Iridium Announces
Third-Quarter 2020 Results; Improves 2020
Outlook
Oct. 20, 2020
Iridium
Communications Inc. reported financial results
for the third quarter of 2020 and updated its
full-year 2020 outlook. Net loss was $4.0
million, or $0.03 per diluted share, for the
third quarter of 2020, as compared to net loss
of $18.0 million, or $0.14 per diluted share,
for the third 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. Also contributing to
the improvement was growth in service revenue
and lower selling, general and administrative
expense. Operational EBITDA ("OEBITDA")(1) for
the third quarter was $93.4 million, as compared
to $88.5 million for the prior-year period,
representing a year-over-year increase of 6% and
an OEBITDA margin(1) of 62%.
OEBITDA primarily benefitted from increased
commercial revenue and a reduction in operating
expenses.
Iridium reported
third-quarter total revenue of $151.5 million,
which consisted of $116.9 million of service
revenue and $34.6 million of revenue related to
equipment sales and engineering and support
projects. Total revenue
increased 5% versus the comparable period of
2019, while service revenue grew by 1%. Service
revenue, which represents primarily recurring
revenue from Iridium's growing subscriber base,
was 77% of total revenue for the third quarter
of 2020.
The Company ended the
quarter with 1,429,000 total billable
subscribers, which compares to 1,269,000 for the
year-ago period and is up by a record 67,000
from 1,362,000 for the quarter ended June 30,
2020. Subscriber growth during the most recent
quarter was driven by rising activations of
personal communications devices. Total billable
subscribers grew 13% year-over-year, driven by
growth in commercial IoT customers.
"Iridium's business model
has proven quite resilient given the importance
of our services in the face of a global
pandemic," said Matt Desch, CEO, Iridium. Desch
continued, "Iridium delivered a record 67,000
net subscriber additions during the quarter,
which drove sequential growth in commercial
services. Subscriber equipment sales also
increased by 18% year-over-year, driven by
increased demand in the third quarter."
Commenting on the full-year
outlook, Desch added, "In light of continued
momentum, Iridium is raising its full-year
guidance for 2020. We now expect to generate
approximately $355 million in operational EBITDA
and finish the year with net leverage of
approximately 4.0 times operational EBITDA. With
nearly a full turn of deleveraging in 2020, we
are well on our way to achieving our targeted
leverage range and undertaking material returns
of capital to shareholders."
Iridium Business Highlights
Service – Commercial
Commercial service remained
the largest part of Iridium's business,
representing 61% of the Company's total revenue
during the third 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 $91.8 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
voice and data revenue associated with the
effects of the global pandemic.
Commercial voice and data
subscribers were down 2% from the year-ago
period to 352,000 subscribers.
Commercial voice and data average revenue
per user ("ARPU") was steady at $41 during the
third quarter. Commercial IoT
data ARPU was $9.48 in the third quarter,
compared to $11.36 in last year's comparable
period. The decrease in ARPU resulted from
reduced usage 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 $9.1 million, up from $8.1 million
in the year-ago period. This rise was primarily
attributable to growing Iridium Certus®
broadband service. Commercial broadband ARPU was
$270 during the third quarter driven by an
increasing mix of Iridium Certus subscribers,
compared to $260 in last year's comparable
period.
Iridium's commercial
business ended the quarter with 1,287,000
billable subscribers, which compares to
1,138,000 for the year-ago period and is up from
1,223,000 for the quarter ended June 30, 2020.
IoT data subscribers represented 72% of billable
commercial subscribers at the end of the
quarter, an increase from 67% at the end of the
prior-year period.
Hosted payload and other
data service revenue was $14.5 million in the
third 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. 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
was $25.1 million in the third quarter and
included the impact of a contractual step up in
the EMSS Contract on September 15.
Quarterly revenue decreased $0.5 million
from last year's comparable quarter, reflecting
the 2019 benefit of short-term rate increases on
monthly contract extensions in advance of
signing a new seven-year EMSS Contract.
Iridium's government
business ended the quarter with 142,000
subscribers, which compares to 131,000 for the
year-ago period and is up from 139,000 for the
quarter ended June 30, 2020.
Government voice and data subscribers increased
9% from the year-ago period to 61,000 as of
September 30, 2020.
Government IoT data subscribers increased 8%
year-over-year to 81,000 and represented 57% of
total government subscribers.
Equipment
Equipment revenue was $25.1
million during the third quarter, compared to
$21.4 million in the prior-year quarter.
In light of strong demand
for subscriber equipment in the third quarter
and continued favorable trends related to the
U.S. dollar exchange rate, the Company now
expects full-year equipment sales will be equal
to or greater than 2019 levels.
Engineering & Support
Engineering and support
revenue was $9.4 million during the third
quarter, compared to $7.6 million in the
prior-year quarter, primarily due to the
episodic nature of contract work with the U.S.
government.
Capital expenditures were
$10.6 million for the third quarter, which
includes $0.9 million of capitalized interest.
The Company ended the third quarter with gross
debt of $1.64 billion and a cash and cash
equivalents balance of $182.7 million, for a net
debt balance of $1.46 billion.
2020 Outlook
The Company updated its
full-year 2020 outlook for total service
revenue, OEBITDA and net leverage.
The Company now expects:
Total service revenue
growth of approximately 3% for full-year 2020.
(Previous outlook was for total service revenue
growth between 1% and 2%). Total service revenue
for 2019 was $447.2 million.
Full-year 2020 OEBITDA of
approximately $355 million. (Previous outlook
was for 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 4.0 times OEBITDA at the end of
2020. (Previous outlook was for net leverage of
approximately 4.3 times OEBITDA). Net leverage
was 4.8 times OEBITDA at December 31, 2019.