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Iridium Completes Milestone Year; Company Announces 2019 Results And Issues 2020 Outlook


 

 Feb. 25, 2020

Iridium Communications Inc. reported financial results for the fourth quarter of 2019 and issued its full-year 2020 guidance. Net loss was $107.9 million, or $0.82 per diluted share, for the fourth quarter of 2019, as compared to net loss of $7.6 million, or $0.09 per diluted share, for the fourth quarter of 2018. This increase in net loss was primarily the result of debt extinguishment costs associated with Iridium's refinancing, as well as higher interest expense and depreciation and amortization expense related to the completion of the Iridium® NEXT program. Operational EBITDA ("OEBITDA")(1) for the fourth quarter was $80.1 million, as compared to $75.5 million for the prior-year period, representing a year-over-year increase of 6% and an OEBITDA margin(1) of 58%.  OEBITDA primarily benefitted from higher government service revenue and strong growth in commercial IoT.

Iridium reported fourth-quarter total revenue of $138.9 million, which consisted of $113.6 million of service revenue and $25.3 million of revenue related to equipment sales and engineering and support projects. Total revenue increased 5% versus the comparable period of 2018, while service revenue grew 6% from the year-ago period. Service revenue, which represents primarily recurring revenue from Iridium's growing subscriber base, was 82% of total revenue for the fourth quarter of 2019.

The Company ended the quarter with 1,300,000 total billable subscribers, which compares to 1,121,000 for the year-ago period and is up from 1,269,000 for the quarter ended September 30, 2019. Total billable subscribers grew 16% year-over-year, driven by growth in commercial IoT and government business.

Full-Year 2019 Iridium Business Highlights

For the full year, Iridium reported net loss of $162.0 million, or $1.33 per diluted share attributable to common stockholders, as compared to net loss of $13.4 million, or $0.22 per diluted share attributable to common stockholders for 2018. This increase in net loss resulted from debt extinguishment costs associated with Iridium's refinancing, as well as higher depreciation and amortization expense and interest expense related to the completion of the Iridium NEXT program. The Company reported record total revenue in 2019 of $560.4 million, which was up 7% from the year-ago period. Total revenue included $447.2 million of service revenue and $113.3 million of revenue related to equipment sales and engineering and support projects. OEBITDA for 2019 was $331.7 million, a 10% increase from $302.0 million in the prior year, representing an OEBITDA margin of 59%. Capital expenditures were $117.8 million for the full-year 2019.

"2019 was a transformational year for Iridium with the completion of our constellation and the launch of our new Iridium Certus® broadband service. These milestones support a new era of technological innovation and growth, and also signal the long-awaited move from capital spending to a sustained period of positive cash flow," said Matt Desch, CEO, Iridium.

Commenting on the refinancing of Iridium's BPIAE credit facility, Desch said, "Iridium completed the issuance of a seven-year Term Loan in November, which fully refinanced the French credit facility that supported the development and execution of the Iridium NEXT program. The new facility, along with the retirement of Iridium's high yield notes earlier this month, streamline our capital structure and provide Iridium significant financial flexibility for shareholder friendly activities as we look to the future."

Fourth-Quarter Iridium Business Highlights

Service – Commercial

Commercial service remained the largest part of Iridium's business, representing 64% 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.

Commercial service revenue was $88.6 million, up 4% from last year's comparable period due primarily to increased revenues from IoT and voice and data services.

Commercial voice and data subscribers were up 1% from the year-ago period to 363,000 subscribers. Commercial voice and data average revenue per user ("ARPU") was $47 during the fourth quarter, compared to $45 in last year's comparable period, as a result of growing broadband usage associated with new activations of Iridium Certus™ terminals and increased access and roaming revenue. Commercial IoT data subscribers grew 24% from the year-ago period to 802,000 customers, driven by continued strength in consumer personal communications devices. Commercial IoT data ARPU was $10.50 in the fourth quarter, compared to $11.55 in last year's comparable period.

Iridium's commercial business ended the quarter with 1,165,000 billable subscribers, which compares to 1,008,000 for the prior-year quarter and is up from 1,138,000 for the quarter ended September 30, 2019. IoT data subscribers represented 69% of billable commercial subscribers at the end of the quarter, an increase from 64% at the end of the prior-year period.

Hosted payload and other data service revenue was $12.1 million in the fourth quarter compared to $14.2 million in the prior-year period. Last year's quarter benefitted from $4.5 million in non-recurring revenue related to satellite time and location services.

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.

Iridium signed three new contracts in 2019 that support the use of Iridium satellite technology and services by the U.S. government. Most significantly, effective September 15, 2019, the Company entered into a seven-year, $738.5 million fixed-price airtime contract with the U.S. Air Force Space Command for Enhanced Mobile Satellite Services (the "EMSS Contract"). Under the EMSS Contract, 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. The other two of these contracts provide for maintenance and support work for the U.S. government's dedicated Iridium gateway. Iridium Certus airtime services are not included under these contracts and may be procured separately for an additional fee.

Government service revenue was $25.0 million and reflected increased revenue from the Company's new EMSS contract with the U.S. government signed in September 2019.

Iridium's U.S. government business ended the quarter with 135,000 subscribers, which compares to 113,000 for the prior-year quarter and is up from 131,000 for the quarter ended September 30, 2019. Government voice and data subscribers increased 6% from the year-ago period to 57,000 as of December 31, 2019. IoT data subscribers increased 32% year-over-year and represented 58% of government subscribers at year-end.

Equipment

Equipment revenue was $17.1 million during the fourth quarter, down 15% from the prior-year period. This was consistent with the Company's guidance.

In 2020, the Company expects an increase in equipment sales related to product evolution.

Engineering & Support

Engineering and support revenue was $8.3 million during the fourth quarter, up 73% from the prior-year quarter, primarily due to an increase in the volume of contracted work to enable services for the U.S. government.

Capital expenditures were $15.1 million for the fourth quarter, including $3.4 million in capitalized interest. The Company ended the fourth quarter with gross debt of $1.8 billion and a cash and cash equivalents balance of $223.6 million. Net debt was $1.6 billion, calculated as $1.45 billion of gross Term Loan and $360.0 million of gross unsecured notes, less $223.6 million of cash and cash equivalents.

Two noteworthy transactions impacted the structure of Iridium's debt financing. In November 2019, the Company entered into a seven-year $1.45 billion secured Term Loan. The proceeds of the Term Loan, along with the cash in its debt service reserve account and cash on hand, were used to prepay all of the indebtedness outstanding under the BPIAE Facility and premiums for early prepayment, net of amounts refunded, of $48.9 million. On February 7, 2020, the Company closed on an additional $200.0 million under its Term Loan. On February 13, 2020, the Company used the proceeds of this transaction, together with cash on hand, to prepay all of the indebtedness outstanding under the Company's senior unsecured notes, premiums for early prepayment of $23.5 million, and accrued interest.

2020 Outlook

The Company issued its full-year 2020 outlook and reiterated other elements of long-term guidance:

Total service revenue growth between 6% and 8% for full-year 2020.

Full-year 2020 OEBITDA between $355 million and $365 million. OEBITDA for 2019 was $331.7 million.

Negligible cash taxes in 2020. Cash taxes are expected to be negligible through approximately 2023.

Net leverage of approximately 4.0 times OEBITDA at the end of 2020. Net leverage was 4.8 times OEBITDA at December 31, 2019.

 

 

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