Iridium Communications Inc. (Nasdaq:IRDM) (“Iridium”) today reported financial results for the third quarter of 2014 and raised its full-year 2014 outlook. Net income was $20.4 million, or $0.17 per diluted share, for the third quarter of 2014, as compared to $16.6 million, or $0.19 per diluted share, for the third quarter of 2013. Operational EBITDA (“OEBITDA”)(1) for the third quarter was $58.4 million, as compared to $53.3 million for the prior-year period, representing a year-over-year increase of 10 percent and an OEBITDA margin(1) of 54 percent. OEBITDA grew largely due to higher service revenue.

Iridium reported third-quarter total revenue of $107.5 million, which consisted of $81.6 million of service revenue and $25.9 million of equipment, engineering and support revenue. Total revenue increased 7 percent versus the comparable period of 2013, while service revenue grew 8 percent from the year-ago period. Service revenue, which represents primarily recurring revenue from Iridium’s growing subscriber base, was 76 percent of total revenue for the third quarter of 2014.

The Company ended the quarter with 726,000 total billable subscribers, which compares to 655,000 for the year-ago period and is up from 705,000 for the quarter ended June 30, 2014. Total billable subscribers grew 11 percent year-over-year, driven by strength in machine-to-machine (“M2M”) and commercial voice customers.

“We posted another good quarter today, while also raising our full-year 2014 outlook for service revenue and cash flow,” said Matt Desch, CEO, Iridium. “Our M2M business continues to be the industry standard with double-digit subscriber and revenue growth, while our maritime business is again gaining ground, with Iridium OpenPort® revenue expanding 29 percent year-over-year. Iridium GO!™ has been an early market success, and a strong order book proves it, with more than 5,000 units already shipped. We’re pleased that early indications suggest a higher ARPU for this product, showing that customers want to stay connected through their smartphones, tablets and other personal devices anywhere in the world.”

Desch continued, “Our Iridium NEXT program continues to track toward its first scheduled launch in mid-2015, as we’ve achieved several key milestones during the last few months. The first satellite engineering model is complete and has been delivered to Iridium’s Technical Support Center, enabling us to conduct a rigorous functionality and compatibility review with the entire network system. Final assembly of the first five space vehicles is underway at the Orbital Sciences factory in Arizona, and the first AireonSM payload has been delivered for testing and integration. Finally, we’ve completed work on our Launch & Early Operations Center, a significant piece of the ground-based infrastructure that will allow us to operate the new satellites as they become part of our mission constellation. Overall, we’ve had a rewarding year in both operating and strategic terms, and look ahead with confidence to our first Iridium NEXT launch.”

Iridium Business Highlights

Service – Commercial

Commercial service remained the largest part of Iridium’s business, representing 61 percent 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. 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 $65.6 million, a 7 percent increase from last year’s comparable period, primarily supported by a gain in M2M data and voice subscribers and a non-recurring $1.4 million prepaid airtime vouchers benefit.

– Commercial voice and data subscribers increased 3 percent from the year-ago period to 356,000 customers. Commercial voice and data average revenue per user (“ARPU”) was $47 during the third quarter, unchanged from last year’s comparable period. Commercial M2M data subscribers grew 21 percent from the year-ago period to 313,000 customers. Commercial M2M data ARPU was $17 during the third quarter, unchanged from last year’s comparable period.

– Iridium’s commercial business ended the quarter with 669,000 billable subscribers, which compares to 604,000 for the prior-year quarter and is up from 650,000 for the quarter ended June 30, 2014. M2M data subscribers represented 47 percent of billable commercial subscribers, an increase from 43 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 $16.0 million, a 14 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 57,000 subscribers, which compares to 51,000 for the prior-year quarter and is up from 55,000 for the quarter ended June 30, 2014. M2M data subscribers increased 21 percent year-over-year and represented 40 percent of government subscribers, an increase from 37 percent at the end of the prior-year period.

Equipment

– Equipment revenue was $20.6 million during the third quarter, a 1 percent year-over-year gain. Revenue increased from the year-ago quarter primarily due to higher overall unit sales.

– The Company’s equipment revenue in 2014 is expected to be greater than it was in 2013.

Engineering & Support

– Engineering and support revenue was $5.4 million during the third quarter, up 9 percent from the prior-year period, primarily resulting from an increased scope of work for ongoing government projects.

Capital expenditures were $36.9 million for the third quarter and primarily related to spending for the Company’s next-generation satellite constellation, Iridium NEXT, and upgraded ground network infrastructure at its commercial gateway. The Company ended the third quarter with a cash and marketable securities balance of $523.1 million and gross debt of $1.1 billion. Net debt was $480.5 million.

2014 Outlook

The Company raised its full-year 2014 outlook for total service revenue growth and OEBITDA. The Company now expects:

– Total service revenue growth between 5 percent and 6 percent for the full-year 2014

– Full-year 2014 OEBITDA of approximately $215 million. OEBITDA for 2013 was $201.1 million.

– Read the full financials on the Iridium website.