Daily news

Iridium Announces Record Second-Quarter 2022 Results; Updates 2022 Outlook

July 26, 2022

Iridium Communications Inc. reported financial results for the second quarter of 2022 and updated its full-year 2022 outlook. Net income was $4.6 million, or $0.04 per diluted share, for the second quarter of 2022, as compared to net income of $3.8 million, or $0.03 per diluted share, for the second quarter of 2021. This change in net income was primarily the result of growth in total revenue, which was broad based. Operational EBITDA ("OEBITDA")(1) for the second quarter was up 12% to a record $105.9 million, as compared to $94.8 million for the prior-year period, representing an OEBITDA margin(1) of 61%.

Iridium reported second-quarter total revenue of $174.9 million, which consisted of $132.9 million of service revenue and $42.0 million of revenue related to equipment sales and engineering and support projects. Total revenue increased 17% from the comparable period of 2021, while service revenue grew 10% from the year-ago period. Service revenue, which represents primarily recurring revenue from Iridium's growing subscriber base, was 76% of total revenue for the second quarter of 2022.

The Company ended the quarter with 1,875,000 total billable subscribers, which compares to 1,616,000 for the year-ago period and is up from 1,781,000 for the quarter ended March 31, 2022. Total billable subscribers grew 16% year-over-year driven primarily by growth in commercial IoT.

"2022 is shaping up to be a blockbuster year for Iridium, as demand for equipment and new subscriber activations drove record revenue growth in the second quarter," said Matt Desch, CEO, Iridium. Desch continued, "We're seeing momentum across all commercial product areas.  In addition to ongoing strength in IoT and broadband, we are also seeing outstanding growth in service offerings like Iridium® Push-to-Talk and Iridium GO!®"

Commenting on Iridium's increased guidance, Desch added, "Based upon the momentum that we continue to see from our extensive global ecosystem of business partners, we are raising our full-year outlook for service revenue growth to between 7% and 9%, and for OEBITDA to between $410 million and $420 million in 2022."

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 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 $106.4 million, up 11% from last year's comparable period due to an increase in revenue from voice and data services, IoT and broadband.

Commercial voice and data revenue was $48.5 million, up 12% from the year-ago period. Commercial voice and data subscribers were up 8% from the year-ago period to 394,000. Commercial voice and data average revenue per user ("ARPU") increased to $42 during the second quarter, compared to $40 in the prior-year period.

Commercial IoT data revenue was $30.6 million, up 13% from the year-ago period. Commercial IoT data subscribers grew 22% from the year-ago period to 1,323,000 customers, driven by continued strength in consumer personal communications devices. Commercial IoT data ARPU was $7.96 in the second quarter, compared to $8.69 in last year's comparable period. The decrease in ARPU resulted primarily from customer mix, including the effect of the growing proportion of personal communications subscribers within IoT, who typically utilize lower ARPU plans.

Commercial broadband revenue was $12.1 million, up 14% from $10.6 million in the year-ago period on increasing activations of Iridium Certus® broadband service. Commercial broadband ARPU was $292 during the second quarter, compared to $289 in last year's comparable period.

Iridium's commercial business ended the quarter with 1,731,000 billable subscribers, which compares to 1,463,000 for the year-ago period and is up from 1,635,000 for the quarter ended March 31, 2022. IoT data subscribers represented 76% of billable commercial subscribers at the end of the quarter, an increase from 74% at the end of the prior-year period.

Hosted payload and other data service revenue was $15.2 million in the second quarter, compared to $14.4 million in the prior-year period, primarily related to increased usage for payload services and precision timing and location services.

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 $26.5 million in the second quarter compared to $25.8 million in the prior-year period, reflecting increased revenue from a contractual step up in the EMSS Contract on September 15, 2021.

Iridium's government business ended the quarter with 144,000 subscribers, which compares to 153,000 for the year-ago period and was down from 146,000 for the quarter ended March 31, 2022. Government voice and data subscribers decreased 3% from the year-ago period to 62,000 as of June 30, 2022. Government IoT data subscribers decreased 8% year-over-year to 82,000 and represented 57% of total government subscribers, compared to 58% at the end of the prior-year period.

Equipment

Equipment revenue was $33.8 million during the second quarter, compared to $21.8 million in the prior-year's quarter.

In 2022, the Company expects considerably higher equipment sales than in 2021.

Engineering & Support 

Engineering and support revenue was $8.3 million during the second quarter, compared to $6.8 million in the prior-year quarter, primarily due to the episodic nature of contract work for the U.S. government and a rise in commercial activity.

The Company expects Engineering and Support revenue to be higher than in prior years for the remainder of 2022 and in coming years, resulting from a new contract awarded by the Space Development Agency to General Dynamics Mission Systems, with Iridium as a subcontractor.

Capital expenditures were $17.5 million for the second quarter, which includes $0.5 million of capitalized interest and an initial payment for the launch of up to five ground spare satellites. The Company ended the second quarter with gross debt of $1.61 billion and a cash and cash equivalents balance of $227.2 million, for a net debt balance of $1.39 billion.

During the quarter ended June 30, 2022, the Company repurchased approximately 1.0 million shares of its common stock under its previously announced share repurchase program at a total purchase price of $35.0 million. As of June 30, 2022, $267.5 million remained available and authorized for repurchase under this program.

2022 Outlook

The Company updated its full-year 2022 outlook for total service revenue and OEBITDA and currently anticipates:

Total service revenue growth between 7% and 9% for full-year 2022 (previous outlook was for total service revenue growth between 5% and 7% for full-year 2022). Total service revenue for 2021 was $492.0 million.

Full-year 2022 OEBITDA between $410 million and $420 million (previous outlook was for full-year 2022 OEBITDA between $400 million and $410 million). OEBITDA for 2021 was $378.2 million.

Negligible cash taxes in 2022. Cash taxes are expected to be negligible through approximately 2024.

Net leverage of between 2.5 and 3.5 times OEBITDA at the end of 2023, assuming the completion of the Company's total $600 million in authorized share repurchases. Net leverage was 3.4 times OEBITDA at December 31, 2021.