Iridium Announces Record Third-Quarter 2024 Results; Improves 2024 OEBITDA Outlook

Oct. 17, 2024 

Iridium Communications Inc.reported financial results for the third quarter of 2024 and updated its full-year 2024 outlook. Net income was $24.4 million, or $0.21 per diluted share, for the third quarter of 2024, as compared to net loss of $1.6 million, or $0.01 per diluted share, for the third quarter of 2023. Operational EBITDA ("OEBITDA")⁽¹⁾ for the third quarter was a record $124.4 million, as compared to $121.3 million for the prior-year period. Net income benefitted from the year-over-year increases in service revenue, engineering and support revenue and equipment sales. In the third quarter, Iridium also had lower operating expenses compared to the prior year period primarily due to a decline in depreciation expense associated with the extension of the estimated useful lives of the Company's satellites.

Iridium reported record third-quarter total revenue of $212.8 million, which consisted of $159.9 million of service revenue and $52.9 million of revenue related to equipment sales and engineering and support projects. Service revenue, which represents primarily recurring revenue from Iridium's growing subscriber base, grew 5% from the year-ago period and was 75% of total revenue for the third quarter of 2024. Total revenue increased 8% versus the comparable period of 2023, largely due to higher commercial service revenue and government engineering revenue.

The Company ended the quarter with 2,482,000 total billable subscribers, which compares to 2,236,000 for the year-ago period and is up from 2,413,000 for the quarter ended June 30, 2024. Total billable subscribers grew 11% year-over-year, led by growth in commercial IoT.

"Robust revenue and subscriber growth in the third quarter continued to support Iridium's shareholder-friendly activities and ongoing capital returns. Since 2021, Iridium has returned over $1 billion to common shareholders through stock repurchase and dividend activities," said Matt Desch, CEO, Iridium. Desch added, "Most recently, our Board of Directors further expanded our buyback program by authorizing the repurchase of an additional $500 million of Iridium common stock through December 31, 2027."

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 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. Many of 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 $133.3 million, up 6% from last year's comparable period primarily due to continued growth in IoT data and voice and data services.
  • Commercial voice and data: Revenue was $57.7 million, up 3% from the year-ago period. Subscribers grew 3% from the year-ago period to 422,000. Average revenue per user ("ARPU") was $46 during the third quarter, unchanged from the prior year period.
  • Commercial IoT data: Revenue was $43.7 million, up 14% from the year-ago period. Subscribers grew 14% from the year-ago period to 1,902,000 customers, driven by continued growth in consumer personal communications devices and commercial users. ARPU was $7.79 in the third quarter, compared to $7.90 in the prior year period.
  • Commercial broadband: Revenue was $15.5 million, down 1% from $15.8 million in the year-ago period due to the transition of our maritime user base to a companion service for VSAT solutions. ARPU was $309 during the third quarter, compared to $322 in the prior year period.
  • Hosted payload and other data service: Revenue was $16.4 million, up 9% from $15.0 million in the year-ago period. The increase reflected higher revenue from other data services, including from Iridium's growing PNT services, which more than offset a year-over-year decrease in hosted payload revenue recognition related to the extension in the estimated useful lives of Iridium's satellites.
• Iridium's commercial business ended the quarter with 2,341,000 billable subscribers, which compares to 2,094,000 for the prior-year quarter and is up from 2,271,000 for the quarter ended June 30, 2024. IoT data subscribers represented 81% of billable commercial subscribers at the end of the quarter, an increase from 80% at the end of the corresponding prior-year 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, which is accounted for as engineering and support revenue. Iridium Certus^® airtime services are not included under these contracts and may be procured separately for an additional fee.

• Government service revenue remained relatively unchanged from the prior-year quarter at $26.5 million in the third quarter. On September 15, 2024, the EMSS Contract's annual rate increased to $107 million, reflecting a previously negotiated contractual step up.
• Iridium's U.S. government business ended the quarter with 141,000 subscribers, which compares to 142,000 at each of the prior-year quarter and the quarter ended June 30, 2024. The Company expects subscriber count to be variable due to the nature of this fixed-price contract. Government voice and data subscribers increased 3% from the year-ago period to 63,000 as of September 30, 2024. Government IoT data subscribers decreased 4% year-over-year and represented 55% of government subscribers at quarter-end.

Equipment

• Equipment revenue was $22.2 million in the third quarter, up 9% compared to $20.4 million in the prior-year quarter.
• In 2024, the Company expects equipment sales to be lower than 2023 and more in line with periods prior to 2022.

Engineering & Support

• Engineering and support revenue was $30.7 million during the third quarter, up 22% compared to $25.2 million in the prior-year quarter, primarily due to a rise in activity with the U.S. government.
• In 2024, the Company expects engineering and support revenue to increase from 2023 with expanded work on the Space Development Agency contract.

Capital expenditures were $18.6 million for the third quarter, including $1.3 million in capitalized interest. The Company ended the third quarter with gross Term Loan debt of $1.8 billion and a cash and cash equivalents balance of $159.6 million. The Company upsized its Term Loan by $200 million in July 2024 and has used cash to continue to execute on its share repurchase plan. The Company ended the third quarter with a net debt balance of $1.7 billion, representing net leverage of 3.5 times trailing twelve months OEBITDA.

Iridium paid a dividend of $0.14 per common share on September 30, 2024, resulting in year-to-date dividend payments of $49.1 million to stockholders.

During the quarter, the Company repurchased approximately 4.7 million shares of its common stock, or 4% of outstanding shares, under its previously announced share repurchase program at a total purchase price of $128.6 million, excluding related commissions and taxes. On September 19, 2024, the Company's Board of Directors authorized an additional $500 million in share repurchases through December 31, 2027 and, as of September 30, 2024, $552.2 million remained available and authorized for repurchase under this program. The Company has retired 25.8 million shares, equivalent to $947.8 million since its share repurchase program commenced in February 2021.

2024 Outlook and Longer-Term Outlook

The Company updated its full-year 2024 outlook:

• Total service revenue growth of approximately 5% for full-year 2024. Total service revenue for 2023 was $584.5 million. (Previous guidance was for total service revenue growth between 4% and 6% for full-year 2024.)
• Full-year 2024 OEBITDA between $465 million and $470 million. OEBITDA for 2023 was $463.1 million. (Previous guidance was for full-year 2024 OEBITDA of between $460 million and $470 million.)
• Cash taxes of less than $10 million per year from 2024 through 2026. We expect that the longer-term cash tax rate will move closer to the statutory rate in 2028.
• Net leverage below 4.0 times OEBITDA through 2026 and falling below 2.0 times OEBITDA by the end of the decade, assuming ongoing execution of the Company's share repurchase authorization and the payment of quarterly dividends consistent with the current level. Net leverage was 3.1 times OEBITDA at December 31, 2023.

(1)   Non-GAAP Financial Measures & Definitions