Iridium Communications Inc. (Nasdaq:IRDM) (“Iridium”) today reported financial results for the first quarter of 2015 and affirmed its full-year 2015 and long-range outlook. Net income was $21.0 million, or $0.17 per diluted share, for the first quarter of 2015, as compared to $16.5 million, or $0.19 per diluted share, for the first quarter of 2014. Operational EBITDA (“OEBITDA”)(1) for the first quarter was $52.5 million, as compared to $51.6 million for the prior-year period, representing a year-over-year increase of 2 percent and an OEBITDA margin(1) of 54 percent. OEBITDA grew largely due to higher government service revenue and lower product warranty costs.

Iridium reported first-quarter total revenue of $97.0 million, which consisted of $75.4 million of service revenue and $21.6 million of equipment, engineering and support revenue. Total revenue declined 1 percent versus the comparable period of 2014, while service revenue grew 3 percent from the year-ago period. Service revenue, which represents primarily recurring revenue from Iridium’s growing subscriber base, was 78 percent of total revenue for the first quarter of 2015.

The Company ended the quarter with 748,000 total billable subscribers, which compares to 674,000 for the year-ago period and is up from 739,000 for the quarter ended December 31, 2014. Total billable subscribers grew 11 percent year-over-year, driven by strength in machine-to-machine (“M2M”) customers.

“We affirmed our 2015 and long-range guidance across the board today and kicked off the year with solid growth in our government and M2M lines of business,” said Matt Desch, CEO, Iridium. “We’re excited that the Iridium NEXT era is rapidly approaching, with a flurry of satellite testing activity underway as we prepare for the first scheduled launch in October. SpaceX is now 18 for 18 with their Falcon 9 missions and we look forward to starting our primary launch campaign with them in early 2016.”

Desch continued, “Our Aireon joint venture continues to build momentum, having recently signed agreements to collaborate on the potential deployment of space-based global aviation monitoring with the air traffic management agency of India and the Blue Med Functional Airspace Block, a cooperative of Air Navigation Service Providers that control the airspace over the Mediterranean. These agreements lay the groundwork for future data services contracts and expand the planned deployment of the AireonSM service in Asia and Europe. With each milestone that Aireon passes, it confirms our belief that it will become the global standard for space-based air traffic surveillance.”

Desch concluded, “When thinking about how our 2015 financial results shape up, we see gains in our M2M, maritime and aviation businesses, but still expect our voice market to be pressured by a strong dollar. The step-up in our fixed-price airtime contract with the U.S. government will also boost service revenue, as will contributions from new products. Overall, we have excellent long-term growth prospects and continue to build to 2018 and the transformational change we expect in our cash flow profile.”

Iridium Business Highlights

Service – Commercial

Commercial service remained the largest part of Iridium’s business, representing 59 percent of the Company’s total revenue during the first 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 $57.4 million, unchanged from last year’s comparable period.

– Commercial voice and data subscribers increased 4 percent from the year-ago period to 351,000 customers. Commercial voice and data average revenue per user (“ARPU”) was $40 during the first quarter, down 7 percent from last year’s comparable period. Voice and data ARPU declined primarily due to foreign currency impacts in the Company’s Russian market and lower airtime usage. Commercial M2M data subscribers grew 18 percent from the year-ago period to 334,000 customers. Commercial M2M data ARPU was $15 during the first quarter, a decrease from $16 in last year’s comparable period.

– Iridium’s commercial business ended the quarter with 685,000 billable subscribers, which compares to 621,000 for the prior-year quarter and is up from 679,000 for the quarter ended December 31, 2014. M2M data subscribers represented 49 percent of billable commercial subscribers, an increase from 46 percent at the end of the prior-year period.

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. The Company operates through two Defense Information Systems Agency contracts, which include a $400 million, five-year, fixed-price agreement for satellite communications services and a $38 million contract to support and maintain the Department of Defense’s (“DoD”) dedicated gateway.

– Government service revenue was $18.0 million, a 13 percent increase from the prior-year period, driven by the Company’s airtime services contract with the DoD.

– Iridium’s government business ended the quarter with a record 63,000 subscribers, which compares to 53,000 for the prior-year quarter and is up from 60,000 for the quarter ended December 31, 2014. Government voice and data subscribers increased 13 percent from the year-ago period to 36,000 customers. M2M data subscribers increased 29 percent year-over-year and represented 43 percent of government subscribers, an increase from 40 percent at the end of the prior-year period.

Equipment

– Equipment revenue was $16.5 million during the first quarter, an 18 percent year-over-year decrease. Revenue declined from the year-ago quarter primarily due to lower commercial handset sales.

– The Company does not expect equipment revenue to grow in 2015, primarily due to a reduction in commercial handset sales as a result of the pronounced increase in the strength of the U.S. dollar.

Engineering & Support

– Engineering and support revenue was $5.0 million during the first quarter, up 13 percent from the prior-year period, primarily resulting from an increased scope of work for ongoing government projects.

Capital expenditures were $50.1 million for the first quarter and primarily related to spending for the Company’s next-generation satellite constellation, Iridium NEXT. The Company ended the first quarter with a cash and marketable securities balance of $488.2 million and gross debt of $1.3 billion. Net debt was $737.1 million.

2015 Outlook

The Company affirmed its full-year 2015 outlook for total service revenue growth and OEBITDA. The Company continues to expect:

– Total service revenue growth between 3 percent and 6 percent for the full-year 2015
– Full-year 2015 OEBITDA between $230 million and $240 million. OEBITDA for 2014 was $216.5 million.

Read the full financial report here.