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Iridium Announces Second-Quarter 2019 Results


 

July 23, 2019  

Iridium Communications Inc. reported financial results for the second quarter of 2019 and affirmed its full-year 2019 outlook.  Net loss was $18.1 million, or $0.16 per diluted share, for the second quarter of 2019, as compared to net loss of $4.4 million, or $0.06 per diluted share, for the second quarter of 2018.  This increase in net loss was primarily the result of a $24.6 million increase in depreciation and amortization expense compared to the year-ago period.  Operational EBITDA ("OEBITDA")(1) for the second quarter was $85.1 million, as compared to $78.7 million for the prior-year period, representing a year-over-year increase of 8% and an OEBITDA margin(1) of 59%.  OEBITDA primarily benefitted from strong growth in commercial IoT and higher government service revenue.

Iridium reported second-quarter total revenue of $143.1 million, which consisted of $110.8 million of service revenue and $32.3 million of revenue related to equipment sales and engineering and support projects.  Total revenue increased 6% versus the comparable period of 2018, while service revenue grew by 7%. Service revenue, which represents primarily recurring revenue from Iridium's growing subscriber base, was 77% of total revenue for the second quarter of 2019, the same as the year-ago period.

The Company ended the quarter with 1,213,000 total billable subscribers, which compares to 1,047,000 for the year-ago period and is up from 1,151,000 for the quarter ended March 31, 2019.  Total billable subscribers grew 16% year-over-year, driven by growth in commercial and government IoT customers.

"Iridium's new network continues to be a catalyst for growth.  IoT services, in particular, are driving subscriber growth and demonstrate how Iridium's versatile platform is a fantastic solution for this expanding market," said Matt Desch, CEO, Iridium.

Commenting on Iridium Certus and Aireon LLC, Desch said, "Services enabled by our new satellites are also creating great opportunities for future revenue growth.  Iridium Certus continues its early ramp in the maritime and land-mobile sectors with growing market recognition, and Aireon is revolutionizing air traffic control surveillance now that its space-based service is in live operation."

The Company's negotiations continue with the Department of Defense ("DoD") to renew its Enhanced Mobile Satellite Services ("EMSS") contract with the U.S. government.  Effective July 21, 2019, the Company entered into a fourth short-term contract extension with the DoD to provide additional time to finalize the terms of a new EMSS contract.  Under the terms of this extension, the DoD will pay Iridium $8.8 million for a one-month period.  Iridium continues to expect a long-term contract at a rate greater than the $88 million in annual revenue in the last full year of the EMSS contract.

Iridium Business Highlights

Service – Commercial

Commercial service remains the largest part of Iridium's business, representing 60% 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 $86.3 million, up 5% from last year's comparable period due to increased revenues from IoT and voice and data services.

Commercial voice and data subscribers were up 1% from the year-ago period to 368,000 subscribers.  Commercial voice and data average revenue per user ("ARPU") was $46 during the second quarter, compared to $45 in last year's comparable period, as a result of new pricing plans introduced in 2018.  Commercial IoT data subscribers grew 25% from the year-ago period to 720,000 customers, driven by continued strength in consumer personal communications devices.  Commercial IoT data ARPU was down 9% from the prior year to $11.40 in the second quarter based upon the higher volume of new personal communications subscribers utilizing lower ARPU plans.

Iridium's commercial business ended the quarter with 1,088,000 billable subscribers, which compares to 940,000 for the year-ago period and is up from 1,036,000 for the quarter ended March 31, 2019.  IoT data subscribers represented 66% of billable commercial subscribers at the end of the quarter, an increase from 61% at the end of the prior-year period.

Hosted payload and other data service revenue was $12.0 million in the second quarter.  This represented a 4% decline from the prior-year period, which included the initial recognition of all Aireon hosted payload service revenues earned since inception.

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.

Government service revenue was $24.5 million and reflects increased revenue from short-term extensions to the Company's EMSS contract with the U.S. government.

Iridium's government business ended the quarter with 125,000 subscribers, which compares to 107,000 for the year-ago period and is up from 115,000 for the quarter ended March 31, 2019.  Government voice and data subscribers increased 2% from the year-ago period to 55,000 as of June 30, 2019.  Government IoT data subscribers increased 32% year-over-year to 70,000 and represented 56% of total government subscribers, an increase from 50% at the end of the prior-year period.

Equipment

Equipment revenue was $23.4 million during the second quarter, compared to $25.9 million in the prior-year's quarter.

The Company continues to forecast lower equipment sales in 2019.

Engineering & Support

Engineering and support revenue was $8.9 million during the second quarter, compared to $5.1 million in the prior-year's quarter, primarily driven by increased government activities.

Capital expenditures were $57.9 million for the second quarter, of which $49 million related to spending the Company's recently completed, next-generation satellite program, Iridium NEXT.  The Company ended the second quarter with credit facility gross debt of $1.6 billion and a cash and cash equivalents balance of $175.8 million.  Net debt was $1.6 billion, calculated as $1.6 billion of credit facility gross debt and $360.0 million of unsecured notes, less $175.8 million of cash and cash equivalents, as well as $194.1 million in restricted cash.


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