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Oct. 19, 2021, 7:04 a.m. EDT

10-Q: IRIDIUM COMMUNICATIONS INC.

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(EDGAR Online via COMTEX) -- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

You should read the following discussion along with our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, filed on February 11, 2021 with the Securities and Exchange Commission, or the SEC, as well as our condensed consolidated financial statements included in this Form 10-Q.

This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Such forward-looking statements include those that express plans, anticipation, intent, contingencies, goals, targets or future development or otherwise are not statements of historical fact. Without limiting the foregoing, the words "believe," "anticipate," "plan," "expect," "intend" and similar expressions are intended to identify forward-looking statements. These forward-looking statements are based on our current expectations and projections about future events, and they are subject to risks and uncertainties, known and unknown, that could cause actual results and developments to differ materially from those expressed or implied in such statements. These risks and uncertainties may be amplified by the COVID-19 pandemic and its potential impact on our business and the global economy. The important factors described under the caption "Risk Factors" in this report and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 filed on February 11, 2021 could cause actual results to differ materially from those indicated by forward-looking statements made herein. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Overview of Our Business

Effects of the COVID-19 Pandemic on Our Business The COVID-19 pandemic and measures taken in response continue to affect countries, communities and markets around the world. Like many other businesses, we started to see a slowdown in the final weeks of March 2020 as a result of the widespread economic shutdown. Our distributors have also experienced business and operational restrictions, which continue to limit their ability to visit customers, complete new installations, and close on new business opportunities, particularly internationally. The economic slowdown extended through 2020 and into 2021, although we have seen significant recovery in some markets, most notably IoT. Other markets, including aviation and maritime, and some international areas continue to suffer significant effects from reduced activity during the pandemic. Aviation, in particular, has started to see recovery but may take years to recover to pre-pandemic levels. In other industries, such as maritime, the effects are significant, but vary greatly by region and business

model, and we expect that additional shutdowns and other restrictions will continue to impact our results of operations. The ultimate effects of the COVID-19 pandemic are difficult to assess or predict with certainty at this time but may include additional risks. For further information on the potential effects of the COVID-19 pandemic on our business, financial condition and results of operations, see "Part I, Item 1A. Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, filed with the Securities and Exchange Commission on February 11, 2021, as well as the "Risk Factors" section of this report below.

Material Trends and Uncertainties

Comparison of Our Results of Operations for the Three Months Ended September 30,







        2021 and 2020
                                                                            Three Months Ended September 30,
                                                                                % of Total                              % of Total                      Change
        ($ in thousands)                                    2021                 Revenue               2020              Revenue             Dollars            Percent
        Revenue:
        Services                                     $       127,774                   78  %       $ 116,914                   77  %       $ 10,860                    9  %
        Subscriber equipment                                  26,898                   17  %          25,120                   17  %          1,778                    7  %
        Engineering and support services                       7,487                    5  %           9,438                    6  %         (1,951)                 (21) %
        Total revenue                                        162,159                  100  %         151,472                  100  %         10,687                    7  %
        Operating expenses:
        Cost of services (exclusive of
        depreciation
        and amortization)                                     25,186                   16  %          23,909                   16  %          1,277                    5  %
        Cost of subscriber equipment                          15,544                   10  %          15,429                   10  %            115                    1  %
        Research and development                               2,815                    2  %           3,116                    2  %           (301)                 (10) %
        Selling, general and administrative                   25,897                   16  %          20,631                   14  %          5,266                   26  %
        Depreciation and amortization                         77,688                   47  %          75,654                   50  %          2,034                    3  %
        Total operating expenses                             147,130                   91  %         138,739                   92  %          8,391                    6  %
        Operating income                                      15,029                    9  %          12,733                    8  %          2,296                   18  %
        Other expense:
        Interest expense, net                                (17,614)                 (10) %         (22,628)                 (15) %          5,014                  (22) %
        Loss on extinguishment of debt                          (879)                  (1) %               -                    -  %           (879)                (100) %
        Other income (expense), net                              (81)                   -  %             205                    -  %           (286)                (140) %
        Total other expense, net                             (18,574)                 (11) %         (22,423)                 (15) %          3,849                  (17) %
        Loss before income taxes                              (3,545)                  (2) %          (9,690)                  (7) %          6,145                  (63) %
        Income tax benefit                                     1,460                    1  %           5,685                    4  %         (4,225)                 (74) %
        Net loss                                     $        (2,085)                  (1) %       $  (4,005)                  (3) %       $  1,920
        








        Revenue
        Commercial Service Revenue
                                                                                      Three Months Ended September 30,
                                                                      2021                                                          2020                                                     Change
                                                                      Billable                                                    Billable                                                  Billable
                                               Revenue            Subscribers (1)          ARPU (2)          Revenue          Subscribers (1)          ARPU (2)          Revenue           Subscribers            ARPU
                                                                                                         (Revenue in millions and subscribers in thousands)
        Commercial services:
        Voice and data                     $       45.7                  372              $     41          $  42.8                  352              $     41          $   2.9                 20             $     -
        IoT data                                   30.0                1,156                  8.93             25.4                  924                  9.48              4.6                232               (0.55)
        Broadband (3)                              11.5                 13.0                   299              9.1                 11.4                   270              2.4                1.6                  29
        Hosted payload and other
        data                                       14.7                         N/A                            14.5                         N/A                             0.2                      N/A
        Total commercial services          $      101.9                1,541                                $  91.8                       1,287                         $  10.1                254
        


(1)Billable subscriber numbers shown are at the end of the respective period.







        Government Service Revenue
                                                                      Three Months Ended September 30,
                                                              2021                                        2020                                       Change
                                                                      Billable                                   Billable                                    Billable
                                                Revenue           Subscribers (1)           Revenue          Subscribers (1)           Revenue             Subscribers
                                                                                   (Revenue in millions and subscribers in thousands)
        Government services                   $    25.9                         149       $   25.1                         142       $    0.8                          7
        


(1)Billable subscriber numbers shown are at the end of the respective period.

We provide airtime and airtime support to U.S. government and other authorized customers pursuant to our Enhanced Mobile Satellite Services contract, or the EMSS Contract. Under the terms of this agreement, which we entered into in September 2019, authorized customers utilize specified Iridium(R) airtime services provided through the U.S. government's dedicated gateway. The fee is not based on subscribers or usage, allowing an unlimited number of users access to these services. The annual rate under the EMSS Contract increased from $103.0 million to $106.0 million during the third quarter of 2021.







        Subscriber Equipment Revenue
        Subscriber equipment revenue increased by $1.8 million, or 7%, for the three
        months ended September 30, 2021 compared to the prior year period, primarily due
        to an increase in the volume of handset sales, partially offset by a decrease in
        the volume of L-band transceiver device sales.
        Engineering and Support Service Revenue
                                                                         Three Months Ended September 30,
                                                                              2021                   2020              Change
                                                                                        (Revenue in millions)
        Commercial engineering and support services                   $             1.3          $     1.1          $     0.2
        Government engineering and support services                                 6.2                8.3               (2.1)
        Total engineering and support services                        $             7.5          $     9.4          $    (1.9)
        


Engineering and support service revenue decreased by $1.9 million or 20% for the three months ended September 30, 2021 compared to the prior year period, primarily due to the episodic nature of contract work under certain government contracts.

Operating Expenses

floor, from an annual interest rate of LIBOR plus 3.75%, with a 1.0% LIBOR floor as a result of the repricing of our term loan with Deutsche Bank AG, or the Term Loan, in January 2021 and July 2021. The decrease in interest expense was offset in part by $1.3 million of third-party financing costs paid in the current year period in connection with the July repricing. Loss on Extinguishment of Debt

Income Tax Benefit

Comparison of Our Results of Operations for the Nine Months Ended September 30,







        2021 and 2020
                                                                             Nine Months Ended September 30,
                                                                                % of Total                              % of Total                      Change
        ($ in thousands)                                    2021                 Revenue               2020              Revenue             Dollars            Percent
        Revenue:
        Services                                     $       365,247                   79  %       $ 346,239                   79  %       $ 19,008                    5  %
        Subscriber equipment                                  72,607                   16  %          67,198                   16  %          5,409                    8  %
        Engineering and support services                      20,759                    5  %          23,495                    5  %         (2,736)                 (12) %
        Total revenue                                        458,613                  100  %         436,932                  100  %         21,681                    5  %
        Operating expenses:
        Cost of services (exclusive of
        depreciation
        and amortization)                                     71,784                   16  %          69,021                   16  %          2,763                    4  %
        Cost of subscriber equipment                          41,243                    9  %          39,772                    9  %          1,471                    4  %
        Research and development                               8,156                    2  %           7,940                    2  %            216                    3  %
        Selling, general and administrative                   72,524                   16  %          62,556                   14  %          9,968                   16  %
        Depreciation and amortization                        229,266                   49  %         227,260                   52  %          2,006                    1  %
        Total operating expenses                             422,973                   92  %         406,549                   93  %         16,424                    4  %
        Operating income                                      35,640                    8  %          30,383                    7  %          5,257                   17  %
        Other expense:
        Interest expense, net                                (58,013)                 (13) %         (71,578)                 (16) %         13,565                  (19) %
        Loss on extinguishment of debt                          (879)                   -  %         (30,209)                  (7) %         29,330                  (97) %
        Other income (expense), net                             (225)                   -  %             332                    -  %           (557)                (168) %
        Total other expense, net                             (59,117)                 (13) %        (101,455)                 (23) %         42,338                  (42) %
        Loss before income taxes                             (23,477)                  (5) %         (71,072)                 (16) %         47,595                  (67) %
        . . .
        


Oct 19, 2021

COMTEX_395483109/2041/2021-10-19T07:04:25

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