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Iridium Communications Inc. – ‘10-Q’ for 6/30/22

On:  Tuesday, 7/26/22, at 7:07am ET   ·   For:  6/30/22   ·   Accession #:  1418819-22-24   ·   File #:  1-33963

Previous ‘10-Q’:  ‘10-Q’ on 4/19/22 for 3/31/22   ·   Next:  ‘10-Q’ on 10/20/22 for 9/30/22   ·   Latest:  ‘10-Q’ on 10/19/23 for 9/30/23

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  As Of               Filer                 Filing    For·On·As Docs:Size

 7/26/22  Iridium Communications Inc.       10-Q        6/30/22   60:5.8M

Quarterly Report   —   Form 10-Q

Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Quarterly Report                                    HTML   1.44M 
 2: EX-31.1     Certification -- §302 - SOA'02                      HTML     24K 
 3: EX-31.2     Certification -- §302 - SOA'02                      HTML     24K 
 4: EX-32.1     Certification -- §906 - SOA'02                      HTML     19K 
10: R1          Document And Entity Information                     HTML     75K 
11: R2          Condensed Consolidated Balance Sheets               HTML    116K 
12: R3          Condensed Consolidated Balance Sheets               HTML     24K 
                (Parenthetical)                                                  
13: R4          Condensed Consolidated Statements of Operations     HTML    107K 
                and Comprehensive Income                                         
14: R5          Consolidated Statements of Changes in               HTML     80K 
                Stockholders' Equity Statement                                   
15: R6          Condensed Consolidated Statements of Cash Flows     HTML    119K 
16: R7          Basis of Presentation and Principles of             HTML     21K 
                Consolidation                                                    
17: R8          Significant Accounting Policies                     HTML     41K 
18: R9          Cash and Cash Equivalents, Restricted Cash and      HTML     27K 
                Marketable Securities                                            
19: R10         Leases                                              HTML     27K 
20: R11         Debt                                                HTML     38K 
21: R12         Derivatives                                         HTML     34K 
22: R13         Stock-Based Compensation                            HTML     78K 
23: R14         Equity Transactions                                 HTML     26K 
24: R15         Revenue                                             HTML     60K 
25: R16         Income Taxes                                        HTML     23K 
26: R17         Net Income (Loss) Per Share                         HTML     50K 
27: R18         Related Party Transactions                          HTML     24K 
28: R19         Significant Accounting Policies (Policies)          HTML     48K 
29: R20         Significant Accounting Policies (Tables)            HTML     26K 
30: R21         Cash and Cash Equivalents, Restricted Cash and      HTML     27K 
                Marketable Securities (Tables)                                   
31: R22         Leases (Tables)                                     HTML     25K 
32: R23         Debt (Tables)                                       HTML     29K 
33: R24         Derivative Instruments and Hedging Activities       HTML     27K 
                (Tables)                                                         
34: R25         Stock-Based Compensation (Tables)                   HTML     69K 
35: R26         Revenue (Tables)                                    HTML     59K 
36: R27         Net Income (Loss) Per Share (Tables)                HTML     50K 
37: R28         Significant Accounting Policies - Schedule of       HTML     26K 
                Inventory (Details)                                              
38: R29         Significant Accounting Policies (Details)           HTML     18K 
39: R30         Cash and Cash Equivalents, Restricted Cash and      HTML     30K 
                Marketable Securities (Details)                                  
40: R31         Leases (Details)                                    HTML     40K 
41: R32         Debt - Narrative (Details)                          HTML     55K 
42: R33         Debt - Interest Incurred (Details)                  HTML     24K 
43: R34         Derivatives (Details)                               HTML     39K 
44: R35         Derivatives - Summary of Unrealized Gains and       HTML     24K 
                Losses (Details)                                                 
45: R36         Stock-Based Compensation Narrative (Details)        HTML     89K 
46: R37         Stock-Based Compensation Activity of Company's      HTML     74K 
                Common Stock Options (Details)                                   
47: R38         Stock-Based Compensation Outstanding RSUs           HTML     42K 
                (Details)                                                        
48: R39         Equity Transactions (Details)                       HTML     37K 
49: R40         Revenue - Narrative (Details)                       HTML     28K 
50: R41         Revenue - Summary of Service Revenue (Details)      HTML     44K 
51: R42         Revenue - Summary of Contract Costs (Details)       HTML     25K 
52: R43         Income Taxes (Details)                              HTML     33K 
53: R44         Net Income (Loss) Per Share - Schedule of Earnings  HTML     41K 
                Per Share, Basic and Diluted (Details)                           
54: R45         Net Income (Loss) Per Share - Anti-Dilutive Shares  HTML     27K 
                (Details)                                                        
55: R46         Related Party Transactions Related Party            HTML     56K 
                Transactions (Details)                                           
58: XML         IDEA XML File -- Filing Summary                      XML    103K 
56: XML         XBRL Instance -- irdm-20220630_htm                   XML   1.42M 
57: EXCEL       IDEA Workbook of Financial Reports                  XLSX    104K 
 6: EX-101.CAL  XBRL Calculations -- irdm-20220630_cal               XML    108K 
 7: EX-101.DEF  XBRL Definitions -- irdm-20220630_def                XML    491K 
 8: EX-101.LAB  XBRL Labels -- irdm-20220630_lab                     XML   1.20M 
 9: EX-101.PRE  XBRL Presentations -- irdm-20220630_pre              XML    651K 
 5: EX-101.SCH  XBRL Schema -- irdm-20220630                         XSD    104K 
59: JSON        XBRL Instance as JSON Data -- MetaLinks              308±   464K 
60: ZIP         XBRL Zipped Folder -- 0001418819-22-000024-xbrl      Zip    308K 


‘10-Q’   —   Quarterly Report

Document Table of Contents

Page (sequential)   (alphabetic) Top
 
11st Page  –  Filing Submission
"Part I. Financial Information
"Financial Statements
"Condensed Consolidated Balance Sheets
"Condensed Consolidated Statements of Operations and Comprehensive Income
"Condensed Consolidated Statements of Changes in Stockholders' Equity
"Condensed Consolidated Statements of Cash Flows
"Notes to Condensed Consolidated Financial Statements
"Note 2
"Note 5
"Note 6
"Note 8
"Note 12
"Management's Discussion and Analysis of Financial Condition and Results of Operations
"Quantitative and Qualitative Disclosures About Market Risk
"Controls and Procedures
"Part II. Other Information
"Legal Proceedings
"Risk Factors
"Unregistered Sales of Equity Securities and Use of Proceeds
"Defaults Upon Senior Securities
"Mine Safety Disclosures
"Other Information
"Exhibits
"Signatures

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM  i 10-Q
 
(Mark One)
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended  i June 30, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number  i 001-33963  
 i Iridium Communications Inc.
(Exact name of registrant as specified in its charter)
 i DE i 26-1344998
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
 i 1750 Tysons Boulevard, Suite 1400,  i McLean,  i VA  i 22102
(Address of principal executive offices, including zip code)
 i 703-287-7400
(Registrant’s telephone number, including area code)
 
Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of Each ClassTrading SymbolName of Each Exchange on Which Registered
 i Common Stock, $0.001 par value i IRDM i The Nasdaq Stock Market LLC
(Nasdaq Global Select Market)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     i Yes  x    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     i Yes  x    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. 
 i Large Accelerated Filerx  Accelerated Filer¨
Non-Accelerated Filer¨ Smaller Reporting Company¨
  Emerging Growth Company¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  i 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   i     No  x
The number of shares of the registrant’s common stock, par value $ i 0.001 per share, outstanding as of July 20, 2022 was  i 126,973,833.
 i 



IRIDIUM COMMUNICATIONS INC.
TABLE OF CONTENTS
 
Item No.     Page
    
  
     
    
     
   
     
   
     
   
     
   
     
ITEM  2.  
     
ITEM  3.  
     
ITEM  4.  
    
  
     
ITEM  1.  
     
ITEM  1A.  
     
ITEM  2.  
     
ITEM  3.  
     
ITEM  4.  
     
ITEM  5.  
     
ITEM  6.  
     
   

2


PART I.
Iridium Communications Inc.
Condensed Consolidated Balance Sheets
(In thousands, except per share data)
 June 30,
2022
December 31, 2021
(Unaudited) 
Assets  
Current assets:
Cash and cash equivalents$ i 227,197 $ i 320,913 
Accounts receivable, net i 75,006  i 63,410 
Inventory i 27,793  i 29,044 
Prepaid expenses and other current assets i 12,827  i 11,043 
Total current assets i 342,823  i 424,410 
Property and equipment, net i 2,541,155  i 2,662,336 
Other assets i 149,582  i 50,050 
Intangible assets, net i 43,223  i 43,999 
Total assets$ i 3,076,783 $ i 3,180,795 
Liabilities and stockholders’ equity  
Current liabilities:  
Short-term secured debt$ i 16,500 $ i 16,500 
Accounts payable i 14,114  i 16,196 
Accrued expenses and other current liabilities i 40,559  i 48,122 
Deferred revenue i 34,817  i 28,018 
Total current liabilities i 105,990  i 108,836 
Long-term secured debt, net i 1,575,509  i 1,581,516 
Deferred income tax liabilities, net i 149,107  i 134,279 
Deferred revenue, net of current portion i 46,796  i 48,070 
Other long-term liabilities i 18,277  i 20,147 
Total liabilities i 1,895,679  i 1,892,848 
Commitments and contingencies i  i 
Stockholders’ equity:  
Common stock, $0.001 par value, 300,000 shares authorized, 127,179 and 131,342 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively i 127  i 131 
Additional paid-in capital i 1,128,103  i 1,154,058 
Retained earnings i 21,011  i 140,810 
Accumulated other comprehensive income (loss), net of tax i 31,863 ( i 7,052)
Total stockholders’ equity i 1,181,104  i 1,287,947 
Total liabilities and stockholders’ equity$ i 3,076,783 $ i 3,180,795 











See notes to unaudited condensed consolidated financial statements.
3


Iridium Communications Inc.
Condensed Consolidated Statements of Operations and Comprehensive Income
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended June 30,Six Months Ended
June 30,
 2022202120222021
Revenue:
Services$ i 132,861 $ i 121,321 $ i 258,970 $ i 237,473 
Subscriber equipment i 33,759  i 21,756  i 67,503  i 45,709 
Engineering and support services i 8,299  i 6,842  i 16,665  i 13,272 
Total revenue i 174,919  i 149,919  i 343,138  i 296,454 
Operating expenses:  
Cost of services (exclusive of depreciation and amortization) i 25,320  i 23,391  i 49,418  i 46,598 
Cost of subscriber equipment i 21,471  i 12,671  i 41,976  i 25,699 
Research and development i 2,986  i 2,624  i 5,605  i 5,341 
Selling, general and administrative i 28,662  i 23,970  i 54,765  i 46,627 
Depreciation and amortization i 75,681  i 75,668  i 151,342  i 151,578 
Total operating expenses i 154,120  i 138,324  i 303,106  i 275,843 
Operating income i 20,799  i 11,595  i 40,032  i 20,611 
Other expense, net:  
Interest expense, net( i 14,780)( i 17,630)( i 29,357)( i 40,399)
Other expense, net( i 220)( i 116)( i 228)( i 144)
Total other expense, net( i 15,000)( i 17,746)( i 29,585)( i 40,543)
Income (loss) before income taxes i 5,799 ( i 6,151) i 10,447 ( i 19,932)
Income tax benefit (expense)( i 1,242) i 9,984 ( i 3,066) i 18,582 
Net income (loss)$ i 4,557 $ i 3,833 $ i 7,381 $( i 1,350)
Weighted average shares outstanding - basic i 128,351  i 133,367  i 129,355  i 134,215 
Weighted average shares outstanding - diluted i 129,611  i 134,981  i 130,811  i 134,215 
Net income (loss) attributable to common stockholders per share - basic and diluted$ i 0.04 $ i 0.03 $ i 0.06 $( i 0.01)
Comprehensive income:
Net income (loss)$ i 4,557 $ i 3,833 $ i 7,381 $( i 1,350)
Foreign currency translation adjustments( i 794) i 1,178  i 481  i 421 
Unrealized gain on cash flow hedges, net of tax (see Note 6)
 i 10,442  i 239  i 38,434  i 4,082 
Comprehensive income$ i 14,205 $ i 5,250 $ i 46,296 $ i 3,153 

















See notes to unaudited condensed consolidated financial statements.
4


Iridium Communications Inc.
Condensed Consolidated Statements of Changes in Stockholders’ Equity
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended June 30, 2022Three Months Ended June 30, 2021
Additional Paid-In CapitalAccumulated
Other Comprehensive Income
Retained
Earnings
Total Stockholders' EquityAdditional Paid-In CapitalAccumulated
Other Comprehensive Loss
Retained
Earnings
Total Stockholders' Equity
Common StockCommon Stock
SharesAmountSharesAmount
Balances at beginning of period i 128,031 $ i 128 $ i 1,126,514 $ i 22,215 $ i 42,919 $ i 1,191,776  i 133,476 $ i 133 $ i 1,152,569 $( i 14,094)$ i 225,170 $ i 1,363,778 
Stock-based compensation— —  i 10,440 — —  i 10,440 — —  i 8,404 — —  i 8,404 
Stock options exercised and awards vested i 130  i   i 147 — —  i 147  i 179  i   i 421 — —  i 421 
Stock withheld to cover employee taxes( i 13)— ( i 466)— — ( i 466)( i 14)— ( i 542)— — ( i 542)
Repurchases and retirements of common stock( i 969)( i 1)( i 8,532)— ( i 26,465)( i 34,998)( i 1,713)( i 1)( i 14,692)— ( i 48,440)( i 63,133)
Cumulative translation adjustments— — — ( i 794)— ( i 794)— — —  i 1,178 —  i 1,178 
Unrealized gain on cash flow hedges, net of tax— — —  i 10,442 —  i 10,442 — — —  i 239 —  i 239 
Net income— — — —  i 4,557  i 4,557 — — — —  i 3,833  i 3,833 
Balances at end of period i 127,179 $ i 127 $ i 1,128,103 $ i 31,863 $ i 21,011 $ i 1,181,104  i 131,928 $ i 132 $ i 1,146,160 $( i 12,677)$ i 180,563 $ i 1,314,178 





Six Months Ended June 30, 2022Six Months Ended June 30, 2021
Additional Paid-In CapitalAccumulated
Other Comprehensive Income (Loss)
Retained
Earnings
Total Stockholders' EquityAdditional Paid-In CapitalAccumulated
Other Comprehensive Loss
Retained
Earnings
Total Stockholders' Equity
Common StockCommon Stock
SharesAmountSharesAmount
Balances at beginning of period i 131,342 $ i 131 $ i 1,154,058 $( i 7,052)$ i 140,810 $ i 1,287,947  i 134,056 $ i 134 $ i 1,160,570 $( i 17,180)$ i 275,915 $ i 1,419,439 
Stock-based compensation— —  i 19,379 — —  i 19,379 — —  i 13,979 — —  i 13,979 
Stock options exercised and awards vested i 736  i 1  i 669 — —  i 670  i 1,278  i 1  i 4,814 — —  i 4,815 
Stock withheld to cover employee taxes( i 104)— ( i 4,024)— — ( i 4,024)( i 115)— ( i 4,740)— — ( i 4,740)
Repurchases and retirements of common stock( i 4,795)( i 5)( i 41,979)— ( i 127,180)( i 169,164)( i 3,291)( i 3)( i 28,463)— ( i 94,002)( i 122,468)
Cumulative translation adjustments— — —  i 481 —  i 481 — — —  i 421 —  i 421 
Unrealized gain on cash flow hedge, net of tax— — —  i 38,434 —  i 38,434 — — —  i 4,082 —  i 4,082 
Net income (loss)— — — —  i 7,381  i 7,381 — — — — ( i 1,350)( i 1,350)
Balances at end of period i 127,179 $ i 127 $ i 1,128,103 $ i 31,863 $ i 21,011 $ i 1,181,104  i 131,928 $ i 132 $ i 1,146,160 $( i 12,677)$ i 180,563 $ i 1,314,178 














See notes to unaudited condensed consolidated financial statements.
5


Iridium Communications Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 Six Months Ended June 30,
20222021
Cash flows from operating activities:
Net income (loss)$ i 7,381 $( i 1,350)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Deferred income taxes i 2,364 ( i 18,922)
Depreciation and amortization i 151,342  i 151,578 
Stock-based compensation (net of amounts capitalized) i 17,924  i 12,539 
Amortization of deferred financing fees i 2,319  i 1,914 
All other items, net i 194 ( i 558)
Changes in operating assets and liabilities:
Accounts receivable( i 11,230)( i 2,123)
Inventory i 1,545  i 4,351 
Prepaid expenses and other current assets( i 1,002)( i 656)
Other assets i 828  i 1,754 
Accounts payable( i 1,129)( i 4,153)
Accrued expenses and other current liabilities( i 6,732)( i 7,199)
Interest payable i 40 ( i 46)
Deferred revenue i 3,577 ( i 9,312)
Other long-term liabilities( i 1,856)( i 1,850)
Net cash provided by operating activities i 165,565  i 125,967 
Cash flows from investing activities:  
Capital expenditures( i 31,018)( i 19,229)
Investment in Aireon (see Note 12)
( i 50,000) i  
Purchases of other investments i  ( i 1,128)
Maturities of marketable securities i   i 1,420 
Net cash used in investing activities( i 81,018)( i 18,937)
Cash flows from financing activities:  
Payments on the Term Loan( i 8,250)( i 8,829)
Repurchases of common stock( i 169,164)( i 122,468)
Proceeds from exercise of stock options i 670  i 4,815 
Tax payment upon settlement of stock awards( i 4,024)( i 4,740)
Net cash used in financing activities( i 180,768)( i 131,222)
Effect of exchange rate changes on cash and cash equivalents, and restricted cash i 2,505  i 422 
Net decrease in cash and cash equivalents, and restricted cash( i 93,716)( i 23,770)
Cash, cash equivalents, and restricted cash, beginning of period i 320,913  i 237,178 
Cash, cash equivalents, and restricted cash, end of period$ i 227,197 $ i 213,408 
Supplemental cash flow information:
Interest paid, net of amounts capitalized$ i 27,587 $ i 35,721 
Income taxes paid, net$ i 938 $ i 903 
Supplemental disclosure of non-cash investing and financing activities:  
Property and equipment received but not paid$ i 4,747 $ i 2,597 
Capitalized amortization of deferred financing costs$ i 63 $ i 65 
Capitalized stock-based compensation$ i 1,455 $ i 1,441 


See notes to unaudited condensed consolidated financial statements.
6


Iridium Communications Inc.
Notes to Condensed Consolidated Financial Statements
1.  i Basis of Presentation and Principles of Consolidation
Iridium Communications Inc. (the “Company”) has prepared its condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). The Company's operations are primarily conducted through, and its operating assets are owned by, its principal operating subsidiary, Iridium Satellite LLC, Iridium Satellite's immediate parent, Iridium Holdings, LLC, and their respective subsidiaries. The accompanying condensed consolidated financial statements include the accounts of (i) the Company, (ii) its wholly owned subsidiaries, and (iii) all less than wholly owned subsidiaries that the Company controls. All material intercompany transactions and balances have been eliminated.
In the opinion of management, the condensed consolidated financial statements reflect all normal recurring adjustments that the Company considers necessary for the fair presentation of its results of operations and cash flows for the interim periods covered, and of the financial position of the Company at the date of the interim condensed consolidated balance sheet. The operating results for interim periods are not necessarily indicative of the operating results for the entire year. Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to instructions, rules and regulations prescribed by the U.S. Securities and Exchange Commission (“SEC”). These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10‑K for the year ended December 31, 2021, as filed with the SEC on February 17, 2022.
2.  i Significant Accounting Policies
 i 
Adopted and Recently Issued Accounting Pronouncements
In March 2020, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). The guidance provides optional expedients and exceptions for contracts, hedging relationships, and other transactions that reference London Inter-bank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued. ASU 2020-04 was further amended in January 2021 when the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope (“ASU 2021-01”), which clarified the applicability of certain provisions. Both ASU 2020-04 and ASU 2021-01 are currently effective prospectively for all entities through December 31, 2022, when the reference rate replacement activity is expected to have been completed. The guidance in ASU 2020-04 and ASU 2021-01 is optional and may be elected over time as reference rate reform activities occur. During 2021, the Company elected to apply the optional expedient for hedge accounting specifically to the interest rate cap agreement (the "Cap") executed in July 2021 (see Note 6). This allowed the Company to assume that the index upon which future interest payments on the hedged portion of the Term Loan (see Note 5) will be based matches the index on the Cap. Adoption of this practical expedient had no impact on the Company's condensed consolidated financial statements upon adoption. The Company has not yet adopted any other expedients and will continue to evaluate the impact this standard may have on its consolidated financial statements.
Effective June 30, 2022, the Company adopted FASB ASU 2017-11, Earnings per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features (“ASU 2017-11”). Part I of ASU 2017-11 simplified the accounting for certain financial instruments with down round features, a provision in an equity-linked financial instrument (or embedded feature) that provides a downward adjustment of the current exercise price based on the price of future equity offerings. The Company also adopted FASB ASU 2020-06, Debt - Debt with Conversion and Other Options and Derivatives and Hedging (“ASU 2020-06”). ASU 2020-06 simplified the accounting for convertible debt instruments and convertible preferred stock by reducing the number of accounting models and limiting the number of embedded conversion features separately recognized from the primary contract. As a result of these adoptions, the Company was permitted to exclude the down-round feature of its investment in Aireon LLC (“Aireon”) from the consideration of whether the instrument is indexed to the entity's own stock (see Note 12).
 i 
Fair Value Measurements
The Company evaluates assets and liabilities subject to fair value measurements on a recurring and non-recurring basis to determine the appropriate level to classify them for each reporting period. This determination requires significant judgments to be made by management of the Company. Fair value is the price that would be received from the sale of an asset or paid to transfer a liability assuming an orderly transaction in the most advantageous market at the measurement date. U.S. GAAP establishes a hierarchical disclosure framework which prioritizes and ranks the level of observability of inputs used in measuring fair value.
7


The fair value hierarchy consists of the following tiers:
Level 1, defined as observable inputs such as quoted prices in active markets for identical assets or liabilities;
Level 2, defined as observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and
Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.
The carrying values of the following financial instruments approximated their fair values as of June 30, 2022 and December 31, 2021: (1) cash and cash equivalents, (2) prepaid expenses and other current assets, (3) accounts receivable, (4) accounts payable, and (5) accrued expenses and other current liabilities. Fair values approximate their carrying values because of their short-term nature. The Level 2 cash equivalents may include money market funds, commercial paper and short-term U.S. agency securities. The Company also classifies its derivative financial instruments as Level 2. The Company did not hold any Level 3 assets as of June 30, 2022 or December 31, 2021.
The fair values of the Company’s Level 2 estimates are based upon certain market assumptions and information available to the Company. In determining fair value, the Company uses a market approach utilizing valuation models that incorporate observable inputs such as interest rates, bond yields and quoted prices for similar assets.
 i 
Leases
For new leases, the Company will determine if an arrangement is or contains a lease at inception. Leases are included as (1) right-of-use (“ROU”) assets within other assets, and (2) ROU liabilities within accrued expenses and other liabilities and are included within other long-term liabilities on the Company’s condensed consolidated balance sheets.
ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Certain leases contain variable contractual obligations as a result of future base rate escalations which are estimated based on observed trends and included within the measurement of present value. The Company’s leases do not provide an implicit rate. The Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The ROU assets also include any lease payments made and exclude lease incentives. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
The Company has lease agreements with lease and non-lease components, which are generally accounted for separately. For certain leases, such as teleport network facilities, the Company elected the practical expedient to combine lease and non-lease components as a single lease component. Taxes assessed on leases in which the Company is either a lessor or lessee are excluded from contract consideration and variable payments when measuring new lease contracts or remeasuring existing lease contracts.
 i 
Inventory
Inventory consists primarily of finished goods and raw materials from third-party manufacturers. The Company outsources manufacturing of subscriber equipment to a third-party manufacturer and purchases accessories from third-party suppliers. The Company’s cost of inventory includes an allocation of overhead, including payroll and payroll-related costs of employees directly involved in bringing inventory to its existing condition, and freight. Inventories are valued using the average cost method and are carried at the lower of cost or net realizable value.
The Company has a manufacturing agreement with Benchmark Electronics Inc. (“Benchmark”) to manufacture most of its subscriber equipment. Pursuant to the agreement, the Company may be required to purchase excess materials at cost plus a contractual markup if the materials are not used in production within the periods specified in the agreement. Benchmark will then repurchase such materials from the Company at the same price paid by the Company, as required for the production of the subscriber equipment.
 i The following table summarizes the Company's inventory balances:
 June 30, 2022December 31, 2021
 (In thousands)
Finished goods$ i 11,455 $ i 18,395 
Raw materials i 17,414  i 11,850 
Inventory valuation reserve( i 1,076)( i 1,201)
Total$ i 27,793 $ i 29,044 
 / 
8


 i  i 
Commitments
Launch and Related Services
In the second quarter of 2022, the Company entered into an agreement for launch and related services, to launch up to five of its ground spare satellites. The Company expects costs related to this launch to total approximately $ i 35.0 million. As of June 30, 2022, the Company had made aggregate payments of $7.5 million related to these services, which were capitalized as construction in progress within property and equipment, net in the accompanying condensed consolidated balance sheets. The Company currently expects the launch to occur in 2023.
 / 
 / 
 i 
Derivative Financial Instruments
The Company uses derivatives (interest rate swap, swaption and cap) to manage its exposure to fluctuating interest rate risk on variable rate debt. Its derivatives are measured at fair value and are recorded on the condensed consolidated balance sheets within other current liabilities and other assets. When the Company’s derivatives are designated as cash flow hedges, the effective portion of the changes in fair value of the derivatives are recorded in accumulated other comprehensive income (loss) within the Company’s condensed consolidated balance sheets and subsequently recognized in earnings when the hedged items impact earnings. Any ineffective portion of a derivative's change in fair value will be recognized in earnings in the same period in which the hedged interest payments affect earnings. Within the condensed consolidated statements of operations and comprehensive income, the gains and losses related to cash flow hedges are recognized within interest income (expense), net, as this is the same financial statement line item used for any gains or losses associated with the hedged items. Cash flows from hedging activities are included in operating activities within the Company’s condensed consolidated statements of cash flows, which is the same category as the item being hedged. See Note 6 for further information.
3.  i Cash and Cash Equivalents
Cash and Cash Equivalents
 i 
The following table presents the Company’s cash and cash equivalents balances:
June 30, 2022December 31, 2021Recurring Fair
Value Measurement
 (In thousands) 
Cash and cash equivalents: 
Cash$ i 33,067 $ i 28,496  
Money market funds i 194,130  i 292,417 Level 2
Total cash and cash equivalents$ i 227,197 $ i 320,913  
 / 
4.  i Leases
Lessor Arrangements
Operating leases in which the Company is a lessor consist primarily of hosting agreements with Aireon (see Note 12) and L3Harris Technologies, Inc. (“L3Harris”) for space on the Company’s satellites. These agreements provide for a fee that will be recognized over the life of the satellites, currently estimated to be approximately  i 12.5 years. Lease income related to these agreements was $ i 5.3 million for each of the three months ended June 30, 2022 and 2021, and $ i 10.7 million for each of the six months ended June 30, 2022 and 2021. Lease income is recorded as hosted payload and other data service revenue within service revenue on the Company’s condensed consolidated statements of operations and comprehensive income.
Aireon has made payments to the Company pursuant to its hosting agreement, and the Company expects Aireon will continue to do so. L3Harris has prepaid all amounts owed to the Company pursuant to its hosting arrangement.  i The following table presents future income with respect to the Company’s operating leases in which it is the lessor existing at June 30, 2022, exclusive of the $ i 10.7 million recognized during the six months ended June 30, 2022, by year and in the aggregate: / 
Year Ending December 31,Amount
(In thousands)
2022$ i 10,722 
2023 i 21,445 
2024 i 21,445 
2025 i 21,445 
2026 i 21,445 
   Thereafter i 77,462 
Total lease income$ i 173,964 
9


5.  i Debt
Term Loan and Revolving Facility
In November 2019 and February 2020, pursuant to a loan agreement (as amended to date, the “Credit Agreement”), the Company entered into a term loan totaling $ i 1,650.0 million in aggregate principal amount with Deutsche Bank AG (the “Term Loan”) and an accompanying $ i 100.0 million revolving loan (the “Revolving Facility”). The Term Loan was repriced on multiple occasions and now bears interest at an annual rate of one-month LIBOR plus  i 2.50%, with a  i 0.75% LIBOR floor. The maturity date of the Term Loan is in November 2026. The interest rate on the Revolving Facility is LIBOR plus  i 3.75%, with no LIBOR floor, and the Revolving Facility has a maturity date in November 2024. Principal payments, payable quarterly, equal $ i 16.5 million per annum (one percent of the full principal amount of the Term Loan), with the remaining principal due upon maturity.
As of June 30, 2022 and December 31, 2021, the Company reported an aggregate of $ i 1,612.9 million and $ i 1,621.1 million in borrowings under the Term Loan, respectively. These amounts do not include $ i 20.9 million and $ i 23.1 million of net unamortized deferred financing costs as of June 30, 2022 and December 31, 2021, respectively. The net principal balance in borrowings in the accompanying condensed consolidated balance sheets as of June 30, 2022 and December 31, 2021 amounted to $ i 1,592.0 million and $ i 1,598.0 million, respectively. As of June 30, 2022 and December 31, 2021, based upon over-the-counter bid levels (Level 2 - market approach), the fair value of the borrowings under the Term Loan was $ i 1,552.4 million and $ i 1,622.1 million, respectively. The Company had not borrowed under the Revolving Facility as of June 30, 2022 and December 31, 2021.
The Credit Agreement restricts the Company’s ability to incur liens, engage in mergers or asset sales, pay dividends, repay subordinated indebtedness, incur indebtedness, make investments and loans, and engage in other transactions as specified in the Credit Agreement. The Credit Agreement provides for specified exceptions, including baskets measured as a percentage of trailing twelve months of earnings before interest, taxes, depreciation and amortization (“EBITDA” as defined in the Credit Agreement) and unlimited exceptions based on achievement and maintenance of specified leverage ratios, for, among other things, incurring indebtedness and liens and making investments, restricted payments for dividends and share repurchases, and payments of subordinated indebtedness. The Credit Agreement also contains a mandatory prepayment sweep mechanism with respect to a portion of the Company’s excess cash flow (as defined in the Credit Agreement), which is phased out based on achievement and maintenance of specified leverage ratios. As of December 31, 2021, the Company was below the specified leverage ratio, and a mandatory prepayment sweep was therefore not required with respect to 2021 cash flows.
The Credit Agreement contains no financial maintenance covenants with respect to the Term Loan. With respect to the Revolving Facility, the Credit Agreement requires the Company to maintain a consolidated first lien net leverage ratio (as defined in the Credit Agreement) of no greater than  i 6.25 to 1 if more than  i 35% of the Revolving Facility has been drawn. The Credit Agreement contains other customary representations and warranties, affirmative and negative covenants, and events of default. The Company was in compliance with all covenants as of June 30, 2022.
Interest on Debt
Total interest incurred includes amortization of deferred financing fees and capitalized interest.  i The following table presents the interest and amortization of deferred financing fees related to the Term Loan:
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
(In thousands)(In thousands)
Total interest incurred$ i 15,931 $ i 18,576 $ i 31,233 $ i 38,713 
Amortization of deferred financing fees$ i 1,200 $ i 1,000 $ i 2,382 $ i 1,973 
Capitalized interest$ i 475 $ i 715 $ i 864 $ i 1,357 
As of June 30, 2022 and December 31, 2021, accrued interest on the Term Loan was $ i 0.2 million and $ i 0.1 million, respectively.
6.  i Derivative Financial Instruments
The Company is exposed to interest rate fluctuations related to its Term Loan. The Company has reduced its exposure to fluctuations in the cash flows associated with changes in the variable interest rate by entering into offsetting positions through the use of interest rate cap and swap contracts which result in recognizing a maximum fixed interest rate for a portion of the Term Loan. These instruments reduce the negative impact of increases in the variable rate over the term of the derivative contracts. These contracts are not used for trading or other speculative purposes. Historically, the Company has not incurred, and does not expect to incur in the future, any losses as a result of counterparty default.
Hedge effectiveness of interest rate swap and cap contracts is based on a long-haul hypothetical derivative methodology and includes all changes in value. The Company formally assesses, both at the hedge’s inception and on an ongoing quarterly basis,
10


whether the designated derivative instruments are highly effective in offsetting changes in the cash flows of the hedged items. When the hedging instrument is sold, expires, is terminated, is exercised, no longer qualifies for hedge accounting, is de-designated, or is no longer probable, hedge accounting is discontinued prospectively.
Interest Rate Swap and Swaption
The Company previously entered into a long-term interest rate swap (“Swap”) to mitigate variability in forecasted interest payments on a portion of the Company’s borrowings under the Term Loan. The Swap expired in November 2021. Under the Swap, on the last business day of each month, the Company received variable interest payments based on one-month LIBOR from the counterparty. The Company paid a fixed rate of  i 1.565% per annum on the Swap.
The Company also entered into an interest rate swaption agreement (“Swaption”), for which the Company paid a fixed annual rate of  i 0.50%. At inception, the Swap and Swaption were designated as cash flow hedges for hedge accounting. The unrealized changes in market value were recorded in accumulated other comprehensive income (loss) and any remaining balance will be reclassified into earnings during the period in which the hedged transaction affects earnings. Due to the changes made to the Term Loan as a result of the July 2021 repricing, at that time the Company elected to de-designate the Swap as a cash flow hedge. Accordingly, as the related interest payments were still probable, the accumulated balance within other comprehensive income (loss) as of the de-designation date was amortized into earnings through the November 2021 expiration date.
The Company sold the Swaption in May 2021 for $ i 0.7 million. The Company continued to pay the fixed annual rate for the Swaption through the term of the Swaption, which expired in November 2021.
Interest Rate Cap
In July 2021, the Company entered into the Cap that began in December 2021, following the expiration of the Swap. The Company entered into the Cap in order to manage its exposure to interest rate movements on a portion of the Term Loan through the maturity of the Term Loan in November 2026. The Cap provides the Company with the right to receive payment if one-month LIBOR exceeds  i 1.5%. As of December 2021, the Company began paying a fixed monthly premium based on an annual rate of  i 0.31% for the Cap. The Cap carried a notional amount of $ i 1,000.0 million as of June 30, 2022 and December 31, 2021.
The Cap is designed to mirror the terms of the Term Loan and to offset the cash flows being hedged. The Company designated the Cap as a cash flow hedge of the variability of the LIBOR-based interest payments on the Term Loan. The effective portion of the Cap's change in fair value will be recorded in accumulated other comprehensive income (loss). Any ineffective portion of the Cap's change in fair value will be recorded in current earnings as interest expense.
Fair Value of Derivative Instruments
As of June 30, 2022 and December 31, 2021, the Company had an asset balance of $ i 67.7 million and $ i 19.7 million, respectively, for the fair value of the Cap and a liability balance of $ i 12.7 million and $ i 14.8 million, respectively, for the fair value of the Cap premium. Both the Cap and the Cap premium are recorded net within other assets.
During the three and six months ended June 30, 2022, the Company collectively incurred $ i 0.8 million and $ i 1.6 million, respectively, in net interest expense for the Swaption and Cap. During the three and six months ended June 30, 2021, the Company collectively incurred $ i 2.1 million and $ i 4.8 million, respectively, in net interest expense for the Swap and Swaption.
Gains and losses resulting from fair value adjustments to the Cap are recorded within accumulated other comprehensive income (loss) within the Company’s condensed consolidated balance sheets and reclassified to interest expense on the dates that interest payments become due. Cash flows related to the derivative contracts are included in cash flows from operating activities on the condensed consolidated statements of cash flows. Over the next 12 months, the Company expects any gains or losses for cash flow hedges amortized from accumulated other comprehensive income (loss) into earnings to have an immaterial impact on the Company’s consolidated financial statements.
 i 
The following table presents the amount of unrealized gain or loss and related tax impact associated with the derivative instruments that the Company recorded in its condensed consolidated statements of operations and comprehensive income:
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
(In thousands)(In thousands)
Unrealized gain, net of tax$ i 10,442 $ i 239 $ i 38,434 $ i 4,082 
Tax expense i 3,197  i 11  i 11,652  i 1,213 
 / 
11


7.  i Stock-Based Compensation
In May 2019, the Company’s stockholders approved the amendment and restatement of the Company’s 2015 Equity Incentive Plan (as so amended and restated, the “Amended 2015 Plan”). As of June 30, 2022, the remaining aggregate number of shares of the Company’s common stock available for future grants under the Amended 2015 Plan was  i 8,474,230. The Amended 2015 Plan provides for the grant of stock-based awards, including nonqualified stock options, incentive stock options, restricted stock, restricted stock units (“RSUs”), stock appreciation rights and other equity securities to employees, consultants and non-employee directors of the Company and its affiliated entities. The number of shares of common stock available for issuance under the Amended 2015 Plan is reduced by (i)  i one share for each share of common stock issued pursuant to an appreciation award, such as a stock option or stock appreciation right with an exercise or strike price of at least  i 100% of the fair market value of the underlying common stock on the date of grant, and (ii)  i 1.8 shares for each share of common stock issued pursuant to any stock award that is not an appreciation award, also known as a “full value award.” The Amended 2015 Plan allows the Company to utilize a broad array of equity incentives and performance cash incentives in order to secure and retain the services of its employees, directors and consultants, and to provide long-term incentives that align the interests of its employees, directors and consultants with the interests of the Company’s stockholders. The Company accounts for stock-based compensation at fair value.
Stock Option Awards
The stock option awards granted to employees generally (i) have a term of  i ten years, (ii) vest over  i four years with  i 25% vesting after the first year of service and the remainder vesting ratably on a quarterly basis thereafter, (iii) are contingent upon employment on the vesting date, and (iv) have an exercise price equal to the fair market value of the underlying shares at the date of grant. The fair value of stock options is determined at the grant date using the Black-Scholes option pricing model.
The Company historically granted stock options to newly hired and promoted employees but now exclusively utilizes RSUs. The Company did not grant any stock options during the three and six months ended June 30, 2022 or 2021.
 i 
Option Summary
A summary of the activity of the Company's stock options is as follows:
SharesWeighted-
Average
Exercise Price
Per Share
Weighted-
Average
Remaining
Contractual
Term (Years)
Aggregate
Intrinsic
Value
 (In thousands, except years and per share data)
Options outstanding at December 31, 2021 i 1,681 $ i 9.35  i 3.28$ i 53,698 
Exercised( i 71) i 9.34 $ i 2,056 
Forfeited( i 2) i 14.24 
Options outstanding at June 30, 2022 i 1,608 $ i 9.34  i 2.78$ i 45,361 
Options exercisable at June 30, 2022 i 1,575 $ i 9.09  i 2.70$ i 44,851 
Options exercisable and expected to vest at June 30, 2022 i 1,607 $ i 9.34  i 2.78$ i 45,358 
 / 

 i 
SharesWeighted-
Average
Exercise Price
Per Share
Weighted-
Average
Remaining
Contractual
Term (Years)
Aggregate
Intrinsic
Value
 (In thousands, except years and per share data)
Options outstanding at December 31, 2020 i 2,554 $ i 9.10  i 3.94$ i 77,182 
Cancelled or expired( i 1) i 7.78 
Exercised( i 621) i 7.62 $ i 23,806 
Forfeited( i 11) i 15.37 
Options outstanding at June 30, 2021 i 1,921 $ i 9.55  i 3.73$ i 58,492 
Options exercisable at June 30, 2021 i 1,783 $ i 8.85  i 3.46$ i 55,513 
Options exercisable and expected to vest at June 30, 2021 i 1,920 $ i 9.54  i 3.73$ i 58,457 
 / 
Restricted Stock Units
The RSUs granted to employees for service generally vest over  i four years, with  i 25% vesting on the first anniversary of the grant date and the remainder vesting ratably on a quarterly basis thereafter, subject to continued employment. Some RSUs granted to employees for performance vest upon the completion of defined performance goals, subject to continued
12


employment. The RSUs granted to non-employee members of the board of directors generally vest in full on the first anniversary of the grant date. The RSUs granted to non-employee consultants generally vest  i 50% on the first anniversary of the grant date, with the remaining  i 50% vesting quarterly thereafter through the second anniversary of the grant date. The Company’s RSUs are classified as equity awards because the RSUs will be settled in the Company’s common stock upon vesting. The fair value of the RSUs is determined at the grant date based on the closing price of the Company's common stock on the date of grant. The related compensation expense is recognized over the service period, or shorter periods based on the retirement eligibility of certain grantees, and is based on the grant date fair value of the Company’s common stock and the number of shares expected to vest. The fair value of the awards is not remeasured at the end of each reporting period. The RSUs do not carry voting rights until they are vested, and shares are issued upon settlement in accordance with the terms of the award.
RSU Summary
 i 
The following tables summarize the Company’s RSU activity:
Shares Underlying RSUsWeighted-
Average
Grant Date
Fair Value
Per RSU
 (In thousands) 
Outstanding at December 31, 2021 i 2,550 $ i 25.80 
Granted i 1,219  i 38.97 
Forfeited( i 113) i 31.12 
Released( i 665) i 33.27 
Outstanding at June 30, 2022 i 2,991 $ i 29.30 
Vested and unreleased at June 30, 2022 (1)
 i 882  
 / 

 i 
Shares Underlying RSUsWeighted-
Average
Grant Date
Fair Value
Per RSU
 (In thousands) 
Outstanding at December 31, 2020 i 2,664 $ i 18.96 
Granted i 843  i 41.67 
Forfeited( i 51) i 27.45 
Released( i 657) i 21.40 
Outstanding at June 30, 2021 i 2,799 $ i 25.07 
Vested and unreleased at June 30, 2021 (1)
 i 860 
 / 
(1)     These RSUs were granted to the Company's board of directors as a part of their compensation for board and committee service, as detailed below, and had vested but had not yet settled, meaning that the underlying shares of common stock had not been issued and released pursuant to the terms of the applicable compensation program.
Service-Based RSUs
The majority of the annual compensation the Company provides to non-employee members of its board of directors is paid in the form of RSUs. In addition, some members of the Company’s board of directors may elect to receive the remainder of their annual compensation, or a portion thereof, in the form of RSUs. An aggregate amount of approximately  i 54,000 and  i 39,000 service-based RSUs were granted to the Company’s non-employee members of the board of directors as a result of these payments and elections during the three and six months ended June 30, 2022 and 2021, respectively, with an estimated grant date fair value of $ i 2.1 million and $ i 1.6 million, respectively.
During the three and six months ended June 30, 2022 and 2021, the Company granted approximately  i 743,000 and  i 461,000 service-based RSUs, respectively, to its employees, with an estimated aggregate grant date fair value of $ i 29.0 million and $ i 19.2 million, respectively.
During the six months ended June 30, 2022 and 2021, the Company granted approximately  i 7,000 and  i 2,000 service-based RSUs, respectively, to non-employee consultants, with an estimated aggregate grant date fair value of $ i 0.3 million and $ i 0.1 million, respectively.
13


Performance-Based RSUs
In March 2022 and 2021, the Company granted approximately  i 248,000 and  i 228,000 annual incentive, performance-based RSUs, respectively, to the Company’s executives and employees (the “Bonus RSUs”), with an estimated grant date fair value of $ i 9.7 million and $ i 9.5 million, respectively. Vesting of the Bonus RSUs is and was dependent upon the Company’s achievement of defined performance goals over the respective fiscal year. The Company records stock-based compensation expense related to performance-based RSUs when it is considered probable that the performance conditions will be met. Management believes it is probable that substantially all of the 2022 Bonus RSUs will vest. The level of achievement, if any, of performance goals will be determined by the compensation committee of the Company’s board of directors and, if such goals are achieved, the 2022 Bonus RSUs will vest, subject to continued employment, in March 2023. All of the 2021 Bonus RSUs vested in March 2022 upon the determination of the level of achievement of the performance goals.
Additionally, in March 2022 and 2021, the Company granted approximately  i 167,000 and  i 110,000 long-term, performance-based RSUs, respectively, to the Company’s executives (the “Executive RSUs”). The estimated aggregate grant date fair value of the Executive RSUs for the 2022 and 2021 grants was $ i 6.5 million and $ i 4.6 million, respectively. Vesting of the Executive RSUs is dependent upon the Company’s achievement of defined performance goals over a two-year period. The vesting of Executive RSUs will ultimately range from  i 0% to  i 150% of the number of shares underlying the Executive RSUs granted based on the level of achievement of the performance goals. If the Company achieves the performance goals,  i 50% of the number of Executive RSUs earned based on performance will vest on the second anniversary of the grant date, and the remaining  i 50% will vest on the third anniversary of the grant date, in each case subject to the executive’s continued service as of the vesting date, which may be accelerated based on the retirement eligibility of certain grantees. During March 2022, approximately  i 50,000 shares underlying performance-based RSUs granted to the Company’s executives in 2020 were forfeited as a result of performance metrics not being fully achieved. During March 2021, the Company awarded approximately  i 3,000 additional shares related to performance-based RSUs granted in 2019 to the Company's executives for over-achievement of performance targets.
8.  i Equity Transactions
Preferred Stock
The Company is authorized to issue  i 2.0 million shares of preferred stock with a par value of $ i 0.0001 per share. The Company previously issued  i 1.5 million shares of preferred stock, all of which have converted to common stock. The remaining  i 0.5 million authorized shares of preferred stock remain undesignated and unissued as of June 30, 2022 and December 31, 2021. As of June 30, 2022 and December 31, 2021, there were no outstanding shares of preferred stock.
Share Repurchases and Retirement
In February 2021, the Company implemented a stock repurchase program for up to $ i 300.0 million of its common stock through December 31, 2022. In March 2022, the Company expanded the repurchase program to include up to an additional $ i 300.0 million of its common stock through December 31, 2023. This timeframe can be extended or shortened by the board of directors. Repurchases may be made from time to time on the open market at prevailing prices or in negotiated transactions off the market. All shares are immediately retired upon repurchase in accordance with the board-approved policy. When treasury shares are retired, the Company’s policy is to allocate the excess of the repurchase price over the par value of shares acquired first, to additional paid-in capital, and then to retained earnings. The portion to be allocated to additional paid-in capital is calculated by applying a percentage, determined by dividing the number of shares to be retired by the number of shares outstanding, to the balance of additional paid-in capital as of the date of retirement.
The Company repurchased and subsequently retired  i 1.0 million and  i 4.8 million shares of its common stock during the three and six months ended June 30, 2022, respectively, for a total purchase price of $ i 35.0 million and $ i 169.2 million, respectively. The Company repurchased and subsequently retired  i 1.7 million and  i 3.3 million shares of its common stock during the three and six months ended June 30, 2021, respectively, for a total purchase price of $ i 63.1 million and $ i 122.5 million, respectively. As of June 30, 2022, $ i 267.5 million remained available and authorized for repurchase under the stock repurchase program.
14


9.  i Revenue
 i 
The following table summarizes the Company’s services revenue:
 Three Months Ended June 30,Six Months Ended June 30,
 2022202120222021
 (In thousands)(In thousands)
Commercial services revenue:
Voice and data $ i 48,482 $ i 43,283 $ i 93,365 $ i 84,707 
IoT data i 30,630  i 27,224  i 59,071  i 51,978 
Broadband i 12,097  i 10,636  i 23,611  i 20,070 
Hosted payload and other data i 15,152  i 14,428  i 29,923  i 29,218 
Total commercial services revenue i 106,361  i 95,571  i 205,970  i 185,973 
Government services revenue i 26,500  i 25,750  i 53,000  i 51,500 
Total services revenue$ i 132,861 $ i 121,321 $ i 258,970 $ i 237,473 
 / 
 i 
The following table summarizes the Company’s engineering and support services revenue:
 Three Months Ended June 30,Six Months Ended June 30,
 2022202120222021
 (In thousands)(In thousands)
Commercial$ i 1,386 $ i 983 $ i 2,497 $ i 1,729 
Government i 6,913  i 5,859  i 14,168  i 11,543 
Total engineering and support services revenue$ i 8,299 $ i 6,842 $ i 16,665 $ i 13,272 
 / 
Approximately  i 27% and  i 34% of the Company's accounts receivable balance at June 30, 2022 and December 31, 2021, respectively, was due from prime contracts or subcontracts with agencies of the U.S. government.
The Company's contracts with customers generally do not contain performance obligations with terms in excess of one year. As such, the Company does not disclose details related to the value of performance obligations that are unsatisfied as of the end of the reporting period. The total value of any performance obligations that extend beyond one year is immaterial to the financial statements.
The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (contract assets), and deferred revenue (contract liabilities) on the condensed consolidated balance sheets. The Company bills amounts under its agreed-upon contractual terms at periodic intervals (for services), upon shipment (for equipment), or upon achievement of contractual milestones or as work progresses (for engineering and support services). Billing may occur subsequent to revenue recognition, resulting in unbilled accounts receivable (contract assets). The Company may also receive payments from customers before revenue is recognized, resulting in deferred revenue (contract liabilities). The Company recognized revenue that was previously recorded as deferred revenue in the amounts of $ i 8.5 million and $ i 10.2 million for the three months ended June 30, 2022 and 2021, respectively, and $ i 17.9 million and $ i 21.8 million during the six months ended June 30, 2022 and 2021. The Company has also recorded costs of obtaining contracts expected to be recovered in prepaid expenses and other current assets (contract assets or commissions), that are not separately disclosed on the condensed consolidated balance sheets. The commissions are recognized over the estimated usage period.  i The following table presents contract assets not separately disclosed:
June 30, 2022December 31, 2021
(In thousands)
Contract Assets:
Commissions$ i 1,574 $ i 1,190 
Other contract costs$ i 2,429 $ i 2,558 
Unbilled receivables$ i 9,317 $ i 10,752 
10.  i Income Taxes
Income before income taxes was $ i 5.8 million and $ i 10.4 million for the three and six months ended June 30, 2022, respectively, while the income tax expense was $ i 1.2 million and $ i 3.1 million for the three and six months ended June 30, 2022, respectively. The effective tax rate was  i 21.4% and  i 29.3% for the three and six months ended June 30, 2022, respectively, which differed from the federal statutory rate of  i 21% primarily due to tax expense associated with nondeductible executive compensation, non-
15


creditable foreign taxes, and U.S. state taxes, which was partially offset by U.S. tax credits and a discrete tax benefit associated with stock compensation.
Loss before income taxes was $ i 6.2 million and $ i 19.9 million for the three and six months ended June 30, 2021, respectively, while the income tax benefit was $ i 10.0 million and $ i 18.6 million for the three and six months ended June 30, 2021, respectively. The effective tax rate was  i 180.3% and  i 97.8% for the three and six months ended June 30, 2021, respectively, which differed from the federal statutory rate of  i 21% primarily due to the net impact of a discrete state tax benefit associated with a state apportionment change. During the second quarter of 2021, the Company changed its state apportionment estimate to reflect state planning that required certain beginning deferred tax balances to be revalued. The revaluation resulted in a one-time discrete tax benefit of $ i 8.3 million. The effective tax rate was also impacted by a discrete tax benefit associated with the stock compensation tax deduction and tax benefits from U.S. state tax losses and the Company's U.S. tax credits. These favorable impacts were partially offset by the impact of a discrete tax expense associated with an increase in the prior year valuation allowance for state net operating losses and the limitation on the tax deduction for executive compensation.
11.  i Net Income (Loss) Per Share
The Company calculates basic net income (loss) per share by dividing net income (loss) attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period. In periods of net income, diluted net income per share takes into account the effect of potential dilutive common shares when the effect is dilutive. Potentially dilutive common shares include (i) shares of common stock issuable upon exercise of outstanding stock options and (ii) contingently issuable RSUs that are convertible into shares of common stock upon achievement of certain service and performance requirements. The effect of potentially dilutive common shares is computed using the treasury stock method. The RSUs granted to members of the Company’s board of directors contain non-forfeitable rights to dividends and therefore are considered to be participating securities in periods of net income, which are immaterial for the periods presented. As a result, the calculation of basic and diluted net income per share excludes net income attributable to the unvested RSUs granted to the Company’s board of directors from the numerator and excludes the impact of the unvested RSUs granted to the Company’s board of directors from the denominator.
 i 
The following table summarizes the computations of basic and diluted net income (loss) per share:
 Three Months Ended June 30,Six Months Ended June 30,
 2022202120222021
 (In thousands, except per share data)
Numerator:
Net income (loss) - basic and diluted$ i 4,557 $ i 3,833  i 7,381 ( i 1,350)
Denominator:  
Weighted average common shares - basic i 128,351  i 133,367  i 129,355  i 134,215 
Dilutive effect of stock options i 984  i 1,176 998— 
Dilutive effect of RSUs i 276  i 438 458— 
Weighted average common shares - diluted i 129,611  i 134,981  i 130,811  i 134,215 
Net income (loss) per share - basic and diluted$ i 0.04 $ i 0.03 $ i 0.06 $( i 0.01)
 / 
Due to the Company’s net loss position for the six months ended June 30, 2021, all potential common stock equivalents were anti-dilutive and therefore excluded from the calculation of diluted net loss per share.  i The following table presents the incremental number of shares underlying stock options and RSUs outstanding with anti-dilutive effects:
 Three Months Ended June 30,Six Months Ended June 30,
 2022202120222021
 (In thousands)(In thousands)
Performance-based RSUs i   i 227  i   i 128 
Service-based RSUs i 293  i 425  i 41  i 555 
Stock options i   i   i   i 1,289 
16


12.  i Related Party Transactions
Aireon LLC and Aireon Holdings LLC
The Company's satellite constellation hosts the Aireon® system, which provides a global air traffic surveillance service through a series of automatic dependent surveillance-broadcast (“ADS-B”) receivers. The Company formed Aireon in 2011, with subsequent investments from the air navigation service providers (“ANSPs”) of Canada, Italy, Denmark, Ireland and the United Kingdom, to develop and market this service. The Company and other Aireon investors hold their interests in Aireon through the Amended and Restated Aireon Holdings LLC agreement (the “Aireon Holdings LLC Agreement”). Aireon Holdings LLC holds 100% of the membership interests in Aireon, which is the operating entity.
In June 2022, the Company entered into a subscription agreement with Aireon and invested $ i 50 million in exchange for a  i 6% preferred interest. The Company's investment in Aireon is accounted for as an equity method investment. The carrying value of the Company's investment in Aireon was $ i 50 million as of June 30, 2022. The original investments by the Company were previously written down to a carrying value of zero.
As of June 30, 2022 and December 31, 2021, the Company's fully diluted ownership stake in Aireon Holdings was approximately  i 39.5% and  i 35.7%, respectively, and is subject to redemption provisions contained in the Aireon Holdings LLC Agreement.
Aireon has contracted to pay the Company a fee to host the ADS-B receivers on its constellation, as well as fees for power and data services in connection with the delivery of the air traffic surveillance data. Pursuant to an agreement with Aireon (the “Hosting Agreement”), Aireon will pay the Company fees of $ i 200.0 million to host the ADS-B receivers, of which $ i 70.5 million had been paid as of June 30, 2022, as well as power fees of up to approximately $ i 3.7 million per year. Aireon also pays data services fees of $ i 19.8 million per year for the delivery of the air traffic surveillance data under a data transmission services agreement. Pursuant to ASU 2016-02, the Company considers the Hosting Agreement an operating lease. The Company recognized $ i 4.0 million of hosting fee revenue for each of the three months ended June 30, 2022 and 2021 and $ i 8.0 million for each of the six months ended June 30, 2022 and 2021. There were no Aireon receivables under the Hosting Agreement as of June 30, 2022 and December 31, 2021. The Company recorded power and data service revenue from Aireon of $ i 5.8 million for each of the three months ended June 30, 2022 and 2021 and $ i 11.7 million for each of the six months ended June 30, 2022 and 2021.
Under two services agreements, the Company also provides Aireon with administrative services and support services, the fees for which are paid monthly. Aireon receivables due to the Company under these two agreements totaled $ i 2.2 million as of both June 30, 2022 and December 31, 2021.
The Company and the other Aireon investors have agreed to participate pro-rata, based on their fully diluted ownership stakes, in funding an investor bridge loan to Aireon. The Company’s maximum funding commitment for the bridge loan is $ i 10.7 million. No bridge loan amounts were outstanding as of June 30, 2022 or December 31, 2021.
17


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, 2021, filed on February 17, 2022 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. 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, 2021, filed on February 17, 2022, 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
We are engaged primarily in providing mobile voice and data communications services using a constellation of orbiting satellites. We are the only commercial provider of communications services offering true global coverage, connecting people, organizations and assets to and from anywhere, in real time. Our low-earth orbit (LEO), L-band network provides reliable, weather-resilient communications services to regions of the world where terrestrial wireless or wireline networks do not exist or are limited, including remote land areas, open ocean, airways, the polar regions, and regions where the telecommunications infrastructure has been affected by political conflicts or natural disasters.
We provide voice and data communications services to businesses, the U.S. and foreign governments, non-governmental organizations and consumers via our satellite network, which has an architecture of 66 operational satellites with in-orbit and ground spares and related ground infrastructure. We utilize an interlinked mesh architecture to route traffic across the satellite constellation using radio frequency crosslinks between satellites. This unique architecture minimizes the need for ground facilities to support the constellation, which facilitates the global reach of our services and allows us to offer services in countries and regions where we have no physical presence.
We sell our products and services to commercial end-users through a wholesale distribution network, encompassing approximately 100 service providers, approximately 290 value-added resellers, or VARs, and approximately 85 value-added manufacturers, or VAMs, which create and sell technology that uses the Iridium® network either directly to the end user or indirectly through other service providers, VARs or dealers. These distributors often integrate our products and services with other complementary hardware and software and have developed a broad suite of applications using our products and services to target specific lines of business. We expect that demand for our services will increase as more applications are developed and deployed that utilize our technology.
At June 30, 2022, we had approximately 1,875,000 billable subscribers worldwide, representing an increase of 16% from approximately 1,616,000 billable subscribers at June 30, 2021. We have a diverse customer base, with end users in the following lines of business: land mobile, maritime, aviation, Internet of Things, or IoT, hosted payloads and other data services and the U.S. government.

18


Material Trends and Uncertainties
Our industry and customer base have historically grown as a result of:
demand for remote and reliable mobile communications services;
a growing number of new products and services and related applications;
a broad wholesale distribution network with access to diverse and geographically dispersed niche markets;
increased demand for communications services by disaster and relief agencies, and emergency first responders;
improved data transmission speeds for mobile satellite service offerings;
regulatory mandates requiring the use of mobile satellite services;
a general reduction in prices of mobile satellite services and subscriber equipment; and
geographic market expansion through the ability to offer our services in additional countries.
Nonetheless, we face a number of challenges and uncertainties in operating our business, including:
our ability to maintain the health, capacity, control and level of service of our satellites;
our ability to develop and launch new and innovative products and services;
changes in general economic, business and industry conditions, including the effects of currency exchange rates;
our reliance on a single primary commercial gateway and a primary satellite network operations center;
competition from other mobile satellite service providers and, to a lesser extent, from the expansion of terrestrial-based cellular phone systems and related pricing pressures;
market acceptance of our products;
regulatory requirements in existing and new geographic markets;
challenges associated with global operations, including as a result of conflicts in or affecting markets in which we operate;
rapid and significant technological changes in the telecommunications industry;
our ability to generate sufficient internal cash flows to repay our debt;
reliance on our wholesale distribution network to market and sell our products, services and applications effectively;
reliance on a global supply chain, including single-source suppliers for the manufacture of most of our subscriber equipment and for some of the components required in the manufacture of our end-user subscriber equipment and our ability to purchase component parts that are periodically subject to shortages resulting from surges in demand, natural disasters or other events, including the COVID-19 pandemic; and
reliance on a few significant customers, particularly agencies of the U.S. government, for a substantial portion of our revenue, as a result of which the loss or decline in business with any of these customers may negatively impact our revenue and collectability of related accounts receivable.

19


Comparison of Our Results of Operations for the Three Months Ended June 30, 2022 and 2021
Three Months Ended June 30,Change
2022% of Total Revenue2021% of Total Revenue
($ in thousands)DollarsPercent
Revenue:
Services$132,861 76 %$121,321 81 %$11,540 10 %
Subscriber equipment33,759 19 %21,756 14 %12,003 55 %
Engineering and support services8,299 %6,842 %1,457 21 %
Total revenue174,919 100 %149,919 100 %25,000 17 %
Operating expenses:
Cost of services (exclusive of depreciation
and amortization)25,320 14 %23,391 16 %1,929 %
Cost of subscriber equipment21,471 12 %12,671 %8,800 69 %
Research and development2,986 %2,624 %362 14 %
Selling, general and administrative28,662 16 %23,970 16 %4,692 20 %
Depreciation and amortization75,681 44 %75,668 50 %13 — %
Total operating expenses154,120 88 %138,324 92 %15,796 11 %
Operating income20,799 12 %11,595 %9,204 79 %
Other expense:
Interest expense, net(14,780)(9)%(17,630)(12)%2,850 (16)%
Other expense, net(220)— %(116)— %(104)90 %
Total other expense, net(15,000)(9)%(17,746)(12)%2,746 (15)%
Income (loss) before income taxes5,799 %(6,151)(4)%11,950 (194)%
Income tax benefit (expense)(1,242)(1)%9,984 %(11,226)(112)%
Net income$4,557 %$3,833 %$724 


20


Revenue
Commercial Service Revenue 
Three Months Ended June 30,
20222021Change
Revenue
Billable
Subscribers (1)
ARPU (2)
Revenue
Billable
Subscribers (1)
ARPU (2)
RevenueBillable
Subscribers
ARPU
(Revenue in millions and subscribers in thousands)
Commercial services:
Voice and data$48.5 394 $42 $43.3 365 $40 $5.2 29 $
IoT data 30.6 1,323 7.96 27.2 1,085 8.69 3.4 238 (0.73)
Broadband (3)
12.1 14.1 292 10.6 12.6 289 1.5 1.5 
Hosted payload and other data15.2 N/A14.4 N/A0.8 N/A
Total commercial services$106.4 1,731 $95.5 1,463$10.9 268 
(1)Billable subscriber numbers shown are at the end of the respective period.
(2)Average monthly revenue per unit, or ARPU, is calculated by dividing revenue in the respective period by the average of the number of billable subscribers at the beginning of the period and the number of billable subscribers at the end of the period and then dividing the result by the number of months in the period. Billable subscriber and ARPU data is not applicable for hosted payload and other data service revenue items.
(3)Commercial broadband service consists of Iridium OpenPort® and Iridium Certus® broadband services.
For the three months ended June 30, 2022, total commercial services revenue increased $10.9 million, or 11%, from the prior year period primarily as a result of increases in voice and data, IoT, broadband and hosted payload and other data revenue. These increases were driven primarily by increases in billable subscribers across all commercial service lines. Commercial voice and data revenue increased $5.2 million, or 12%, for the three months ended June 30, 2022, compared to the same period of the prior year, primarily due to an increase in volume across all postpaid and prepaid voice and data services. Commercial IoT revenue increased $3.4 million, or 13%, for the three months ended June 30, 2022, compared to the same period of the prior year, driven by a 22% increase in IoT billable subscribers primarily due to continued strength in consumer personal communications devices. The effect on revenue of increased subscribers was partially offset by an 8% reduction in IoT ARPU, primarily due to the shifting mix of subscribers using lower ARPU plans, including the increased proportion of personal communications subscribers. Commercial broadband revenue increased $1.5 million, or 14%, for the three months ended June 30, 2022, compared to the prior year period, driven by an increase in broadband billable subscribers. Hosted payload and other service revenue increased $0.8 million, or 5%, for the three months ended June 30, 2022, compared to the prior year period, primarily related to increased usage for our payload services and our precision timing and location services.
Government Service Revenue 
 Three Months Ended June 30,  
 20222021Change
Revenue
Billable
Subscribers (1)
Revenue
Billable
Subscribers (1)
RevenueBillable
Subscribers
(Revenue in millions and subscribers in thousands)
Government services$26.5 144$25.8 153$0.7 (9)
(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 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, which caused the increase in revenue of $0.7 million compared to the prior year period.

21


Subscriber Equipment Revenue
Subscriber equipment revenue increased by $12.0 million, or 55%, for the three months ended June 30, 2022, compared to the prior year period, primarily due to an increase in the volume of handset and IoT device sales.
Engineering and Support Service Revenue
 Three Months Ended June 30, 
 20222021Change
 (In millions)
Commercial engineering and support services$1.4 $1.0 $0.4 
Government engineering and support services6.9 5.8 1.1 
Total engineering and support services$8.3 $6.8 $1.5 
Engineering and support service revenue increased by $1.5 million, or 22%, for the three months ended June 30, 2022, compared to the prior year period, primarily due to the episodic nature of contract work under certain government and commercial contracts. Based on a contract awarded by the Space Development Agency to General Dynamics Mission Systems, with Iridium as a subcontractor, which we refer to as the SDA contract, we expect engineering and support service revenue, as well as associated expenses, to be higher than prior years for the remainder of 2022 and in coming years.
Operating Expenses
Cost of Services (exclusive of depreciation and amortization)
Cost of services (exclusive of depreciation and amortization) includes the cost of network engineering and operations staff, including contractors, software maintenance, product support services and cost of services for government and commercial engineering and support service revenue.
Cost of services (exclusive of depreciation and amortization) increased by $1.9 million, or 8%, for the three months ended June 30, 2022 from the prior year period, primarily as a result of the increase in work under certain government and commercial engineering contracts, as noted above.
Cost of Subscriber Equipment
Cost of subscriber equipment includes the direct costs of equipment sold, which consist of manufacturing costs, allocation of overhead, and warranty costs.
Cost of subscriber equipment increased by $8.8 million, or 69%, for the three months ended June 30, 2022, compared to the prior year period primarily due to an increase in volume of handset and IoT device sales, as noted above. The percentage increase of subscriber equipment costs exceeded the percentage increase in subscriber equipment revenue primarily due to a change in the product mix and increased inventory component costs.
Research and Development
Research and development expenses increased by $0.4 million, or 14%, for the three months ended June 30, 2022, compared to the prior year period based on increased spending on device-related features for our network.
Selling, General and Administrative
Selling, general and administrative expenses that are not directly attributable to the sale of services or products include sales and marketing costs, as well as employee-related expenses (such as salaries, wages, and benefits), legal, finance, information technology, facilities, billing and customer care expenses.
Selling, general and administrative expenses increased by $4.7 million, or 20%, for the three months ended June 30, 2022, compared to the prior year period, primarily due to higher management incentive and other equity compensation costs and travel expenses incurred in the current year quarter as compared to the prior year quarter. We expect selling, general and administrative expense to increase by approximately 20% in 2022 primarily related to stock compensation costs.
Depreciation and Amortization
Depreciation and amortization expense remained relatively flat compared to the prior year period. We anticipate depreciation and amortization expense to remain relatively consistent from quarter to quarter based on our anticipated capital expenditures.
22


Other Expense
Interest Expense, Net
Interest expense, net decreased $2.9 million, or 16%, for the three months ended June 30, 2022, compared to the prior year period. The decrease resulted primarily from a decrease in the interest rate for the Term Loan following the July 2021 repricing.
Income Taxes
For the three months ended June 30, 2022, our income tax expense was $1.2 million, compared to income tax benefit of $10.0 million for the prior year period. The increase in income tax expense is primarily related to the prior period net impact of a discrete state tax benefit associated with a state apportionment change and pre-tax book income in 2022 compared to the prior year pre-tax book loss.
Net Income (Loss)
Net income was $4.6 million for the three months ended June 30, 2022, compared to $3.8 million for the prior year period. The change was primarily a result of an $9.2 million increase in operating income and an $2.9 million decrease in interest expense, net, offset by the $11.2 million increase in income tax expense as described above.
Comparison of Our Results of Operations for the Six Months Ended June 30, 2022 and 2021
Six Months Ended June 30,Change
2022% of Total Revenue2021% of Total Revenue
($ in thousands)DollarsPercent
Revenue:
Services$258,970 75 %$237,473 81 %$21,497 %
Subscriber equipment67,503 20 %45,709 15 %21,794 48 %
Engineering and support services16,665 %13,272 %3,393 26 %
Total revenue343,138 100 %296,454 100 %46,684 16 %
Operating expenses:
Cost of services (exclusive of depreciation
and amortization)49,418 14 %46,598 16 %2,820 %
Cost of subscriber equipment41,976 12 %25,699 %16,277 63 %
Research and development5,605 %5,341 %264 %
Selling, general and administrative54,765 16 %46,627 16 %8,138 17 %
Depreciation and amortization151,342 44 %151,578 51 %(236)— %
Total operating expenses303,106 88 %275,843 94 %27,263 10 %
Operating income40,032 12 %20,611 %19,421 94 %
Other expense:
Interest expense, net(29,357)(9)%(40,399)(14)%11,042 (27)%
Other expense, net(228)— %(144)— %(84)58 %
Total other expense, net(29,585)(9)%(40,543)(14)%10,958 (27)%
Income (loss) before income taxes10,447 %(19,932)(8)%30,379 (152)%
Income tax benefit (expense)(3,066)(1)%18,582 %(21,648)(116)%
Net income (loss)$7,381 %$(1,350)(2)%$8,731 (647)%

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Revenue
Commercial Service Revenue 
Six Months Ended June 30,
20222021Change
Revenue
Billable
Subscribers (1)
ARPU (2)
Revenue
Billable
Subscribers (1)
ARPU (2)
RevenueBillable
Subscribers
ARPU
(Revenue in millions and subscribers in thousands)
Commercial services:
Voice and data$93.4 394 $41 $84.7 365 $39 $8.7 29 $
IoT data 59.1 1,323 7.83 52.0 1,085 8.46 7.1 238 (0.63)
Broadband (3)
23.6 14.1 289 20.1 12.6 276 3.5 1.5 13 
Hosted payload and other data29.9 N/A29.2 N/A0.7 N/A
Total commercial services$206.0 1,731 $186.0 1,463$20.0 268 
(1)Billable subscriber numbers shown are at the end of the respective period.
(2)Average monthly revenue per unit, or ARPU, is calculated by dividing revenue in the respective period by the average of the number of billable subscribers at the beginning of the period and the number of billable subscribers at the end of the period and then dividing the result by the number of months in the period. Billable subscriber and ARPU data is not applicable for hosted payload and other data service revenue items.
(3)Commercial broadband service consists of Iridium OpenPort and Iridium Certus broadband services.
For the six months ended June 30, 2022, total commercial services revenue increased $20.0 million, or 11%, from the prior year period primarily as a result of increases in voice and data, IoT, broadband and hosted payload and other data revenue mainly driven by increases in billable subscribers. Commercial voice and data revenue increased $8.7 million, or 10%, from the prior year period primarily due to an increase in volume across all voice and data services. Commercial IoT revenue increased $7.1 million, or 14%, for the six months ended June 30, 2022, compared to the prior year period, driven by a 22% increase in IoT billable subscribers primarily due to continued strength in personal communications devices. The subscriber increase effect on revenue was partially offset by a 7% reduction in IoT ARPU, primarily due to the shifting mix of subscribers using lower ARPU plans, including the increased proportion of personal communication subscribers. Commercial broadband revenue increased $3.5 million, or 17%, for the six months ended June 30, 2022, compared to the prior year period, due primarily to the increase in broadband billable subscribers and an increase in ARPU associated with the increase in the mix of subscribers utilizing higher ARPU Iridium Certus broadband plans. Hosted payload and other service revenue also increased $0.7 million, or 2%, for the six months ended June 30, 2022, compared to the prior year period, primarily related to increased usage for our payload services.
Government Service Revenue 
 Six Months Ended June 30,  
 20222021Change
Revenue
Billable
Subscribers (1)
Revenue
Billable
Subscribers (1)
RevenueBillable
Subscribers
(Revenue in millions and subscribers in thousands)
Government services$53.0 144$51.5 153$1.5 (9)
(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 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, which caused the increase of $1.5 million compared to the prior year period.

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Subscriber Equipment Revenue
Subscriber equipment revenue increased by $21.8 million, or 48%, for the six months ended June 30, 2022 compared to the prior year period, primarily due to an increase in the volume of all device sales.
Engineering and Support Service Revenue
 Six Months Ended June 30, 
 20222021Change
 (In millions)
Commercial engineering and support services$2.5 $1.7 $0.8 
Government engineering and support services14.2 11.5 2.7 
Total engineering and support services$16.7 $13.2 $3.5 
Engineering and support service revenue increased $3.5 million, or 26%, for the six months ended June 30, 2022 compared to the prior year period primarily due to the episodic nature of contract work under certain government and commercial projects. As a result of the SDA contract noted above, we expect engineering and support service revenue, as well as associated expenses, to be generally higher than prior years for the remainder of 2022 and in coming years.
Operating Expenses
Cost of Services (exclusive of depreciation and amortization)
Cost of services (exclusive of depreciation and amortization) increased by $2.8 million, or 6%, for the six months ended June 30, 2022 from the prior year period, primarily as a result of an increase in work under certain government and commercial engineering contracts, as noted above, and higher satellite operation costs.
Cost of Subscriber Equipment
Cost of subscriber equipment increased by $16.3 million, or 63%, for the six months ended June 30, 2022 compared to the prior year period primarily due to an increase in volume of all device sales, as noted above. The percentage increase of subscriber equipment costs exceeded the percentage increase in subscriber equipment revenue primarily due to a change in the customer mix and increased inventory component costs.
Research and Development
Research and development expenses increased by $0.3 million, or 5%, for the six months ended June 30, 2022 compared to the prior year period based on increased spending on device-related features for our network.
Selling, General and Administrative
Selling, general and administrative expenses increased by $8.1 million, or 17%, for the six months ended June 30, 2022 compared to the prior year period, primarily due to higher management incentive and other equity compensation costs and increased travel expenses incurred in the current year period as compared to the prior year period. We expect selling, general and administrative expense to increase by approximately 20% in 2022 primarily related to stock compensation costs.
Depreciation and Amortization
Depreciation and amortization expense remained relatively flat compared to the prior year period. We anticipate depreciation and amortization expense to remain relatively consistent from quarter to quarter based on our anticipated capital expenditures.
Other Expense
Interest Expense, Net
Interest expense, net decreased $11.0 million for the six months ended June 30, 2022 compared to the prior year period. The decrease resulted primarily from decreases in the interest rate on our Term Loan as a result of the repricings in January 2021 and July 2021. As the repricing events occurred in 2021, third-party financing costs decreased $3.6 million in the current year.
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Income Taxes
For the six months ended June 30, 2022, our income tax expense was $3.1 million, compared to income tax benefit of $18.6 million for the prior year period. The increase in income tax expense was primarily related to (i) the prior period net impact of a discrete state tax benefit associated with a state apportionment change, (ii) pre-tax book income in 2022 compared to the prior year pre-tax book loss, and (iii) a decreased stock compensation tax benefit.
Net Income (Loss)
Net income was $7.4 million for the six months ended June 30, 2022, compared to net loss of $1.4 million for the prior year period. The change primarily resulted from the $19.4 million increase in operating income, as well as the $11.0 million decrease in interest expense, net. These changes were offset by the $21.6 million increase in the income tax expense as described above.
Liquidity and Capital Resources
In November 2019 and February 2020, we borrowed a total of $1,650.0 million in aggregate principal amount under a term loan with Deutsche Bank AG, or the Term Loan, with an accompanying $100.0 million revolving loan available to us, or the Revolving Facility. Both facilities are under a credit agreement with the lenders, or the Credit Agreement. As repriced to date, the Term Loan bears interest at an annual rate of LIBOR plus 2.50%, with a 0.75% LIBOR floor. All other terms of the Term Loan remain the same as before the repricings, including maturity in November 2026. The interest rate on the Revolving Facility is LIBOR plus 3.75% with no LIBOR floor, and the Revolving Facility has a maturity date in November 2024. See Note 5 to our condensed consolidated financial statements included in this report for further discussion of the Term Loan and Revolving Facility.
As of June 30, 2022, we reported an aggregate balance of $1,612.9 million in borrowings under the Term Loan, before $20.9 million of net deferred financing costs, for a net principal balance of $1,592.0 million outstanding in our condensed consolidated balance sheet. We have not drawn on our Revolving Facility.
Our Term Loan contains no financial maintenance covenants. With respect to the Revolving Facility, we are required to maintain a consolidated first lien net leverage ratio of no greater than 6.25 to 1 if more than 35% of the Revolving Facility has been drawn. The Credit Agreement contains other customary representations and warranties, affirmative and negative covenants, and events of default. We were in compliance with all covenants under the Credit Agreement as of June 30, 2022.
The Credit Agreement restricts our ability to incur liens, engage in mergers or asset sales, pay dividends, repay subordinated indebtedness, incur indebtedness, make investments and loans, and engage in other transactions as specified in the Credit Agreement. The Credit Agreement provides for specified exceptions, including baskets measured as a percentage of trailing twelve months of earnings before interest, taxes, depreciation and amortization, or EBITDA (as defined in the Credit Agreement), and unlimited exceptions based on achievement and maintenance of specified leverage ratios, for, among other things, incurring indebtedness and liens and making investments, restricted payments for dividends and share repurchases, and payments of subordinated indebtedness. The Credit Agreement permits repayment, prepayment, and repricing transactions. The Credit Agreement also contains a mandatory prepayment sweep mechanism with respect to a portion of our excess cash flow (as defined in the Credit Agreement), which is phased out based on achievement and maintenance of specified leverage ratios. As of December 31, 2021, our leverage ratio was below the specified level, and we were not required to make a mandatory prepayment with respect to 2021 cash flows.
We entered into an interest rate cap agreement, or the Cap, that began in December 2021. The Cap manages our exposure to interest rate movements on a portion of our Term Loan. The Cap provides the right to receive payment if one-month LIBOR exceeds 1.5%. Under the Cap, we pay a fixed monthly premium at an annual rate of 0.31%. The Cap carried a notional amount of $1,000.0 million as of June 30, 2022. The Cap is designed to mirror the terms of the Term Loan and to offset the cash flows being hedged. We designated the Cap as a cash flow hedge of the variability of the LIBOR-based interest payments on the Term Loan. The effective portion of the Cap's change in fair value will be recorded in accumulated other comprehensive income (loss) and will be reclassified into earnings during the period in which the hedged transaction affects earnings. See Note 6 to our condensed consolidated financial statements included in this report for further discussion of the Cap and our prior derivative financial instruments.
As of June 30, 2022, we had entered into non-cancelable purchase obligations of approximately $55.2 million for inventory purchases with Benchmark Electronics, Inc., our primary third-party vendor. Our purchase obligations, all of which are due during 2022, increased by $23.2 million from December 31, 2021 due to increased demand and recovery from supply-chain constraints experienced during 2021.
As of June 30, 2022, our total cash and cash equivalents balance was $227.2 million, down from $320.9 million as of December 31, 2021, principally as a result of the $169.2 million in repurchases of our common stock during the six months ended June 30, 2022, offset by internally generated cash flows. We also had $100.0 million of borrowing availability under our Revolving Facility. In addition to the Revolving Facility, our principal sources of liquidity are internally generated cash flows. Other than the purchase obligation noted above, our principal liquidity requirements over the next twelve months are primarily (i) required principal and interest on the Term Loan, which we expect to be $16.5 million and, based on the current interest rate,
26


approximately $70.0 million, respectively, (ii) capital expenditures of approximately $75.0 million, depending on costs in connection with the potential launch of ground spare satellites, and (iii) working capital. In our discretion, we may also make share repurchases under the share repurchase program described in Note 8 to the financial statements included in this report, although we have no obligation to do so.
We believe our liquidity sources will provide sufficient funds for us to meet our liquidity requirements for at least the next 12 months.
Our material long-term cash requirement is the repayment of the remaining principal amount under the Term Loan upon its maturity in 2026, which is expected to be $1,555.1 million. We expect to refinance this amount at or prior to maturity.
Cash Flows
The following table summarizes our cash flows:
 Six Months Ended June 30, 
 20222021Change
 (In thousands)
Cash provided by operating activities$165,565 $125,967 $39,598 
Cash used in investing activities$(81,018)$(18,937)$(62,081)
Cash used in financing activities$(180,768)$(131,222)$(49,546)
Cash Flows Provided by Operating Activities
Net cash provided by operating activities for the six months ended June 30, 2022 increased $39.6 million from the prior year period. Net income (loss), as adjusted for non-cash activities, improved by $36.3 million over the prior year, primarily as a result of improved profitability. Working capital also improved by approximately $3.3 million. Cash flows from working capital increased related to deferred revenue, primarily caused by the required semi-annual payment from Aireon. Cash flows from working capital were offset by an increase in accounts receivable due to increased sales across all revenue types.
Cash Flows Used in Investing Activities
Net cash used in investing activities for the six months ended June 30, 2022 increased by $62.1 million as compared to the prior year period due to the $50.0 million investment in Aireon (see Note 12 for further information) and increased capital expenditures. We continue to expect our capital expenditures to average approximately $40.0 million per year until 2029, exclusive of any costs we may incur to launch our ground spares.
Cash Flows Used in Financing Activities
Net cash used in financing activities for the six months ended June 30, 2022 increased by $49.5 million compared to the prior year period primarily due to an increase in cash used for the repurchases of our common stock in the first half of 2022 as compared to the first half of 2021. See Note 8 for further information on our stock repurchase program.
Seasonality
Our results of operations have been subject to seasonal usage changes for commercial customers, and our results will be affected by similar seasonality going forward. March through October are typically the peak months for commercial voice services revenue and related subscriber equipment sales. U.S. government revenue and commercial IoT revenue have been less subject to seasonal usage changes.
Critical Accounting Policies and Estimates
The discussion and analysis of our financial condition and results of operations is based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States, or U.S. GAAP. The preparation of these financial statements requires the use of estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to revenue recognition, useful lives of property and equipment, long-lived assets and other intangible assets, deferred financing costs, income taxes, stock-based compensation, and other estimates. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. There have been no changes to our critical accounting policies and estimates from those described in our Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC on February 17, 2022.
Recent Accounting Pronouncements
Refer to Note 2 to our condensed consolidated financial statements for a full description of recent accounting pronouncements and recently adopted pronouncements.
27


ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We had an outstanding aggregate balance of $1,612.9 million under the Term Loan as of June 30, 2022. Our Cap began in December 2021, which manages our exposure to interest rate movements on a portion of our Term Loan. The Cap provides the right to receive payment if one-month LIBOR exceeds 1.5%. For the portion of the Term Loan not covered under our hedging arrangements, we pay interest at an annual rate equal to the London Interbank Offered Rate, or LIBOR, plus 2.5%, with a 0.75% LIBOR floor. Accordingly, we have been and continue to be subject to interest rate fluctuations. In July, the one-month LIBOR has increased to over the level of the Cap. As a result of the interest rate rising from the LIBOR floor to the level of the Cap, we expect our annual interest expense to increase by approximately $12.0 million, or approximately $3.0 million per quarter. For every LIBOR increase of 25 basis points above the level of the Cap, we expect our annual interest expense to increase by an additional $1.5 million related to the unhedged portion of the Term Loan.
We have not borrowed under our Revolving Facility. Accordingly, although the Revolving Facility bears interest at LIBOR plus 3.75%, without a LIBOR floor, if and as drawn, we are not currently exposed to fluctuations in interest rates with respect to our Revolving Facility.
Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash and cash equivalents, as well as accounts receivable. We maintain our cash and cash equivalents with financial institutions with high credit ratings and at times maintain the balance of our deposits in excess of federally insured limits. A significant portion of our cash is held in a money market fund invested in U.S. treasuries, agency mortgage-backed securities and/or U.S. government-guaranteed debt. Accounts receivable are due from both domestic and international customers. We perform credit evaluations of our customers’ financial condition and record reserves to provide for estimated credit losses. Accounts payable are owed to both domestic and international vendors.

ITEM 4.    CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our chief executive officer, who is our principal executive officer, and our chief financial officer, who is our principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as of the end of the period covered by this report. In evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs. In addition, the design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a control system, misstatements due to error or fraud may occur and not be detected.
Based on this evaluation, our chief executive officer and our chief financial officer concluded that our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the U.S. Securities and Exchange Commission’s rules and forms, and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosures.
Changes in Internal Control Over Financial Reporting
During the quarter ended June 30, 2022, there were no changes in our internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II.
OTHER INFORMATION 
ITEM 1.    LEGAL PROCEEDINGS.
There are no material pending legal proceedings, other than ordinary routine litigation incidental to our business.

ITEM 1A.     RISK FACTORS.
Our business is subject to risks and events that, if they occur, could adversely affect our financial condition and results of operations and the trading price of our securities. In addition to the other information set forth in this quarterly report on Form 10-Q, you should carefully consider the factors described in “Part I, Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the Securities and Exchange Commission on February 17, 2022, as supplemented by the following updated risk factor.
Our Russian operations have been and may continue to be negatively affected by Russia's invasion of Ukraine and related sanctions imposed in response, and we may in the future choose or be required to further limit or shut down those operations entirely.
We provide satellite communications services in Russia through two local subsidiaries employing 34 people and authorized Russian service providers, using a dedicated gateway in Russia. In 2021, revenue from our operations in Russia represented approximately 2.3% of our total revenue, including approximately 2.5% of our total service revenue and 2.4% of our equipment revenue. As a result of Russia's invasion of Ukraine in February 2022, we have ceased shipment of equipment to Russia, as well as making other adjustments to our operations in light of U.S. and international sanctions. As a result of these factors, we expect significantly reduced revenue from our operations in Russia in 2022. Further, our sales in Russia are conducted in rubles and then translated to U.S. dollars in our financial results. The value of the ruble has fluctuated substantially since the invasion, which may affect our reported revenues.
In addition, we may in the future choose or be required to further limit or cease operations in Russia entirely, in which case we will no longer receive any revenue from those operations. We could also incur significant expenses as a result of the process of shutting down operations in Russia.
ITEM 2.     UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
Issuer Purchases of Equity Securities
Period(a)
Total number of shares purchased
(b)
Average price paid per share
(c)
Total number of shares purchased as part of publicly announced plans or programs
(d)
Maximum dollar value) of shares that may yet be purchased under the plans or programs
April 1-30423,522 $37.88 423,522 $286.4 million
May 1-31545,881 $34.71 545,881 $267.5 million
June 1-30— — — $267.5 million
Total969,403 $35.06 969,403 — 
In February 2021, our board of directors approved the repurchase of up to $300.0 million of our common stock through December 31, 2022. A portion of the repurchases effected in April 2022, as shown in the table above, exhausted the remainder of the February 2021 authorization. In March 2022, our board of directors approved the repurchase of up to an additional $300.0 million of our common stock through December 31, 2023. All shares listed above were purchased under these authorizations in open market transactions.
ITEM 3.     DEFAULTS UPON SENIOR SECURITIES.
None. 
ITEM 4.     MINE SAFETY DISCLOSURES.
Not applicable.
29


ITEM 5.     OTHER INFORMATION.
None.
30


ITEM 6.     EXHIBITS.
The following list of exhibits includes exhibits submitted with this Form 10-Q as filed with the Securities and Exchange Commission.
Exhibit Description
31.1 
31.2 
32.1** 
101 
The following financial information from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, filed with the Securities and Exchange Commission on July 26, 2022, formatted in iXBRL (Inline eXtensible Business Reporting Language):
(i) Condensed Consolidated Balance Sheets at June 30, 2022 and December 31, 2021;
(ii) Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended June 30, 2022 and 2021;
(iii) Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and six months ended June 30, 2022 and 2021;
(iv) Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2022 and 2021; and
(iv) Notes to Condensed Consolidated Financial Statements.
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
**These certifications are being furnished solely to accompany this quarterly report pursuant to 18 U.S.C. Section 1350, and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and are not to be incorporated by reference into any filing of the registrant, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
31


SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 IRIDIUM COMMUNICATIONS INC.
   
 By:/s/ Thomas J. Fitzpatrick
  Thomas J. Fitzpatrick
  Chief Financial Officer
(as duly authorized officer and as principal financial officer of the registrant)
 Date: July 26, 2022
32

Dates Referenced Herein   and   Documents Incorporated by Reference

This ‘10-Q’ Filing    Date    Other Filings
12/31/23
12/31/22
Filed on:7/26/228-K
7/20/22
For Period end:6/30/22
2/17/2210-K,  8-K
12/31/2110-K,  5,  SD
6/30/2110-Q
12/31/2010-K,  10-K/A,  DEF 14A,  SD
 List all Filings 
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