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Iridium Announces Second-Quarter 2023 Results; Reports Record Operational EBITDA

July 25, 2023

Iridium Communications Inc.  reported financial results for the second quarter of 2023 and reiterated its full-year 2023 outlook. Net loss was $30.7 million, or $0.24 per diluted share, for the second quarter of 2023, as compared to net income of $4.6 million, or $0.04 per diluted share, for the second quarter of 2022. Operational EBITDA ("OEBITDA")(1) for the second quarter was $115.8 million, as compared to $105.9 million for the prior-year period, representing a year-over-year increase of 9%. The net loss was primarily the result of the write-off of Iridium's remaining ground spare satellite following the successful launch of five of its six ground spare satellites in May. This charge offset the benefits of strong revenue growth in Iridium's Commercial Service lines and an increase in Engineering and Support revenue.

Iridium reported second-quarter total revenue of $193.1 million, which consisted of $145.1 million of service revenue and $48.0 million of revenue related to equipment sales and engineering and support projects. Total revenue increased 10% versus the comparable period of 2022, while service revenue grew 9% from the year-ago period. Service revenue, which represents primarily recurring revenue from Iridium's growing subscriber base, was 75% of total revenue for the second quarter of 2023.

The Company ended the quarter with 2,140,000 total billable subscribers, which compares to 1,875,000 for the year-ago period and is up from 2,051,000 for the quarter ended March 31, 2023. Total billable subscribers grew 14% year-over-year, driven by growth in commercial IoT.

"We had another great quarter of double-digit growth in subscribers and commercial service revenue, which drove record operational EBITDA," said Matt Desch, CEO, Iridium. Desch added, "Iridium's strong cash flow continues to support ongoing business investment and the return of capital to our 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 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 $118.6 million, up 12% from last year's comparable period due to broad-based growth across all revenue lines.

Commercial voice and data: Revenue was $55.0 million, up 13% from the year-ago period. Subscribers grew 3% from the year-ago period to 405,000. Average revenue per user ("ARPU") was $46 during the second quarter, compared to $42 in the prior-year period, due to higher access fees.

Commercial IoT data: Revenue was $34.6 million, up 13% from the year-ago period. Subscribers grew 19% from the year-ago period to 1,578,000 customers, driven by continued growth in consumer personal communications devices. ARPU was $7.48 in the second quarter, compared to $7.96 in last year's comparable period. The decrease in ARPU resulted primarily from shifting mix of subscribers using lower ARPU plans, including personal communications subscribers.

Commercial broadband: Revenue was $14.0 million, up 16% from $12.1 million in the year-ago period on increasing activations of Iridium Certus® broadband service. ARPU was $296 during the second quarter, compared to $292 in last year's comparable period, reflecting an increasing mix of broadband subscribers using Iridium Certus.

Iridium's commercial business ended the quarter with 1,999,000 billable subscribers, which compares to 1,731,000 for the prior-year quarter and is up from 1,912,000 for the quarter ended March 31, 2023. IoT data subscribers represented 79% of billable commercial subscribers at the end of the quarter, an increase from 76% at the end of the prior-year period.

Hosted payload and other data service revenue remained consistent at $15.1 million in the second quarter compared to the year-ago period.

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.

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 remained flat at $26.5 million in the second quarter, reflecting the contractual rate in the EMSS Contract.

Iridium's U.S. government business ended the quarter with 141,000 subscribers, which compares to 144,000 for the prior-year quarter and 139,000 for the quarter ended March 31, 2023. Government voice and data subscribers decreased 3% from the year-ago period to 60,000 as of June 30, 2023. Government IoT data subscribers decreased 1% year-over-year and represented 57% of government subscribers at quarter-end.


Equipment revenue was $27.4 million in the second quarter, down 19% compared to $33.8 million in the prior-year quarter.

For full year 2023, the Company expects equipment sales in line with 2022's record level.

Engineering & Support

Engineering and support revenue was $20.6 million during the second quarter, compared to $8.3 million in the prior-year quarter, due to a rise in both government and commercial activity.

The Company expects Engineering and Support revenue in 2023 to be higher than 2022 primarily due to the full year impact of the Space Development Agency contract, which was granted in mid-2022.

Capital expenditures were $22.4 million for the second quarter, including $1.3 million in capitalized interest. In May, Iridium successfully launched five of its remaining ground spares to enhance the redundancy of its global satellite network. Capital expenditures associated with this launch were less than $40 million, including about $6.0 million in the second quarter. The Company ended the second quarter with gross debt of $1.5 billion and a cash and cash equivalents balance of $103.5 million, for a net debt balance of $1.4 billion, representing net leverage of 3.1 times OEBITDA.

Iridium paid its second dividend of $0.13 per common share on June 30, 2023. Dividends through the second quarter of 2023 have resulted in $32.7 million in payments to stockholders.

During the quarter, the Company repurchased approximately 1.1 million shares of its common stock under its previously announced share repurchase program at a total purchase price of $66.1 million. As of June 30, 2023, $60.4 million remained available and authorized for repurchase under this program through December 31, 2023.


2023 Outlook


The Company reiterated its full-year 2023 outlook:

Total service revenue growth between 9% and 11% for full-year 2023. Total service revenue for 2022 was $534.7 million.

Full-year 2023 OEBITDA between $455 million and $465 million. OEBITDA for 2022 was $424.0 million.

Negligible cash taxes in 2023. 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 $600.0 million share repurchase authorization and the payment of four quarters of dividends. Net leverage was 3.2 times OEBITDA at December 31, 2022.


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