168,396        163,309        3

Subscriber equipment

     18,844       20,362       -7     35,958        37,922        -5

Engineering and support (4)

              

Government

     5,401       4,857       11     10,469        10,971        -5

Commercial

     736       490       50     1,207        1,195        1
  

 

 

   

 

 

     

 

 

    

 

 

    

Total engineering and support

     6,137       5,347       15     11,676        12,166        -4
  

 

 

   

 

 

     

 

 

    

 

 

    

Total Revenue

   $ 111,604     $ 109,195       2   $ 216,030      $ 213,397        1
  

 

 

   

 

 

     

 

 

    

 

 

    

Operational EBITDA

              

Operational EBITDA

   $ 65,832     $ 62,546       5   $ 130,172      $ 123,252        6

Other

              

Capital expenditures (5)

   $ 119,228     $ 80,980       $ 168,172      $ 75,822     

Net debt (6)

   $ 1,308,479     $ 1,105,959            

Cash, cash equivalents, and marketable securities

   $ 356,521     $ 443,088            

Credit facility

   $ 1,800,000     $ 1,651,253            

Deferred financing costs

     (111,580     (132,058          
  

 

 

   

 

 

           

Credit facility, net

   $ 1,688,420     $ 1,519,195            
  

 

 

   

 

 

           

 

(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. Additionally, M2M data service provides position, navigation and timing technology through Iridium Communications Inc.’s one-way satellite timing, location, and authentication services.
(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 credit facility, 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 June 30,      % Change  
     2017      2016         

Billable Subscribers (1)

        

Commercial

        

Voice and M2M data service

        

Voice and data

     360        359        0

M2M data

     461        384        20
  

 

 

    

 

 

    

Total commercial voice and M2M data service

     821        743        10

Government

        

Voice and M2M data service

        

Voice and data

     48        43        12

M2M data

     44        37        19
  

 

 

    

 

 

    

Total government voice and M2M data service

     92        80        15
  

 

 

    

 

 

    

Total billable subscribers

     913        823        11
  

 

 

    

 

 

    

 

     Three Months Ended June 30,      % Change     Six Months Ended June 30,      % Change  
     2017      2016            2017      2016         

Net Subscriber Additions

                

Commercial

                

Voice and M2M data service

                

Voice and data

     9        11        -18     7        8        -13

M2M data

     29        19        53     48        25        92
  

 

 

    

 

 

      

 

 

    

 

 

    

Total commercial voice and M2M data service

     38        30        27     55        33        67

Government

                

Voice and M2M data service

                

Voice and data

     3        2        50     4        3        33

M2M data

     3        3        0     4        5        -20
  

 

 

    

 

 

      

 

 

    

 

 

    

Total government voice and M2M data service

     6        5        20     8        8        0
  

 

 

    

 

 

      

 

 

    

 

 

    

Total billable subscribers

     44        35        26     63        41        54
  

 

 

    

 

 

      

 

 

    

 

 

    
     Three Months Ended June 30,      % Change     Six Months Ended June 30,      % Change  
     2017      2016            2017      2016         

ARPU (2)

                

Commercial

                

Voice and data

   $ 41      $ 41        0   $ 40      $ 40        0

M2M data

   $ 14      $ 15        -7   $ 14      $ 14        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. Non-subscriber generated revenue is excluded from the ARPU calculation. Historically, government service revenue was driven by changes in subscriber count or ARPU, however under the terms of the 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.