From: Iridium Communications Inc.
Posted: Thursday, February 23, 2017
Iridium Communications Inc. (Nasdaq:IRDM) ("Iridium") today reported financial results for the fourth quarter of 2016 and issued its full-year 2017 and long-range outlook. Net income was $24.1 million, or $0.19 per diluted share, for the fourth quarter of 2016, as compared to net loss of $69.4 million, or $0.77 per diluted share, for the fourth quarter of 2015. Net loss for the fourth quarter of 2015 included a non-cash goodwill impairment charge of $87.0 million, or $0.91 per diluted share. Adjusted to eliminate this non-cash goodwill impairment charge(1), net income would have been $17.6 million, or $0.14 per diluted share, for the fourth quarter of 2015. Operational EBITDA ("OEBITDA")(1) for the fourth quarter was $61.3 million, as compared to $56.8 million for the prior-year period, representing a year-over-year increase of 8% and an OEBITDA margin(1) of 57%. OEBITDA grew largely due to higher machine-to-machine ("M2M") and government service revenue and reduced non-income taxes.
Iridium reported fourth-quarter total revenue of $107.4 million, which consisted of $84.2 million of service revenue and $23.2 million of revenue related to equipment sales and engineering and support projects. Total revenue increased 1% versus the comparable period of 2015, while service revenue grew 2% from the year-ago period. Service revenue, which represents primarily recurring revenue from Iridium's growing subscriber base, was 78% of total revenue for the fourth quarter of 2016.
The Company ended the quarter with 850,000 total billable subscribers, which compares to 782,000 for the year-ago period and is up from 838,000 for the quarter ended September 30, 2016. Total billable subscribers grew 9% year-over-year, driven by growth in machine-to-machine and government customers.
Full-Year 2016 Iridium Business Highlights
For the full year, Iridium reported net income of $111.0 million, or $0.89 per diluted share attributable to common stockholders, as compared to a net income of $7.1 million, or a net loss attributable to common stockholders of $0.09 per diluted share, for 2015. Net income for 2015 included a non-cash goodwill impairment charge of $87.0 million, or $0.86 per diluted share. Adjusted to eliminate this non-cash goodwill impairment charge, full year 2015 net income would have been $94.2 million, or $0.77 per diluted share. The Company reported 2016 total revenue of $433.6 million, which was up 5% from the year-ago period. Total revenue included $334.8 million of service revenue and $98.8 million of revenue related to equipment sales and engineering and support projects. OEBITDA for 2016 was $254.2 million, a 9% increase from $234.0 million in the prior-year, representing an OEBITDA margin of 59%. Capital expenditures were $405.7 million for the full-year 2016.
"We successfully launched the first ten Iridium NEXT satellites in January and are pleased to report that our first Iridium NEXT satellite is now active, carrying live communications traffic within our global network. While validation of these first ten satellites is ongoing to confirm functionality, we anticipate that eight of those initially launched will be put into service by mid-April, while two continue to drift to an adjacent orbital plane for planned deployment and pre-operational testing."
Commenting on full-year financial and business performance, Desch said, "2016 was another strong year for Iridium. The Company delivered 6% total service revenue growth and 9% growth in Operational EBITDA, driven by an increase in revenue from our Government business and growth in personal tracking, as well as leading heavy-equipment manufacturers. These expanding relationships underscore Iridium's strong market position in the burgeoning market for real-time Internet of Things (IoT) solutions. We reached a record 850,000 billable subscribers in 2016, fueled by 15% subscriber growth in commercial M2M data, which accounts for more than half of Iridium's billable commercial subscribers."
Desch concluded, "Today, we affirmed our long-range outlook and issued 2017 full-year guidance. Increased demand for IoT is driving subscriber growth and should serve as an excellent long-term catalyst for Iridium's satellite services, global partner development and customer base."
Fourth-Quarter 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 fourth 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.
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.
Engineering & Support
Capital expenditures were $173.9 million for the fourth quarter and primarily related to spending for the Company's next-generation satellite constellation, Iridium NEXT. The Company ended the fourth quarter with a cash and marketable securities balance of $410.5 million and gross debt of $1.78 billion. Net debt was $1.26 billion, calculated as $1.78 billion of gross debt, less $0.41 billion of cash and marketable securities, as well as $0.11 billion in restricted cash.
The Company issued its full-year 2017 outlook for total service revenue growth and OEBITDA. The Company expects:
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