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Iridium Announces First-Quarter 2013 Results; Company Affirms 2013 Outlook

2013 Outlook

The Company affirmed its full-year 2013 outlook for total billable subscriber growth, total service revenue growth and OEBITDA. The Company continues to expect: 

  • Total billable subscriber growth between 15 percent and 20 percent for the full-year 2013
  • Total service revenue growth between 8 percent and 10 percent for the full-year 2013
  • Full-year 2013 OEBITDA to be between $215 million and $225 million. OEBITDA for 2012 was $205.8 million.
  2013 Outlook  2013 Outlook 
  (February 2013) (May 2013) 
Total Billable Subscriber Growth 15% to 20% Affirmed
Total Service Revenue Growth 8% to 10% Affirmed
Operational EBITDA (OEBITDA) $215 million to $225 million Affirmed

Non-GAAP Financial Measures & Definitions

(1)   In addition to disclosing financial results that are determined in accordance with U.S. GAAP, the Company discloses Operational EBITDA and Operational EBITDA margin, which are non-GAAP financial measures, as supplemental measures to help investors evaluate the Company's fundamental operational performance. Operational EBITDA represents earnings before interest, income taxes, depreciation and amortization, Iridium NEXT revenue and expenses (for periods prior to the deployment of Iridium NEXT), stock-based compensation expenses, and the impact of purchase accounting. The Company also presents Operational EBITDA expressed as a percentage of revenue, or Operational EBITDA margin. Operational EBITDA, along with its related measure, Operational EBITDA margin, does not represent, and should not be considered, an alternative to U.S. GAAP measurements such as net income or loss, and the Company's calculations thereof may not be comparable to similarly titled measures reported by other companies. By eliminating interest, income taxes, depreciation and amortization, Iridium NEXT revenue and expenses (for periods prior to the deployment of Iridium NEXT only), stock-based compensation expenses, and the impact of purchase accounting, the Company believes the result is a useful measure across time in evaluating its fundamental core operating performance. Management also uses Operational EBITDA to manage the business, including in preparing its annual operating budget, debt covenant compliance, financial projections and compensation plans. The Company believes that Operational EBITDA is also useful to investors because similar measures are frequently used by securities analysts, investors and other interested parties in their evaluation of companies in similar industries. However, there is no standardized measurement of Operational EBITDA, and Operational EBITDA as the Company presents it may not be comparable with similarly titled non-GAAP financial measures used by other companies. As indicated, Operational EBITDA does not include interest expense on borrowed money, the payment of income taxes, amortization of the Company's definite-lived intangible assets, or depreciation expense on the Company's capital assets, which are necessary elements of the Company's operations. It also excludes expenses in connection with the development, deployment and financing of Iridium NEXT. Since Operational EBITDA does not account for these and other expenses, its utility as a measure of the Company's operating performance has material limitations. Due to these limitations, the Company's management does not view Operational EBITDA in isolation and also uses other measurements, such as net income, revenues and operating profit, to measure operating performance. Please refer to the schedule below for a reconciliation of consolidated GAAP net income to Operational EBITDA and Iridium's Investor Relations webpage at www.iridium.com for a discussion and reconciliation of this and other non-GAAP financial measures.

Supplemental Reconciliation of GAAP Net Income to Operational EBITDA
   
  Iridium Communications Inc.
  For the Three Months Ended March 31,
  2013 2012
  (In thousands)
GAAP net income $14,934 $12,418
Interest expense 65 85
Interest income (702) (153)
Income taxes 7,549 (949)
Depreciation and amortization 18,231 24,204
Iridium NEXT expenses, net 5,060 6,729
Share-based compensation 1,904 1,668
Non-cash purchase accounting (194) (137)
Operational EBITDA $46,847 $43,865

Conference Call Information

As previously announced, the Company will host a conference call to discuss its results at 8:30 a.m. ET on Thursday, May 2, 2013. Callers should dial (877) 334-1964 (U.S. only) or (631) 291-4574 (from outside the U.S.) to access the call. The conference call will also be simultaneously webcast on Iridium's Investor Relations webpage at www.iridium.com . A replay of the conference call will be available beginning Thursday, May 2, 2013 through Thursday, May 9, 2013 at Iridium's Investor Relations webpage. Callers can also dial (855) 859-2056 (U.S. only) or (404) 537-3406, Access Code 22209188, for an audio replay of the conference call.

About Iridium Communications Inc.

Iridium ® is the only mobile voice and data satellite communications network that spans the entire globe. Iridium enables connections between people, organizations and assets to and from anywhere, in real time. Together with its ever-expanding ecosystem of partner companies, Iridium delivers an innovative and rich portfolio of reliable solutions for markets that require truly global communications. The company has a major development program underway for its next-generation network – Iridium NEXT. Iridium Communications Inc. is headquartered in McLean, Va., U.S.A., and its common stock trades on the NASDAQ Global Select Market under the ticker symbol IRDM. For more information about Iridium products, services and partner solutions, visit www.iridium.com . IRDM-F

Forward-Looking Statements

Statements in this press release that are not purely historical facts may constitute forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements regarding Iridium's expectations with respect to total billable subscriber growth, total service revenue growth and OEBITDA for the full-year 2013; the development of and timing for launch of Iridium NEXT; anticipated equipment revenue; anticipated revenues from Aireon, and expectations for contract renewal with the U.S. Department of Defense . Forward-looking statements can be identified by the words "anticipates," "may," "can," "believes," "expects," "projects," "intends," "likely," "will," "to be" and other expressions that are predictions or indicate future events, trends or prospects. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of Iridium to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to, uncertainties regarding increases in customer demand for Iridium's products and services, including demand from the U.S. Government, Iridium's ability to maintain the health, capacity and content of its satellite constellation, and the development of and transition to Iridium NEXT, including expanded capacity and features, and the development of and market for Aireon's global aviation monitoring service, as well as general industry and economic conditions, and competitive, legal, governmental and technological factors. Other factors that could cause actual results to differ materially from those indicated by the forward-looking statements include those factors listed under the caption "Risk Factors" in the Company's Form 10-K filed with the Securities and Exchange Commission ("the SEC") for the year ended December 31, 2012, filed with the SEC on March 5, 2013, as well as other filings Iridium makes with the SEC from time to time. There is no assurance that Iridium's expectations will be realized. If one or more of these risks or uncertainties materialize, or if Iridium's underlying assumptions prove incorrect, actual results may vary materially from those expected, estimated or projected. Iridium's forward-looking statements speak only as of the date of this press release, and Iridium undertakes no obligation to update forward-looking statements. 

Iridium Communications Inc.
Consolidated Statements of Operations
(In thousands)
     
  Three Months Ended March 31, Non-Cash Purchase Accounting for the Three Months Ended March 31, (1)
  2013 2012 2013 2012
         
Revenue:        
Service revenue        
Commercial  $ 53,700  $ 51,104  $ (56)  $ (123)
Government  15,087  15,744  --   -- 
Total service revenue  68,787  66,848  (56)  (123)
Subscriber equipment  17,331  21,540  --   
Engineering and support service  3,071  5,086  --   -- 
Total revenue  89,189  93,474  (56)  (123)
         
Operating expenses:        
Cost of services (exclusive of depreciation and amortization)  14,476  18,003  (259)  (259)
Cost of subscriber equipment sales  11,120  13,342  --   -- 
Research and development  1,659  5,689  --   -- 
Selling, general and administrative  18,365  18,148  9  -- 
Depreciation and amortization  18,231  24,204  12,371  19,572
Total operating expenses  63,851  79,386  12,121  19,313
         
Operating profit (loss)  25,338  14,088  (12,177)  (19,436)
         
Other (expense) income:        
Interest income (expense), net   637  68  --   -- 
Undrawn credit facility fees  (2,096)  (2,779)  --   -- 
Other (expense) income, net  (1,396)  92  --   -- 
Total other expense  (2,855)  (2,619)  --   -- 
         
Earnings (loss) before income taxes  22,483  11,469  (12,177)  (19,436)
Benefit from (provision for) income taxes  (7,549)  949  4,088  7,116
Net income (loss)  14,934  12,418  (8,089)  (12,320)
Series A Preferred Stock dividends  1,750  --   --   -- 
Net income attributable to common stockholders  $ 13,184  $ 12,418  $ (8,089)  $ (12,320)
         
Operational EBITDA  $ 46,847  $ 43,865    
         
(1) The impact of purchase accounting on the carrying value of inventory, favorable lease assets, property and equipment, intangible assets and accruals of Iridium Communications Inc., was an increase of approximately $19.8 million, $0.2 million, $348.2 million, $95.5 million and $29.0 million, respectively, compared to Iridium Holdings LLC's balance sheet as of September 29, 2009. Similarly, Iridium Holdings LLC's deferred revenue decreased by $7.4 million. As a result of the effect of the purchase accounting, the decrease in the carrying value of deferred revenue caused a decrease in revenue, which we expect will continue into future periods. In addition, the increase in accruals had the effect of reducing cost of services (exclusive of depreciation and amortization), which we expect will continue into future periods. The increase in property and equipment and intangible assets had the effect of increasing depreciation and amortization expense, which we expect will continue into future periods. The increase in favorable lease assets and related amortization thereof had the effect of increasing selling, general and administration expense, which we expect will continue into future periods.
 
Iridium Communications Inc.
Summary Revenue and OEBITDA Highlights
       
  Three Months Ended March 31, % Change
  2013 2012  
  (In thousands)  
Revenue       
Service revenue (1)      
Commercial      
Voice and M2M data service      
Voice and data  $ 42,445  $ 41,880 1%
M2M data (2)  11,255  9,224 22%
Total commercial voice and M2M data service  53,700  51,104 5%
       
Government (3)      
Voice and M2M data service      
Voice and data  14,204  15,116 -6%
M2M data  883  628 41%
Total government voice and M2M data service  15,087  15,744 -4%
Total service revenue  68,787  66,848 3%
       
Subscriber equipment  17,331  21,540 -20%
       
Engineering and support (4)      
Government   2,590  4,820 -46%
Commercial  481  266 81%
Total engineering and support  3,071  5,086 -40%
       
Total Revenue  $ 89,189  $ 93,474 -5%
       
       
Operational EBITDA      
Operational EBITDA  $ 46,847  $ 43,865 7%
       
Other      
Capital expenditures (5)  $ 19,244  $ 34,791  
       
Net debt (6)  $ 412,139  $ 253,502  
       
(1) Service revenue consists of primarily subscription-based services which often generate a long-term recurring revenue stream from subscribers.
(2) M2M data service provides a two-way short burst data transmission between Iridium Communications Inc.'s network and a telemetry unit, which may be located, for example, on a container in transit or a buoy monitoring oceanographic conditions.
(3) Government service revenue consists of voice and M2M data subscription-based services provided to agencies of the U.S. government through prime contracts or subcontracts.
(4) Engineering and support includes maintenance services to the U.S. government's dedicated gateway in Hawaii and engineering services to assist customers in developing new technologies for use on Iridium Communications Inc.'s satellite system.
(5) Capital expenditures based on cash spent in the respective period.
(6) Net debt is calculated by taking the sum of the short term and long term debt less cash and cash equivalents, marketable securities, and the debt service reserve for the credit facility.
 
Iridium Communications Inc.
Subscriber Highlights
       
       
Billable Subscribers (1) As of March 31, % Change
  2013 2012  
  (In thousands, except ARPU)  
Commercial      
Voice and M2M data service      
Voice and data  332  313 6%
M2M data  238  183 30%
Total commercial voice and M2M data service  570  496 15%
       
Government      
Voice and M2M data service      
Voice and data  34  36 -6%
M2M data  17  12 42%
Total government voice and M2M data service  51  48 6%
Total billable subscribers  621  544 14%
       
       
       
  Three Months Ended March 31, % Change
  2013 2012  
  (In thousands, except ARPU)  
Net Subscriber Additions      
Commercial      
Voice and M2M data service      
Voice and data  --   6 -100%
M2M data  10  15 -33%
Total commercial voice and M2M data service  10  21 -52%
       
Government      
Voice and M2M data service      
Voice and data  (2)  (1) 100%
M2M data  2  1 100%
Total government voice and M2M data service  --   --  0%
Total billable subscribers  10  21 -52%
       
       
 ARPU (2) Three Months Ended March 31,  
Commercial 2013 2012  
Voice and data  $ 43  $ 45 -4%
M2M data  $ 16  $ 18 -11%
Government      
Voice and data  $ 136  $ 138 -1%
M2M data  $ 19  $ 18 6%
       
(1) Subscribers as of the end of the respective period.
(2) ARPU is calculated by dividing the revenue in the respective period by the average of billable subscribers at the beginning of the period and billable subscribers at the end of the period and then dividing the results by the months in the period.
CONTACT: Investor Contact:
         Steve Kunszabo
         Iridium Communications Inc.
         +1 (703) 287-7570
         steve.kunszabo@iridium.com
         
         Press Contact:
         Diane Hockenberry
         Iridium Communications Inc.
         +1 (703) 287-7421
         diane.hockenberry@iridium.com

Iridium Communications Inc. logo

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