Iridium Announces Fourth-Quarter and Full-Year 2014 Results; Company Issues 2015 Outlook
Iridium Communications Inc. (Nasdaq:IRDM) (“Iridium”) today reported financial results for the fourth quarter of 2014 and issued its full-year 2015 and long-range outlook. Net income was $23.0 million, or $0.19 per diluted share, for the fourth quarter of 2014, as compared to $15.6 million, or $0.18 per diluted share, for the fourth quarter of 2013. Operational EBITDA (“OEBITDA”)(1) for the fourth quarter was $51.8 million, as compared to $49.8 million for the prior-year period, representing a year-over-year increase of 4 percent and an OEBITDA margin(1) of 52 percent. OEBITDA grew largely due to higher service revenue.
Iridium reported fourth-quarter total revenue of $100.5 million, which consisted of $78.2 million of service revenue and $22.3 million of equipment, engineering and support revenue. Total revenue increased 2 percent versus the comparable period of 2013, while service revenue also grew 2 percent from the year-ago period. Service revenue, which represents primarily recurring revenue from Iridium’s growing subscriber base, was 78 percent of total revenue for the fourth quarter of 2014.
The Company ended the quarter with 739,000 total billable subscribers, which compares to 664,000 for the year-ago period and is up from 726,000 for the quarter ended September 30, 2014. Total billable subscribers grew 11 percent year-over-year, driven by strength in machine-to-machine (“M2M”) and commercial voice customers.
“2014 was a strong year for Iridium, as we achieved many of our strategic objectives and exceeded our financial targets,” said Matt Desch, CEO, Iridium. “We reached significant milestones in the Iridium NEXT program including successful qualification of most hardware components, testing our satellite platform software and completing the upgrade of our ground infrastructure around the world. We also successfully amended our credit facility and completed the related capital raise, strengthening our funding profile and giving us the needed flexibility to execute our operating plan. Our commercial M2M business grew service revenue and subscribers 19%, while our maritime business also performed well, with Iridium OpenPort® revenue expanding 12% year-over-year. These are all important steps as we look ahead to 2018 and the transformational change we expect in our cash flow profile.”
Desch continued, “As we assess our prospects in 2015, we’re excited to be entering the launch phase for our next-generation constellation. Our Iridium NEXT build remains on budget, and we have reconfirmed with our suppliers that the system is on track to be fully deployed in 2017. However, we’ve moved our first planned launch from June 2015 to October 2015, as our partner, Thales Alenia Space, needs the additional time to fully test the payload software before flight.”
Desch concluded, “When evaluating our 2015 financial outlook, we expect continued solid growth in our M2M, maritime and aviation business lines, but see pressure in our legacy voice business. We believe a strong dollar has softened handset sales in many places outside the U.S. in the last few months. Our long-range guidance remains unchanged, as future contributions from our U.S. Government business, the value of our Aireon joint venture, new products and the potential of Iridium NEXT broadband services all support a healthy service revenue trajectory. Overall, we have excellent long-term growth prospects and expect to execute against the key targets that ensure our success.”
Full-Year 2014 Iridium Business Highlights
For the full year, Iridium reported net income of $75.0 million, or $0.69 per diluted share, as compared to net income of $62.5 million, or $0.71 per diluted share, for 2013. The Company reported 2014 total revenue of $408.6 million, which was up 7 percent from the year-ago period. Total revenue included $309.4 million of service revenue and $99.1 million of equipment, engineering and support revenue. OEBITDA for 2014 was $216.5 million, an 8 percent increase from $201.1 million in the prior-year, representing an OEBITDA margin of 53 percent. Capital expenditures were $441.1 million for the full-year 2014.
Fourth-Quarter Iridium Business Highlights
Service – Commercial
Commercial service remained the largest part of Iridium’s business, representing 60 percent 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.
– Commercial service revenue was $60.7 million, unchanged from last year’s comparable period. The year-ago quarter benefited from a change in the Company’s prepaid airtime policy.
– Commercial voice and data subscribers increased 4 percent from the year-ago period to 354,000 customers. Commercial voice and data average revenue per user (“ARPU”) was $43 during the fourth quarter, down 9 percent from last year’s comparable period. Voice and data ARPU declined primarily due to a one-time benefit of $3.6 million in the fourth quarter of 2013 related to a change in the Company’s prepaid airtime policy that did not have the same impact in the fourth quarter of 2014. Commercial M2M data subscribers grew 19 percent from the year-ago period to 325,000 customers. Commercial M2M data ARPU was $16 during the fourth quarter, unchanged from last year’s comparable period.
– Iridium’s commercial business ended the quarter with 679,000 billable subscribers, which compares to 613,000 for the prior-year quarter and is up from 669,000 for the quarter ended September 30, 2014. M2M data subscribers represented 48 percent of billable commercial subscribers, an increase from 45 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 $17.5 million, a 12 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 60,000 subscribers, which compares to 51,000 for the prior-year quarter and is up from 57,000 for the quarter ended September 30, 2014. M2M data subscribers increased 25 percent year-over-year and represented 42 percent of government subscribers, an increase from 39 percent at the end of the prior-year period.
Equipment
– Equipment revenue was $17.1 million during the fourth quarter, an 8 percent year-over-year gain. Revenue increased from the year-ago quarter primarily due to higher Iridium GO!® and L-band transceiver unit sales.
– The Company does not expect equipment revenue to grow in 2015, primarily due to a reduction in commercial handset sales as a result of the recent pronounced increase in the strength of the U.S. dollar.
Engineering & Support
– Engineering and support revenue was $5.2 million during the fourth quarter, down 10 percent from the prior-year period, primarily resulting from a decreased scope of work for ongoing government projects.
Capital expenditures were $296.1 million for the fourth 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 fourth quarter with a cash and marketable securities balance of $472.4 million and gross debt of $1.3 billion. Net debt was $733.0 million.
2015 Outlook
The Company issued its full-year 2015 outlook for total service revenue growth and OEBITDA. The Company expects:
Total service revenue growth between 3 percent and 6 percent for the full-year 2015
Full-year 2015 OEBITDA between $230 million and $240 million. OEBITDA for 2014 was $216.5 million.
More outlook and financial details are available here.
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
