Iridium Announces
Second-Quarter 2020 Results; Updates 2020
Outlook
July 28, 2020
Iridium Communications Inc.
reported financial results for the second
quarter of 2020 and updated its full-year 2020
outlook. Net loss was $12.4 million, or $0.09
per diluted share, for the second quarter of
2020, as compared to net loss of $18.1 million,
or $0.16 per diluted share, for the second
quarter of 2019. This decrease in net loss was
primarily the result of lower net interest
expenses related to the refinancing of Iridium's
credit facility and high-yield notes from the
year ago period and a decline in in-orbit
insurance costs and research and development
expenses. Operational EBITDA ("OEBITDA")(1) for
the second quarter was $85.3 million, as
compared to $85.1 million for the prior-year
period, representing an OEBITDA margin(1) of
61%.
Iridium reported
second-quarter total revenue of $140.2 million,
which consisted of $113.4 million of service
revenue and $26.8 million of revenue related to
equipment sales and engineering and support
projects. Total revenue decreased 2% versus the
comparable period of 2019, while service revenue
grew by 2%. Service revenue, which represents
primarily recurring revenue from Iridium's
growing subscriber base, was 81% of total
revenue for the second quarter of 2020.
The Company ended the
quarter with 1,362,000 total billable
subscribers, which compares to 1,213,000 for the
year-ago period and is up from 1,332,000 for the
quarter ended March 31, 2020. Total billable
subscribers grew 12% year-over-year, driven by
growth in commercial and government IoT
customers.
"Despite the headwinds
caused by the global pandemic, Iridium continues
to grow subscribers, service revenue and cash,"
said Matt Desch, CEO, Iridium. Desch continued,
"As businesses around the world started to
reopen in the second quarter, we've also seen
some recovery in activity from our technology
and distribution partners."
Commenting on the full-year
outlook, Desch added, "With each passing month,
we are getting increased visibility that allows
us to refine our guidance for the year. Iridium
is fortunate to provide mission-critical
services across a broad array of industries,
which has allowed our business to remain
resilient in this environment. I think it's
notable that despite the economic slowdown,
Iridium increased its cash position by more than
$50 million in the second quarter, all of which
came from operating activities. We expect to
continue to generate significant free cash flow
in 2020 and beyond."
Iridium Business
Highlights
Service –
Commercial
Commercial service remained
the largest part of Iridium's business,
representing 63% 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 $88.4 million, up 2% from last year's
comparable period due to an increase in revenue
from hosted payload and other data services and
broadband services, partially offset by lower
data service usage associated with the COVID-19
pandemic.
Commercial voice and data
subscribers were down 3% from the year-ago
period to 349,000 subscribers. Commercial voice
and data average revenue per user ("ARPU") was
$40 during the second quarter, compared to $41
in last year's comparable period.
Commercial IoT data
subscribers grew 20% from the year-ago period to
863,000 customers, driven by consumer personal
communications and tracking devices. Commercial
IoT data ARPU was $8.91 in the second quarter,
compared to $11.40 in last year's comparable
period. The decrease in ARPU resulted from
reduced usage, principally, associated with
COVID-19 impacts, most notably in aviation, as
well as the effect of the increased proportion
of personal communications subscribers within
IoT. These subscribers utilize lower ARPU plans.
Commercial broadband
revenue was $8.5 million, up from $7.4 million
in the year-ago period. This rise was primarily
attributable to growing Iridium Certus broadband
service. Commercial broadband ARPU was $258
during the second quarter, compared to $245 in
last year's comparable period.
Iridium's commercial
business ended the quarter with 1,223,000
billable subscribers, which compares to
1,088,000 for the year-ago period and is up from
1,192,000 for the quarter ended March 31, 2020.
IoT data subscribers represented 71% of billable
commercial subscribers at the end of the
quarter, an increase from 66% at the end of the
prior-year period.
Hosted payload and other
data service revenue was $15.4 million in the
second quarter compared to $12.0 million in the
prior-year period, which was primarily due to
increased Aireon data service fees related to a
contractual step-up.
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.
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. Air
Force Space Command 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. Air
Force Space Command. 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 in the second quarter compared
to $24.5 million in the prior-year period,
reflecting increased revenue from the Company's
EMSS Contract.
Iridium's government
business ended the quarter with 139,000
subscribers, which compares to 125,000 for the
year-ago period and is down from 140,000 for the
quarter ended March 31, 2020. Government voice
and data subscribers increased 9% from the
year-ago period to 60,000 as of June 30, 2020.
Government IoT data subscribers increased 13%
year-over-year to 79,000 and represented 57% of
total government subscribers, an increase from
56% at the end of the prior-year period.
Equipment
Equipment revenue was $19.8
million during the second quarter, compared to
$23.4 million in the prior-year's quarter.
The Company continues to
expect full-year equipment sales will be down
from 2019 levels due to the impact of the global
pandemic on the industries that we support.
Engineering &
Support
Engineering and support
revenue was $7.0 million during the second
quarter, compared to $8.9 million in the
prior-year quarter, primarily due to the
episodic nature of contract work with the U.S.
government.
Capital expenditures were
$9.2 million for the second quarter, which
includes $0.8 million of capitalized interest.
The Company ended the second quarter with gross
debt of $1.65 billion and a cash and cash
equivalents balance of $119.1 million, for a net
debt balance of $1.53 billion.
2020 Outlook
The Company refined its
full-year 2020 outlook for total service revenue
growth and OEBITDA. The Company now expects:
Total service revenue
growth between 1% and 2% for full-year 2020.
Total service revenue for 2019 was $447.2
million.
Full-year 2020 OEBITDA of
approximately $340 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 4.3 times OEBITDA at the end of
2020. Net leverage was 4.8 times OEBITDA at
December 31, 2019.