Iridium Communications Inc. (Nasdaq:IRDM) (“Iridium”) today reported financial results for the third quarter of 2016 and updated its full-year 2016 and long-range outlook.  Net income was $31.6 million, or $0.26 per diluted share, for the third quarter of 2016, as compared to $29.5 million, or $0.24 per diluted share, for the third quarter of 2015.  Operational EBITDA (“OEBITDA”)(1) for the third quarter was $69.7 million, as compared to $63.8 million for the prior-year period, representing a year-over-year increase of 9% and an OEBITDA margin(1) of 62%.  OEBITDA grew largely due to higher government service revenue and a rise in commercial voice and M2M data services.

Iridium reported third-quarter total revenue of $112.8 million, which consisted of $87.3 million of service revenue and $25.5 million of revenue related to equipment sales and engineering and support projects.  Total revenue increased 6% versus the comparable period of 2015, while service revenue grew by 8% 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 third quarter of 2016.

The Company ended the quarter with 838,000 total billable subscribers, which compares to 781,000 for the year-ago period and is up from 823,000 for the quarter ended June 30, 2016.  Total billable subscribers grew 7% year-over-year, driven by growth in government customers and machine-to-machine (“M2M”).

“We delivered another solid quarter of subscriber growth driven in part by our commercial M2M business.  Continued strength in commercial M2M demonstrates the power of our network and resilience of our business, even in the face of economic headwinds and industry pressures.  We expect that global demand for reliable, real-time Internet of Things (IoT) solutions will continue to fuel long-term growth of Iridium M2M services,” said Matt Desch, CEO, Iridium.

Commenting on Iridium NEXT, Desch said, “We were encouraged by SpaceX’s public comment that the Falcon 9 rocket should be back to flight later this year.  Today, ten Iridium NEXT satellites are at Vandenberg Air Force Base and ready for first launch.  Iridium is scheduled to be SpaceX’s first commercial flight from Vandenberg Air Force Base following the completion of its investigation into the cause of the September launch pad incident.  As of September, we have completed the placement of the launch and in-orbit insurance for each of the seven planned Falcon launches of the Iridium NEXT mission.”

Desch continued, “We anticipate full deployment of the Iridium NEXT constellation will move into 2018.  Our next generation satellites will facilitate hosted payload services from customers Aireon and Harris, and drive global access to our powerful new Iridium CertusSM broadband service.  The realization of the Iridium NEXT mission will conclude a decade-long capital program and enable our corporate financial transformation.”

Iridium Business Highlights

Service — Commercial

Commercial service remained the largest part of Iridium’s business, representing 58% 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 $65.3 million, up 3% from last year’s comparable period.
  • Commercial voice and data subscribers decreased by 1% from the year-ago period to 358,000 customers.  Commercial voice and data average revenue per user (“ARPU”) increased from last year’s comparable period to $44.  Commercial M2M data subscribers grew 13% from the year-ago period to 398,000 customers.  Commercial M2M data ARPU was $15 during the third quarter, unchanged from last year’s comparable period.
  • Iridium’s commercial business ended the quarter with 756,000 billable subscribers, which compares to 712,000 for the year-ago period and is up from 743,000 for the quarter ended June 30, 2016.  M2M data subscribers represented 53% of billable commercial subscribers at the end of the quarter, an increase from 49% 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 (“DISA”) contracts, which include a $400 million, five-year, fixed-price agreement for satellite communications services and a $38 million multi-year contract to support and maintain the Department of Defense’s (“DoD”) dedicated gateway.   

  • Government service revenue was $22 million, a 22% increase from the prior-year period, driven by the Company’s airtime services contract with DISA.
  • Iridium’s government business ended the quarter with 82,000 subscribers, which compares to 69,000 for the year-ago period and is up from 80,000 for the quarter ended June 30, 2016.  Government voice and data subscribers increased from the year-ago period to 43,000 as of September 30, 2016.  M2M data subscribers increased 30% year-over-year and represented 48% of government subscribers, an increase from 43% at the end of the prior-year period.


  • Equipment revenue was $19.9 million during the third quarter, compared to $21.2 million in the prior-year period.
  • The Company expects equipment revenue for full-year 2016 to be comparable to 2015 results.

Engineering & Support

  • Engineering and support revenue was $5.6 million during the third quarter, compared to $3.7 million in the prior-year period.

Capital expenditures were $75.0 million for the third quarter and primarily related to spending for the Company’s next-generation satellite constellation, Iridium NEXT.  The Company ended the third quarter with a cash and marketable securities balance of $426.4 million and gross debt of $1.7 billion.  Net debt was $1.1 billion, calculated as $1.7 billion of gross debt, less $0.4 billion of cash and marketable securities, as well as $0.1 billion in restricted cash.

2016 Outlook

The Company updated its full-year 2016 outlook for total service revenue growth and OEBITDA.  The Company now expects:

  • Total service revenue growth between 5% and 6% for the full-year 2016.
  • Full-year 2016 OEBITDA between $250 million and $255 million.  OEBITDA for 2015 was $234.0 million.