Iridium Announces First-Quarter 2014 Results; Company Affirms 2014 and Long-Range Outlook
Iridium Communications Inc. (Nasdaq:IRDM) (“Iridium”) today reported financial results for the first quarter of 2014 and affirmed its full-year 2014 and long-range outlook.
Net income was $16.5 million, or $0.19 per diluted share, for the first quarter of 2014, as compared to $14.9 million, or $0.17 per diluted share, for the first quarter of 2013. Operational EBITDA (“OEBITDA”)(1) for the first quarter was $51.6 million, as compared to $46.8 million for the prior-year period, representing a year-over-year increase of 10 percent and an OEBITDA margin(1) of 53 percent. OEBITDA grew largely due to higher service revenue.
Iridium reported first-quarter total revenue of $98.0 million, which consisted of $73.4 million of service revenue and $24.6 million of equipment, engineering and support revenue. Total revenue increased 10 percent versus the comparable period of 2013, while service revenue grew 7 percent from the year-ago period. Service revenue, which represents primarily recurring revenue from Iridium’s growing subscriber base, was 75 percent of total revenue for the first quarter of 2014.
The Company ended the quarter with 674,000 total billable subscribers, which compares to 621,000 for the year-ago period and is up from 664,000 for the quarter ended December 31, 2013. Total billable subscribers grew 9 percent year-over-year, driven by strength in machine-to-machine (“M2M”) and commercial voice customers.
“We affirmed our 2014 and long-range outlook across the board today, and also reported our best all-around quarter in nearly two years,” said Matt Desch, CEO, Iridium. “Total service revenue grew 7 percent year-over-year with contributions from many of our key sectors, while our equipment business regained its footing, posting a 16 percent revenue gain on higher overall unit sales. We’re encouraged by our solid start to 2014, and are poised to build on this momentum with exciting new products like Iridium GO!TM, by capitalizing on opportunities in our maritime business, and further penetrating the heavy equipment OEM segment in the M2M market.”
Desch continued, “The Iridium NEXT program is tracking to budget, and we continue to expect the new network will be fully deployed in 2017. We’re seeing excellent development and testing progress ahead of our first launch scheduled for 2015, as the initial flight hardware was recently delivered to the Orbital Sciences satellite production facility in Arizona. Our primary launch services provider, SpaceX, is also conducting rigorous spacecraft interface and deployment testing at its launch facility in California. Finally, we expect an amended credit facility with our lending group to be imminent. This is a significant financial goal for Iridium in 2014, as it will give us the needed flexibility to execute our operating plan during the most critical stage of our business model, while also providing necessary clarity around our capital structure and funding profile during this important stretch.”
Desch concluded, “Aireon also continues to hit key milestones, demonstrating the importance of real-time, global aircraft surveillance in a connected world. Once operational, this joint venture will offer transformative benefits to the aviation industry including fuel savings over oceanic and remote areas, more efficient flight routing and management, and in cases like the recent Malaysian Airlines Flight 370 tragedy, the value of being able to monitor aircraft anywhere around the globe.”
Iridium Business Highlights
Service Commercial
Commercial service remained the largest part of Iridium’s business, representing 59 percent of the Company’s total revenue during the first 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 $57.4 million, a 7 percent increase from last year’s comparable period, primarily supported by a gain in M2M data and voice subscribers.
– Commercial voice and data subscribers increased 2 percent from the year-ago period to 338,000 customers. Commercial voice and data average revenue per user (“ARPU”) was $43 during the first quarter, unchanged from last year’s comparable period. Commercial M2M data subscribers grew 19 percent from the year-ago period to 283,000 customers. Commercial M2M data ARPU was $16 during the first quarter, unchanged from last year’s comparable period.
– Iridium’s commercial business ended the quarter with 621,000 billable subscribers, which compares to 570,000 for the prior-year quarter and is up from 613,000 for the quarter ended December 31, 2013. M2M data subscribers represented 46 percent of billable commercial subscribers, an increase from 42 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 renewing its satellite communications services relationship and a $38 million deal to support and maintain the Department of Defense’s (“DoD”) dedicated gateway.
– Government service revenue was $16.0 million, a 6 percent increase from the prior-year period, driven by the Company’s new airtime services contract with the DoD.
– Iridium’s government business ended the quarter with 53,000 subscribers, which compares to 51,000 for the prior-year quarter and for the quarter ended December 31, 2013. M2M data subscribers increased 24 percent year-over-year and represented 40 percent of government subscribers, an increase from 33 percent at the end of the prior-year period.
Equipment
– Equipment revenue was $20.2 million during the first quarter, a 16 percent year-over-year increase. Revenue grew 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 due to higher overall unit sales.
Engineering & Support
– Engineering and support revenue was $4.4 million during the first quarter, up 45 percent from the prior-year period, primarily resulting from an increased scope of work for ongoing government projects.
Capital expenditures were $58.5 million for the first 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 first quarter with a cash and marketable securities balance of $255.2 million and gross debt of $1.1 billion. Net debt was $714.8 million.
