Iridium Announces First-Quarter 2024 Results

April 18, 2024

Iridium Communications Inc. reported financial results for the first quarter of 2024 and reiterated its full-year 2024 outlook. Net income was $19.7 million, or $0.16 per diluted share, for the first quarter of 2024, as compared to net income of $9.8 million, or $0.08 per diluted share, for the first quarter of 2023. Operational EBITDA ("OEBITDA")(1) for the first quarter was $115.0 million, as compared to $111.9 million for the prior-year period, representing a year-over-year increase of 3%. Net income benefitted from a year-over-year decrease in depreciation expense associated with the extension of the estimated useful lives of the Company's satellites and continued growth in total commercial services revenue.

Iridium reported first-quarter total revenue of $203.9 million, which consisted of $148.6 million of service revenue and $55.3 million of revenue related to equipment sales and engineering and support projects. Service revenue, which represents primarily recurring revenue from Iridium's growing subscriber base, grew 7% from the year-ago period and was 73% of total revenue for the first quarter of 2024. Total revenue decreased 1% versus the comparable period of 2023, largely due to lower equipment revenue.

The Company ended the quarter with 2,333,000 total billable subscribers, which compares to 2,051,000 for the year-ago period and is up from 2,279,000 for the quarter ended December 31, 2023. Total billable subscribers grew 14% year-over-year, led by growth in commercial IoT.

"Continued strong service revenue growth fueled Iridium's business results in the first quarter," said Matt Desch, CEO, Iridium. Desch added, "Subscriber growth and demand for Iridium's mission-critical applications are driving new service development and free cash flow."

Commenting on Iridium's recent acquisition, Desch said, "We're excited to broaden our opportunities for growth with the closing of the Satelles acquisition in early April. This transaction makes Iridium a leading provider of satellite-based time and location services." Desch added, "With the prevalence of GPS jamming and location spoofing on the rise, our new Satellite Time and Location service will allow us to protect critical infrastructure and expand resilient time-synchronization for enterprises and governments around the world."

Iridium Business Highlights

Service – Commercial 

Commercial service remained the largest part of Iridium's business, representing 60% 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.

Commercial service revenue was $122.1 million, up 8% from last year's comparable period due to broad-based growth.

Commercial voice and data: Revenue was $55.0 million, up 5% from the year-ago period. Subscribers grew 3% from the year-ago period to 405,000. Average revenue per user ("ARPU") was $45 during the first quarter, compared to $44 in the prior-year period, with the increase due primarily to higher access fees.

Commercial IoT data: Revenue was $39.4 million, up 23% from the year-ago period. Subscribers grew 18% from the year-ago period to 1,766,000 customers, driven by continued growth in consumer personal communications devices. ARPU was $7.57 in the first quarter, compared to $7.22 in last year's comparable period. The increase in ARPU resulted primarily from a new contract with a large customer.

Commercial broadband: Revenue was $13.7 million, up 2% from $13.4 million in the year-ago period on subscriber growth. ARPU was $274 during the first quarter, compared to $294 in last year's comparable period, reflecting the increased prevalence of Iridium's use as a companion service rather than primary.

Hosted payload and other data service: Revenue was $14.0 million, down 7% from $15.0 million in the year-ago period. As previously noted, there was a year-over-year decrease in hosted payload revenue related to the change in the estimated useful lives of Iridium's satellites that went into effect in the fourth quarter of 2023.

Iridium's commercial business ended the quarter with 2,188,000 billable subscribers, which compares to 1,912,000 for the prior-year quarter and is up from 2,134,000 for the quarter ended December 31, 2023. IoT data subscribers represented 81% of billable commercial subscribers at the end of the quarter, an increase from 79% at the end of the corresponding prior-year period.

Service – U.S. 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. 

Under Iridium's Enhanced Mobile Satellite Services contract (the "EMSS Contract"), a seven-year, $738.5 million fixed-price airtime contract with the U.S. Space Force signed in September 2019, Iridium provides specified satellite airtime services, including unlimited global standard and secure voice, paging, fax, Short Burst Data®, Iridium Burst®, RUDICS and Distributed Tactical Communications System services for an unlimited number of Department of Defense and other federal government subscribers. Iridium also provides maintenance and support work for the U.S. government's dedicated Iridium® gateway under two other contracts with the U.S. Space Force. Iridium Certus® airtime services are not included under these contracts and may be procured separately for an additional fee.

Government service revenue remained flat at $26.5 million in the first quarter, reflecting the contractual rate in the EMSS Contract.

Iridium's U.S. government business ended the quarter with 145,000 subscribers, which compares to 139,000 for the prior-year quarter and remains unchanged from the quarter ended December 31, 2023. Government voice and data subscribers increased 3% from the year-ago period to 62,000 as of March 31, 2024. Government IoT data subscribers increased 5% year-over-year and represented 57% of government subscribers at quarter-end.

Under the terms of the multi-year EMSS Contract, Iridium's fixed-price rate will increase to $107 million for the contract year beginning September 15, 2024.

Equipment

Equipment revenue was $24.9 million in the first quarter, down 40% compared to $41.7 million in the prior-year quarter.

In 2024, the Company expects equipment sales to be lower than 2023 and to be more in line with periods prior to 2022.

Engineering & Support

Engineering and support revenue was $30.4 million during the first quarter, compared to $24.2 million in the prior-year quarter, primarily due to a rise in activity with the U.S. government.

In 2024, the Company expects engineering and support revenue to increase from 2023 with ongoing work on the Space Development Agency contract.

Capital expenditures were $14.6 million for the first quarter, including $1.1 million in capitalized interest. The Company ended the first quarter with gross debt of $1.6 billion and a cash and cash equivalents balance of $174.0 million. The Company received cash of approximately $125 million as a result of an increase in the Term Loan, which was used in April to fund the Satelles acquisition. The Company ended the first quarter with a net debt balance of $1.4 billion, representing net leverage of 3.1 times OEBITDA.

Iridium paid a dividend of $0.13 per common share on March 28, 2024, resulting in a total payment of $16.1 million to stockholders. The Board of Directors plans to increase the quarterly dividend to $0.14 per share starting with the second quarter 2024 dividend, which would result in a full-year dividend increase of 5.8%.

During the quarter, the Company repurchased approximately 1.9 million shares of its common stock under its previously announced share repurchase program at a total purchase price of $56.6 million. As of March 31, 2024, $277.4 million remained available and authorized for repurchase under this program through December 31, 2025. The Company has retired 17.8 million shares, equivalent to $722.6 million, since its share repurchase program commenced in February 2021.