Iridium Communications Inc. (Nasdaq:IRDM) (“Iridium”) today reported financial results for the second quarter of 2015 and updated its full-year 2015 and long-range outlook. Net income was $26.0 million, or $0.21 per diluted share, for the second quarter of 2015, as compared to $15.0 million, or $0.14 per diluted share, for the second quarter of 2014. Operational EBITDA (“OEBITDA”)(1) for the second quarter was $61.0 million, as compared to $54.7 million for the prior-year period, representing a year-over-year increase of 12% and an OEBITDA margin(1) of 60%. OEBITDA grew largely due to higher government service revenue and lower product warranty costs.
Iridium reported second-quarter total revenue of $101.9 million, which consisted of $78.0 million of service revenue and $23.9 million of equipment, engineering and support revenue. Total revenue declined 1% versus the comparable period of 2014, while service revenue grew 2% from the year-ago period. Service revenue, which represents primarily recurring revenue from Iridium’s growing subscriber base, was 77% of total revenue for the second quarter of 2015.
The Company ended the quarter with 766,000 total billable subscribers, which compares to 705,000 for the year-ago period and is up from 748,000 for the quarter ended March 31, 2015. Total billable subscribers grew 9% year-over-year, driven by growth in machine-to-machine (“M2M”) customers.
“2015 has shaped up to be a more challenging year than we expected,” said Matt Desch, CEO, Iridium. “We’ve lowered our annual service revenue and Operational EBITDA guidance to largely reflect ongoing macroeconomic headwinds. Our voice market continues to be pressured by a strong dollar and weakness in the energy sector, and we’re also seeing reduced oil and gas activity now impact our M2M results. Despite these hurdles, we believe the foundation of our long-range growth trajectory remains intact.”
Desch continued, “We’re driving solid progress in our Iridium NEXT program as we approach the launch of our first two new satellites. The satellite platform software testing is 100% complete, our team is making good progress on payload testing and they’ve validated the performance of voice and data calls on the new network architecture. We continue to move the initial space vehicles through low-rate production and have successfully integrated the first AireonSM payload with the satellite platform. However, a subsystem supplier is reworking an important hardware component related to the Ka-band satellite links, which is pushing our initial launch on the Dnepr rocket out two months to December. We also have full faith and confidence that SpaceX will be able to meet our launch requirements, and we still expect Iridium NEXT will be fully deployed in 2017.”
Desch concluded, “Our satellite constellation is performing at a high level and continues to serve our customers well. We’re building on our highly defensible leadership position in the handset business with new products including our recently launched push-to-talk service, and our global, real-time offering in the M2M market, which continues to gain traction in the heavy-equipment OEM sector. Our Aireon joint venture continues to build momentum with an expanded agreement to support Aireon’s additional power needs, as well as recently added agreements to collaborate on the potential deployment of space-based global aviation monitoring with the air traffic management agencies of Iceland and New Zealand. These agreements lay the groundwork for future data services contracts and expand the planned deployment of the Aireon service around the world. Overall, we have excellent long-term growth prospects and continue to focus on 2018 and the transformational change we expect in our cash flow profile.”
