Iridium Releases Financial Results
Tuesday, April 28, 2020 | Comments

Iridium Communications reported financial results for the first quarter of 2020 and updated its full-year 2020 outlook. Net loss was $31.7 million for the first quarter of 2020 compared with a net loss of $18 million for the first quarter of 2019.

This increase in net loss was primarily the result of debt extinguishment costs associated with Iridium's refinancing of its senior unsecured notes.

Iridium reported first-quarter total revenue of $145.3 million, which consisted of $116 million of service revenue and $29.3 million of revenue related to equipment sales and engineering and support projects. Total revenue increased 9% from the comparable period of 2019, while service revenue grew 8% from the year-ago period. Service revenue, which represents primarily recurring revenue from Iridium's growing subscriber base, was 80% of total revenue for the first quarter of 2020.

The company ended the quarter with 1.3 million total billable subscribers, which compares with 1.15 million for the year-ago period. Total billable subscribers grew 16% year-over-year, driven by growth in commercial and government internet of things (IoT) customers.

"In the first quarter, Iridium delivered solid growth in total revenue and billable subscribers, driven by strong gains in service revenue, engineering and support services, and equipment sales," said Matt Desch, CEO, Iridium. “New revenue from Iridium Certus broadband, along with increases in contractual revenue from the U.S. government and Aireon also aided our results. Iridium is pleased to have completed all planned refinancing activities in recent months, and we remain confident in our ability to generate significant free cashflow in 2020 and beyond. Accordingly, we continue to be committed to undertaking shareholder-friendly activities in due course."

Because of the impact of COVID-19 to the business, Desch said the company began to see a reduction in the pace of subscriber additions in March and heard from some partners about varying levels of business impact depending on their industry. Into April, these trends accelerated. The company continues to forecast overall growth in service revenue for 2020, and the company updated its full-year outlook to account for these unfavorable impacts.

"Iridium's satellite services are used for mission-critical applications across the globe, and our revenue base has, historically, been more resilient than many businesses to exogenous shocks and economic cycles, though the current economic shutdown is unprecedented," said Desch. “The timing of the shutdown coincides with Iridium's peak season and will impact us accordingly. Still, we remain confident in Iridium's ongoing financial position and our capacity to generate significant free cashflow."

Commercial service remained the largest part of Iridium's business, representing 63% of the company's total revenue during the first quarter. The commercial customer base includes markets such as maritime, aviation, oil and gas, mining, recreation, forestry, construction, transportation and emergency services.

Commercial service revenue was $91 million, up 7% from last year's comparable period due to an increase in revenue primarily from hosted payload and other data services, broadband and IoT. Commercial broadband revenue was $8.7 million, up from $6.8 million in the year-ago period. This rise was primarily attributable to the introduction of Iridium Certus broadband service. Commercial broadband average revenue per user (ARPU) was $267 during the first quarter, compared to $233 in last year's comparable period.

Government service revenue was $25 million and reflected increased revenue from the company's Enhanced Mobile Satellite Services (EMSS) contract, a seven-year, $738.5 million fixed-price airtime contract with the U.S. Air Force Space Command signed in September 2019.

Equipment revenue was $22.3 million during the first quarter, up 6% from the prior-year period. Because of the combined effects of the current global shutdown, deterioration in the oil and gas market, and strength of the U.S. dollar, the company now expects full-year equipment sales will be down from 2019 levels.

Engineering and support revenue was $7 million during the first quarter, compared with $5.7 million in the prior year's quarter, primarily because of an increase in the volume of contracted work. Capital expenditures were $9.5 million for the first quarter, which includes $1.2 million of capitalized interest. The company ended the first quarter with gross debt of $1.65 billion and a cash and cash equivalents balance of $67.3 million, for a net debt balance of $1.58 billion.

The company updated its full-year 2020 outlook and anticipates growth in total service revenue for full-year 2020. Total service revenue for 2019 was $447.2 million. Negligible cash taxes in 2020. Cash taxes are expected to be negligible through about 2023.

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