UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________________________________________________________________________
FORM 10-K
_____________________________________________________________________________________________
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020
OR
For the transition period from to
Commission File Number 001-33963
_____________________________________________________________________________________________
Iridium Communications Inc.
(Exact name of registrant as specified in its charter)
_____________________________________________________________________________________________
DE
(State or other jurisdiction of
incorporation or organization)
26-1344998
(I.R.S. Employer
Identification No.)
1750 Tysons Boulevard, Suite 1400, McLean, VA 22102
(Address of principal executive offices, including zip code)
703-287-7400
(Registrant’s telephone number, including area code)
Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each Class
Common Stock, $0.001 par value
Trading Symbol
IRDM
Name of Each Exchange on Which Registered
The Nasdaq Stock Market LLC
(Nasdaq Global Select Market)
Securities Registered Pursuant to Section 12(g) of the Act: None
_________________________________________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
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. Yes ☒ 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). Yes ☒ 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. (Check one):
Accelerated Filer
Large Accelerated Filer
Smaller Reporting Company
Non-Accelerated Filer
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. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of internal control over financial reporting under Section 404(b) of the
Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold as of June 30, 2020, the last
business day of the registrant's most recently completed second fiscal quarter, was approximately $2,895.0 million.
The number of shares of the registrant’s common stock, par value $0.001 per share, outstanding as of February 5, 2021 was 134,279,633.
Portions of the registrant’s definitive proxy statement for its 2021 annual meeting of stockholders to be filed pursuant to Regulation 14A with the Securities and Exchange Commission not later than 120 days
after the registrant’s fiscal year end of December 31, 2020, are incorporated by reference into Part III of this Form 10-K.
DOCUMENTS INCORPORATED BY REFERENCE
IRIDIUM COMMUNICATIONS INC.
ANNUAL REPORT ON FORM 10-K
Year Ended December 31, 2020
TABLE OF CONTENTS
PART I
Item 1.
Business
Item 1A.
Risk Factors
Item 1B.
Unresolved Staff Comments
Item 2.
Item 3.
Item 4.
PART II
Item 5.
Item 6.
Item 7.
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Selected Financial Data
Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
Item 8.
Item 9.
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A.
Controls and Procedures
Item 9B.
Other Information
PART III
Item 10.
Directors, Executive Officers and Corporate Governance
Item 11.
Executive Compensation
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13.
Certain Relationships and Related Party Transactions, and Director Independence
Item 14.
Principal Accountant Fees and Services
PART IV
Item 15.
Exhibits, Financial Statement Schedules
Item 16.
Form 10-K Summary
SIGNATURES
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Forward-Looking Statements
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 developments or otherwise are not statements of historical fact.
Without limiting the foregoing, the words “believes,” “anticipates,” “plans,” “expects,” “intends” 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 discussed under the caption “Risk Factors” in this Form 10-K 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.
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Item 1. Business
Corporate Background
PART I
We were formed as GHL Acquisition Corp., a special purpose acquisition company, in November 2007, for the purpose of effecting a merger, capital stock
exchange, asset acquisition, stock purchase, reorganization or other similar business combination. On February 21, 2008, we consummated our initial
public offering. On September 29, 2009, we acquired, directly and indirectly, all the outstanding equity of Iridium Holdings LLC, or Iridium Holdings, and
changed our name from GHL Acquisition Corp. to Iridium Communications Inc.
Iridium Holdings was formed under the laws of Delaware in 2000, and on December 11, 2000, Iridium Holdings, through its wholly owned subsidiary
Iridium Satellite LLC, or Iridium Satellite, acquired certain satellite assets from Iridium LLC, a non-affiliated debtor in possession, pursuant to an asset
purchase agreement.
Business Overview
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 unique L-band satellite network provides reliable 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 our satellite constellation using radio frequency crosslinks between satellites. This unique architecture
minimizes the need for local 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.
In February 2019, we completed our Iridium NEXT program, the replacement of our first-generation satellites with a new satellite constellation that
supports higher data speeds for new products, including Iridium Certus broadband service. The new constellation maintains the same interlinked mesh
architecture of our first-generation constellation and is compatible with all end-user equipment.
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The Iridium constellation also hosts the Aireon system, which provides a global air traffic surveillance service through a series of automatic dependent
surveillance-broadcast, or ADS-B, receivers on our satellites. We formed Aireon LLC in 2011, with subsequent investments from the air navigation service
providers, or ANSPs, of Canada, Italy, Denmark, Ireland and the United Kingdom, to develop and market this service. Aireon has contracted to provide the
service to our co-investors in Aireon and to other ANSPs around the world, including the U.S. Federal Aviation Administration, or FAA. Aireon has also
contracted to pay us a fee to host the ADS-B receivers on our satellites, as well as data service fees for the delivery of the air traffic surveillance data over
the Iridium system. In addition, we have entered into an agreement with L3Harris Technologies, Inc., or L3Harris, the manufacturer of the Aireon hosted
payload, pursuant to which L3Harris pays us fees to allocate the remaining hosted payload capacity to its customers and data service fees on behalf of these
customers.
Our commercial business, which we view as our primary source of long-term growth, is diverse and serves markets such as emergency services, maritime,
aviation, government, utilities, oil and gas, mining, recreation, forestry, heavy equipment, construction, railways and other transportation. Many of our end
users view our products and services as critical to their daily operations and integral to their communications and business infrastructure. For example,
multinational corporations in various sectors use our services for business telephony, e-mail and data transfer, including telematics and personal location
tracking, and to provide mobile communications services for employees in areas inadequately served by other telecommunications networks. Commercial
enterprises use our services to track assets in remote areas and provide telematics information such as location and engine diagnostics. Ship crews and
passengers use our services for ship-to-shore calling, as well as to send and receive e-mail and data files, and to receive electronic media, weather reports,
emergency bulletins and electronic charts. Shipping operators use our services to manage operations on board ships and to transmit data, such as course,
speed, fuel, weather and other navigation service data. Aviation end users use our services for air-to-ground telephony and data communications for
position reporting, flight following, emergency tracking, weather information, electronic flight bag updates, and airline operational communications.
Explorers and adventurers use our services as a safety and critical
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communications lifeline to remain in contact with friends and family, as well as for emergency distress signals. We expect that Iridium Certus, launched in
January 2019, will continue to drive growth opportunities in our commercial business. With initial broadband services provided for the maritime and land-
mobile industries, Iridium Certus offers the flexibility to scale device speeds, sizes and power requirements both up and down based on the needs of the
end-user. It provides a platform for our partners to develop specialized broadband, narrowband and midband (a term we use to describe services between
our legacy 2.4 Kbps narrowband and our 128 Kbps and higher broadband offerings) applications on our network.
The U.S. government, directly and indirectly, has been and continues to be our largest single customer, generating $130.6 million in service and
engineering and support service revenue, or 22% of our total revenue, for the year ended December 31, 2020. This does not include revenue from the sale
of equipment that may be ultimately purchased by U.S. or non-U.S. government agencies through third-party distributors, or airtime services purchased by
U.S. or non-U.S. government agencies that are provided through our commercial gateway, as we lack specific visibility into these activities and the related
revenue. We are operating under a multi-year, fixed-price contract with the U.S. government to provide specified satellite airtime services for an unlimited
number of U.S. Department of Defense and other federal government subscribers. This contract has a total value of $738.5 million over its seven-year term,
through September 2026. We may provide other services, such as Iridium Certus, to the U.S. government under separate arrangements for an additional fee.
In addition, we intend to invest approximately $10-$12 million over the first three years of our Enhanced Mobile Satellite Services, or EMSS, contract in
support of the U.S. government to implement enhanced services at its dedicated gateway, which will be accounted for as additional cost of services.
The U.S. government owns and operates a dedicated gateway that is only compatible with our satellite network. The U.S. armed services, State
Department, Department of Homeland Security, Federal Emergency Management Agency, or FEMA, Customs and Border Protection, and other U.S.
government agencies, as well as other nations’ governmental agencies, use our voice and data services for a wide variety of applications. Our voice and
data products are used for numerous primary and backup communications solutions, including logistical, administrative, morale and welfare, tactical, and
emergency communications. In addition, our products are installed in ground vehicles, ships, and rotary- and fixed-wing aircraft and are used for
command-and-control and situational awareness purposes. Our satellite network provides increased network security to the U.S. government because traffic
is routed across our satellite constellation before being brought down to earth through the dedicated, secure U.S. government gateway. The U.S.
government has made, and continues to make, significant investments to upgrade its dedicated gateway, to purchase our voice and data devices, and to
invest directly and indirectly in research and development and implementation support for additional services on our network, such as Distributed Tactical
Communications Services, or DTCS, and Iridium Certus.
We sell our products and services to commercial end users through a wholesale distribution network, encompassing approximately 125 service providers,
approximately 285 value-added resellers, or VARs, and approximately 90 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 December 31, 2020, we had approximately 1,476,000 billable subscribers worldwide, representing a 14% increase compared to December 31, 2019.
Total revenue increased from $560.4 million in 2019 to $583.4 million in 2020.
Industry
We compete in the mobile satellite services sector of the global communications industry. Mobile satellite services operators provide voice and data
services to people and machines using a network of satellites and ground facilities. Mobile satellite services are intended to meet users’ needs for
connectivity in all locations where terrestrial wireless and wireline communications networks do not exist, do not provide sufficient coverage, or are
impaired, including rural and developing areas that lack adequate wireless or wireline networks, airways, ocean and polar regions where few alternatives
exist, and regions where the telecommunications infrastructure has been affected by political conflicts or natural disasters.
Government organizations, including military and intelligence agencies and disaster response agencies, non-governmental organizations, and industrial
operations and support teams depend on mobile and fixed voice and data satellite communications services on a regular basis. Businesses with global
operations require reliable communications services when operating in remote locations around the world. Mobile satellite services users span many
sectors, including emergency services, maritime,
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aviation, government, utilities, oil and gas, mining, recreation, forestry, heavy equipment, construction, railways and other transportation, among others.
Many of our customers view satellite communications services as critical to their daily operations.
We believe that increasing mobile penetration creates additional demand for mobile satellite services. According to a 2020 study by the GSM Association,
unique mobile subscribers, excluding cellular Internet of Things, or IoT, reached 5.2 billion throughout the world as of the end of 2019 and are projected to
reach 5.8 billion by 2025.
We believe that growth in the terrestrial wireless industry has increased awareness of the need for reliable mobile voice and data communications services.
In addition, despite significant penetration and competition, terrestrial wireless systems do not cover a large majority of the earth’s surface and are focused
mainly in those areas where people live, excluding oceans and other remote regions where ships, airplanes and other remote assets may travel or be located.
By offering mobile communications services with global voice and data coverage, mobile satellite service providers address the demand from businesses,
governments and individuals for connectivity and reliability in locations not consistently served by wireline and wireless terrestrial networks.
The mobile satellite services industry also benefits from the continued development of innovative, lower-cost technology and applications integrating
mobile satellite products and services, including the continued advancement of IoT. We believe that growth in demand for mobile satellite services is driven
in large part by the declining cost of these services, the diminishing size and lower costs of voice, data and IoT devices, the rollout of new applications
tailored to the specific needs of customers across a variety of markets, and expansion into new international markets.
Communications industry sectors include:
• mobile satellite services, which provide customers with voice and data connectivity to mobile and fixed devices using ground facilities and
networks of geostationary, or GEO, satellites, which are located approximately 22,300 miles above the equator, medium earth orbit satellites,
which orbit between approximately 6,400 and 10,000 miles above the earth’s surface, or low earth orbit, or LEO, satellites, such as those in our
constellation, which orbit between approximately 300 and 1,000 miles above the earth’s surface;
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fixed satellite services, which typically use GEO satellites to provide customers with broadband communications links between fixed points on the
earth’s surface; and
terrestrial services, which use a network of land-based equipment, including switching centers and radio base stations, to provide wireless or
wireline connectivity and are complementary to satellite services.
Within the two major satellite sectors, fixed satellite services and mobile satellite services, operators differ significantly from each other with respect to size
of antenna and types of services offered. Fixed satellite services providers, such as Intelsat S.A., Eutelsat Communications S.A. and SES S.A., are
characterized by large, often stationary or fixed ground terminals that send and receive high-bandwidth signals to and from the satellite network for video
and high-speed data customers and international telephone markets. By contrast, mobile satellite services providers, such as us, Inmarsat Global Limited,
Globalstar, Inc., and ORBCOMM Inc. focus more on voice and data services, where mobility and small-sized terminals are essential.
LEO systems, such as the one we operate, generally have lower transmission delays, or latency, than GEO systems, such as that operated by Inmarsat, due
to the shorter distance signals have to travel, which also enables the use of smaller antennas on mobile devices. We believe the unique interlinked mesh
architecture of our constellation, combined with the global footprint of our satellites, distinguishes us from regional LEO satellite operators such as
Globalstar and ORBCOMM, by allowing us to route voice and data transmissions to and from anywhere on the earth’s surface without the need for local
ground infrastructure. As a result, we are the only mobile satellite services operator offering real-time, low-latency services with true global coverage,
including full coverage of the polar regions.
Our Competitive Strengths
• Our Constellation. Our upgraded satellite constellation enables our Iridium Certus offerings, empowers the development of a range of new global
products and services, and supports Aireon’s aircraft tracking service, as well as other hosted payload missions.
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Attractive and growing markets. We believe that the mobile satellite services industry will continue to experience growth driven by the increasing
awareness of the need for reliable mobile voice and data communications services, the lack of coverage of most of the earth's surface by terrestrial
wireless systems, and the continued development of innovative, lower-cost technology, applications integrating mobile satellite products and
services, and the continued development of the IoT. Only satellite providers can offer global coverage, and the satellite industry is characterized by
significant financial, technological and regulatory barriers to entry.
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Strategic relationship with the U.S. government. The U.S. government is our largest single customer, and we have provided airtime services to the
U.S. government (particularly the Department of Defense) since our inception. We believe the U.S. government views our encrypted handset, IoT
devices, DTCS and other products as mission-critical services and equipment. The U.S. government continues to make significant investments in a
dedicated gateway on a U.S. government site to provide operational security and allow U.S. government handset and IoT users to communicate
securely with other U.S. government communications equipment. This gateway is only compatible with our satellite network. In September 2019,
we entered into a seven-year, fixed-price contract with the U.S. government to provide specific narrowband satellite airtime services for an
unlimited number of U.S. government and other federal government subscribers, with a total contract value of $738.5 million. We have seen
significant annual increases in the number of federal government subscribers during the last several years, and we expect this trend to continue,
increasing the value of our services to U.S. government customers.
• Wholesale distribution network. The specialized needs of our global end users span many markets, including emergency services, maritime,
aviation, government, utilities, oil and gas, mining, recreation, forestry, heavy equipment, construction, railways and other transportation. We sell
our products and services to commercial end users through a wholesale distribution network of service providers, VARs and VAMs, which often
specialize in a particular line of business. Our distributors use our products and services to develop innovative and integrated communications
solutions for their target markets, embedding our technology in their products or combining our products with other technologies, such as GPS and
terrestrial wireless technology. In addition to promoting innovation, our wholesale distribution model allows us to capitalize on the research and
development expenditures of our distribution partners, while lowering overall customer acquisition costs and mitigating some risks, such as
consumer relationship risks. By supporting these distributors as they develop new products, services and applications, we believe we create
additional demand for our products and services and expand our target markets at a lower cost than would a more direct marketing model. We
believe our distribution network can continue to grow with us and increase our market penetration. For example, we used our wholesale
distribution approach to introduce Iridium Certus, with multiple VAMs developing Iridium Certus
and terrestrial markets at their expense, and agreements with numerous service partners to sell, service and support Iridium Certus terminals and
service to global customers across these markets.
customer terminals for the maritime, aviation
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True global coverage. Our network provides true global coverage, which none of our competitors, whether LEO or GEO, can offer. Our network
design of 66 operational satellites relies on an interlinked mesh architecture to transmit signals from satellite to satellite, which reduces the need
for multiple local ground stations around the world and facilitates the global reach of our services. GEO satellites orbit above the earth’s equator,
limiting their visibility to far northern or southern latitudes and polar regions. LEO satellites from operators like Globalstar and ORBCOMM use
an architecture commonly referred to as “bent pipe,” which requires voice and data transmissions to be immediately routed to ground stations in
the same region as the satellite and can only provide real-time service when they are within view of a ground station, limiting coverage to areas
near where they have been able to license and locate ground infrastructure. The LEO design of our satellite constellation produces minimal voice
and data transmission delays compared to GEO systems due to the shorter distance our signals have to travel, and LEO systems typically have
smaller antenna and power requirements. As a result, we believe that we are well-positioned to capitalize on the growth in our industry from end
users who require reliable, easy-to-use mobile communications services in all locations.
Our Business and Growth Strategies
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Leverage our largely fixed-cost infrastructure by growing our service revenue. Our business model is characterized by high capital costs, primarily
incurred every 10 to 15 years, in connection with designing, building and launching new generations of our satellite constellation, like our recently
completed Iridium NEXT program, and a low incremental cost of providing service to additional end users. We believe that service revenue will
be our largest source of future growth and profits, and we intend to focus on growing both our commercial and government service revenue in
order to leverage our largely fixed-cost infrastructure. In particular, we believe that competitive broadband, midband and narrowband data services
through Iridium Certus and satellite IoT services, where we are engaging large, global enterprises as long-term customers for data and telematics
solutions, represent our greatest opportunities for service revenue growth.
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Expand our target markets through the development of new products and services. We believe that we can expand our target markets by
developing and offering a broader range of products and services, including a wider array of cost-effective and competitive broadband, midband
and IoT data services using Iridium Certus technology to complement and expand on our existing legacy narrowband services. Iridium Certus is a
multi-service platform that can deliver a range of services, from voice to a high-throughput L-band data connection, at a range of competitive price
points, data speeds, and terminal dimensions to meet an expanding set of customer requirements. Iridium Certus services will include background
IP data, streaming IP data, high quality voice, messaging, and safety services, including Global Maritime Distress Safety System, or GMDSS, and
Aeronautical Mobile Satellite (Route) Service, or AMS(R)S. During 2020 we also introduced Iridium Edge Pro , which allows partners to create
and run their own custom-made IoT applications, and Iridium Edge Solar, a self-charging, low-maintenance, long-field-life IoT product with over-
the-air configuration capabilities, and launched Iridium GMDSS service.
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Accelerate the development of personal communications capabilities. Part of our strategy for the development of personal mobile satellite
communications is to allow individuals to connect to our network in more ways, including from devices such as smartphones, tablets and laptops
through our Iridium GO! device or a variety of personal communication devices from VAMs and VARs like Garmin. We are making our
technology more accessible and cost-effective for our distribution partners to integrate by licensing our core technologies; by adding functionality,
such as push-to-talk, or PTT, capability, which allows multiple users to participate in talk groups worldwide; by providing rugged, dependable
devices and services; and by developing new services that take advantage of the capabilities of our global constellation.
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Continued growth in services provided to the U.S. government. In 2019 we entered into a multi-year, fixed-price contract with the U.S. Space
Force for Enhanced Mobile Satellite Services, or the EMSS Contract. Under the terms of this agreement, we provide Iridium airtime services,
including unlimited global standard and secure voice, paging, fax, Short Burst Data , Iridium Burst , RUDICS and DTCS services for an
unlimited number of Department of Defense and other federal government subscribers. The fixed-price rate for the current year of the EMSS
contract is $103 million, with increases thereafter. Other services such as Iridium Certus and Satellite Time and Location provide us with
opportunities to offer new products and services to the U.S. government for an additional fee.
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Continue to expand our distribution network. We believe our wholesale distribution network lowers our costs and risks, and we plan to continue to
selectively expand our network of service providers, VAMs and VARs, to expand our sales and distribution efforts geographically, and to add
additional industries or lines of business. We expect that our current and future value-added partners will continue to develop customized products,
services and applications targeted to the land mobile, IoT, maritime, aviation and government markets. We believe these markets and the new
service providers, VAMs and VARs who join our network as a result of new product offerings represent an attractive opportunity for continued
subscriber growth.
Continue to support Aireon in the execution of its business plan. Aireon, which we formed in 2011, is our primary hosted payload customer.
Aireon received subsequent investments from five ANSPs: NAV CANADA, Enav (Italy), NATS (United Kingdom), Naviair (Denmark) and the
Irish Aviation Authority. Aireon developed an ADS-B receiver payload which is hosted on our satellites and gathers ADS-B position information
from aircraft to provide a global air traffic surveillance service. Aireon has contracted to offer its service to ANSPs, the FAA, and other
commercial customers worldwide. Aireon has also contracted to pay us a fee to host their payloads on our satellites and pays us data service fees
for the delivery of the air traffic surveillance data from those payloads over the Iridium system. We will also continue to hold a meaningful equity
stake in Aireon.
Distribution Channels
We sell our products and services to customers through a wholesale distribution network of approximately 125 service providers, approximately 285 VARs
and approximately 90 VAMs. These distributors sell our products and services to end users, either directly or indirectly through service providers, VARs or
dealers. Of these distributors, 54 sell primarily to U.S. and international government customers. Our distributors often integrate our products and services
with other complementary hardware and software and have developed individual solutions targeting specific lines of business. We also sell airtime services
directly to the U.S. government, including the Department of Defense, for resale to other government agencies. The U.S. government and international
government agencies may purchase additional services as well as our products and related applications through our network of distributors.
We provide our distributors with support services, including assistance with coordinating end user sales and marketing, strategic planning and training, and
second-tier customer support, as well as helping them market our products and services and respond to new business opportunities. We have representatives
covering three regions around the world to better manage our distributor relationships: the Americas, which includes North, South and Central America;
Asia Pacific, which includes
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Australia and Asia; and Europe, the Middle East, Africa and Russia. We have also established a global service program to provide portside service for our
maritime customers at major ports worldwide. In addition, we maintain various online management tools that allow us to communicate efficiently with our
distributors, and allow them to manage their customers’ Iridium devices from anywhere in the world. By relying on our distributors to manage end user
sales, we believe that we reduce some of the risks and costs related to our business, such as consumer relationship risks and sales and marketing costs,
while providing a broad and expanding distribution network for our products and services with access to diverse and geographically dispersed niche
markets. We are also able to benefit from the specialized expertise of our distributors, who continue to develop innovative and improved solutions and
applications integrating our product and service offerings, providing us with an attractive platform to support our growth.
Commercial Markets
We view our commercial business as our primary source of long-term growth. Service providers and VARs serve as our main distribution channel by
purchasing our products and services and marketing them directly to their customers or indirectly through independent dealers. They are each responsible
for customer billing, end user customer care, managing credit risk and maintaining all customer account information. If our service providers or VARs
provide our services through dealers, these dealers will often provide such services directly to the end user. Service providers typically purchase our most
basic products and services, such as mobile voice services and related satellite handsets, and offer additional services such as voice mail. Unlike service
providers, our VARs typically focus more on data applications and provide a broader array of value-added services specifically targeted to the niche
markets they serve, such as IoT, maritime, aviation and government markets, where high-use customers with specialized needs are concentrated. These
VARs integrate our handsets, transceivers, high-speed data devices and Short Burst Data, or SBD , modems with other hardware and software to create
packaged solutions for end users. Examples of these applications include cockpit voice and data solutions for use by the aviation sector and voice, data and
tracking applications for industrial customers, such as Caterpillar Inc., the Department of Defense, and other U.S. and foreign government agencies. Our
service providers include satellite service providers such as Marlink AS, Applied Satellite Technology Limited and Network Innovations, as well as some
of the largest telecommunications companies in the world, including Telstra Corporation Limited, KDDI Corporation and Singapore Telecommunications
Limited. Our VARs include ARINC Incorporated, Blue Sky Network, LLC, Caterpillar Inc., Garmin Services Inc., General Dynamics Satellite
Communication Services, Inc., Gogo Business Aviation LLC, Komatsu Ltd, Kore Telematics Inc., MetOcean Telematics Limited, Mix Telematics
International (Pty) Ltd., NAL Research Corporation, OnixSat Rastreamento de Veículos Ltda. and Zunibal S.A.
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We also sell our products to VAMs, who integrate our transceivers or chipsets into their proprietary hardware. These VAMs produce specialized end-user
equipment, including integrated ship, vehicular and aviation communications systems, and global asset tracking devices, which they offer to end users in
IoT, maritime, aviation and government markets. As with our service providers and VARs, VAMs sell their products either directly or through other
distributors, including some of our service providers and VARs. Our VAMs include Applied Satellite Engineering, Inc., Beam Communications Pty Ltd.,
Calamp Wireless Networks Corporation, Cobham plc, Garmin Services Inc., Gilat Telecom Ltd., Honeywell Global Tracking Limited and Quake Global,
Inc.
In addition to VARs and VAMs, we maintain relationships with approximately 100 value-added developers, or VADs. We typically provide technical
information to these companies on our products and services, which they then use to develop software and hardware that complements our products and
services in line with the specifications of our VARs and VAMs. These products include handset docking stations, airline tracking and flight management
applications and crew e-mail applications for the maritime industry. We believe that working with VADs allows us to create new platforms for our products
and services and increases our market opportunity while reducing our overall research and development, marketing and support expenses. Our VADs
include Global Marine Networks, LLC, Maxtena, Inc., TE Connectivity Corporation and Two10degrees Limited.
We maintain a pricing model for our commercial products and services with a wholesale rate structure. Under our distribution agreements, we charge our
distributors wholesale rates for commercial products and services, subject to discount and promotional arrangements and geographic pricing. We also
charge fixed monthly access fees per subscriber for some of our services. Our distributors are in turn responsible for setting their own pricing to their
customers. Our agreements with distributors typically have terms of one year and are automatically renewable for additional one-year terms, subject to
termination rights. We believe we benefit from the simplicity of this business model, which reduces back-office complexities and costs and allows
distributors to remain focused on revenue generation, while also providing incentives for distributors to focus on selling our commercial product and
service portfolio and developing additional applications.
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Government Markets
We provide mission-critical mobile satellite products and services to all military branches of the Department of Defense as well as other U.S. government
departments and agencies. These users require voice and two-way data capability with global coverage, low latency, mobility and security and often operate
in areas where no other terrestrial or wireless means of communications are available. We believe we are well-positioned to satisfy demand from these
users. Our 9575A handset is the only commercial, mobile handheld satellite phone that is capable of Type I encryption accredited by the U.S. National
Security Agency for Top Secret voice communications. In addition, the U.S. government continues to make significant investments in a dedicated gateway
that provides operational security and allows users of encrypted U.S. government handsets to communicate securely with other U.S. government
communications equipment. These investments include upgrading the gateway to take advantage of the enhanced capabilities of our new network,
including Iridium Certus and other enhanced services. This U.S. government gateway is only compatible with our satellite network.
We provide airtime and airtime support to U.S. government and other authorized customers pursuant to our seven-year EMSS contract managed by the U.S.
Space Force, which we entered into in September 2019. Under the terms of this agreement, authorized customers utilize our airtime services through the
U.S. government’s dedicated gateway. These services include unlimited global standard and secure voice, broadcast, netted or DTCS and select other
services for an unlimited number of U.S. government subscribers. Other services may be purchased at an additional cost. The fixed-price rate for the
current year of the EMSS contract is $103 million, with increases in annual value resulting in a total contract value of $738.5 million over the seven-year
term. While we sell airtime directly to the U.S. government for resale to end users, our hardware products are sold to U.S. government customers through
our network of distributors, which typically integrate them with other products and technologies. We may provide other services, such as Iridium Certus, to
the U.S. government under separate arrangements for an additional fee. In addition, we intend to invest approximately $10-$12 million over the first three
years of the EMSS contract in support of the U.S. government to implement enhanced services at its dedicated gateway, which will be accounted for as
additional cost of services. Pursuant to federal acquisition regulations, the U.S. government may terminate the EMSS contract, in whole or in part, at any
time.
We also provide maintenance services for the U.S. government gateway pursuant to our Gateway Maintenance and Support Services, or GMSS, contract
managed by the U.S. Space Force. This agreement, effective April 2019, provides for a six-month base term and four one-year options, the first two of
which have been exercised, for a total value of the contract to us of approximately $54 million. Pursuant to federal acquisition regulations, the U.S.
government may terminate the GMSS contract, in whole or in part, at any time.
In October 2019, we were also awarded a five-year indefinite-delivery/indefinite-quantity, or IDIQ, contract managed by the U.S. Space Force to enable
ongoing innovation and enhancements for the U.S. government gateway. This contract has a one-year base period and four one-year options, the first of
which has been exercised, with a value of up to $76 million to us over the five-year period. Pursuant to federal acquisition regulations, the U.S. government
may terminate the IDIQ contract, in whole or in part, at any time.
U.S. government services accounted for approximately 22% of our total revenue for the year ended December 31, 2020. Our reported U.S. government
revenue includes airtime revenue derived from the EMSS contract and services provided through the GMSS contract, the IDIQ contract, and other
engineering and support contracts with the U.S. government. This revenue does not include airtime services purchased by U.S. or non-U.S. government
agencies that are provided through our commercial gateway, which we report as commercial service revenue, or equipment purchased by government
customers from third-party distributors. We are unable to determine the specific amount of U.S. government revenue derived from these commercial
sources.
Lines of Business
The specialized needs of our global customers span many markets. Our system is able to offer our customers cost-effective communications solutions with
true global coverage in areas unserved or underserved by existing telecommunications infrastructure. Our mission-critical communications solutions have
become an integral part of the communications and business infrastructure of many of our end users. In many cases, our service is the only connectivity for
these critical applications or is used to complement terrestrial communications solutions.
Our current principal vertical lines of business include land mobile, maritime, aviation, IoT, hosted payloads and other data services, and U.S. government.
We report commercial voice and data service, IoT data service, commercial broadband, hosted payload and other data service, and government service
revenue separately. Land mobile and aviation are the principal contributors to the revenue we report as commercial voice and data, while maritime is
primarily reported in commercial
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broadband revenue. Since we introduced Iridium Certus broadband in January 2019, Iridium Certus services have accounted for an increasing portion of
our revenue, and we expect that trend to continue.
Commercial Voice and Data and Commercial Broadband
We offer commercial voice and data and commercial broadband services primarily in the land mobile, maritime, and aviation sectors. Beginning in 2020,
we separately reported commercial Iridium Certus broadband revenue with Iridium OpenPort service revenue as commercial broadband revenue, and
prior year periods have been conformed to this presentation in our financial information included in this report. Previously, Iridium Certus broadband
revenue and Iridium OpenPort service revenue were included in commercial voice and data revenue. Because there is considerable overlap in these sectors,
we continue to combine our discussion of these revenue lines in this report, noting within the discussion where our broadband services contribute,
particularly in maritime.
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Land Mobile
We are the leading provider of mobile satellite communications services to the land mobile sector, providing handset services to areas not served or
inconsistently served by existing terrestrial communications networks. In a 2020 report, TMF Associates reported that there were approximately 801,000
land voice satellite units in service in 2019. Mining, forestry, construction, oil and gas, utilities, heavy industry and transport companies as well as the
military, public safety and disaster relief agencies constitute the largest portion of our land mobile end users. Sales of Iridium GO! and Iridium PTT
services also contribute to the land mobile sector. We believe that demand for mobile communications devices operating outside the coverage of terrestrial
networks, combined with our small, lightweight, durable handsets with true global coverage, will allow us to capitalize on growth opportunities among
these users.
In addition, we believe Iridium Certus broadband land mobile units are attractive in this market, as the combination of price, speeds, equipment, service
costs and durability of equipment addresses a distinct market need. We also expect Iridium Certus midband services to be a source of revenue growth in the
coming years.
Our land mobile end users utilize our satellite communications services for:
• Voice and data: Multinational corporations in various sectors use our services for business telephony, e-mail and data transfer services, location-
based services, broadband and to provide telephony services for employees in areas inadequately served by terrestrial networks. Oil and gas and
mining companies, for example, provide their personnel with our equipment solutions while surveying new drilling and mining opportunities and
while conducting routine operations in remote areas that are not served by terrestrial wireless communications networks. In addition, a number of
recreational, scientific and other outdoor users rely on our mobile handheld satellite phones and services for use when beyond terrestrial wireless
coverage. Iridium PTT offers non-governmental organizations (NGOs), military, first responder, oil and gas, civil government and other users the
ability to hold group calls using the Iridium Extreme PTT handset or other devices developed by our VAMs and VARs using the Iridium 9523
PTT core transceiver. The Thales MissionLINK terminal, the first Iridium Certus offering in the land mobile area, allows rapid deployment and
on-the-move communications, location tracking and telemetry. We expect to introduce additional offerings, including Iridium Certus midband
services in 2021.
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• Mobile and remote office connectivity: A variety of enterprises use our services to make and receive voice calls and to establish data, e-mail,
internet and corporate network connections.
•
•
Public safety and disaster relief: Relief agencies, such as FEMA, and other agencies, such as the Department of Homeland Security, use our
products and services in their emergency response plans, particularly in the aftermath of natural disasters such as Hurricanes Dorian, Harvey, Irma
and Maria, and the 2017 Mexico City area earthquake. These agencies generate significant demand for both our voice and data products,
especially in advance of the hurricane season in North America.
Public telephone infrastructure: Telecommunications service providers use our services to satisfy regulatory mandates and government
expectations regarding the availability of communications services for rural populations currently not served by terrestrial infrastructure. Telstra
Corporation, for example, uses our services to provide communications services in some of Australia’s most remote locations.
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Maritime
We serve the commercial maritime market with a variety of products, including broadband terminals, embedded devices and handsets. This market includes
merchant shipping, fishing, leisure research vessels and specialized watercraft. Traditionally, the majority of our revenue from the maritime market has
been derived from shipboard data terminals including the Iridium Pilot , which uses the Iridium OpenPort high-speed voice and data service. Since we
introduced Iridium Certus broadband in January 2019, Iridium Certus services have accounted for an increasing portion of our revenue from this market,
and we expect that trend to continue. Our products and services targeting the maritime market typically have high average revenue per subscriber. Once one
of our maritime systems is installed on a vessel, it often generates a multi-year recurring revenue stream from the customer. As a consequence, from time to
time we may offer promotions or rebates to accelerate new customer acquisitions and solidify this expected long-term revenue stream.
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We believe demand for higher-speed, low-cost data services will allow us to capitalize on opportunities in this market. We believe Iridium Certus, which
offers data speeds of up to 704 Kbps, presents a superior communication solution to L-band users in the maritime market. We expect this offering to
increase the addressable market for our maritime services.
Maritime end users utilize our satellite communications services for the following:
•
•
•
•
Business critical data applications: Ship operators use our services to exchange e-mail and data files and to receive other information such as
meteorological reports, emergency bulletins, cargo and voyage data and electronic chart updates. We believe Iridium Certus and Iridium OpenPort
provide attractively priced options for shipping operators and fishing fleets seeking increased functionality, as well as for yachts, work boats and
other vessels for which traditional marine satellite systems have typically been costly and underperforming.
Voice services: Maritime global voice services are used for both vessel operations and communications for crew welfare. Merchant shipping
companies use phone cards for crew use at preferential around-the-clock flat rates.
Vessel management and asset tracking: Shipping operators, such as Briese Schiffahrts GmbH, use our services to manage operations on ships and
to transmit data, such as course, speed and fuel stock. Our services are commonly integrated with GPS to provide a real-time position reporting
capability. Many fishing vessels are required by law to carry terminals using approved mobile satellite services for tracking purposes as well as to
monitor catches and to ensure compliance with geographic fishing restrictions. European Union regulations, for example, require EU-registered
fishing vessels of over 15 meters to carry terminals for the purpose of positional reporting of those vessels. Furthermore, new security regulations
in some jurisdictions are expected to require tracking of merchant vessels in territorial waters, which would provide an additional growth
opportunity for us.
Safety and Security applications: Ships in distress, including as a result of potential piracy, hijack or terrorist activity, rely on mobile satellite voice
and data services. The Ship Security and Alert Systems, or SSAS, and Long Range Identification Tracking, or LRIT, regulations were adopted by
the International Maritime Organization, or IMO, to enhance maritime security in response to the threat from terrorism and piracy. Most deep-sea
passenger and cargo ships must be fitted with a device that can send an alert message containing the ship’s ID and position whenever the ship is
under threat or has been compromised. In addition, the IMO and a NATO advisory group have recommended the installation of a safe room
equipped with a standalone secure communication link the crew can use from inside the room to communicate with rescuing forces. Our
distribution partners have developed several product solutions using our network to meet these requirements for merchant and fishing vessels.
The GMDSS is a maritime service built to alert a maritime rescue coordination center of each vessel’s situation and position, information that can then be
used to coordinate search and rescue efforts among ships in the area. GMDSS service is also used to distribute important navigational and meteorological
information to vessels. The IMO requires all vessels flagged by signatories to the International Convention for the Safety of Life at Sea, or SOLAS, over
300 gross tons and certain passenger vessels, irrespective of size, that travel in international waters to carry distress and safety terminals that provide
GMDSS services. We have been recognized by the IMO as a provider for the GMDSS. GMDSS service using our network became available in 2020, and
our partners offer maritime terminals that include GMDSS service capabilities to vessel operators.
Aviation
We are one of the leading providers of mobile satellite communications services to the aviation sector. Our services are increasingly used in commercial
and global government aviation applications, principally by corporate jets, corporate and government helicopter fleets, specialized general aviation fleets,
such as medevac companies and fire suppression fleets, and high-end personal aircraft. Our services are also employed by commercial airline operators for
flight deck voice and data link services for aircraft operational and safety communications. As a result of authorizations by the FAA and U.S. Federal
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Communications Commission, or FCC, for us to provide air traffic datalink communications, commercial operators are installing avionics that use the
Iridium network on the flight deck to comply with international air navigation communications requirements to operate in oceanic and remote airspace,
including polar regions. Voice and data avionics platforms from our VAMs have been adopted as standard equipment and as factory options for a range of
airframes in business aviation and air transport, such as Gulfstream Aerospace Corporation, Bombardier Inc., Cessna Aircraft Company, Boeing and
Airbus. Avionics platforms that utilize our network are also retrofitted on thousands of corporate and commercial aircraft already in operation.
The global aviation community in particular has been negatively affected by the COVID-19 pandemic and measures taken to combat it. Global flight
movements partially recovered during the last three quarters of 2020, gaining back approximately 50% of lost traffic levels from the low point in mid-April
by year end. We expect to see continued recovery in the aviation sector in 2021, as COVID vaccine availability increases; however, it is likely that air
traffic will not fully recover for a number of years. Charter or private jet usage has increased in this same period, and many commercial aircraft have been
converted to cargo aircraft given the demand. In addition, rotorcraft and unmanned aerial vehicle usage has remained relatively flat in this period. We
continue to see aviation as an area of growth for us as it recovers from these effects.
Aviation end users utilize our satellite communications services for:
•
Air traffic control communications and safety applications: The International Civil Aviation Organization, or ICAO, has approved standards and
recommended practices allowing us to provide AMS(R)S to commercial aircraft on long-haul routes. This allows member states to evaluate and
approve our services for safety communications on flights in oceanic and remote airspace. The FAA has approved Iridium for use in the Future Air
Navigation Services, or FANS, including Automatic Dependent Surveillance - Contract, or ADS-C, datalink communications and Controller-Pilot
Data Link Communications, or CPDLC, with air traffic control. Aircraft crew and air traffic controllers use our services for data and voice
communications between the aircraft flight deck and ground-based air traffic control facilities. We are the only satellite provider capable of
offering these critical flight safety applications around the entire globe, including the polar regions. We believe this particular sector of the market
provides us with significant growth opportunities, as our services and applications can serve as a cost-effective alternative to systems currently in
operation.
• Aviation operational communications: Aircraft crew and ground operations use our services for air-to-ground telephony and data communications.
This includes the ADS-C automatic reporting of an aircraft’s position and mission-critical condition data to the ground and CPDLC for clearance
and information services. We provide critical communications applications for numerous airlines and air transport customers including Hawaiian
Airlines, United Airlines, UPS, Cathay Pacific Airways, Delta Airlines, Southwest Airlines and El Al Airlines. These operators rely on our
services because other forms of communication may be unaffordable or unreliable in areas such as the polar regions. Collins Aerospace (ARINC)
and SITA, the two leading providers of voice and data link communications services and applications to the commercial airline industry, integrate
our products and services into their offerings.
•
•
Aviation passenger communications: Corporate and private fleet aircraft passengers use our services for air-to-ground telephony and data
communications. We believe our distributors’ small, lightweight, cost-effective solutions offer an attractive option for aircraft operators,
particularly small fleet operators; for example, some operators use our services to enable small-cabin passengers to e-mail using their own Wi-Fi-
enabled mobile devices, including smartphones, without causing interference with aircraft operation. We expect that users in the corporate aviation
market, and original equipment manufacturers, or OEMs, for business jets, will increase adoption of our services for in-flight passenger data
communications using our network. We believe this presents a significant opportunity to increase market penetration and revenues in this market.
Rotary and general aviation applications: The Iridium network is uniquely suited to these sectors, as we have small antenna designs that work
under rotor blades and enable installation on smaller general aviation platforms. We are also a major supplier for rotary aviation applications to
end users in a number of markets, including medevac, law enforcement, oil and gas, and corporate work fleets. Companies such as Air Logistics,
EagleMed and Air Evac Lifeteam rely on applications from our distributors for traditional voice communications, fleet tracking and management,
and real-time flight diagnostics. VARs and VAMs such as Flightcell International Ltd., Garmin Services Inc., Honeywell International, Inc.,
SkyTrac and Spider Tracks Limited incorporate Iridium products and services into their applications for these markets.
• Unmanned Aerial Vehicles (UAVs): Our small antennas and system designs support a wide range of UAV platforms. In addition, our global
footprint enables reliable beyond-line-of-sight communications for these UAV platforms regardless of their operational range. We operate as the
communication link for remote-piloted aircraft for uses such as package delivery, medical supply, law enforcement, corporate surveying and even
military applications.
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We believe the benefits of Iridium Certus will enhance our ability to address aviation market needs across these sectors.
Commercial IoT Data
We are one of the leading providers of satellite-based IoT services. We believe this market continues to experience increasing penetration and presents
opportunities for future growth. As with land mobile, our largest IoT users include mining, construction, oil and gas, utilities, heavy industry, maritime,
forestry and transport companies, as well as the military, public safety and disaster relief agencies. We believe increasing demand for automated data
collection processes from mobile and remote assets operating outside the coverage of terrestrial wireline and wireless networks, as well as the continued
need to integrate the operation of such assets into enterprise management and information technology systems, will likewise increase demand for our IoT
applications. For example, our IoT devices have been adopted as standard equipment and as factory options by heavy equipment manufacturers such as
Caterpillar Inc., Hitachi, Komatsu and Doosan to provide telematics solutions for end users.
Our IoT services are used for:
•
Personal tracking devices and location-based services: Several of our VAMs and VARs, such as Garmin, NAL Research and Somewear Labs,
market small, portable devices that provide personal tracking and data communications services to consumers and commercial end users. In
addition, Iridium GO! and the Iridium Extreme handsets offer personal tracking and location-based services. These devices use IoT data services
to send location information and other data to web-based portals for tracking.
• Heavy equipment monitoring: Large, global heavy equipment original equipment manufacturers, such as Caterpillar Inc., Komatsu Limited,
Hitachi Construction Machinery Co. Ltd., CNH Global N.V. and AGCO Corporation, use our global IoT services to monitor their off-road heavy
equipment in markets such as construction, mining, agriculture and forestry.
•
•
•
•
•
Fleet management: Our global coverage permits our products and services to be used to monitor the location of vehicle fleets, hours of service and
engine telemetry data, as well as to conduct two-way communications with drivers around the world. Fleet management companies, such as
Trimble Transportation & Logistics, Mix Telematics and Zatix, use our service to provide distance drivers with reliable communications to their
dispatchers and their destinations to coordinate changing business needs, and our satellite network provides continuous communications coverage
while they are in transit. We expect that the need for more efficient, cost-effective and safer fleet operations, as well as the imposition of
regulatory mandates related to driver safety, such as drive-time monitoring, will increase demand for our services in this area.
Fixed-asset monitoring: Multinational corporations, such as oil-field service companies like Schlumberger Limited and ConocoPhillips Company,
use our services to run applications that allow remote monitoring and operation of equipment and facilities around the globe, such as oil pipelines
and offshore drilling platforms.
Asset tracking: Leveraging IoT applications developed by several of our distributors, companies use our services and related devices to track
assets, including personnel, for logistics, theft-prevention and safety purposes. Companies and organizations that have fleets of vehicles use IoT
solutions from Iridium distributors to improve the efficiency of their operations. For example, customers use Trimble Transportation’s solution to
provide global communication to transportation assets, and the Department of Homeland Security Office of Enforcement and Removal uses Fleet
Management Solutions’ IoT solution to transmit position, direction, speed and other data for management of its vehicle fleet.
Resource management: Our global coverage and data throughput capabilities support natural resource management applications, such as fisheries
management systems. Three of our VARs—CLS, MetOcean Telematics and Rock Seven—have developed applications for the fishing industry
that enable regulatory compliance of fishing practices in a number of countries around the world.
Scientific data monitoring: The global coverage of our network supports many scientific data collection applications such as the Argo float
program of the National Oceanographic and Atmospheric Administration, or NOAA, the Global Ocean Observation project Challenger, operated
by Rutgers University, and the anti-poaching programs of organizations such as Smithsonian National Zoo & Conservation Institute, Zoological
Society of London, and Veterans Empowered to Protect African Wildlife, or VETPAW. These programs rely on our IoT services to collect
scientific data from buoys and ocean gliders located throughout the world’s oceans and from wildlife habitats for monitoring and analysis. We
believe the increased need for monitoring climate and environmental data associated with global climate change and human impact on the planet
will increase demand for these services.
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In the future, we expect our value-added partners to develop new IoT solutions with increased capabilities based on our Iridium Certus 9770 transceiver
and other future midband devices we plan to provide across all of our key IoT vertical markets.
Hosted Payload and Other Data Services
Our Iridium satellites also host customer payloads. We generate revenue from these customers both from the hosted payload capacity and from data service
fees. Because these revenues are based on a contractual commitment for the life of the Iridium constellation, we recognize revenue from these customers
over the expected life of the system.
In addition to access and usage fees in the vertical lines of business described above, we generate revenue from several ancillary services related to our core
service offerings. In conjunction with Satelles, Inc., we offer Satellite Time and Location services, which helps augment GPS and provides reliable
location, timing and positioning data. We provide inbound connections from the public switched telephone network, or PSTN, short message services, or
SMS, subscriber identity module, or SIM, activation, customer reactivation, and other peripheral services. We also provide research and development
services to assist customers in developing new technologies compatible with our system, which we may leverage for use in service and product offerings in
the future. We charge our distributors fees for these services.
U.S. Government
We are one of the leading providers of mobile satellite communications services to the U.S. government, principally the Department of Defense. We
provide mobile satellite products and services to all branches of the U.S. armed forces. Our voice products are used for a variety of primary and backup
communications solutions, including tactical operations, logistical, administrative, morale and welfare, and emergency communications. In addition, our
products and related applications are installed on ground vehicles, ships, rotary- and fixed-wing aircraft, embedded in unattended sensors and used for
command and control and situational awareness purposes. Global security concerns are among the factors driving demand for our products and services in
this sector. See “—U.S. Government Services” for more information.
Seasonality
Our business is subject to seasonal usage changes for commercial customers, and we expect it to be affected by similar seasonality going forward. March
through October are typically the peak months for commercial voice traffic and related subscriber equipment sales, given the predominance of population
and outdoor activity in the northern hemisphere. U.S. government usage and commercial IoT usage have been less subject to seasonal changes.
Services and Products
At December 31, 2020, we had approximately 1,476,000 billable subscribers worldwide. Our principal services are mobile satellite services, including
mobile voice and data services, high-speed data services, IoT services, hosted payload and other data services and engineering services. Sales of our
commercial services collectively accounted for approximately 63% of our total revenue for the year ended December 31, 2020. We also sell related voice
and data equipment to our customers, which accounted for approximately 15% of our total revenue for the year ended December 31, 2020. In addition, we
offer services to U.S. government customers, including the Department of Defense. U.S. government services, including engineering services, accounted
for approximately 22% of our total revenue for the year ended December 31, 2020.
Commercial Services
Postpaid Mobile Voice and Data Satellite Communications Services
We sell our mobile voice and data services to service providers and VARs who in turn offer such services to end users, either directly or indirectly through
dealers, using various packaged solutions such as seasonal or annual plans with differing price levels that vary depending upon expected usage. In
exchange for these services, we typically charge service providers and VARs a monthly access fee per subscriber, as well as usage fees for airtime resources
consumed by their respective subscribers.
Prepaid Mobile Voice Satellite Communications Services
We also offer mobile voice services to service providers and VARs through prepaid plans. Service providers and VARs pay us in advance for defined
blocks of airtime minutes with expiration periods in various configurations, ranging from 30 days to two years. These services are then generally sold to
subscribers in the form of prepaid e-vouchers and scratch cards that enable subscribers to use our services on a per-minute basis. We believe service
providers and VARs are drawn to these services
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because they enable greater cost control by eliminating the need for monthly billings and reducing collection costs, and can be sold in countries where
credit may not be readily available for end users. Our distributors often offer our prepaid voice services through fixed devices to subscribers in rural
villages, at remote industrial, commercial and residential sites, and on ships at sea, among other places. Fixed voice services are in many cases an attractive
alternative to handheld mobile satellite communications services in situations where multiple users will access the service within a defined geographic area
and terrestrial wireline or wireless service is not available. Fixed phones, for example, can be configured as pay phones that accept prepaid scratch cards
and can be installed at a central location, for example in a rural village or on a maritime vessel.
Iridium PTT Service
Building on the foundation of DTCS technology, which provides regional tactical radio service to U.S. government users, our Iridium PTT service enables
regional or global PTT calls among users on the same talkgroup in up to 10 customer-defined, geographically disparate locations around the world,
providing a fast and robust communication experience. Iridium PTT can be used via the Iridium Extreme PTT satellite phone or the Iridium 9523 PTT core
transceiver, which gives our VAMs the ability to build Iridium PTT into existing land mobile, maritime and aviation communications platforms. For
example, Icom Inc. of Japan has developed the first purpose-built satellite PTT radio handheld unit for use on the Iridium network. We and our partners are
also developing interoperability solutions for existing terrestrial land mobile radio systems, which will further extend the utility of the service.
Broadband Data Services
Our new broadband data offering, Iridium Certus, was launched in January 2019. Iridium Certus is a new suite of products and services enabled by our
upgraded satellite constellation. Iridium Certus is a multi-service platform capable of offering higher quality voice, enterprise-grade broadband
functionality, SBD, streaming, PTT and safety services on a global basis, with speeds currently available up to 704 Kbps. Ultimately, Iridium Certus is
designed to support a variety of cost points, antenna types and data speeds ranging from midband to broadband speeds as high as 1.4 Mbps. We have
licensed the Iridium Certus technology to VAMs who have introduced products for the maritime and land mobile markets and are developing additional
products for those markets and the aviation and government markets, as well as distribution partners for the Iridium Certus service in each of these vertical
markets. We believe Iridium Certus provides a competitive, cost-effective and reliable range of services to the market, in standalone applications or as a
complement to other wireless technologies for critical applications and safety services.
We also offer Iridium OpenPort, which provides maritime, aviation and terrestrial users speeds of up to 134 Kbps and three independent voice lines. For
our Iridium OpenPort service, we typically charge service providers usage fees for airtime consumed by the respective subscribers for voice and data
communications. In conjunction with our distributors, we also offer additional services that permit service providers and VARs to offer complete integrated
solutions for prepaid calling, e-mail and IP-based data communications. For example, one of our distribution partners, KVH Industries, Inc., has been
integrating Iridium Pilot with its miniature Very Small Aperture Terminal, or mini-VSAT , broadband service to provide backup connectivity when the
mini-VSAT terminal is out of its coverage area or non-operational. In the future, we expect our distributors to focus on selling Iridium Certus and
eventually transition many ships that use Iridium OpenPort services to Iridium Certus services.
SM
Internet of Things Services
Our IoT services are designed to address the market need for a small and cost-effective solution for sending and receiving data, such as location, from fixed
and mobile assets in remote locations to a central monitoring station. Most of our IoT services operate through a two-way SBD transmission or circuit-
switched data, between our network and a transceiver, which may be located, for example, on a container in transit or a buoy monitoring oceanographic
conditions. The small size of our devices and their low-cost, omnidirectional antennas make them attractive for use in applications such as tracking asset
shipments and monitoring unattended remote assets, including oil and gas assets, as well as vehicle tracking and mobile security. We sell our IoT services
to our distributors, who incorporate them and in turn provide a solution package to commercial and government customers. Increasingly, our IoT
transceivers are being built into products for consumer markets, such as personal location devices that provide two-way messaging. In the future, we expect
our IoT partners to develop new offerings with increased capabilities based on our Iridium Certus 9770 transceiver and other future midband devices we
plan to create that have optimized size, speed, power, and antenna characteristics for various applications. As with our mobile voice and data offerings, we
typically charge service providers and VARs a monthly access fee per subscriber as well as usage fees for data used by their respective subscribers.
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U.S. Government Services
We provide U.S. government customers bulk access to our services, including voice, netted voice, data, messaging and paging services, as well as
maintenance services for the U.S. government’s dedicated gateway. We provide airtime to U.S. government subscribers through the U.S. government’s
gateway under the EMSS contract, which is a fixed-price contract covering voice, low-speed data, paging, broadcast and DTCS services. Additional
services, such as broadband capabilities utilizing Iridium Certus technology, would be provided at an additional fee. To comply with U.S. government
requirements, we ensure handsets sold for use by the U.S. government are manufactured in the United States. U.S. government customers procure our voice
and data devices through specific, approved distributors from our network of service providers and VARs. Our VARs and VAMs typically integrate our
products with other products, which they then offer to U.S. government customers as customized products, typically provisioned by Defense Information
Systems Agency, or DISA. Our voice and data solutions for the U.S. government include:
•
•
•
personnel tracking devices;
asset tracking devices for equipment, vehicles and aircraft;
beyond-line-of-sight aircraft communications applications;
• maritime communications applications;
•
•
specialized communications solutions for high-value individuals; and
specialized, secure, mobile communications and data devices for the military and other government agencies, such as secure satellite handsets with
U.S. National Security Agency Type I encryption capability.
With funding support from the U.S. government, we continue to invest in research and development to develop new products and applications for use by all
branches of the U.S. armed forces. For example, in conjunction with DISA, we and select distribution partners offer DTCS, which provides critical, secure,
PTT, netted communications using lightweight, handheld tactical radios, or add-ons to existing government tactical radios. In addition, we offer a secure
satellite phone based on the Iridium Extreme, which we also developed with funding support from the U.S. government and which has been accredited by
the National Security Agency, or NSA, to provide Type-1 encryption, enabling communications up to Top Secret from anywhere in the world.
Our Products
We offer a broad array of voice and data products for customers that work worldwide. In most cases, our devices or an antenna must be located outside and
within view of a satellite to be able to access our network.
Satellite Handsets and Iridium GO!
Our principal handset offerings are the Iridium 9555 and Iridium Extreme satellite handsets, which are similar in functionality to ordinary cellular phones
but with the solid, durable feel that satellite phone users demand. We believe our reputation for industrial-strength products is critical for customers, many
of whom are located in the most inhospitable spots on the planet and require rugged and reliable communications equipment.
Iridium 9555. The Iridium 9555 provides voice, SMS and data connectivity. This model features a large, bright screen, SMS and e-mail capabilities, an
integrated antenna and a speakerphone. The Iridium 9555 weighs 9.4 ounces and offers up to 3.1 hours of talk time. The Iridium 9555 has an industrial feel,
with a rugged housing to protect its sophisticated satellite transceiver.
Iridium Extreme. The Iridium Extreme adds to the Iridium 9555’s capabilities by providing a rugged exterior that meets Military Standard 810F for
durability, a dedicated, two-way emergency SOS button, and fully integrated GPS and location-based services. These extra features are provided in a
handset that is even smaller than the Iridium 9555, weighing 8.7 ounces and offering up to four hours of talk time. An emergency response service provided
by GEOS Travel Safety Group, or GEOS, is included with the purchase of the phone and airtime usage. The two-way emergency SOS button initiates a
phone call and an emergency message via SMS to GEOS, which then coordinates with local emergency responders.
Iridium Extreme PTT. The Iridium Extreme PTT enhances the Iridium Extreme with an intelligently designed push-to-talk mode, expanded speakerphone,
reinforced PTT button, and extended capacity battery. The user interface provides access to multiple communication services, including voice calling, SMS
and SOS, allowing users to connect to a talkgroup located in up
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to 10 customer-defined geographic regions worldwide. The Iridium Extreme PTT weighs 9.5 ounces and offers up to 6.5 hours of talk time in phone mode
and five hours of talk time in PTT mode.
Iridium GO! We also offer Iridium GO!, a small, rugged, personal connectivity device that connects to the Iridium network to create a Wi-Fi hotspot,
enabling the use of smartphones and tablets for voice calls, text messages and emails, posts to social networking sites, and limited use of optimized mobile
websites. Iridium GO! also has an emergency SOS button and GPS and location-based services. Smartphone or tablet access is provided through special
applications downloaded for free from the Apple App Store or through Google Play for Android smartphones or tablets. A software development kit is
available to enable the creation of additional applications or integrate Iridium GO! connectivity into existing applications.
We expect these devices to maintain our competitive position as premium offerings in the market due to their capabilities, mobility, reliability and global
coverage. In addition to these devices, we offer variants of the Iridium 9555 handset and the Iridium Extreme handset that are qualified for sale to U.S.
government customers.
Broadband Data Devices
Iridium Certus terminals are specifically designed for the maritime, aviation, land mobile or government markets and ultimately will offer a variety of
significantly enhanced data speeds and antenna types. Iridium Certus terminals provide enterprise-grade broadband functionality alongside high quality
voice capabilities that can be used on a global basis, with speeds currently available up to 704 Kbps. Ultimately, Iridium Certus is designed to support a
variety of cost points, antenna types and data speeds ranging from midband to broadband speeds as high as 1.4 Mbps. We have licensed the Iridium Certus
technology to a group of VAMs who have introduced products for the maritime and land mobile markets and are developing additional products for those
markets as well as the aviation and government markets.
Iridium Certus is ideal for maritime operational and safety services. These terminals deliver the satellite communications technology that the industry
demands, combining all the benefits of L-band with broadband and truly global coverage. Iridium Certus terminals offer superior connectivity for maritime
customers whether used as a standalone service or as a companion to VSAT services. Our principal end users for Iridium Certus in the maritime market are
merchant shipping, commercial fishing, large leisure vessels, and work boats. The initial terminals in this market were the Cobham Sailor 4300 and Thales
VesseLINK. In addition, Intellian, a Korean maritime terminal manufacturer, introduced an Iridium Certus terminal to the market in 2020.
In aviation, Iridium Certus will deliver critical safety services and in-flight communications. Our principal targeted end users for Iridium Certus in the
aviation market will include commercial, corporate and government users, general aviation, rotorcraft and unmanned aircraft. The initial terminal in this
market will be the FlytLINK by Thales. A number of other VAMs have been licensed to create aviation terminals using Iridium Certus services as well.
In the land mobile market, we expect enterprises, governments, and individuals that want to extend their use of mobile networks into remote areas without
having to deploy ground-based infrastructure or expensive terminals will utilize Iridium Certus. Iridium Certus devices may be integrated with internet,
cellular, land mobile radio, and location-based applications to keep users connected, offering global push-to-talk, situational awareness, email, messaging
and voice-over-IP. We believe our principal end users for Iridium Certus in the land mobile market will be military users, rail, first responders, non-
governmental organizations, oil and gas users, and remote fleets. The initial terminal in this market is the Thales MissionLINK, with additional terminals
expected in the near future.
In the government market, Iridium Certus terminals will provide beyond-line-of-sight communications critical to mission
success. The initial terminal in this market is the Thales MissionLINK.
Our legacy terminal, the Iridium Pilot, provides up to three independent voice lines and an internet connection for data communications of up to 134 Kbps,
using our Iridium OpenPort service. All voice and data capabilities can be used simultaneously. Our principal customers for Iridium Pilot are service
providers who integrate the device with their own hardware and software products to provide a suite of customer-focused voice and IP-based data packages
for ship operation, crew calling and e-mail. We believe our Iridium Pilot terminal, with its flexible service options, provides an excellent low-cost option to
the maritime market, including market sectors such as luxury yachts, tug boats, and other fishing and cruising vessels. Iridium Pilot also offers a low-cost
solution as a companion to maritime Ku- and Ka- Band VSAT systems providing broadband and data services for ships, where Iridium Pilot can fill in
coverage gaps and operate during significant rain fade events that impair K-band service, provide services where the VSAT terminal is not licensed to
operate, and provide an alternate channel during VSAT maintenance and configuration. We also offer Iridium Pilot Land Station, which allows remote
individuals and
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businesses from off-the-grid terrestrial locations to obtain reliable internet connections and voice calling no matter where they are located.
Voice and Data Modems
We also offer a combined voice transceiver and data modem, which our distributors integrate into a variety of communications solutions that are deployed
in different applications around the world. Our principal offering in this space is the Iridium Core 9523 L-band transceiver, which utilizes the transceiver
core of our Iridium Extreme satellite handset. The Iridium Core 9523 provides a small voice and data module that can be integrated with other components
to create a modem tailored for typical VAM applications as well as specific applications, such as a dual-mode terrestrial radio and satellite phone or IoT
applications that require more efficient data throughput through circuit-switched data transmission. The Iridium 9523 PTT adds PTT capability, allowing
development partners to design and build land mobile, fixed, aviation and maritime devices with Iridium PTT service. In the future, we expect our value-
added partners to develop new products based on our Iridium Certus 9770 transceiver and other optimized midband devices. Our principal customers for
our L-band transceivers are VAMs and VARs, who integrate them into specialized devices that access our network.
Internet of Things Data Devices
Our principal IoT devices are the Iridium 9602 and 9603 full-duplex SBD transceivers. The Iridium 9602 is a small data device with two-way transmission,
capable of sending packet data to and from any point in the world with low latency. The principal customers for our Iridium 9602 data modems are VARs
and VAMs, who embed the device into their tracking, sensor, and data applications and systems, such as asset tracking systems. Our partners often combine
the Iridium 9602 with a GPS receiver to provide location information to customer applications. We also offer the Iridium 9603, an even smaller transceiver
that is functionally identical to the Iridium 9602. In addition, a number of VARs and VAMs include a cellular modem as part of their Iridium applications to
provide low-cost cellular data transmission when available. These types of multimode applications are adopted by end users who require the ability to
regularly transfer data but operate in areas with inconsistent cellular coverage. We provide gap-filler coverage for these applications, allowing users to
operate anywhere on the globe.
We also offer Iridium Burst, our one-to-many global data broadcast service, which enables enterprises to send data to an unlimited number of devices
anywhere in the world, even inside buildings, vehicles or aircraft, and Iridium Edge, an off-the-shelf, environmentally sealed, rugged device that
complements existing cellular solutions to create dual-mode connectivity for the most remote and inaccessible areas of the world.
Iridium Edge reduces the cost and complications associated with hardware development, manufacture and certification of satellite-specific terminals, which
we expect to enable greater adoption of our IoT services. In 2020, we introduced Iridium Edge Pro, a standalone IoT device that offers real-time GPS
tracking capabilities, with a flexible programming platform that allows partners to create and run their own custom-made applications, and Iridium Edge
Solar, a standalone, programmable, solar-powered device that offers real-time GPS tracking in a self-charging, low-maintenance unit with over-the-air
configuration that allows partners to create distinct tracking applications. In the future, we expect our IoT partners to develop new products with increased
capabilities based on Iridium Certus midband devices.
Device Development and Manufacturing
We contract with Cambridge Consulting Ltd. and other suppliers to develop our devices, with Benchmark Electronics Inc., or Benchmark, to manufacture
most of our devices in a facility in Thailand, and with Hybrid Design Associates to manufacture a portion of our devices in the U.S. Pursuant to our
contract with Benchmark, we 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 generally repurchases the materials from us at the same price we paid, as required for the
production of the devices. Our agreement with Benchmark is automatically renewable for additional one-year terms unless terminated by either party.
We selected several VAMs to manufacture terminals for use with our Iridium Certus broadband service. Iridium Certus terminals are specifically designed
for the maritime, aviation or land mobile markets, and certain of these VAMs were given limited exclusivity in those markets, in exchange for sales
commitments.
We generally provide our distributors with a warranty on subscriber equipment for one to two years from the date of activation, depending on the product.
We also utilize other suppliers, some of which are the sole source, to manufacture some of the component parts of our devices.
17
In addition to our principal products, we also offer a selection of accessories for our devices, including extended-life batteries, holsters, earbud headphones,
portable auxiliary antennas, antenna adaptors, USB data cables and charging units, among others. We purchase these products from several third-party
suppliers either pursuant to contractual agreements or off the shelf at market prices.
Domestic and Foreign Revenue
We supply services and products to customers in a number of foreign countries. We allocate revenue geographically based on where we invoice our
distributors, whom we bill for mobile satellite services and related equipment sales, and not according to the location of the end user. These distributors sell
services directly or indirectly to end users, who may be located elsewhere. It is not possible for us to determine the geographical distribution of revenue
from end users, as we do not contract directly with them. Substantially all of our revenue is invoiced in U.S. dollars. The table below sets forth the
percentage of our revenue by country for the last three years.
States
Kingdom
Countries
(1)
2020
Year Ended December 31,
2019
2018
55 %
8 %
36 %
54 %
9 %
37 %
53 %
10 %
37 %
(1)
No single country in this group represented more than 10% of our revenue for any of the periods indicated.
For more information about our revenue from sales to foreign and domestic customers, see Note 15 to our consolidated financial statements included in this
annual report.
Traffic Originating Outside the United States
A significant portion of our voice and data traffic originates outside the United States. The table below sets forth the percentage of our commercial voice
and data traffic originating outside the United States, excluding Iridium OpenPort and Iridium Certus broadband traffic, for the last three years.
Commercial voice traffic (minutes)
Commercial data traffic (kilobytes)
Our Network
2020
Year Ended December 31,
2019
2018
91 %
72 %
90 %
71 %
90 %
72 %
Our satellite network has an architecture of 66 operational LEO satellites in six orbital planes of eleven vehicles each in nearly circular polar orbits, in
addition to in-orbit spares and related ground infrastructure, as well as ground spares. In 2019, we completed the process of replacing our first-generation
constellation, which we refer to as the Iridium NEXT program. We deployed a total of 75 satellites on eight Falcon 9 rockets launched by Space
Exploration Technologies Corp., or SpaceX, as part of this program and de-orbited our first generation satellites. These replacement satellites support new
services and higher data speeds for new products.
Our operational satellites orbit at an altitude of approximately 483 miles (778 kilometers) above the earth and travel at approximately 16,689 miles per
hour, resulting in a complete orbit of the earth approximately every 100 minutes. The design of our constellation ensures that generally at least one satellite
is visible to subscribers from any point on the earth's surface, covering all of the world's population. While our constellation offers true global coverage,
most of our devices and antennas must have a direct line of sight to a satellite to transmit or receive a signal, and services on those devices are not available
in locations where a satellite signal cannot be transmitted or received, which for some devices includes inside a building.
Our constellation is unique among commercial constellations in the usage of radio frequency crosslinks between our satellites, which eliminates the need
for local ground infrastructure. These crosslinks enable each satellite to communicate with up to four other satellites in space, two in the same orbital plane
and two in adjacent planes. Our traffic is routed on a preplanned route between satellites to a predetermined satellite that is in contact with one of the
Iridium teleport network, or TPN, locations. The TPN sites then transmit and receive the traffic to and from the gateways, which in turn provide the
interface to terrestrial-based
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networks such as the PSTN, a public land mobile network, or PLMN, and the internet. The use of a TPN allows grounding traffic at multiple locations
within our ground network infrastructure. This and other design elements provide flexibility that allows for rapid reconfiguration of grounding traffic from
the satellites in the event of a space, antenna or ground routing anomaly and results in greater reliability of our network. The design of our space and
ground control system also facilitates the real-time monitoring and management of the satellite constellation and facilitates service upgrades via software
enhancements. We also upgraded our ground infrastructure, including gateway and teleport technology and satellite control systems, in advance of the
completion of the Iridium NEXT program.
We believe our interlinked satellite infrastructure provides several advantages over low-earth-orbiting “bent-pipe” satellite networks that rely on multiple
terrestrial gateways, such as Globalstar’s and ORBCOMM’s networks. We have the only satellite network with true global coverage, and our constellation
is less vulnerable to single points of failure, as traffic can be routed around any one satellite problem to complete the communications path to the ground. In
addition, the small number of ground stations increases the security of our constellation, a factor that makes our network particularly attractive to
government institutions and large enterprises. The low orbit of our constellation also allows our network to operate with low latency and with smaller
antennas due to the proximity of our satellites to the earth.
Our constellation is designed to provide significant coverage overlap for mitigation of service gaps from individual satellite outages, particularly at higher
northern and southern latitudes. Each satellite in our constellation was designed with a high degree of on-board subsystem robustness, an on-board fault
detection system, and isolation and recovery capabilities for safe and quick risk mitigation. Our ability to reposition our satellites provides us with
operating flexibility and enhances our ability to maintain a commercially acceptable level of service. If a satellite should fail or become unusable, in most
cases we will be able to reposition one of our in-orbit spare satellites to take over its functions within days, with minimal impact on our services.
Our primary commercial gateway is located in Tempe, Arizona, with a second dedicated commercial gateway located in Russia. A gateway processes and
terminates calls and generates and controls user information pertaining to registered users, such as geo-location and call detail records. The U.S.
government owns and operates a dedicated gateway for U.S. government users, which provides an interface between voice and data devices and the
Defense Information Systems Network and other terrestrial infrastructure, providing U.S. government users with secure communications capabilities. Our
network has multiple antennas located at the TPN facilities, including the Tempe gateway, that communicate with our satellites and pass calls and data
between the gateway and the satellites as the satellites pass above our antennas, thereby connecting signals from the terminals of end users to our gateways.
This system, together with our satellite crosslinks, enables communications that are not dependent on a ground station in the region where the end user is
using our services.
We operate our satellite constellation from our satellite network operations center, or SNOC, in Leesburg, Virginia. This facility manages the performance
and status of each of our satellites, developing and distributing routing tables for use by the satellites, TPN facilities and gateways, directing traffic routing
through the network and controlling the formation of coverage areas by the satellites’ main mission antennas. We also operate TPN facilities in Fairbanks,
Alaska and Tempe, Arizona in the United States, in Svalbard, Norway, and in Punta Arenas, Chile, that perform telemetry, tracking and control functions
and route commercial services.
From time to time, individual satellites in our constellation experience operating problems that may result in a satellite outage, but due to the overlapping
coverage within our constellation and the dynamic nature of our LEO system, the individual satellite outages typically do not negatively affect our
customers’ use of our system for a prolonged period. In addition, most system processing related to our service is performed using software on board each
satellite instead of on the ground. We believe this provides us with significant flexibility and contributes to the longevity of the constellation by enabling
engineers to develop additional functionality and software-based solutions to occasional faults and anomalies in the system.
We selectively replace parts for our gateway and TPN facilities as necessary and maintain an inventory of spare parts, which we continuously monitor.
When we do not have necessary spares in inventory or our spares become obsolete, we rely on third parties to develop necessary parts.
We hold a space station license for the launch and operation of our constellation, which expires February 23, 2032. Our U.S. gateway earth station and the
U.S. government customer and commercial subscriber earth station licenses expire between October 2021 and 2026. We must file renewal applications for
earth station licenses between 30 and 90 days prior to expiration.
The Iridium constellation also hosts the Aireon system. The Aireon system was developed by Aireon LLC, which we formed in 2011, with subsequent
investments from the ANSPs of Canada, Italy, the United Kingdom, Denmark and Ireland, to provide a global air traffic surveillance service through a
series of ADS-B receivers on our satellites. Aireon has contracted to offer this service to our co-investors in Aireon, as well as other ANSPs, including the
FAA. These ANSPs will use the service to provide
19
improved air traffic control services over the oceans, as well as polar and remote regions. Aireon also plans to market the data to airlines and other users.
Under our agreements with Aireon, Aireon will pay us fees of $200.0 million to host the ADS-B receivers on our satellites, of which they have paid us
$54.5 million as of December 31, 2020, as well as power and data services fees of approximately $23.5 million per year in the aggregate for the delivery of
the air traffic surveillance data over the Iridium system.
While the Aireon ADS-B receivers are the primary hosted payload on our satellites, we have also entered into an agreement with L3Harris for it to utilize
the remaining space for payloads it has constructed for its customers. This agreement resulted in an additional $74.1 million in hosting and data service
fees, all of which L3Harris has paid as of December 31, 2020.
We do not currently hold any active in-orbit insurance policies covering losses from satellite failures and we do not expect to obtain in-orbit insurance
covering losses from satellite failures or other operational problems affecting our constellation.
Regulatory Matters
Our Spectrum
We hold licenses to use 8.725 MHz of contiguous spectrum in the L-band, which operates at 1.6 GHz, and allows for two-way communication between our
devices and our satellites. In addition, we are authorized to use 200 MHz of K-Band (23 GHz) spectrum for satellite-to-satellite communications, known as
inter-satellite links, and 400 MHz of Ka-Band spectrum (19.4 GHz to 19.6 GHz and 29.1 GHz to 29.3 GHz) for two-way communication between our
satellites and our ground stations, known as feeder links. We are also authorized to use the 156.0125-162.0375 MHz spectrum for reception of Automatic
Identification System transmissions from maritime vessels and the 1087.7-1092.3 MHz spectrum for reception of Automatic Dependent Surveillance-
Broadcast transmissions from aircraft. Access to this spectrum enables us to design satellites, network and terrestrial infrastructure enhancements cost
effectively because each product and service can be deployed and sold worldwide. Our products and services are offered in over 100 countries, and we and
our distributors continue to seek authorizations in additional countries.
Our use of spectrum is globally coordinated and recorded by, and subject to the frequency rules and regulations of, the International Telecommunication
Union, or ITU. The ITU is the United Nations organization responsible for worldwide co-operation in the telecommunications sector. In order to protect
satellite systems from harmful radio frequency interference from other satellite systems, the ITU maintains a Master International Frequency Register of
radio frequency assignments. Each ITU administration is required to give notice of, coordinate and record its proposed use of radio frequency assignments
with the ITU’s Radiocommunication Bureau. The coordination negotiations are conducted by the national administrations with the assistance of satellite
operators. When the coordination process is completed, the ITU formally notifies all proposed users of frequencies and orbital locations in order to protect
the recorded assignments from subsequent nonconforming or interfering uses by member states of the ITU. Only member states have full standing within
this inter-governmental organization. Filings to the ITU were made on our behalf by the United States.
The ITU also controls the assignment of country codes used for placing telephone calls between different countries. Our network has been assigned the
8816 and 8817 country codes and uses these numbers for calling and communications between terminals.
Constellation De-Orbiting Obligations
We have certain de-orbit obligations under our FCC licenses. Specifically, pursuant to an orbital debris mitigation plan incorporated into our FCC satellite
constellation license in 2002, we were required to lower each of our first-generation satellites to an orbit with a perigee of approximately 250 kilometers as
it reached the end of its useful life and to coordinate these orbit-lowering maneuvers with the U.S. Combined Space Operations Center. In August 2014, we
received a license modification from the FCC permitting us to operate up to ten of our first-generation satellites pursuant to the less stringent 25 year de-
orbit standards for non-geostationary satellites that the FCC acknowledged in 2004 would serve the public interest and has been utilized for other satellite
constellations since that time. All of our new satellites are subject to the less stringent 25 year de-orbit standard.
Our FCC license required us to de-orbit a first-generation satellite following its replacement with a new satellite and to notify the FCC within 30 days
following removal of a first-generation satellite from its operational orbit for purposes of de-orbit. We began de-orbiting individual satellites as they were
replaced with new satellites. We completed the required de-orbit initiation
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process for our first-generation satellites during 2019. We plan to de-orbit our new satellites pursuant to and within the 25 year de-orbit standard consistent
with the FCC authorization of our new constellation.
Aireon LLC and Aireon Holdings LLC Agreement
In November 2012, we, through our Iridium Satellite subsidiary, and Aireon entered into an Amended and Restated Limited Liability Company Agreement
with NAV CANADA, the ANSP of Canada, and a wholly owned subsidiary of NAV CANADA. In February 2014, we entered into a Second Amended and
Restated Limited Liability Company Agreement, or the Aireon LLC Agreement, with NAV CANADA; Enav S.p.A., the ANSP of Italy; Naviair, the ANSP
of Denmark; Irish Aviation Authority Limited, the ANSP of Ireland, or IAA; and wholly owned subsidiaries of NAV CANADA, Enav and Naviair. In May
2018, we entered into a Third Amended and Restated Limited Liability Company Agreement, or the Aireon LLC Agreement, with NAV CANADA; Enav;
NATS (Services) Limited, the ANSP of the United Kingdom; Naviair; IAA; and wholly owned subsidiaries of NAV CANADA, Enav, NATS, Naviair, and
IAA. In December 2018, in connection with Aireon’s entry into a debt facility, we and the other Aireon investors contributed our interests in Aireon into a
new holding company, Aireon Holdings LLC, and entered into an Amended and Restated Aireon Holdings LLC Agreement. Aireon Holdings holds 100%
of the membership interests in Aireon LLC, which remains the operating entity.
Under the Aireon Holdings LLC Agreement, we hold a common membership interest, and the other investors hold preferred membership interests resulting
from their investments in Aireon for an aggregate purchase price of approximately $339 million. If and when funds are available, Aireon Holdings is
required to redeem a portion of our ownership interest for a payment of $120 million, following which NAV CANADA’s subsidiary will hold a 45%
interest in Aireon Holdings, and the other ANSP subsidiaries will collectively hold a 33% interest, with Iridium retaining a 22% interest. Based on Aireon’s
business plan and restrictions under Aireon’s debt facility, we do not expect this redemption of our ownership interest to occur for several years.
The Aireon Holdings LLC Agreement provides for Aireon Holdings to be managed by a board of directors consisting of 11 members. Currently, we may
nominate two directors, NAV CANADA may nominate five directors, Enav and NATS may each nominate one director, and Naviair and IAA may together
nominate one director. The chief executive officer of Aireon Holdings serves as the eleventh director. The Aireon Holdings LLC Agreement also provides
the minority-interest holders with several protective provisions.
In addition, pursuant to a debt facility for Aireon LLC provided by us and the other Aireon investors, we will participate pro-rata, based on our fully diluted
current ownership stake, in an investor bridge loan. As such, in December 2020, we invested $0.2 million in Aireon LLC. We expect future funding by us
and the other Aireon investors to be required in 2021 and 2022. Our maximum commitment under the investor bridge loan is $10.7 million.
Competition
The mobile satellite services industry is highly competitive but has significant barriers to entry, including the cost and difficulty associated with obtaining
spectrum licenses and successfully building and launching a satellite network. In addition to cost, there is a significant amount of lead time associated with
obtaining the required licenses, building and launching the satellite constellation, and deploying the ground network technology. We currently face
substantial competition from other service providers that offer a range of mobile and fixed communications options. Currently, our principal mobile
satellite services competitors are Inmarsat, Globalstar, ORBCOMM, and Thuraya Telecommunications Co., or Thuraya. We compete primarily on the basis
of coverage, quality, mobility and pricing of services and products.
Inmarsat owns and operates a fleet of GEO satellites. Unlike LEO satellites, GEO satellites orbit the earth at approximately 22,300 miles above the equator.
GEO systems require substantially larger and more expensive antennas, and typically have higher transmission delays than LEO systems. Due to its GEO
system, Inmarsat’s coverage area covers most bodies of water except for a majority of the polar regions. Inmarsat is the leading provider of satellite
communications services to the maritime sector. Inmarsat also offers land-based and aviation communications services.
Globalstar owns and operates a fleet of LEO satellites. Globalstar’s service is available only on a multi-regional basis as a result of its “bent pipe”
architecture, which requires that voice and data transmissions be routed from satellites immediately to nearby ground stations. This design requires the use
of multiple ground stations, which are impractical in extreme latitudes or over oceans.
ORBCOMM also provides commercial services using a fleet of LEO satellites. Like Globalstar, ORBCOMM’s network also has a “bent pipe” architecture,
which constrains its real-time coverage area. ORBCOMM’s principal focus is low-cost data and
21
IoT services, where it directly competes with our IoT offerings. Because a ground station may not be within view of a satellite, ORBCOMM’s services may
have a significant amount of latency, which may limit their use in some mission-critical applications. It does not offer voice service or high-speed data
services.
We also compete with regional mobile satellite communications services in several geographic markets. In these cases, the majority of our competitors’
customers require regional, not global, mobile voice and data services, so our competitors may present a viable alternative to our services. All of these
regional competitors operate or plan to operate GEO satellites. Our regional mobile satellite services competitors currently include Thuraya, principally in
Europe, the Middle East, Africa, Australia and several countries in Asia. In addition, there are a number of new entrants to the mobile satellite services
industry, with varying constellation designs and business models, primarily providing commodity broadband services similar to existing GEO-based fixed
satellite services operators. While their announced Ka and Ku-band operations and business plans are different from, and even complementary to, Iridium's
L-band services, some may in the future provide services that compete with us.
While we view our services as largely complementary to terrestrial wireline and wireless communications networks, we also compete with them indirectly.
We provide service in areas that are inadequately covered by these ground systems. To the extent that terrestrial communications companies invest in
underdeveloped areas, we will face increased competition in those areas. We believe that local telephone companies currently are reluctant to invest in new
switches, landlines and cellular towers to expand their networks in rural and remote areas due to high costs and limited usage. Many of the underdeveloped
areas are sparsely populated, making it difficult to generate the necessary returns on the capital expenditures required to build terrestrial wireless networks
in those areas. We believe that our solutions offer a cost-effective and reliable alternative to terrestrial-based wireline and wireless systems in these remote
regions.
Research and Development
Our research and development efforts have focused on the development, design and testing of our new constellation and new products, such as Iridium
Certus, Iridium Edge, Iridium PTT, Iridium Burst, Iridium GO!, transceiver modules and chipsets. We also develop product enhancements and new
applications for our existing products. Our research and development expenses were $12.0 million, $14.3 million and $22.4 million for the years ended
December 31, 2020, 2019 and 2018, respectively.
Employees and Human Capital Resources
Employees
As of December 31, 2020, we had 516 full-time employees and 6 part-time employees, none of whom are subject to any collective bargaining agreement.
We consider our employee relations to be good.
Human Capital Resources
Our Company is made up of varied and creative teams, and we are committed to creating an innovative and inclusive environment where our employees
are proud to work. We foster this sentiment by focusing on development, employee wellness and social responsibility. This starts with an onboarding
process that introduces our core mission and values, policies and procedures, performance review process and background about the company. We support
our employees in their career development by providing on-the-job training and education reimbursement to help employees maintain or enhance skills in
their current position or help with acquiring new skills to prepare for future opportunities. To measure employee engagement, we conduct an annual survey
to assess and track retention and satisfaction. We take responses from our employees seriously and use them to inform specific strategies every year tailored
to both the entire company as well as specific teams. We also help our employees stay engaged in other ways, including participation in Employee
Resource Groups, or ERGs, and other outreach efforts that cover a range of topics and interests. Active ERGs include Iridium Women Connect and the
Diversity and Inclusion Advisory Council.
We formed our Diversity and Inclusion Advisory Council in 2020, and it has identified four objectives to make our Iridium community, and the world, a
more diverse and inclusive place:
• Helping to recruit and retain team members with diverse backgrounds and experiences;
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Fostering participation in activities supporting diversity and inclusion within our communities;
Training, educating, and communicating with team members on the importance of diversity and inclusion to our culture and viability; and
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Periodically assessing our continual growth toward greater diversity and inclusion.
We currently have four working groups to put these objectives into practice. Each working group has its own goals, stakeholder relationships, strategy and
executive sponsorship.
Response to COVID-19
As for most companies and individuals, the COVID-19 pandemic has dramatically changed the way that we all live and work. From the earliest reports of
coronavirus, we closely monitored its spread to understand the potential impact on the health and safety of our workers and our partners. Our COVID-19
task force closely monitors federal and local guidelines and communicates frequently to employees about recent developments and actions.
We developed a health and safety policy specific to COVID-19 that outlines protocols consistent with federal guidelines. We quickly transitioned our
workforce to work from home, except for employees needing in-person access to laboratories or other resources onsite. We believe we’ve learned to
operate successfully in this new environment, and we remain committed to supporting a more carbon-friendly, hybrid work program for our team once
infection rates allow.
For our employees whose duties require on-site work (less than 20% of our workforce), we increased cleaning and sanitation at all locations, installed smart
screen questionnaires, installed hand sanitizer stations and had a third party inspector check for air quality improvements and required changes in our
facilities. We developed a scenario analysis to guide our employees and are supporting them as needed to ensure they are safe and well-equipped to do their
jobs.
Intellectual Property
At December 31, 2020, we held 31 U.S. patents. These patents cover several aspects of our satellite system, our global network, our communications
services, and our devices.
In addition to our owned intellectual property, we also license critical intellectual property from Motorola Solutions to operate and maintain our network
and related ground infrastructure and services as well as to design and manufacture our devices. This intellectual property is essential to our ability to
continue to operate our constellation and sell our services and devices. We maintain our licenses with Motorola Solutions pursuant to several agreements,
which can be terminated by Motorola Solutions upon the commencement by or against us of any bankruptcy proceeding or other specified liquidation
proceedings or upon our material failure to perform or comply with any provision of the agreements. If Motorola Solutions were to terminate any such
agreement, it may be difficult or, under certain circumstances, impossible to obtain the technology from alternative vendors. Motorola Solutions has
assigned a portion of the patents covered by some of these licenses to one or more third parties.
We license additional intellectual property and technology from other third parties and expect to do so in the future in connection with our network and
related ground infrastructure and services as well as our devices. If any such third party were to terminate its agreement with us or cease to support and
service such intellectual property or technology, or if we are unable to renew such licenses on commercially reasonable terms or at all, it may be difficult,
more expensive or impossible to obtain substitute intellectual property or technology from alternative vendors. Any substitute intellectual property or
technology may also have lower quality or performance standards, which would adversely affect the quality of our devices and services. For more
information, see “Risk Factors—We are dependent on intellectual property licensed from third parties to operate our constellation and sell our devices and
for the enhancement of our existing devices and services.”
Available Information
Copies of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments, if any, to those reports filed
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, are available free of charge through our website at
www.iridium.com and on the website of the Securities and Exchange Commission, or SEC, at www.sec.gov. A request for any of these reports may also be
submitted to us by writing: Investor Relations, Iridium Communications Inc., 1750 Tysons Boulevard, Suite 1400, McLean, VA 22102, or by calling our
Investor Relations line at 703-287-7570.
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Item 1A. Risk Factors
Risks related to our satellites and network
Our satellites may experience operational problems, which could affect our ability to provide an acceptable level of service to our customers.
From time to time, we experience temporary intermittent losses of signal cutting off calls in progress, preventing completions of calls when made or
disrupting the transmission of data. If the magnitude or frequency of such problems increase and we are no longer able to provide a commercially
acceptable level of service, our business and financial results and our reputation would be hurt and our ability to pursue our business plan would be
compromised.
We may be required in the future to make changes to our constellation to maintain or improve its performance. Any such changes may require prior FCC
approval, and the FCC may subject the approval to other conditions that could be unfavorable to our business. In addition, from time to time we may
reposition our satellites within the constellation in order to optimize our service, which could result in degraded service during the repositioning period.
Although we have some ability to remedy some types of problems affecting the performance of our satellites remotely from the ground, the physical repair
of our satellites in space is not feasible.
Our products could fail to perform or could perform at reduced levels of service because of technological malfunctions or deficiencies, regulatory
compliance issues, or events outside of our control, which would seriously harm our business and reputation.
Our products and services are subject to the risks inherent in a large-scale, complex telecommunications system employing advanced technology and
heavily regulated by, among others, the FCC and similar authorities internationally. Any disruption to our satellites, services, information systems or
telecommunications infrastructure, or regulatory compliance issues, could result in the inability or reduced ability of our customers to receive our services
for an indeterminate period of time. These customers include government agencies conducting mission-critical work throughout the world, as well as
consumers and businesses located in remote areas of the world and operating under harsh environmental conditions where traditional telecommunications
services may not be readily available. Any disruption to our services or extended periods of reduced levels of service could cause us to lose customers or
revenue, result in delays or cancellations of future implementations of our products and services, result in failure to attract customers, or result in litigation,
customer service or repair work that would involve substantial costs and distract management from operating our business. The failure of any of the diverse
elements of our system, including our satellites, our commercial gateway, our satellite teleport network facilities or our satellite network operations center,
to function as required could render our system unable to perform at the quality and capacity levels required for success. Any system failures, repeated
product failures or shortened product life, or extended reduced levels of service could reduce our sales, increase costs, or result in warranty or liability
claims or litigation, cause us to extend our warranty period, and seriously harm our business.
We do not maintain in-orbit satellite insurance for our satellites, as a result of which we may be subject to increased costs.
We obtained insurance for our satellites covering launch and in-orbit failures of our satellites for a period of twelve months from the date of launch. All of
our satellites were launched more than twelve months ago, and we have no plans to purchase further in-orbit insurance. As a result, a failure of one or more
of our satellites, or the occurrence of equipment failures and other related problems, would constitute an uninsured loss and could harm our financial
condition.
Our satellites have a limited life and may fail prematurely, which could cause our network to be compromised and materially and adversely affect our
business, prospects and profitability, or cause us to incur additional expense to launch replacement satellites.
We have in the past and may in the future experience in-orbit malfunctions of our satellites, which could adversely affect the reliability of their service or
result in total failure of the satellite. In-orbit failure of a satellite may result from various causes, including component failure, loss of power or fuel,
inability to control positioning of the satellite, solar or other astronomical events, including solar radiation and flares, and space debris. Other factors that
could affect the useful lives of our satellites include the quality of construction, gradual degradation of solar panels and the durability of components.
Although we do not incur any direct cash costs related to the failure of a single satellite, if a satellite fails, we record an impairment charge in our statement
of operations to reduce the remaining net book value of that satellite to zero, and any such impairment charges could depress our net income for the period
in which the failure occurs. Further, a large number of such failures could shorten the expected life of our constellation, which would increase our
depreciation expense, or require us to launch our ground spare satellites or even replace our constellation sooner than currently planned, either of which
would increase our projected capital expenditures.
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If operations at our commercial gateways or operations center were to be disrupted, we may experience interruptions in our ability to provide service to
our customers.
Our commercial satellite network traffic is supported by a gateway in Tempe, Arizona, as well as a gateway in Izhevsk, Russia for traffic within Russian
boundaries, and we operate our satellite constellation from our satellite network operations center in Leesburg, Virginia. If we are unable to use our primary
commercial gateway in Tempe, it could take us from one to eight hours to switch operations to our backup facility for most services, and potentially longer
for some services. During this time, our customers would be unable to use those services, and we could suffer a loss of revenue and harm to our reputation.
When operating on our backup facility, any further failure could leave us unable to offer services for an extended period. Our gateways and operations
center may also experience service shutdowns or periods of reduced service in the future as a result of equipment failures, delays in deliveries or regulatory
issues. Any such failure would impede our ability to provide service to our customers.
Our customized hardware and software may be difficult and expensive to service, upgrade or replace.
Some of the hardware and software we use in operating our gateways is significantly customized and tailored to meet our requirements and specifications
and could be difficult and expensive to service, upgrade or replace. Although we maintain inventories of some spare parts, it nonetheless may be difficult,
expensive or impossible to obtain replacement parts for the hardware due to a limited number of those parts being manufactured to our requirements and
specifications. In addition, our business plan contemplates updating or replacing some of the hardware and software in our network as technology
advances, but the complexity of our requirements and specifications may present us with technical and operational challenges that complicate or otherwise
make it expensive or infeasible to carry out such upgrades and replacements. If we are not able to suitably service, upgrade or replace our equipment, our
ability to provide our services and therefore to generate revenue could be harmed.
Rapid and significant technological changes in the satellite communications industry may impair our competitive position and require us to make
significant additional capital expenditures.
The satellite communications industry is subject to rapid advances and innovations in technology. We may face competition in the future from companies
using new technologies and new satellite systems. New technology could render our system obsolete or less competitive by satisfying customer demand in
more attractive ways or through the introduction of incompatible standards. Particular technological developments that could adversely affect us include the
deployment by our competitors of new satellites with greater power, flexibility, efficiency or capabilities than ours, as well as continuing improvements in
terrestrial wireless technologies. For us to keep up with technological changes and remain competitive, we may need to make significant capital
expenditures, including capital to design and launch new products and services. Customer acceptance of the products and services that we offer will
continually be affected by technology-based differences in our product and service offerings compared to those of our competitors. New technologies may
also be protected by patents or other intellectual property laws and therefore may not be available to us. Any failure on our part to implement new
technology within our system may compromise our ability to compete.
Our networks and those of our third-party service providers may be vulnerable to security risks.
We expect the secure transmission of confidential information over public networks to continue to be a critical element of our ability to compete for
business, manage our risks, and protect our customers and our reputation. Our network and those of our third-party service providers and our customers
may be vulnerable to unauthorized access, computer attacks, viruses and other security problems. Persons who circumvent security measures could
wrongfully access and obtain or use information on our network or cause service interruptions, delays or malfunctions in our devices, services or
operations, any of which could harm our reputation, cause demand for our products and services to fall, and compromise our ability to pursue our business
plans. Recently, there have been reported a number of significant, widespread security attacks and breaches that have compromised network integrity for
many companies and governmental agencies, in some cases reportedly originating from outside the United States. In addition, there are reportedly private
products available in the market today which may attempt to unlawfully intercept communications made using our network. We may be required to expend
significant resources to respond to, contain, remediate, and protect against these attacks and threats, including compliance with applicable data breach and
security laws and regulations, and to alleviate problems, including reputational harm and litigation, caused by these security incidents. In addition, in the
event of such a security incident, our customer contracts may not adequately protect us against liability to third parties with whom our customers conduct
business. Although we have implemented and intend to continue to implement security measures, these measures may prove to be inadequate. These
security incidents could have a significant effect on our systems, devices and services, including system failures and delays that could limit network
availability, which could harm our business and our reputation and result in substantial liability.
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Our satellites may collide with space debris or another spacecraft, which could adversely affect the performance of our constellation.
In February 2009, we lost an operational satellite as a result of a collision with a non-operational Russian satellite. Although we have some ability to
actively maneuver our satellites to avoid potential collisions with space debris or other spacecraft, this ability is limited by, among other factors,
uncertainties and inaccuracies in the projected orbit location of and predicted conjunctions with debris objects tracked and cataloged by the U.S.
government. Additionally, some space debris is too small to be tracked and therefore its orbital location is completely unknown; nevertheless, this debris is
still large enough to potentially cause severe damage or a failure of our satellites should a collision occur. If our constellation experiences additional
satellite collisions with space debris or other spacecraft, our service could be impaired.
The space debris created by the February 2009 satellite collision may cause damage to other spacecraft positioned in a similar orbital altitude.
The 2009 collision of one of our satellites with a non-operational Russian satellite created a space debris field concentrated in the orbital altitude where the
collision occurred, and thus increased the risk of space debris damaging or interfering with the operation of our satellites, which travel in this orbital
altitude, as well as satellites owned by third parties, such as U.S. or foreign governments or agencies and other satellite operators. Although there are tools
used by us and providers of tracking services, such as the U.S. Combined Space Operations Center, to detect, track and identify space debris, we or third
parties may not be able to maneuver the satellites away from such debris in a timely manner. Any such collision could potentially expose us to significant
losses and liability if we were found to be at fault.
Risks related to our business operations
Our business has been negatively affected by the COVID-19 pandemic, actions taken to mitigate the pandemic, and economic disruptions that have
resulted, but we are unable to predict the full extent or nature of these impacts at this time.
In response to the COVID-19 pandemic, many jurisdictions in the United States and around the world ordered their residents to cease traveling to non-
essential jobs and to stay in their homes as much as possible. Since March 2020, we have been conducting business with remote work for most employees,
prohibition on most employee travel, and remote sales and support activities, among other modifications. The pandemic and the steps taken to respond have
also caused substantial domestic and global economic disruption, including similar restrictions on activity among our distributors, which has led to reduced
sales and has limited our distributors’ ability to install or service our products. These limitations may continue for the duration of these pandemic-related
restrictions, and we or our distributors may take additional actions to respond as the situation evolves.
Further, unemployment has significantly increased, and financial markets are experiencing significant levels of volatility and uncertainty, which could have
an adverse effect on consumer and commercial spending and negatively affect demand for our and our distributors’ products and services, particularly in
markets such as aviation and recreation. This, in turn, could negatively affect the value of our current agreements with our distributors and their willingness
to enter into or renew contracts with us. The pandemic has also negatively affected the payment of accounts receivable and collections. One of our
distributors has sought protection in bankruptcy, causing us to reduce the amount we expect to receive from them for past services. If additional distributors
seek protection in bankruptcy, it could further harm our cash flows and results of operations.
As a result of the negative effects at the outset of the pandemic, we reduced our initial revenue and earnings outlook for 2020. Other effects of the COVID-
19 pandemic and the effects of the modifications we and others have made in response are difficult to assess or predict with certainty at this time but may
include risks to employee health and safety, a decline in the market price of our common stock, a prolonged economic downturn, and deterioration of the
economy and consumer and commercial spending, any of which could further adversely affect our business, results of operations and/or financial condition
in 2021 and beyond.
Aireon, our primary hosted payload customer, has been negatively affected by reduced air traffic as a result of the COVID-19 pandemic, which could
reduce or eliminate the value of our agreements with, and ownership interest in, Aireon.
Aireon is our primary hosted payload customer, and we expect annual revenue to us from Aireon hosting, data services and power fees to be approximately
$39.5 million. In addition, if and when funds are available following a planned refinancing of its credit facility, Aireon’s parent company, Aireon Holdings,
is required to redeem a portion of our ownership interest for a payment of $120.0 million, and we would then retain a common ownership interest of
approximately 22% in Aireon Holdings. Based on Aireon’s business plan and restrictions under Aireon’s debt facility, we do not expect this redemption of
our ownership interest to occur for several years.
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Aireon provides air traffic surveillance services to ANSPs around the world, as well as other offerings based on its collection of air traffic surveillance data.
The COVID-19 pandemic has resulted in substantially reduced air traffic worldwide, and it is uncertain when air traffic volumes will recover. A portion of
Aireon’s customers pay them on a per-flight-hour basis, and even those customers with fixed-fee arrangements may seek to renegotiate their fees in the face
of dramatically reduced air traffic. Further, Aireon’s business model requires expansion of its customer base to achieve its projected financial results, which
may be substantially more difficult until air traffic volumes recover. While our fee arrangements with Aireon do not depend on traffic volumes, if Aireon’s
revenues are substantially reduced, they may not be able to pay us the contractually required hosting, data services and power fees in a timely manner or at
all. Further, Aireon may need to seek additional financing. Any sale of equity securities by Aireon would dilute our ownership if and to the extent that we
do not invest additional funds to maintain our proportional ownership interest. If additional funding is not available, Aireon may default on its credit
facility, which could result in the loss or reduction in value of our investment in Aireon, or be forced out of business, in which case we would not receive
any further hosting, data or power fees, or the expected $120.0 million redemption payment, and we would lose the value of our retained investment in
Aireon Holdings.
Our business plan depends on increased demand for mobile satellite services, among other factors.
Our business plan is predicated on growth in demand for mobile satellite services. Demand for mobile satellite services may not grow, or may even
contract, either generally or in particular geographic markets, for particular types of services or during particular time periods. A lack of demand could
impair our ability to sell products and services, develop and successfully market new products and services and could exert downward pressure on prices.
Any decline in prices would decrease our revenue and profitability and negatively affect our ability to generate cash to pay down our debt or for capital
expenditures, investments and other working capital needs.
Our ability to successfully implement our business plan will also depend on a number of other factors, including:
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our ability to maintain the health, capacity and control of our satellite constellation;
the level of market acceptance and demand for our products and services;
our ability to introduce innovative new products and services that satisfy market demand;
our ability to expand our business using our existing spectrum resources both in the United States and internationally;
our ability to sell our products and services in additional countries;
our ability to comply with applicable regulatory requirements, both in the United States and internationally;
our ability to maintain our relationship with U.S. government customers, particularly the Department of Defense;
the ability of our distributors to market and distribute our products, services and applications effectively and their continued development of
innovative and improved solutions and applications for our products and services;
the effectiveness of our competitors in developing and offering similar services and products; and
our ability to maintain competitive prices for our products and services and to control our costs.
Our agreements with U.S. government customers, particularly the Department of Defense, which represent a significant portion of our revenue, are
subject to termination.
The U.S. government, through a dedicated gateway owned and operated by the Department of Defense, has been and continues to be, directly and
indirectly, our largest customer, representing 22% of our revenue for each of the years ended December 31, 2020 and 2019. We provide the majority of our
services to the U.S. government pursuant to our GMSS and EMSS contracts. We entered into these contracts in April 2019 and September 2019,
respectively. The GMSS contract provides for a six-month base term and up to four one-year options exercisable at the election of the U.S. government,
two of which have been exercised so far, and the EMSS contract provides for a seven-year term. The U.S. government may terminate these agreements, in
whole or in part, at any time for its convenience. Our relationship with the U.S. government is also subject to the overall U.S. government budget and
appropriation decisions and processes. U.S. government budget decisions, including with respect to defense spending, are based on changing government
priorities and objectives, which are driven by numerous factors, including geopolitical events and macroeconomic conditions, and are beyond our control.
If the U.S. government terminates either of these agreements, we would lose a significant portion of our revenue.
We are dependent on intellectual property licensed from third parties to operate our constellation and sell our devices and for the enhancement of our
existing devices and services.
We license critical intellectual property and technology to operate and maintain our network and related ground infrastructure and services as well as to
design, manufacture, and sell our devices. This intellectual property and technology is essential to our
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ability to continue to operate our constellation and sell our services and devices. In addition, we are dependent on third parties to develop enhancements to
our current products and services even in circumstances where we own the intellectual property. If any third-party owner of such intellectual property or
technology were to terminate any license agreement with us or cease to support and service such intellectual property or technology or perform
development on our behalf, or if we are unable to renew such licenses on commercially reasonable terms or at all, it may be difficult, more expensive or
impossible to obtain such intellectual property, technology, or services from alternative vendors. Any substitute intellectual property or technology may
also be costly to develop and integrate, or could have lower quality or performance standards, which would adversely affect the quality of our devices and
services. In connection with the development of new devices and services, we may be required to obtain additional intellectual property rights from third
parties. We can offer no assurance that we will be able to obtain such intellectual property rights on commercially reasonable terms or at all. If we are
unable to obtain such intellectual property rights on commercially reasonable terms, we may not be able to develop some new devices and services.
Our failure to effectively manage the expansion of our portfolio of products and services could impede our ability to execute our business plan, and we
may experience increased costs or disruption in our operations.
In order to achieve the substantial future revenue growth we have projected, we must develop and market new products and services, such as Iridium
Certus. We currently face a variety of challenges, including maintaining the infrastructure and systems necessary for us to manage the growth of our
business. As our product and service portfolio continues to expand, the responsibilities of our management team and demands on other company resources
also increase. Consequently, we may further strain our management and other company resources with the increased complexities and administrative
burdens associated with a larger, more complex portfolio of products and services. For example, we have in the past experienced quality issues and
incorrect market assessments in connection with the introduction of new products and services, and we may experience such issues in the future. Our
failure to meet these challenges as a result of insufficient management or other resources could significantly impede our ability to execute our business
plan, which relies in part on our ability to leverage our largely fixed-cost infrastructure. To properly manage our growth, we may need to hire and retain
additional personnel, upgrade our existing operational management and financial and reporting systems, and improve our business processes and controls.
Failure to effectively manage the expansion of our portfolio of products and services in a cost-effective manner could result in declines in product and
service quality and customer satisfaction, disruption of our operations, or increased costs, any of which would reduce our ability to increase our
profitability.
We could lose market share and revenue as a result of increasing competition from companies in the wireless communications industry, including
cellular and other satellite operators, and from the extension of land-based communications services.
We face intense competition in all of our markets, which could result in a loss of customers and lower revenue and make it more difficult for us to enter
new markets. We compete primarily on the basis of coverage, quality, portability, and pricing of services and products.
The provision of satellite-based services and products is subject to downward price pressure when capacity exceeds demand or as a result of aggressive
discounting by some operators under financial pressure to expand their respective market share. In addition, we may face competition from new
competitors, new technologies or new equipment, including proposed new LEO constellations. For example, we may face competition for our land-based
services in the United States from incipient ancillary terrestrial component, or ATC, service providers who are designing a satellite operating business and a
terrestrial component around their spectrum holdings. In addition, some of our competitors have announced plans for the launch of additional satellites. As
a result of competition, we may not be able to successfully retain our existing customers and attract new customers.
In addition to our satellite-based competitors, terrestrial voice and data service providers, both wireline and wireless, could further expand into rural and
remote areas and provide the same general types of services and products that we provide through our satellite-based system. Although satellite
communications services and terrestrial communications services are not perfect substitutes, the two compete in some markets and for some services.
Consumers generally perceive terrestrial wireless voice communication products and services as cheaper and more convenient than those that are satellite-
based. Many of our terrestrial competitors have greater resources, wider name recognition and newer technologies than we do. In addition, industry
consolidation could hurt us by increasing the scale or scope of our competitors, thereby making it more difficult for us to compete.
We depend on third parties to market and sell our products and services, and their inability to do so effectively could impair our revenue and our
reputation.
We select third-party distributors, in some cases on an exclusive basis, and rely on them to market and sell our products and services to end users and to
determine the prices end users pay. We also depend on our distributors to develop innovative and
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improved solutions and applications integrating our product and service offerings. As a result of these arrangements, we are dependent on the performance
of our distributors to generate most of our revenue. Our distributors operate independently of us, and we have limited control over their operations, which
exposes us to significant risks. Distributors may not commit the same level of resources to market and sell our products and services that we would, and
these distributors may also market and sell competitive products and services. In addition, our distributors may not comply with the laws and regulatory
requirements in their local jurisdictions, which could limit their ability to market or sell our products and services. If our distributors develop faulty or
poorly performing products using our technology or services, we may be subject to claims, and our reputation could be harmed. If current or future
distributors do not perform adequately, or if we are unable to locate competent distributors in particular countries and secure their services on favorable
terms, we may be unable to increase or maintain our revenue in these markets or enter new markets, we may not realize our expected growth, and our brand
image and reputation could be hurt.
In addition, we may lose distributors due to competition, consolidation, regulatory developments, business developments affecting our distributors or their
customers, or for other reasons. For example, the COVID-19 pandemic and the steps taken to respond are causing substantial domestic and global
economic disruption, including financial difficulties and restrictions on activity among our distributors, which have led to reduced sales and limited our
distributors’ ability to install or service our products. These disruptions have also negatively affected the payment of accounts receivable and collections.
For example, one of our distributors has sought protection in bankruptcy, causing us to reduce the amount we expect to receive from them for past services.
Other distributors could similarly seek to reorganize or seek protection from creditors, including us. These financial disruptions could also result in industry
consolidation. In 2009, one of our largest competitors, Inmarsat, acquired our then largest distributor, Stratos Global Wireless, Inc., and in 2014, Inmarsat
acquired Globe Wireless, one of our service providers. Following each acquisition, Inmarsat essentially stopped promoting sales of our products and
services, and they may further reduce their efforts in the future. Any future consolidation of our distributors would further increase our reliance on a few
key distributors of our services and the amount of volume discounts that we may have to give those distributors. Our two largest distributors, Marlink
Group and Garmin, together represented approximately 9% of our revenue for the year ended December 31, 2020, and our ten largest distributors
represented, in the aggregate, 30% of our revenue for the year ended December 31, 2020. The loss or consolidation of any of these distributors, or a
decrease in the level of effort expended by any of them to promote our products and services, could reduce the distribution of our products and services as
well as the development of new products and applications, which would negatively impact our revenue.
We rely on a limited number of key vendors for supply of equipment and services, the loss of any of which could cause us to incur additional costs and
delays in the production and delivery of our products.
We currently rely on two manufacturers of our devices, including our mobile handsets, L-band transceivers and SBD devices. We also utilize sole source
suppliers for some of the component parts of our devices. If any of our suppliers were to terminate its relationship with us, we may not be able to find a
replacement supplier in a timely manner, at an acceptable price or at all.
Our manufacturers and suppliers may become capacity-constrained, or could face financial difficulties as a result of a surge in demand, a natural disaster or
other event, including the impacts of the COVID-19 pandemic. For example, in 2020, a manufacturer of components used in several Iridium transceiver
and handset products suffered a fire at its factory. As a result, we may experience a delay in fulfilling some product orders and are evaluating replacement
components and product changes. If we fail to effectively address these issues, we could suffer delays, which could reduce our sales of those products and
use of the related services and could harm our reputation. Even if we are successful in these mitigation efforts, we may experience increased costs on the
affected products.
In addition, one or more component suppliers may decide to cease production of various components of our products, resulting in a shortage or interruption
in supplies or an inability to meet increased demand. Any delay in production or delivery of our products or components by our suppliers due to an
extended closure of their plants or other restrictions imposed in response to the COVID-19 pandemic could also adversely affect our business. Although we
may be able to replace or supplement sole source suppliers, there could be a substantial period of time in which our products would not be available; any
new relationship may involve higher costs and delays in development and delivery, and we may encounter technical challenges in successfully replicating
the manufacturing processes. If our manufacturers or suppliers terminate their relationships with us, fail to provide equipment or services to us on a timely
basis, or fail to meet our performance expectations, we may be unable to provide products or services to our customers in a competitive manner, which
could in turn negatively affect our financial results and our reputation.
Conducting and expanding our operations outside the United States creates numerous risks, which may harm our operations and compromise our
ability to expand our international operations.
We have significant operations outside the United States. We estimate that commercial data traffic originating outside the United States, excluding our
Iridium OpenPort broadband data service traffic, accounted for 72% and 71% of total commercial
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data traffic for the years ended December 31, 2020 and 2019, respectively, while commercial voice traffic originating outside the United States, excluding
Iridium OpenPort traffic, accounted for 91% and 90% of total commercial voice traffic for the years ended December 31, 2020 and 2019. We cannot
provide the precise geographical distribution of revenue from end users because we do not contract directly with them. Instead, we determine the country in
which we earn our revenue based on where we invoice our distributors. These distributors sell services directly or indirectly to end users, who may be
located or use our products and services elsewhere. We and our distributors are also seeking authorization to sell our services in additional countries. The
COVID-19 pandemic has, and we expect will continue to, put pressure on global economic conditions and overall spending, which could negatively affect
end user adoption of our products.
Conducting operations outside the United States involves numerous risks and, while expanding our international operations would advance our growth, it
would also increase our exposure to these risks. For example, in 2013 we commenced the provision of satellite communications services in Russia through
a local subsidiary and its authorized Russian service providers and subsequently constructed a dedicated gateway in Russia. The U.S. government has
imposed economic and diplomatic sanctions on certain Russian corporations, banks, and citizens and might impose additional sanctions in the future. If
such sanctions, or any Russian response to such sanctions, affects our operations in Russia, it could limit our growth in Russia or prevent us from
continuing to operate there at all, which would reduce our revenues.
Other risks associated with the proposed expansion of our international operations include:
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effects of the COVID-19 pandemic, including on international economies, supply chains and travel;
difficulties in penetrating new markets due to established and entrenched competitors;
difficulties in developing products and services that are tailored to the needs of local customers;
lack of local acceptance or knowledge of our products and services;
lack of recognition of our products and services;
unavailability of, or difficulties in establishing, relationships with distributors;
significant investments, including the development and deployment of dedicated gateways, as some countries require physical gateways within
their jurisdiction to connect the traffic coming to and from their territory;
instability of international economies and governments;
changes in laws and policies affecting trade and investment in other jurisdictions, including the United Kingdom’s exit from the European Union;
exposure to varying legal standards, including data privacy, security and intellectual property protection in other jurisdictions;
difficulties in obtaining required regulatory authorizations;
difficulties in enforcing legal rights in other jurisdictions;
local domestic ownership requirements;
requirements that operational activities be performed in-country;
changing and conflicting national and local regulatory requirements;
foreign currency exchange rates and exchange controls; and
ongoing compliance with the U.S. Foreign Corrupt Practices Act, U.S. export controls, anti-money laundering and trade sanction laws, and similar
anti-corruption and international trade laws in other countries.
If any of these risks were to materialize, it could affect our ability to successfully compete and expand internationally.
Government organizations, foreign military and intelligence agencies, natural disaster aid associations, and event-driven response agencies use our
commercial voice and data satellite communications services. Accordingly, we may experience reductions in usage due to changing global circumstances.
The prices for our products and services are typically denominated in U.S. dollars. Any appreciation of the U.S. dollar against other currencies, including as
a result of the COVID-19 pandemic, will increase the cost of our products and services to our international customers and, as a result, may reduce the
competitiveness of our international offerings and make it more difficult for us to grow internationally. Conversely, in some locations, primarily Russia, we
conduct business in the local currency, and a depreciation of the local currency against the U.S. dollar will reduce the U.S. dollar value of our revenues
from those countries. In recent years, Russia has experienced significant currency depreciation against the U.S. dollar.
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Pursuing strategic transactions may cause us to incur additional risks.
We may pursue acquisitions, joint ventures or other strategic transactions from time to time. We may face costs and risks arising from any such
transactions, including integrating a new business into our business or managing a joint venture. These risks may include adverse legal, organizational and
financial consequences, loss of key customers and distributors, and diversion of management’s time.
In addition, any major business combination or similar strategic transaction may require significant additional financing, and our ability to obtain such
financing may be restricted by the credit agreement governing our currently outstanding Term Loan. Further, depending on market conditions, investor
perceptions of our company and other factors, we might not be able to obtain financing on acceptable terms, in acceptable amounts, or at appropriate times
to implement any such transaction. Any such financing, if obtained, may dilute existing stockholders.
Spectrum values historically have been volatile, which could cause the value of our business to fluctuate.
Our business plan is evolving, and it may in the future include forming strategic partnerships to maximize value for our spectrum, network assets and
combined service offerings in the United States and internationally. Values that we may be able to realize from such partnerships will depend in part on the
value placed on our spectrum authorizations. Valuations of spectrum in other frequency bands historically have been volatile, and we cannot predict at what
amount a future partner may be willing to value our spectrum and other assets. In addition, to the extent that the FCC takes action that makes additional
spectrum available or promotes the more flexible use or greater availability of existing satellite or terrestrial spectrum allocations, for example by means of
spectrum leasing or new spectrum sales, the availability of such additional spectrum could reduce the value of our spectrum authorizations and, as a result,
the value of our business.
We may be negatively affected by global economic conditions.
Our operations and performance depend significantly on worldwide economic conditions. Uncertainty about global economic conditions poses a risk as
individual consumers, businesses and governments may postpone spending in response to tighter credit, negative financial news, declines in income or
asset values, or budgetary constraints. Reduced demand would cause a decline in our revenue and make it more difficult for us to operate profitably,
potentially compromising our ability to pursue our business plan. While we expect the number of our subscribers and revenue to continue to grow, we
expect the future growth rate will be slower than our historical growth and may not continue in every quarter of every year. We expect our future growth
rate will be affected by the condition of the global economy, increased competition, maturation of the satellite communications industry, and the difficulty
in sustaining high growth rates as we increase in size. Any substantial appreciation of the U.S. dollar may also negatively affect our growth by increasing
the cost of our products and services in foreign countries.
Our ability to operate our company effectively could be impaired if we lose members of our senior management team or key technical personnel.
We depend on the continued service of key managerial and technical personnel and personnel with security clearances, as well as our ability to continue to
attract and retain highly qualified personnel. We compete for such personnel with other companies, government entities, academic institutions and other
organizations. The unexpected loss or interruption of the services of such personnel could compromise our ability to effectively manage our operations,
execute our business plan and meet our strategic objectives.
Risks related to our capital structure
We have a considerable amount of debt, which may limit our ability to fulfill our obligations and/or to obtain additional financing.
As of December 31, 2020, we had $1,637.6 million of consolidated gross indebtedness on an actual basis under our Term Loan. Our capital structure and
reliance on indebtedness can have several important consequences, including, but not limited to, the following:
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If future cash flows are insufficient, we may not be able to make principal or interest payments on our debt obligations, which could result in the
occurrence of an event of default under one or more of those debt instruments.
• Our leverage level could increase our vulnerability to adverse economic and industry conditions.
• Our indebtedness requires us to dedicate a substantial portion of our cash flow from operations to payments on our debt, thereby reducing the
availability of our cash flow for operations and other purposes.
• Our leverage level could make it more difficult for us to satisfy our obligations to our lenders, resulting in possible defaults on and acceleration of
such indebtedness.
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• Our leverage level could place us at a competitive disadvantage compared to any competitors that have less debt or comparable debt at more
favorable interest rates and that, as a result, may be better positioned to withstand economic downturns.
• Our consolidated indebtedness has the general effect of reducing our flexibility to react to changing business and economic conditions insofar as
they affect our financial condition. The interest rates at which we might secure additional financings may be higher than our currently outstanding
debt instruments or higher than forecasted at any point in time, which could adversely affect our business, financial condition, results of operations
and cash flows.
• Market conditions could affect our access to capital markets, restrict our ability to secure financing to make planned capital expenditures and
investments and pay other expenses, which could adversely affect our business, financial condition, cash flows and results of operations.
Further, despite our substantial levels of indebtedness, we and our subsidiaries have the ability to incur substantially more indebtedness, which could
further intensify the risks described above.
If we do not generate sufficient cash flows, we may be unable to service all of our indebtedness.
To service our indebtedness, we will require a significant amount of cash. Our ability to generate cash, make scheduled payments or to refinance our debt
obligations depends on our successful financial and operating performance, which may be affected by a range of economic, competitive and business
factors, many of which are outside of our control and some of which are described elsewhere in the “Risk Factors” section of this Form 10-K.
If our cash flows and capital resources are insufficient to fund our debt service obligations, or to repay the Term Loan when it matures, we may have to
undertake alternative financing plans, such as refinancing or restructuring our debt, selling assets or operations, reducing or delaying capital investments, or
seeking to raise additional capital. We may not be able to refinance our debt, or any refinancing of our debt could be at higher interest rates and may require
us to comply with more restrictive covenants that could further restrict our business operations. Our ability to implement successfully any such alternative
financing plans will depend on a range of factors, including general economic conditions, the level of activity in capital markets generally, and the terms of
our various debt instruments then in effect.
The credit agreement governing our Term Loan contains cross-default or cross-acceleration provisions that may cause all of the debt issued under that
instrument to become immediately due and payable because of a default under an unrelated debt instrument.
Our failure to comply with the obligations contained in the credit agreement governing our Term Loan or other current or future instruments of
indebtedness could result in an event of default under the applicable instrument, which could result in the related debt and the debt issued under other
instruments (together with accrued and unpaid interest and other fees) becoming immediately due and payable. In such event, we would need to raise funds
from alternative sources, which funds may not be available to us on favorable terms, on a timely basis, or at all. Alternatively, such a default could require
us to sell our assets and otherwise curtail our operations in order to pay our creditors. These alternative measures could have a material adverse effect on
our business, financial position, results of operations and/or cash flows, which could cause us to become bankrupt or insolvent or otherwise impair our
ability to make payments in respect of our indebtedness.
Adverse changes in our credit ratings or withdrawal of the ratings assigned to our debt securities by rating agencies may negatively affect us.
Our ability to access capital markets is important to our ability to operate our business. Increased scrutiny of the satellite industry and the impact of
regulation, as well as changes in our financial performance and unfavorable conditions in the capital markets could result in credit agencies reexamining
our credit ratings. A downgrade in our credit ratings could restrict or discontinue our ability to access capital markets at attractive rates and increase our
borrowing costs. Furthermore, any rating assigned could be lowered or withdrawn entirely by a rating agency if, in that rating agency’s judgment, future
circumstances relating to the basis of the rating, such as adverse changes, so warrant. Any future lowering of our ratings likely would make it more difficult
or more expensive for us to obtain additional debt financing.
If we default under the Term Loan, the lenders may require immediate repayment in full of amounts borrowed or foreclose on our assets.
The credit agreement governing our Term Loan contains events of default, including cross-default with other indebtedness, bankruptcy, and a change in
control (as defined in the credit agreement). If we experience an event of default, the lenders may require repayment in full of all principal and interest
outstanding under the Term Loan. If we fail to repay such amounts, the
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lenders may foreclose on the assets we have pledged under the Term Loan, which includes substantially all of the assets of our domestic subsidiaries,
including our principal operating subsidiary, Iridium Satellite.
Certain provisions in the credit agreement governing our Term Loan limit our financial and operating flexibility.
The credit agreement governing our Term Loan contains covenants that place restrictions on, among other things, our ability to:
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incur liens,
engage in mergers or asset sales,
pay dividends,
repay subordinated indebtedness,
incur indebtedness,
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engage in other transactions as specified in the credit agreement.
While the credit agreement provides for exceptions, complying with these restrictions may make it more difficult for us to successfully execute our
business plan and compete against companies who are not subject to such restrictions.
The LIBOR calculation method may change, and LIBOR is expected to be phased out after 2021.
Our Term Loan bears interest at a rate based on the London Interbank Offered Rate, or LIBOR. On July 27, 2017, the U.K. Financial Conduct Authority, or
the FCA, announced that it will no longer require banks to submit rates for the calculation of LIBOR after 2021. In the meantime, actions by the FCA,
other regulators, or law enforcement agencies may result in changes to the method by which LIBOR is calculated. If changes to LIBOR result in an
increase in rates, our interest expense under the Term Loan would increase. Further, if LIBOR is no longer available, our Term Loan provides a process to
determine a substitute rate, and if such substitute rate is higher than LIBOR, our interest expense under the Term Loan would increase.
The market price of our common stock may be volatile.
The trading price of our common stock may be subject to substantial fluctuations. Factors affecting the trading price of our common stock may include:
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failure in the performance of our satellites;
actual or anticipated variations in our operating results, including termination or expiration of one or more of our key contracts, or a change in
sales levels under one or more of our key contracts;
failure of Aireon to successfully carry out its business plan;
failure to comply with the terms of the credit agreement governing our Term Loan;
sales of a large number of shares of our common stock or the perception that such sales may occur;
the dilutive effect of outstanding stock options and other equity awards;
changes in financial estimates by industry analysts, or our failure to meet or exceed any such estimates, or changes in the recommendations of any
industry analysts that elect to follow our common stock or the common stock of our competitors;
impairment of intangible assets;
actual or anticipated changes in economic, political or market conditions, such as recessions or international currency fluctuations;
actual or anticipated changes in the regulatory environment affecting our industry;
changes in the market valuations of our competitors;
low trading volume; and
announcements by our competitors regarding significant new products or services or significant acquisitions, strategic partnerships, divestitures,
joint ventures or other strategic initiatives.
The trading price of our common stock might also decline in reaction to events that affect other companies in our industry even if these events do not
directly affect us. If our stock, the market for other stocks in our industry, or the stock market in general
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experiences a loss of investor confidence, the trading price of our common stock could decline for reasons unrelated to our business, financial condition or
results of operations.
We may not pay dividends on our common stock in the foreseeable future.
We do not currently pay cash dividends on our common stock, and we may elect to retain all cash we generate to fund the growth of our business, fund
acquisitions, pay down our existing debt, or for other purposes. Accordingly, we may not pay dividends on our common stock in the foreseeable future.
Risks related to legal and regulatory matters
Our business is subject to extensive government regulation, which mandates how we may operate our business and may increase our cost of providing
services and slow our expansion into new markets.
Our ownership and operation of a satellite communications system and the sale of products that operate on that system are subject to significant regulation
in the United States, including by the FCC, the U.S. Department of Commerce and others, and in foreign jurisdictions by similar local authorities. The rules
and regulations of these U.S. and foreign authorities may change, and such authorities may adopt regulations that limit or restrict our operations as
presently conducted or currently contemplated. Such authorities may also make changes in the licenses of our competitors that affect our spectrum. Such
changes may significantly affect our business. Further, because regulations in each country are different, we may not be aware if some of our distribution
partners or persons with whom we or they do business do not hold the requisite licenses and approvals. Our failure to provide services in accordance with
the terms of our licenses or our failure to operate our satellites or ground stations as required by our licenses and applicable laws and government
regulations could result in the imposition of government sanctions on us, including the suspension or cancellation of our licenses. Our failure or delay in
obtaining the approvals required to operate in other countries would limit or delay our ability to expand our operations into those countries. Our failure to
obtain industry-standard or government-required certifications for our products could compromise our ability to generate revenue and conduct our business
in other countries. Any imposition of sanctions, loss of license or failure to obtain the authorizations necessary to use our assigned radio frequency
spectrum and to distribute our products in the United States or foreign jurisdictions could cause us to lose sales, hurt our reputation and impair our ability to
pursue our business plan.
In addition, one of our subsidiaries, Iridium Carrier Services LLC, holds a common carrier radio license and is thus subject to regulation as a common
carrier, including limitations and prior approval requirements with respect to direct or indirect foreign ownership. A change in the manner in which we
provide service, or a failure to comply with any common carrier regulations that apply to us or to pay required fees, could result in sanctions including
fines, loss of authorizations, or the denial of applications for new authorizations or the renewal of existing authorizations.
Repurposing of satellite spectrum by adjacent operators of L-band spectrum for terrestrial services could interfere with our services.
In February 2003, the U.S. Federal Communications Commission, or FCC, adopted Ancillary Terrestrial Component, or ATC, rules that permit satellite
service providers to establish terrestrial wireless networks in previously satellite-only bands, subject to certain requirements intended to ensure that
terrestrial services remain ancillary to primary satellite operations and do not interfere with existing operators. In 2011, the FCC granted Ligado Networks
(then known as Lightsquared), or Ligado, a waiver to convert its L-band satellite spectrum to terrestrial use, including a 10 MHz band close to the spectrum
that we use for all of our services. That waiver was subsequently suspended in 2012 due to concerns about potential interference to GPS operations. Ligado
sought another waiver in 2015 to modify the ATC of its L-band mobile satellite service network with a terrestrial-only proposal designed to address GPS
industry concerns. In April 2020, the FCC announced that it had approved Ligado’s waiver request. We oppose this waiver out of concern for the
interference that we believe Ligado’s proposed operations would cause to our operations in adjacent L-band spectrum.
Ligado’s implementation of these services would result in terrestrial use of L-band spectrum in the 1.6 GHz band, which we use to provide our services,
and such implementation may affect the performance of our system for customers of our existing and future services. While the FCC’s decision to approve
these services included conditions designed to protect other satellite services that use L-band spectrum from harmful interference, these conditions may
prove insufficient, or the level of services provided may exceed those estimated by the FCC, in which case these or future terrestrial services permitted by
the FCC could substantially interfere with our satellites and devices, which would adversely affect our services. If other countries permit similar terrestrial
use of L-band spectrum in the 1.6 GHz band, the performance of our system may be subject to interference there as well.
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If the FCC revokes, modifies or fails to renew our licenses, or fails to grant a new license or modification, our ability to operate will be harmed or
eliminated.
We hold FCC licenses, specifically a license for our satellite constellation, licenses for our U.S. gateway and other ground facilities, and blanket earth
station licenses for U.S. government customers and commercial subscribers, that are subject to revocation if we fail to satisfy specified conditions. The
FCC licenses are also subject to modification by the FCC. Our satellite constellation license expires on February 23, 2032. Our U.S. gateway earth station
and the U.S. government customer and commercial subscriber earth station licenses expire between October 2021 and 2026. There can be no assurance that
the FCC will renew the FCC licenses we hold or grant new ones or modifications. If the FCC revokes, modifies or fails to renew the FCC licenses we hold,
or fails to grant a new license or modification, or if we fail to satisfy any of the conditions of our respective FCC licenses, we may not be able to continue
to provide mobile satellite communications services.
As we and our distributors expand our offerings to include more consumer-oriented devices, we are more likely to be subject to product liability claims,
recalls or litigation, which could adversely affect our business and financial performance.
Through our distributors, we offer several devices and services aimed at individual consumers, and we and our distributors continue to introduce additional
devices and services. These devices and services, such as satellite handsets, personal locator devices and location-based services, can contain design and
manufacturing defects. Defects may also occur in components and devices that we purchase from third parties. There can be no assurance we will be able
to detect and fix all defects in the hardware, software and services that we sell. These devices and services may be used in isolated and dangerous locations,
including emergency response situations, and users who suffer property damage, personal injury or death while using such devices or services may seek to
assert claims or bring lawsuits against us. Further, it is possible that our devices could become the subject of consumer protection investigations,
enforcement actions, or litigation, including class actions. We seek to limit our exposure to all of these claims by maintaining a consumer protection
compliance program, and through appropriate notices, disclosures, indemnification provisions and disclaimers, but these steps may not be effective. We
also maintain product liability insurance, but this insurance may not cover any particular claim or litigation, or the amount of insurance may be inadequate
to cover the claims brought against us. Product liability insurance could become more expensive and difficult to maintain and might not be available on
acceptable terms or at all. In addition, it is possible that our devices could become the subject of a product recall as a result of a device defect. We do not
maintain recall insurance, so any recall could have a significant effect on our financial results. In addition to the direct expenses of product liability claims,
investigations, recalls and litigation, a claim, investigation, recall or litigation might cause us adverse publicity, which could harm our reputation and
compromise our ability to sell our devices in the future.
The collection, storage, transmission, use and disclosure of user data and personal information could give rise to liabilities or additional costs as a
result of laws, governmental regulations, and evolving views of personal privacy rights and information security standards.
We transmit, process, and in some cases store in the normal course of our business, personal information. Many jurisdictions around the world have
adopted laws and regulations regarding the collection, storage, transmission, use and disclosure of personal information. The legal standards for processing,
storing and using this personal information continue to evolve, impose additional obligations and risk on our business, and have the potential to make some
of our business processes more costly or less feasible. For example, the California Consumer Privacy Act, or the CCPA, went into effect on January 1, 2020
and gives California residents expanded rights to access and delete their personal information, opt out of certain personal information sharing and receive
detailed information about how their personal information is used by requiring companies to provide new disclosures to California consumers (as that term
is broadly defined) and provide such consumers new ways to opt out of certain sales of personal information. In Europe, the European Commission enacted
the General Data Protection Regulation, or GDPR, which became effective in May 2018. The GDPR superseded prior EU data protection legislation,
imposes more stringent EU data protection requirements, and provides for greater penalties for noncompliance.
In addition, the interpretation of privacy and data protection laws and regulations regarding the collection, storage, transmission, use and disclosure of such
information in some jurisdictions remains unclear. These laws may be interpreted, applied and enforced in conflicting ways from country to country and in
a manner that is not consistent with our current business practices. Complying with these varying privacy and data security legal requirements could cause
us to incur additional costs and change our business practices. Further, our services are accessible in many foreign jurisdictions, and some of these
jurisdictions may claim that we are required to comply with their laws, even where we have no operating entity, employees or infrastructure located in that
jurisdiction. We could face direct expenses related to a variety of enforcement actions, government investigations, or litigation, and an interruption to our
business and adverse publicity because of such enforcement actions, government investigations, or litigation. Such enforcement actions, government
investigations, or litigation could also cause us to incur significant expenses if we were required to modify our products, our services, our
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infrastructure, or our existing security and privacy procedures in order to comply with new or expanded privacy and security regulations.
In addition, if end users allege that their personal information is not collected, stored, transmitted, used or disclosed by us or our business partners
appropriately or in accordance with our policies or applicable laws, or that our failure to adequately secure their personal information compromised its
security, we could have liability to them or to consumer protection agencies, including claims, investigations and litigation related to such allegations. Any
failure on our part to protect end users’ personal information could result in a loss of user confidence, hurt our reputation, result in the loss of users, and
cause us to incur significant expenses.
We have been and may in the future become subject to claims that our devices or services violate the patent or intellectual property rights of others,
which could be costly and disruptive to us.
We operate in an industry that is susceptible to significant intellectual property litigation. As a result, we or our devices or services may become subject to
intellectual property infringement claims or litigation. The defense of intellectual property suits is both costly and time-consuming, even if ultimately
successful, and may divert management’s attention from other business concerns. An adverse determination in litigation to which we may become a party
could, among other things:
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subject us to significant liabilities to third parties, including treble damages;
require disputed rights to be licensed from a third party for royalties that may be substantial;
require us to cease using technology that is important to our business; or
prohibit us from selling some or all of our devices or offering some or all of our services.
We may be unable to offer one or more services in important regions of the world due to regulatory requirements, which could limit our growth.
While our constellation is capable of providing service globally, our ability to sell one or more types of service in some regions may be limited by local
regulations. Some countries have specific regulatory requirements such as local domestic ownership requirements or requirements for physical gateways
within their jurisdiction to connect traffic coming to and from their territory. In some countries, we may not be able to find an acceptable local partner or
reach an agreement to develop additional gateways, or the cost of developing and deploying such gateways may be prohibitive, which could impair our
ability to expand our product and service offerings in such areas and undermine our value for potential users who require service in these areas. Also, other
countries where we already provide service may impose similar requirements in the future, which could restrict our ability to continue to sell service in
those countries. The inability to offer to sell our products and services in all major international markets could impair our international growth. In addition,
the construction of such gateways in foreign countries may trigger and require us to comply with various U.S. regulatory requirements that could conflict
with or contravene the laws or regulations of the local jurisdiction. Any of these developments could limit, delay or otherwise interfere with our ability to
construct gateways or other infrastructure or network solutions around the world.
Security and emergency services regulations in the U.S. and other countries may affect our ability to operate our system and to expand into new
markets.
Our operations are subject to regulations of the U.S. Department of Commerce’s Bureau of Industry and Security relating to the export of satellites and
related technical data as well as our subscriber equipment, the U.S. Treasury Department’s Office of Foreign Assets Control relating to transactions
involving entities sanctioned by the United States, and the U.S. State Department’s Office of Defense Trade Controls relating to satellite launch. We are
also required to provide U.S. and some foreign government law enforcement and security agencies with call interception services and related government
assistance, in respect of which we face legal obligations and restrictions in various jurisdictions. Given our global operations and unique network
architecture, these requirements and restrictions are not always easy to comply with or harmonize. In addition, some countries require providers of
telecommunications services to connect specified emergency numbers to local emergency services. We have discussed and continue to discuss with
authorities in various countries the procedures used to satisfy our obligations, and have had to, and may in the future need to, obtain amendments or
waivers to licenses or obligations in various countries. Countries are not obligated to grant requested amendments or waivers, and there can be no assurance
that relevant authorities will not suspend or revoke our licenses or take other legal actions to attempt to enforce the requirements of their respective
jurisdictions.
These U.S. and foreign obligations and regulations may limit or delay our ability to offer products and services in a particular country. As new laws and
regulations are issued, we may be required to modify our business plans or operations. In addition, changing and conflicting national and local regulatory
requirements may cause us to be in compliance with local requirements in one country, while not being in compliance with the laws and regulations of
another. If we fail to comply with regulations in
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the United States or any other country, we could be subject to substantial fines or sanctions that could make it difficult or impossible for us to operate in the
United States or such other country, or we may need to make substantial additional expenditures to bring our systems, products and services into
compliance with the requirements.
We may be unable to obtain and maintain contractually required liability insurance, and the insurance we obtain may not cover all liabilities to which
we may become subject.
Under our agreements with Motorola Solutions and the U.S. government, we are required to maintain an in-orbit liability insurance policy with a de-
orbiting endorsement. The current policy, together with the de-orbiting endorsement, covers amounts that we and other specified parties may become liable
to pay for bodily injury and property damages to third parties related to processing, maintaining, and de-orbiting our first-generation satellites. Our current
policy has a one-year term, which expires on December 8, 2021, and excludes coverage for all third-party damages relating to the 2009 collision of our
satellite with a non-operational Russian satellite. The price, terms and availability of insurance have fluctuated significantly since we began offering
commercial satellite services. The cost of obtaining insurance can vary as a result of either satellite failures or general conditions in the insurance industry.
Higher premiums on insurance policies would increase our cost. In-orbit liability insurance policies on satellites may not continue to be available on
commercially reasonable terms or at all. In addition to higher premiums, insurance policies may provide for higher deductibles, shorter coverage periods
and additional policy exclusions. For example, our current de-orbit insurance covers only twelve months from attachment and therefore would not cover
losses arising outside that timeframe. In addition, even if we continue to maintain an in-orbit liability insurance policy, the coverage may not protect us
against all third-party losses, which could be material.
Our current in-orbit liability insurance policy contains, and we expect any future policies would likewise contain, specified exclusions and material change
limitations customary in the industry. These exclusions may relate to, among other things, losses resulting from in-orbit collisions such as the one we
experienced in 2009, acts of war, insurrection, terrorism or military action, government confiscation, strikes, riots, civil commotions, labor disturbances,
sabotage, unauthorized use of the satellites, and nuclear or radioactive contamination, as well as claims directly or indirectly occasioned as a result of noise,
pollution, electrical and electromagnetic interference, and interference with the use of property.
In addition to our in-orbit liability insurance policy, we are required to purchase product liability insurance to cover the potential liability of Motorola
Solutions, as the successor to the manufacturer of our first-generation satellites. We may not in the future be able to renew this product liability coverage on
reasonable terms and conditions, or at all. Our failure to maintain this insurance could increase our exposure to third-party damages that may be caused by
any of our satellites.
Wireless devices’ radio frequency emissions are the subject of regulation and litigation concerning their environmental effects, which includes alleged
health and safety risks. As a result, we may be subject to new regulations, demand for our services may decrease, and we could face liability based on
alleged health risks.
There has been adverse publicity concerning alleged health risks associated with radio frequency transmissions from portable hand-held telephones that
have transmitting antennas. Lawsuits have been filed against participants in the wireless industry alleging a number of adverse health consequences,
including cancer, as a result of wireless phone usage. Other claims allege consumer harm from failures to disclose information about radio frequency
emissions or aspects of the regulatory regimes governing those emissions. Although we have not been party to any such lawsuits, we may be exposed to
such litigation in the future. While we comply with applicable standards for radio frequency emissions and power and do not believe that there is valid
scientific evidence that use of our devices poses a health risk, courts or governmental agencies could determine otherwise. Any such finding could reduce
our revenue and profitability and expose us and other communications service providers or device sellers to litigation, which, even if frivolous or
unsuccessful, could be costly to defend.
If consumers’ health concerns over radio frequency emissions increase, they may be discouraged from using wireless handsets or other wireless consumer
devices. Further, government authorities might increase regulation of wireless handsets and other wireless consumer devices as a result of these health
concerns. Any actual or perceived risk from radio frequency emissions could reduce the number of our subscribers and demand for our products and
services.
Our ability to use our net operating loss carryforwards to offset future taxable income may be subject to certain limitations.
Our ability to utilize U.S. net operating loss carryforwards and other tax attributes may be limited if we experience an “ownership change” under Section
382 of the Internal Revenue Code of 1986, as amended, or the Code, which generally occurs if one or more stockholders or groups of stockholders who
own at least 5% of our common stock increase their ownership in the aggregate by more than 50% over their lowest ownership percentage within a rolling
period that begins on the later of three years prior to the testing date and the date of the last ownership change. Similar rules may apply under state tax laws.
If an “ownership change” were to occur, Section 382 of the Code would impose an annual limit on the amount of pre-ownership change net operating loss
carryforwards and other tax attributes we could use to reduce our taxable income. It is possible that
37
such an ownership change could materially reduce our ability to use our net operating loss carryforwards or other tax attributes to offset taxable income,
which could impact our profitability.
We could be subject to adverse determinations by taxing authorities or changes to tax laws.
We are subject to regular review and audit by both domestic and foreign tax authorities. As a result, we have received, and may in the future receive,
assessments in multiple jurisdictions on various tax-related assertions, including transfer pricing adjustments or permanent establishment. Any adverse
outcome of such a review or audit could have a negative effect on our operating results and financial condition. In addition, the determination of our
provision for income taxes and other tax liabilities requires significant judgment, including transactions and calculations where the ultimate tax
determination is uncertain. Although we believe our estimates are reasonable, the ultimate tax outcome may differ from the amounts recorded in our
financial statements and may materially affect our financial results in the period or periods for which such determination is made. Furthermore, tax policies,
laws or rates in various jurisdictions may be subject to significant change, which could materially and adversely affect our financial position and results of
operations.
Changes in tax laws could increase our worldwide tax rate and materially affect our financial position and results of operations.
Many U.S. states and foreign countries have adopted or proposed changes to current tax laws. Further, organizations such as the Organization for Economic
Cooperation and Development have published action plans that, if adopted by countries where we do business, could increase our tax obligations in these
countries. Due to our U.S. and international business activities, certain of these enacted and proposed changes to the taxation of our activities could
increase our worldwide effective tax rate, which in turn could harm our financial position and results of operations.
If we fail to maintain proper and effective internal controls, our ability to produce accurate financial statements on a timely basis could be impaired.
We are subject to the reporting requirements of the Securities Exchange Act of 1934, the Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform
and Consumer Protection Act of 2010, and the rules and regulations of the SEC and The Nasdaq Global Select Market. The Sarbanes-Oxley Act requires,
among other things, that we maintain effective disclosure controls and procedures and internal controls over financial reporting. We perform system and
process evaluation and testing of our internal controls over financial reporting to allow management to report on the effectiveness of our internal controls
over financial reporting in our Annual Reports on Form 10-K, as required by Section 404 of the Sarbanes-Oxley Act. If we are not able to comply with the
requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner, or if we are unable to maintain proper and effective internal controls, we may
not be able to produce timely and accurate financial statements, and we may conclude that our internal controls over financial reporting are not effective. If
that were to happen, the market price of our stock could decline, and we could be subject to sanctions or investigations by the Nasdaq Global Select
Market, the SEC or other regulatory authorities.
Maintaining effective internal controls over financial reporting is necessary for us to produce reliable financial statements. If we fail to maintain such
controls, it could result in a material misstatement of our financial statements that would not be prevented or detected on a timely basis, which could cause
investors and other users to lose confidence in our financial statements.
Item 1B. Unresolved Staff Comments
None.
38
Item 2. Properties
We own or lease the facilities described in the following table:
Location
McLean, Virginia
Chandler, Arizona
Leesburg, Virginia
Tempe, Arizona
Tempe, Arizona
Fairbanks, Alaska
Svalbard
Izhevsk, Udmurtia
Moscow
Punta Arenas
Country
USA
USA
USA
USA
USA
USA
Norway
Russia
Russia
Chile
Approximate
Square Feet
30,600
197,000
40,000
31,000
25,000
4,000
1,800
8,785
2,158
3,200
Item 3. Legal Proceedings
Facilities
Corporate Headquarters
Technical Support Center, Distribution Center, Warehouse and Satellite
Teleport Network Facility
Satellite Network Operations Center
System Gateway and Satellite Teleport Network Facility
Operations and Finance Office Space
Satellite Teleport Network Facility
Satellite Teleport Network Facility
System Gateway and Satellite Teleport Network Facility
Sales and Administration Offices
Satellite Teleport Network Facility
Owned/Leased
Leased
Leased
Owned
Owned Building on
Leased Land
Leased
Owned
Owned Building on
Leased Land
Leased
Leased
Owned Building on Leased
Land
Neither we nor any of our subsidiaries are currently subject to any material legal proceeding, nor, to our knowledge, is any material legal proceeding
threatened against us or any of our subsidiaries.
Item 4. Mine Safety Disclosures
Not applicable.
39
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Our common stock is currently listed on the Nasdaq Global Select Market under the symbol “IRDM.” As of February 5, 2021 there were 118 holders of
record of our common stock.
PART II
Dividend Policy
We have not paid any dividends on our common stock to date.
Stock Price Performance Graph
The graph below compares the cumulative total return of our common stock from December 31, 2015 through December 31, 2020 with the comparable
cumulative return of three indices, the S&P 500 Index, the Dow Jones Industrial Average Index and the Nasdaq Telecommunications Index. The graph
plots the growth in value of an initial investment of $100 in each of our common stock, the S&P 500 Index, the Dow Jones Industrial Average Index and
the Nasdaq Telecommunications Index over the indicated time periods. The stock price performance shown on the graph is not necessarily indicative of
future price performance. The following stock price performance graph shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act,
nor shall this information be incorporated by reference into any future filing under the Securities Act or the Exchange Act or any other document, except to
the extent that we specifically incorporate it by reference into such filing or document.
40
Item 6. Selected Financial Data
Iridium Communications Inc.
The following selected historical financial data as of and for the years ended December 31, 2020, 2019, 2018, 2017 and 2016 was derived from our audited
financial statements. The selected financial data below should be read in conjunction with our financial statements and related notes, and “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this Form 10-K. The selected financial data is historical
data and is not necessarily indicative of our future results of operations.
Statement of Operations Data
2020
2019
Year Ended December 31,
2018
(In thousands, except per share amounts)
2017
Revenue:
Services
Subscriber equipment
Engineering and support services
Total revenue
(1)
(3)
(2)
Total operating expenses
Operating income
Net income (loss)
Comprehensive income (loss)
Weighted average shares outstanding - basic
Weighted average shares outstanding - diluted
Net income (loss) per share - basic
Net income (loss) per share - diluted
$
$
$
$
$
$
$
$
463,095 $
86,119
34,225
583,439 $
547,956 $
35,483 $
(56,054) $
(66,367) $
133,491
133,491
(0.42) $
(0.42) $
447,158 $
82,856
30,430
560,444 $
550,324 $
10,120 $
(161,999) $
(160,069) $
125,167
125,167
(1.33) $
(1.33) $
406,757 $
97,848
18,403
523,008 $
481,355 $
41,653 $
(13,384) $
(18,385) $
108,975
108,975
(0.22) $
(0.22) $
349,735 $
77,119
21,192
448,046 $
346,759 $
115,476 $
233,856 $
235,506 $
97,934
128,130
2.23 $
1.82 $
2016
334,822
74,211
24,607
433,640
257,269
176,371
111,032
114,649
95,967
124,875
1.00
0.89
Balance Sheet Data
2020
2019
December 31,
2018
(In thousands)
2017
2016
(1)(3)
Total current assets
Total assets
Total long-term liabilities
Total stockholders' equity
(3)
$
$
$
$
347,821 $
3,360,949 $
1,828,438 $
1,419,439 $
342,935 $
3,623,557 $
2,050,524 $
1,459,282 $
390,384 $
4,014,271 $
2,149,975 $
1,601,577 $
411,072 $
3,782,051 $
1,971,356 $
1,596,469 $
516,770
3,499,625
2,072,673
1,343,758
(1)
Includes accelerated depreciation of $36.8 million in the fourth quarter of 2017 associated with the write-off of amounts previously paid to
International Space Company Kosmotras (“Kosmotras”) which decreased operating income and total assets by that amount.
(2)
Includes the impact of $14.2 million related to the gain on the transaction with Boeing, effective January 3, 2017.
(3)
Includes the impact of $30.2 million and $111.7 million loss on extinguishment of debt in February 2020 and November 2019, respectively, and the
impact of the Tax Cuts and Jobs Act of 2017, or the Tax Act, enacted in December 2017 on our deferred tax assets and liabilities.
Cash Flow Data
Cash provided by (used in):
Operating activities
Investing activities
Financing activities
2020
2019
Year Ended December 31,
2018
(In thousands)
2017
2016
$
$
$
249,767 $
(46,470) $
(188,186) $
198,143 $
(127,819) $
(313,280) $
263,709 $
(378,912) $
193,503 $
259,621 $
(372,680) $
16,866 $
225,199
(242,360)
224,178
41
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Background
We were initially formed in 2007 as GHL Acquisition Corp., a special purpose acquisition company. In 2009, we acquired all the outstanding equity in
Iridium Holdings LLC and changed our name to Iridium Communications Inc.
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 unique L-band satellite network provides reliable 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 upgraded 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. Our upgraded satellite constellation is compatible with all of our end-user equipment
and supports more bandwidth and higher data speeds for our new products, including our recently introduced Iridium Certus broadband service.
We sell our products and services to commercial end users through a wholesale distribution network, encompassing approximately 125 service providers,
285 value-added resellers, or VARs, and 90 value-added manufacturers, or VAMs, who either sell 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 for our products and services targeting specific lines of business.
At December 31, 2020 we had approximately 1,476,000 billable subscribers worldwide, an increase of 176,000, or 14%, from approximately 1,300,000
billable subscribers at December 31, 2019. We have a diverse customer base, including end users in land-mobile, Internet of Things, or IoT, maritime,
aviation and government.
We recognize revenue from both the provision of services and the sale of equipment. Service revenue represented 79% and 80% of total revenue for the
years ended December 31, 2020 and 2019, respectively. Voice and data and IoT data service revenues have historically generated higher margins than
subscriber equipment revenue, and we expect this trend to continue. We also recognize revenue from our hosted payloads, principally Aireon, including
fees for hosting the payloads and fees for transmitting data from the payloads over our network, as well as revenue from other services, such as satellite
time and location services.
Services Agreements for Upgrade of Satellite Constellation
In 2019, we completed the full replacement of our first-generation satellites with our upgraded constellation at a cost of approximately $3 billion.
In June 2010, we executed a primarily fixed price full scale development contract, or FSD, with Thales Alenia Space for the design and manufacture of
satellites for the upgraded constellation. The total price under the FSD was $2.3 billion. Final payments under this contract were made during the second
quarter of 2019. These costs were capitalized as construction in progress within property and equipment, net in the accompanying condensed consolidated
balance sheets.
To complete the upgraded constellation, we launched a total of 75 satellites into low earth orbit using eight Falcon 9 rockets under two contracts with Space
Exploration Technologies Corp., or SpaceX, with a total price of $510.8 million. Final payments to SpaceX for these launches were made during the second
quarter of 2019. These costs were capitalized as construction in progress within property and equipment, net in the accompanying consolidated balance
sheets. We shared one launch with GFZ German Research Centre for Geosciences for which we received $29.8 million from them.
42
Term Loan
On November 4, 2019, pursuant to a new loan agreement, or the Credit Agreement, we entered into a $1,450.0 million term loan, or the Term Loan, and an
accompanying $100.0 million revolving loan, or the Revolving Facility. We used the proceeds of the Term Loan along with our debt service reserve
account, or DSRA, and cash on hand to repay in full all of the indebtedness outstanding under the credit facility with a syndicate of bank lenders
guaranteed by Bpifrance Assurance Export S.A.S., or the BPIAE Facility, as well as related expenses. The Term Loan was issued at a price equal to
99.5% of its face value and initially bore interest at an annual rate of LIBOR plus 3.75%, with a 1.0% LIBOR floor, and has a seven-year maturity.
On February 7, 2020, we closed on an additional $200.0 million under the Term Loan. On February 13, 2020, we used these proceeds, together with cash
on hand, to prepay and retire all of the indebtedness outstanding under our senior unsecured notes, or the Notes, including premiums for early prepayment.
The additional amount is fungible with the original $1,450.0 million, having the same maturity date, interest rate and other terms, but was issued at a 1.0%
premium to face value. To prepay the Notes, we paid a call price equal to the present value at the redemption date of (i) 105.125% of the $360.0 million
principal amount of the Notes plus (ii) all interest due through the first call date in April 2020, representing a total call premium of $23.5 million, plus all
accrued and unpaid interest to the redemption date.
In January 2021, we repriced the Term Loan in order to reduce the annual interest rate to LIBOR plus 2.75%, with a 1.0% LIBOR floor, with no other
material changes to the terms. The Revolving Facility bears interest at LIBOR plus 3.75% (but without a LIBOR floor) if and as drawn, with no original
issue discount, a commitment fee of 0.5% per year on the undrawn amount, and a five-year maturity. See Note 7 for further discussion of our Term Loan.
The Credit Agreement, as amended to date, 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, and also contains a
mechanism to sweep a portion of our excess cash flow (as defined in the Credit Agreement). The Credit Agreement provides for specified exceptions,
baskets measured as a percentage of trailing twelve months of earnings before interest, taxes, depreciation and amortization, or EBITDA, and unlimited
exceptions in the case of incurring indebtedness and liens and making investments, dividend payments, and payments of subordinated indebtedness, as well
as a phase-out of the excess cash flow sweep, based on achievement and maintenance of specified leverage ratios. The Credit Agreement permits
repayment, prepayment, and repricing transactions, subject to a 1% penalty in the event the facility is prepaid or repriced within six months after the
repricing action noted above.
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 maintenance of a consolidated first lien net leverage ratio (as defined in the Credit Agreement) of no greater than 6.25 to 1 if more
than 35% of the Revolving Facility has been drawn. The Credit Agreement also contains other customary representations and warranties, affirmative and
negative covenants, and events of default.
Derivative Financial Instruments
On November 27, 2019, we executed a long-term interest rate swap, or the Swap, effective through November 2021 to mitigate variability in forecasted
interest payments on a portion of our borrowings under our Term Loan. We receive variable interest payments based on one-month LIBOR from the
counterparty. We also entered into an interest rate swaption agreement, or the Swaption, that, if executed on November 22, 2021, would extend our Swap
through November 2026. We pay a fixed annual rate of 0.50% for the Swaption, and a fixed rate of 1.565% on the Swap. Both the Swap and the Swaption
derivative instruments carry a notional amount of $1,000.0 million. We designated both the Swap and Swaption as qualifying hedging instruments and
accounted for these derivatives as cash flow hedges. Gains and losses resulting from fair value adjustments to the Swap and Swaption are recorded within
accumulated other comprehensive loss within our consolidated balance sheets and reclassified to interest expense on the dates that interest payments
become due. Cash flows related to the interest rate swaps are included in cash flows from operating activities on the consolidated statements of cash flows.
See Note 8 to our consolidated financial statements included in this report for further discussion of our derivative financial instruments.
Senior Unsecured Notes
On March 21, 2018, we issued $360.0 million in aggregate principal under the Notes, before $9.0 million of deferred financing costs, for a net principal
balance of $351.0 million in borrowings from the Notes. The Notes bore interest at 10.25% per annum and were due to mature on April 15, 2023. Interest
was payable semi-annually on April 15 and October 15, beginning on October 15, 2018, and principal would have been repaid in full upon maturity. As
noted above, the notes were redeemed on February 13, 2020.
43
Total Interest on Debt and Loss on Extinguishment
Total interest incurred during the years ended December 31, 2020, 2019 and 2018 was $98.6 million, $140.1 million and $142.7 million, respectively.
Interest incurred includes amortization of deferred financing fees of $3.8 million, $21.6 million and $26.5 million, for the years ended December 31, 2020,
2019 and 2018, respectively. Interest capitalized during the year ended December 31, 2020 and 2019 was $3.2 million and $15.1 million, respectively.
Interest accrued for the years ended December 31, 2020 and 2019 was $0.2 million and $7.8 million, respectively. As part of the repayment of the BPIAE
Facility in November 2019, noted above, we incurred a loss of approximately $111.7 million for the early extinguishment which was recorded within other
income (expense) on our consolidated statements of operations and comprehensive loss. Similarly, in February 2020, we incurred a loss of approximately
$30.2 million for the early extinguishment of the Notes, also recorded within other income (expense) on our consolidated statements of operations and
comprehensive loss.
Material Trends and Uncertainties
Our industry and customer base has 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;
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 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 parts that are periodically subject to shortages resulting from surges
in demand, natural disasters or other events; 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.
Critical Accounting Policies and Estimates
The discussion and analysis of our financial condition and results of operations is based upon our 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
44
basis, we evaluate our estimates, including those related to revenue recognition, income taxes, useful lives of property and equipment, loss contingencies,
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.
The accounting policies we believe to be most critical to understanding our financial results and condition and that require complex and subjective
management judgments are discussed below. Our accounting policies are more fully described in Note 2 in Item 8 “Financial Statements and
Supplementary Data” included in this report. Please see the notes to our consolidated financial statements for a full discussion of these significant
accounting policies.
Revenue Recognition
We sell services and equipment through contracts with our customers. We evaluate whether a contract exists as it relates to collectibility of the contract.
Once a contract is deemed to exist, we evaluate the transaction price including both fixed and variable consideration. The variable consideration contained
within our contracts with customers may include discounts, credits and other similar items. When a contract includes variable consideration, we evaluate
the estimate of the variable consideration to determine whether the estimate needs to be constrained. Therefore, we include constrained consideration in the
transaction price only to the extent that it is probable that a significant reversal of the amount of cumulative revenue recognized will not occur when the
uncertainty associated with the variable consideration or collectibility is subsequently resolved. Variable consideration estimates are updated at the end of
each quarter and collectibility assessments are evaluated with new customers, or on an ongoing basis if initially deemed not probable, and updated as facts
and circumstances change.
We sell prepaid services in the form of e-vouchers and prepaid cards. A liability is established equal to the cash paid upon purchase for the e-voucher or
prepaid card. We recognize revenue from (i) the prepaid services upon the use of the e-voucher or prepaid card by the customer and (ii) the estimated
pattern of use. While the terms of prepaid e-vouchers can be extended by the purchase of additional e-vouchers, prepaid e-vouchers may not be extended
beyond three or four years, dependent on the initial term when purchased.
Revenue associated with some of our fixed-price engineering services arrangements is recognized over time using costs incurred to date relative to total
estimated costs at completion to measure progress toward satisfying our performance obligation. We recognize revenue on cost-plus-fixed-fee
arrangements to the extent of estimated costs incurred plus the applicable fees earned. If actual results are not consistent with our estimates or assumptions,
we may be exposed to changes to earned and unearned revenue that could be material to our results of operations.
Income Taxes
We account for income taxes using the asset and liability approach. This approach requires that we recognize deferred tax assets and liabilities based on
differences between the financial statement bases and tax bases of our assets and liabilities. Deferred tax assets and liabilities are recorded based upon
enacted tax rates for the period in which the deferred tax items are expected to reverse. Changes in tax laws or tax rates in various jurisdictions are reflected
in the period of change. Significant judgment is required in the calculation of our tax provision and the resulting tax liabilities as well as our ability to
realize our deferred tax assets. Our estimates of future taxable income and any changes to such estimates can significantly impact our tax provision in a
given period. Significant judgment is required in determining our ability to realize our deferred tax assets related to federal, state and foreign tax attributes
within their carryforward periods including estimating the amount and timing of the future reversal of deferred tax items in our projections of future taxable
income. A valuation allowance is established to reduce deferred tax assets to the amounts we expect to realize in the future. We also recognize tax benefits
related to uncertain tax positions only when we estimate that it is “more likely than not” that the position will be sustainable based on its technical merits. If
actual results are not consistent with our estimates and assumptions, this may result in material changes to our income tax provision.
The Tax Cuts and Jobs Act of 2017, enacted in December of 2017, or the Tax Act, introduced significant changes to U.S. income tax law that have a
meaningful impact on our provision for income taxes. Due to the complexity involved in applying the provisions of the Tax Act, we made reasonable
estimates of the effects and recorded these estimates in our financial statements. Accounting for the income tax effects of the Tax Act requires significant
judgments and estimates in the interpretation and calculations of the various provisions. During 2019 and 2020, the U.S. Treasury Department, as well as
the Internal Revenue Service, or IRS, and other standard-setting bodies issued guidance related to certain provisions in the Tax Act. These same standard-
setting bodies may issue additional guidance on how the provisions of the Tax Act will be applied or otherwise administered that is different from our
interpretation. As we collect and prepare necessary data, interpret the Tax Act
45
and analyze any additional guidance issued by the IRS or other standard-setting bodies, we may need to make adjustments to prior estimates, which could
materially impact our financial statements in the period in which the adjustments are made.
Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation and amortization. Property and equipment are depreciated or amortized over their
estimated useful lives. We apply judgment in determining the useful lives based on factors such as engineering data, our long-term strategy for using the
assets, the manufacturer's estimated design life for the assets, laws and regulations that could impact the useful lives of the assets and other economic
factors. In evaluating the useful lives of our satellites, we assess the current estimated operational life of the satellites, including the potential impact of
environmental factors on the satellites, ongoing operational enhancements and software upgrades. Additionally, we review engineering data relating to the
operation and performance of our satellite network.
We depreciate our satellites over the shorter of their potential operational life or the period of their expected use. The appropriateness of the useful lives is
evaluated on a quarterly basis or as events occur that require additional assessment. The upgraded satellites that have been placed into service are
depreciated using the straight-line method over their respective estimated useful lives. If the estimated useful lives of our upgraded satellites change, it
could have a material impact on the timing of the recognition of depreciation expense.
During the construction period for our upgraded satellite constellation, assets under construction primarily consisted of costs incurred associated with the
design, development and launch of the upgraded satellites, upgrades to our current infrastructure and ground systems and internal software development
costs. We capitalized a portion of the interest on the BPIAE Facility during the construction period of the upgraded satellite constellation. Capitalized
interest was added to the cost of the upgraded satellites. Once these assets were placed in service, they are depreciated using the straight-line method over
their respective estimated useful lives. During each year end, we evaluate the useful lives of all assets under construction.
46
Comparison of Our Results of Operations for the Year Ended December 31, 2020 and the Year Ended December 31, 2019
($ In thousands)
Revenue:
Service revenue
Commercial
Government
Total service revenue
Subscriber equipment
Engineering and support services
Total revenue
Operating expenses:
Cost of services (exclusive of depreciation
and amortization)
Cost of subscriber equipment
Research and development
Selling, general and administrative
Depreciation and amortization
Total operating expenses
Operating income
Other income (expense):
Interest expense, net
Loss on extinguishment of debt
Other income (expense), net
Total other expense
Loss before income taxes
Income tax benefit
Net loss
Commercial Service Revenue
Year Ended December 31,
2020
% of Total
Revenue
2019
% of Total
Revenue
Change
Dollars
Percent
$
$
362,208
100,887
463,095
86,119
34,225
583,439
91,097
51,596
12,037
90,052
303,174
547,956
35,483
(94,271)
(30,209)
33
(124,447)
(88,964)
32,910
(56,054)
62 % $
17 %
79 %
15 %
6 %
100 %
350,026
97,132
447,158
82,856
30,430
560,444
16 %
9 %
2 %
15 %
52 %
94 %
6 %
(16)%
(5)%
0 %
(21)%
(15)%
5 %
(10)% $
94,958
50,186
14,310
93,165
297,705
550,324
10,120
(115,396)
(111,710)
(1,133)
(228,239)
(218,119)
56,120
(161,999)
Year Ended December 31,
63 % $
17 %
80 %
15 %
5 %
100 %
17 %
9 %
2 %
17 %
53 %
98 %
2 %
(21)%
(20)%
0 %
(41)%
(39)%
10 %
(29)% $
12,182
3,755
15,937
3,263
3,795
22,995
(3,861)
1,410
(2,273)
(3,113)
5,469
(2,368)
25,363
21,125
81,501
1,166
103,792
129,155
(23,210)
105,945
3 %
4 %
4 %
4 %
12 %
4 %
(4)%
3 %
(16)%
(3)%
2 %
0 %
251 %
(18)%
(73)%
(103)%
(45)%
(59)%
(41)%
(65)%
2020
Billable
Subscribers
(1)
ARPU
(2)
Revenue
2019
Billable
Subscribers
(Revenue in millions and subscribers in thousands)
Revenue
ARPU
(1)
(2)
Commercial services:
Voice and data
IoT data
Broadband
Hosted payload and other data
(3)
Total commercial services
$
$
168.6
97.0
36.0
60.6
362.2
350 $
962 $
11.7 $
N/A
1,324
40 $
9.16
266
$
173.1
96.4
30.5
50.0
350.0
41 $
352 $
802 $ 11.10
10.8 $
248
N/A
1,165
$
Change
Billable
Subscribers
ARPU
Revenue
(4.5)
0.6
5.5
10.6
12.2
(1)
(1.94)
18
(2) $
160 $
0.9 $
N/A
159
(1)
(2)
Billable subscriber numbers are shown as of the end of the respective period.
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
47
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.
Commercial broadband consists of Iridium OpenPort and Iridium Certus broadband services, which were previously reported in commercial voice and
data revenue. Prior year periods have been conformed to this presentation.
(3)
For the year ended December 31, 2020, total commercial revenue increased $12.2 million, or 3%, due to increased hosted payload and other data services
revenue and increased commercial broadband revenue. Hosted payload and other data service revenue increased $10.6 million, or 21%, primarily due to
increased Aireon data service fees related to a contractual step-up and increased Aireon power fees. Commercial broadband revenue increased $5.5 million,
or 18%, from the prior year period, principally due to sales of Iridium Certus broadband services, which were commercially introduced in January 2019.
Commercial IoT data revenue also increased slightly, up $0.6 million, or 1%, over the prior year period. This primarily reflects a 20% increase in
commercial IoT data billable subscribers, primarily from continued strength in consumer personal communications devices, offset in part by a decrease in
ARPU, driven by the decrease in usage revenue related to COVID-19, particularly with aviation customers, and an increase in the proportion of consumer
personal communications device users comprising IoT subscribers, as users of these devices typically utilize lower ARPU plans. The increases in revenue
were partially offset by a $4.5 million, or 3%, decline in commercial voice and data revenue from the prior year resulting from a decrease in subscribers
and decreased usage following mobility restrictions associated with the COVID-19 pandemic.
Government Service Revenue
Year Ended December 31,
2020
2019
Change
Revenue
Billable
Subscribers
(1)
Revenue
Billable
Subscribers
(1)
Revenue
Billable
Subscribers
Government service revenue
$
100.9
(Revenue in millions and subscribers in thousands)
135 $
97.1
152 $
3.8
17
(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, 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 the services. For the year
ended December 31, 2020, government service revenue increased $3.8 million from the prior year period as a result of the higher pricing in the new EMSS
Contract.
Subscriber Equipment Revenue
Subscriber equipment revenue increased $3.3 million, or 4%, to $86.1 million for the year ended December 31, 2020 compared to the prior year, primarily
due to an increase in the volume and higher average selling price of L-band transceivers and an increase in volume of IoT device sales, partially offset by a
decrease in the volume of handset sales.
Engineering and Support Service Revenue
Commercial
Government
Total
Year Ended December 31,
2020
2019
(In millions)
Change
$
$
4.5 $
29.7
34.2 $
2.8 $
27.6
30.4 $
1.7
2.1
3.8
Engineering and support service revenue increased by $3.8 million, or 12%, for the year ended December 31, 2020 compared to the prior year primarily as
a result of an increase in the volume of contracted work to enable services for the U.S. government and an increase in the volume of work for commercial
customers, primarily related to the Aireon hosted payload operations center.
48
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) decreased by $3.9 million, or 4%, for the year ended December 31, 2020 compared to the
prior year, primarily as a result of a decrease in in-orbit insurance costs, which were amortized over a one-year period from the in-service date, as we
completed the placement of upgraded satellites in-orbit in February 2019. This decrease was offset in part by higher costs to support the new EMSS
Contract and an increase in the volume of contracted engineering and support services, 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 $1.4 million, or 3%, for the year ended December 31, 2020 compared to the prior year period primarily due to the
increase in the volume of L-band transceivers and IoT device sales, as described above.
Research and Development
Research and development expenses decreased by $2.3 million, or 16%, for the year ended December 31, 2020 compared to the prior year period primarily
due to decreased spend on devices for our upgraded 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 decreased by $3.1 million, or 3%, for the year ended December 31, 2020 compared to the prior year, primarily
due to a decrease in management incentive compensation and decreased spend on travel and marketing related events as a result of COVID-19. These
decreases were offset by an increase in wages and equity compensation associated with an increase in headcount.
Depreciation and Amortization
Depreciation and amortization expense increased by $5.5 million, or 2%, for the year ended December 31, 2020 compared to the prior year, primarily due
to the increased number of upgraded satellites in service during the current period as we completed the replacement of our first-generation satellites in
February 2019. As the upgraded satellites are the largest proportion of our asset base, we anticipate depreciation and amortization to remain relatively
consistent over the next several years.
Other Income (Expense)
Interest Expense, net
Interest expense, net, for the year ended December 31, 2020 was $94.3 million, compared to $115.4 million for the prior year period. The decrease was
primarily related to the impact of the refinancing of our debt including a decrease in the weighted average effective interest rate and lower average
outstanding borrowings under our total debt obligations. The decrease was offset in part by less interest being capitalized as the average balance of
satellites in construction decreased in 2020 as upgraded satellites were completed in the prior year and less interest income.
49
Loss on Extinguishment of Debt
Loss on extinguishment of debt was $30.2 million for the year ended December 31, 2020, compared to $111.7 million for the prior year period. During
November 2019, we issued our Term Loan, and used the proceeds of the Term Loan, along with our DSRA and cash on hand to repay in full all of the
indebtedness outstanding under the BPIAE Facility, including premiums for early prepayment. During February 2020, we closed on an additional $200.0
million under our Term Loan and used these proceeds, together with cash on hand, to prepay all of the indebtedness outstanding under the Notes, including
premiums for early prepayment. In each case, we wrote off the remaining unamortized debt issuance costs, resulting in the loss on extinguishment of debt.
Income Tax Benefit
For the year ended December 31, 2020, our income tax benefit was $32.9 million, compared to an income tax benefit of $56.1 million for the prior
year. Our effective tax rate was approximately 37.0% for the year ended December 31, 2020 compared to 25.7% for the prior year. The decrease in income
tax benefit was primarily related to a decrease in loss before income taxes compared to the prior year. If our current estimates change in future periods, the
impact on the deferred tax assets and liabilities may change correspondingly. See Note 12 to our consolidated financial statements for more detail on the
individual items impacting our effective tax rate for the years.
Net Loss
Net loss was $56.1 million for the year ended December 31, 2020, compared to net loss of $162.0 million during the prior year. This decrease in net loss
was primarily the result of the $81.5 million decrease in loss on extinguishment of debt, the $23.0 million increase in total revenues, and the $21.1
million decrease in interest expense, net, as described above, partially offset by the $23.2 million decrease in income tax benefit, as described above.
50
Comparison of Our Results of Operations for the Year Ended December 31, 2019 and the Year Ended December 31, 2018
($ In thousands)
Revenue:
Service revenue
Commercial
Government
Total service revenue
Subscriber equipment
Engineering and support services
Total revenue
Operating expenses:
Cost of services (exclusive of depreciation
and amortization)
Cost of subscriber equipment
Research and development
Selling, general and administrative
Depreciation and amortization
Total operating expenses
Operating income
Other income (expense):
Interest expense, net
Loss on extinguishment of debt
Other income (expense), net
Total other expense
Loss before income taxes
Income tax benefit
Net loss
Commercial Service Revenue
Year Ended December 31,
2019
% of Total
Revenue
2018
% of Total
Revenue
Change
Dollars
Percent
$
$
350,026
97,132
447,158
82,856
30,430
560,444
94,958
50,186
14,310
93,165
297,705
550,324
10,120
(115,396)
(111,710)
(1,133)
(228,239)
(218,119)
56,120
(161,999)
63 % $
17 %
80 %
15 %
5 %
100 %
17 %
9 %
2 %
17 %
53 %
98 %
2 %
(21)%
(20)%
0 %
(41)%
(39)%
10 %
(29)% $
318,757
88,000
406,757
97,848
18,403
523,008
86,016
56,857
22,429
97,846
218,207
481,355
41,653
(55,149)
(7,292)
139
(62,302)
(20,649)
7,265
(13,384)
61 % $
17 %
78 %
19 %
3 %
100 %
16 %
11 %
4 %
19 %
42 %
92 %
8 %
31,269
9,132
40,401
(14,992)
12,027
37,436
8,942
(6,671)
(8,119)
(4,681)
79,498
68,969
(31,533)
(11)%
(1)%
0 %
(12)%
(4)%
1 %
(3)% $
(60,247)
(104,418)
(1,272)
(165,937)
(197,470)
48,855
(148,615)
10 %
10 %
10 %
(15)%
65 %
7 %
10 %
(12)%
(36)%
(5)%
36 %
14 %
(76)%
109 %
1,432 %
(915)%
266 %
956 %
672 %
1,110 %
Year Ended December 31,
2019
Billable
Subscribers
(1)
ARPU
(2)
Revenue
2018
Billable
Subscribers
(Revenue in millions and subscribers in thousands)
Revenue
ARPU
(2)
(1)
Commercial services:
Voice and data
IoT data
Hosted payload and other data
Total Commercial
$
$
203.6
96.4
50.0
350.0
47 $
363 $
802 $ 11.10
N/A
1,165
$
193.2
85.1
40.4
318.7
45 $
361 $
647 $ 12.26
N/A
1,008
$
Change
Billable
Subscribers
ARPU
Revenue
10.4
11.3
9.6
31.3
2 $
2
155 $ (1.16)
N/A
157
(1)
(2)
Billable subscriber numbers are shown as of the end of the respective period.
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.
51
For the year ended December 31, 2019, total commercial revenue increased $31.3 million, or 10%, due to increased revenue across all commercial services
compared to the prior period. Commercial IoT data revenue increased $11.3 million, or 13%, from the prior year period primarily due to a 24% increase in
commercial IoT data billable subscribers primarily from continued strength in consumer personal communications devices. This higher volume of new
personal communication subscribers caused overall IoT ARPU to be lower. Commercial voice and data revenue increased $10.4 million, or 5%, from the
prior year period. This increase was principally due to price increases in access and roaming fees that were implemented during the second quarter of 2018.
The increase in commercial voice and data revenue was also due to increased broadband subscribers. Hosted payload and other data service revenue
increased $9.6 million, or 24%, primarily due to revenue recognition from hosting services and increased data services due to an increase in the number of
upgraded satellites in service, both related to Aireon and L3Harris.
Government Service Revenue
Year Ended December 31,
2019
2018
Change
Revenue
Billable
Subscribers
(1)
Revenue
Billable
Subscribers
(1)
Revenue
Billable
Subscribers
Government service revenue
$
97.1
(Revenue in millions and subscribers in thousands)
113 $
88.0
135 $
9.1
22
(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 EMSS Contract. Under the terms of this
agreement, authorized customers utilize certain 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 the services. Immediately prior to entering into the EMSS Contract in September
2019, we were providing airtime service at varying monthly rates to the U.S. government under month-to-month extensions of our previous EMSS
contract, following the expiration of a six-month extension on April 21, 2019. For the year ended December 31, 2019, government service revenue
increased $9.1 million from the prior year period as a result of the month-to-month extensions we agreed to with the U.S. government while the EMSS
Contract was being negotiated and the higher monthly rate once the EMSS Contract was executed and became effective on September 15, 2019.
Subscriber Equipment Revenue
Subscriber equipment revenue decreased $15.0 million, or 15%, to $82.9 million for the year ended December 31, 2019 compared to the prior year. This
decrease was primarily due to a decrease in volume of handset sales and Iridium Pilot unit sales, partially offset by an increase in the volume of Short Burst
Data devices and Iridium Certus devices. Handset sales in 2018 were abnormally strong.
Engineering and Support Service Revenue
Commercial
Government
Total
Year Ended December 31,
2019
2018
(In millions)
Change
$
$
2.8 $
27.6
30.4 $
0.7 $
17.7
18.4 $
2.1
9.9
12.0
Engineering and support service revenue increased by $12.0 million, or 65%, for the year ended December 31, 2019 compared to the prior year primarily as
a result of an increase in the volume of contracted work to enable services for the U.S. government.
52
Operating Expenses
Cost of Services (exclusive of depreciation and amortization)
Cost of services (exclusive of depreciation and amortization) increased by $8.9 million, or 10%, for the year ended December 31, 2019 compared to the
prior year, primarily as a result of an increase in the volume of contracted engineering and support services as noted above. This increase was also driven
by higher satellite operations support associated with a greater number of upgraded satellites in service during the current period, corresponding with higher
levels of activity directed towards operating the completed system. These increases were partially offset by a decrease in in-orbit insurance costs, which are
amortized over a one-year period from the launch date, as we have completed the placement of new satellites in-orbit.
Cost of Subscriber Equipment
Cost of subscriber equipment decreased $6.7 million, or 12%, for the year ended December 31, 2019 compared to the prior year period primarily due to the
decreased volume of handset and Iridium Pilot unit sales, partially offset by an increase in the volume of Short Burst Data devices and Iridium Certus
devices.
Research and Development
Research and development expenses decreased by $8.1 million, or 36%, for the year ended December 31, 2019 compared to the prior year period primarily
due to decreased spend on devices for our upgraded 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 decreased by $4.7 million, or 5%, for the year ended December 31, 2019 compared to the prior year, primarily
due to a decrease in professional fees, including lower consulting and regulatory fees, as well as a decrease in sales and marketing costs.
Depreciation and Amortization
Depreciation and amortization expense increased by $79.5 million, or 36%, for the year ended December 31, 2019 compared to the prior year, primarily
due to the increased number of new satellites in service during the current period as we completed the replacement of our first-generation satellites.
Other Income (Expense)
Interest Expense, net
Interest expense, net, for the year ended December 31, 2019 was $115.4 million, compared to $55.1 million for the prior year period. The increase in
interest expense is primarily related to a decrease in interest being capitalized as the average balance of satellites in construction decreased as upgraded
satellites were completed. In addition, during the years ended December 31, 2019 and 2018, we incurred approximately $34.1 million and $26.3 million,
respectively, in interest on the Notes that were issued in March 2018, resulting in only nine months of interest in 2018.
Loss on Extinguishment of Debt
During November 2019, we issued our Term Loan, and used the proceeds of the Term Loan, along with the our DSRA and cash on hand to repay in full all
of the indebtedness outstanding under the BPIAE Facility, including premiums for early prepayment. In conjunction with the prepayment of the BPIAE
Facility, we wrote off the remaining unamortized debt issuance costs. We also used proceeds received from Aireon and our Notes to extinguish debt. These
prepayments resulted in a loss on extinguishment of debt of $111.7 million and $7.3 million for the years ended December 31, 2019 and 2018, respectively.
The 2018 amount was previously included within interest expense.
53
Income Tax Benefit
For the year ended December 31, 2019, our income tax benefit was $56.1 million, compared to an income tax benefit of $7.3 million for the prior year. Our
effective tax rate was approximately 25.7% for the year ended December 31, 2019 compared to 35.4% for the prior year. The increase in income tax benefit
was primarily related to an increase in loss before income taxes compared to the prior year, stock compensation, tax credits as well as nonrecurring
adjustments to our deferred tax assets and liabilities related to state law changes. If our current estimates change in future periods, the impact on the
deferred tax assets and liabilities may change correspondingly. See Note 12 to our consolidated financial statements for more detail on the individual items
impacting our effective tax rate for the years.
Net Loss
Net loss was $162.0 million for the year ended December 31, 2019, compared to net loss of $13.4 million during the prior year period. This increase in net
loss was primarily the result of the $104.4 million increase in loss on extinguishment of debt, the $79.5 million increase in depreciation and amortization
expense and the $60.2 million increase in interest expense, net, as described above, partially offset by the $37.4 million increase in total revenues and the
$48.9 million increase in income tax benefit, as described above.
54
Liquidity and Capital Resources
In November 2019, we issued our Term Loan totaling $1,450.0 million, with an accompanying $100.0 million Revolving Facility. We used the proceeds of
the Term Loan, cash in our DSRA and cash on hand to repay in full all of the indebtedness outstanding under the BPIAE Facility, including premiums for
early prepayment.
In February 2020, we issued an additional $200.0 million under our Term Loan and used the proceeds and approximately $183.5 million of cash on hand to
repay in full all of the indebtedness outstanding under our Notes, including premiums for early repayment. These additional funds have all of the same
terms as the initial borrowing under the Term Loan and were issued at a premium of 1.0% to face value.
On January 20, 2021, we repriced our Term Loan. The Term Loan now bears interest at an annual rate of LIBOR plus 2.75%, with a 1.00% LIBOR floor.
All other terms remain the same. To reprice the Term Loan, we incurred additional financing costs of $3.4 million.
As of December 31, 2020, we reported an aggregate balance of $1,637.6 million in borrowings under the Term Loan in our consolidated balance sheet, net
of $24.0 million of deferred financing costs for a net balance of $1,613.6 million outstanding. 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.
The Credit Agreement contains a mandatory prepayment mechanism with respect to a portion of our excess cash flow (as defined in the Credit Agreement).
It provides for specified exceptions, baskets measured as a percentage of trailing twelve months of earnings before interest, taxes, depreciation and
amortization, and unlimited exceptions in the case of incurring indebtedness and liens and making investments, dividend payments, and payments of
subordinated indebtedness, as well as a phase-out of the mandatory excess cash flow prepayments, based on achievement and maintenance of specified
leverage ratios. The Credit Agreement permits repayment, prepayment, and repricing transactions. Our mandatory excess cash flow prepayment, as
specified in the Credit Agreement, was $12.6 million as of December 31, 2020. This amount will be paid in 2021 and counts towards our required quarterly
principal payments under the Term Loan. We were in compliance with all other covenants under the Credit Agreement as of December 31, 2020.
As of December 31, 2020, our total cash and cash equivalents balance was $237.2 million, our marketable securities balance was $7.5 million, and we
had $100.0 million of borrowing availability under our Revolving Facility. Our principal sources of liquidity are cash, cash equivalents, marketable
securities and internally generated cash flows. Our principal liquidity requirements over the next twelve months are primarily principal and interest on
the Term Loan and share repurchases under the share repurchase program described in Note 10. We believe our liquidity sources will provide sufficient
funds for us to meet our liquidity requirements for at least the next 12 months.
Cash Flows - Comparison of the Year Ended December 31, 2020 and the Year Ended December 31, 2019
The following table shows our consolidated cash flows:
Statement of Cash Flows
Net cash provided by operating activities
Net cash used in investing activities
Net cash used in financing activities
Year Ended December 31,
2020
2019
(in thousands)
Change
$
$
$
249,767 $
(46,470) $
(188,186) $
198,143 $
(127,819) $
(313,280) $
51,624
81,349
125,094
55
Cash Flows from Operating Activities
Net cash provided by operating activities for the year ended December 31, 2020 increased $51.6 million from the prior year period. Net loss, as adjusted for
non-cash activities, improved by $36.6 million over the prior year, primarily due to the $105.9 million increase in net income, partially offset by the non-
cash $81.5 million decrease in the loss on extinguishment of debt. Net cash from operating activities also increased as a result of working capital changes
by approximately $15.0 million. This increase was primarily the result of timing of accounts receivable collections, as well as lower purchases of inventory
in 2020, compared to the prior year. In 2019, there was an increase in inventory primarily associated with last-time purchases of manufacturers'
discontinued parts that did not recur in 2020. These improvements in cash were offset in part by a decrease in interest payable compared to the prior year.
In November 2019 and February 2020, we replaced our Credit Facility and Notes, respectively, with the Term Loan, resulting in monthly interest payments
and an increase in cash used compared to previous semi-annual interest payments. As a result, there was minimal interest payable in the 2020 working
capital balance for the Term Loan.
Cash Flows from Investing Activities
Net cash used in investing activities for the year ended December 31, 2020 decreased $81.3 million from the prior year period primarily due to a decrease
in capital expenditures as we completed payments for the construction of our upgraded constellation in 2019. We estimate our capital expenditures will
average approximately $40.0 million per year until 2029.
Cash Flows from Financing Activities
Net cash used in financing activities for the year ended December 31, 2020 decreased $125.1 million compared to the prior year period primarily due to
utilizing our cash to pay down debt. This resulted in principal payments and related costs, net of borrowings of $196.4 million for 2020, compared to
$313.8 million for 2019. See Note 7 to our consolidated financial statements included in this report for further discussion of our indebtedness.
Cash Flows - Comparison of the Year Ended December 31, 2019 and the Year Ended December 31, 2018
The following table shows our consolidated cash flows:
Statement of Cash Flows
Net cash provided by operating activities
Net cash used in investing activities
Net cash (used in) provided by financing activities
Cash Flows from Operating Activities
Year Ended December 31,
2019
2018
(in thousands)
Change
$
$
$
198,143 $
(127,819) $
(313,280) $
263,709 $
(378,912) $
193,503 $
(65,566)
251,093
(506,783)
Net cash provided by operating activities for the year ended December 31, 2019 decreased $65.6 million from the prior year period primarily due to a
decrease in working capital of approximately $65.5 million. This is primarily the result of less interest from the Credit Facility being capitalized as the
average balance of satellites under construction decreased as satellites were launched and placed into service, which would have been recorded as an
investing activity and is now recorded as an operating activity. Additionally, in November of 2019, we refinanced our Credit Facility resulting in monthly
interest payments compared to previous semi-annual payments. As such, there is no interest payable in the 2019 working capital balance for the new Term
Loan.
Cash Flows from Investing Activities
Net cash used in investing activities for the year ended December 31, 2019 decreased $251.1 million from the prior year period primarily due to a decrease
in capital expenditures as we completed payments for the construction of our upgraded constellation.
56
Cash Flows from Financing Activities
Net cash used in financing activities was $313.3 million for the year ended December 31, 2019, compared to net cash provided by financing activities of
$193.5 million for the year ended December 31, 2018. The increase in cash used in financing activities is a direct result of our deleveraging of our
outstanding debt. In 2019, the combination of scheduled principal payments and the refinancing resulted in net payments of $313.8 million. In 2018, the
issuance of the Notes and scheduled principal payments resulted in net borrowings of $198.5 million. See Note 7 to our condensed consolidated financial
statements included in this report for further discussion of our indebtedness.
Off-Balance Sheet Arrangements
We do not currently have, nor have we had in the last three years, any relationships with unconsolidated entities or financial partnerships, such as entities
referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet
arrangements or other contractually narrow or limited purposes.
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.
57
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We had an outstanding aggregate balance of $1,637.6 million under the Term Loan as of December 31, 2020. We have executed a long-term interest rate
swap, or the Swap, for $1,000.0 million of the Term Loan, through November 2021. We also entered into an interest rate swaption, or the Swaption, that if
executed on November 22, 2021, would extend our Swap through November 2026. For the portion of the Term Loan not covered under the Swap, we
currently pay interest at an annual rate equal to the London Interbank Offered Rate, or LIBOR, plus 2.75%, with a 1.0% LIBOR floor, which will,
accordingly, subject us to interest rate fluctuations in future periods. Had the currently outstanding borrowings under the Term Loan been outstanding
throughout the year ended December 31, 2020, a one-half percentage point increase or decrease in the LIBOR would not have had a material impact on our
interest cost for the period.
We had no borrowings under our Revolving Facility as of December 31, 2020. Accordingly, although the Revolving Facility bears interest at a rate equal to
LIBOR plus 3.75%, but without a LIBOR floor, if and as drawn, we were not 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. The majority of our cash is swept nightly into 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.
58
Item 8. Financial Statements and Supplementary Data
Iridium Communications Inc.:
Report of Ernst & Young LLP, Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Operations and Comprehensive Loss
Consolidated Statements of Changes in Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
59
Page
60
62
63
64
65
66
Report of Ernst & Young LLP, Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Iridium Communications Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Iridium Communications Inc. (the Company) as of December 31, 2020 and 2019, the
related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity, and cash flows for each of the three years in the
period ended December 31, 2020 and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated
financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2019, and the results of its
operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with U.S. generally accepted accounting
principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s
internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control-Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 11, 2021 expressed an unqualified
opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial
statements based on our audits. We are a public accounting firm registered with PCAOB and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to
those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also
included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or
required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2)
involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion
on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions
on the critical audit matter or in the account or disclosures to which it relates.
60
Useful life of upgraded satellites
Description of the
Matter
At December 31, 2020, the Company had $2.5 billion in Property and Equipment related to its upgraded satellites. As discussed
in Note 2 to the consolidated financial statements, the Company’s upgraded satellites are depreciated on a straight-line basis over
their estimated useful life, which is currently estimated to be 12.5 years. The Company’s useful life estimate is based on
judgments made by management using the manufacturer’s estimated design life for the assets, engineering data relating to the
operation and performance of its satellite network, and the Company’s long-term strategy for use of the assets.
Auditing the Company's estimate of the useful life of the upgraded satellites involved a high degree of subjectivity due to the
application of management’s judgment when evaluating the available information to determine the estimated useful life. The
resulting estimated useful life has a significant effect on the timing of recognition of depreciation expense given the magnitude of
the carrying amount of the upgraded satellites.
How We Addressed
the Matter in Our
Audit
We tested the design and operating effectiveness of controls over the Company's processes to determine the estimated useful life
of its upgraded satellites, including controls over management's evaluation of the available information to determine the estimated
useful life.
To test the Company's estimated useful life of the upgraded satellites, our audit procedures included, among others, evaluating the
application of available information to determine the estimated useful life of the upgraded satellites. For example, we compared
management’s useful life estimate to the manufacturer’s estimated design life, publicly available information on the estimated
useful life of similar assets, satellite operation and performance, and the life of its first-generation satellite constellation.
Additionally, we evaluated the effect of changes, if any, in the Company’s long-term strategy for use of the assets on the useful
life estimate.
/s/ Ernst & Young LLP
We have served as Company's auditor since 2001.
Tysons, Virginia
February 11, 2021
61
Iridium Communications Inc.
Consolidated Balance Sheets
(In thousands, except per share data)
Assets
Current assets:
Cash and cash equivalents
Marketable securities
Accounts receivable, net
Inventory
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Other assets
Intangible assets, net
Total assets
Liabilities and stockholders' equity
Current liabilities:
Short-term secured debt
Accounts payable
Accrued expenses and other current liabilities
Interest payable
Deferred revenue
Total current liabilities
Long-term secured debt, net
Long-term senior unsecured notes, net
Deferred income tax liabilities, net
Deferred revenue, net of current portion
Other long-term liabilities
Total liabilities
Commitments and contingencies
Stockholders' equity:
Series A preferred stock, $0.0001 par value, 1,000 shares authorized and issued, zero outstanding
Series B preferred stock, $0.0001 par value, 500 shares authorized and issued, zero outstanding
Common stock, $0.001 par value, 300,000 shares authorized, 134,056 and 131,632
shares issued and outstanding at December 31, 2020 and 2019, respectively
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss, net of tax
Total stockholders' equity
Total liabilities and stockholders' equity
See notes to consolidated financial statements
62
December 31, 2020
December 31, 2019
$
$
$
$
237,178 $
7,548
61,151
32,480
9,464
347,821
2,917,076
50,548
45,504
3,360,949 $
16,766 $
14,390
49,258
246
32,412
113,072
1,596,893
—
155,084
51,258
25,203
1,941,510
—
—
134
1,160,570
275,915
(17,180)
1,419,439
3,360,949 $
223,561
—
68,697
39,938
10,739
342,935
3,180,799
52,846
46,977
3,623,557
10,875
6,713
49,293
7,790
39,080
113,751
1,412,501
352,994
188,653
67,092
29,284
2,164,275
—
—
132
1,134,048
331,969
(6,867)
1,459,282
3,623,557
Iridium Communications Inc.
Consolidated Statements of Operations and Comprehensive Loss
(In thousands, except per share amounts)
Revenue:
Services
Subscriber equipment
Engineering and support services
Total revenue
Operating expenses:
Cost of services (exclusive of depreciation and amortization)
Cost of subscriber equipment
Research and development
Selling, general and administrative
Depreciation and amortization
Total operating expenses
Operating income
Other income (expense):
Interest expense, net
Loss on extinguishment of debt
Other income (expense), net
Total other expense
Loss before income taxes
Income tax benefit
Net loss
Series A preferred stock dividends, declared and paid excluding
cumulative dividends
Series B preferred stock dividends, declared and paid excluding
cumulative dividends
Series B preferred stock dividends, undeclared
Net loss attributable to common stockholders
Weighted average shares outstanding - basic and diluted
Net loss attributable to common stockholders per share - basic and diluted
Comprehensive loss:
Net loss
Foreign currency translation adjustments, net of tax
Unrealized loss on cash flow hedges, net of tax (see Note 8)
Unrealized gain (loss) on marketable securities, net of tax
Comprehensive loss
2020
Year Ended December 31,
2019
2018
$
$
$
$
$
463,095 $
86,119
34,225
583,439
447,158 $
82,856
30,430
560,444
91,097
51,596
12,037
90,052
303,174
547,956
35,483
(94,271)
(30,209)
33
(124,447)
(88,964)
32,910
(56,054)
—
—
—
(56,054) $
133,491
(0.42) $
(56,054) $
(3,272)
(7,036)
(5)
(66,367) $
94,958
50,186
14,310
93,165
297,705
550,324
10,120
(115,396)
(111,710)
(1,133)
(228,239)
(218,119)
56,120
(161,999)
—
4,194
—
(166,193) $
125,167
(1.33) $
(161,999) $
2,051
(121)
—
(160,069) $
406,757
97,848
18,403
523,008
86,016
56,857
22,429
97,846
218,207
481,355
41,653
(55,149)
(7,292)
139
(62,302)
(20,649)
7,265
(13,384)
1,750
2,109
6,290
(23,533)
108,975
(0.22)
(13,384)
(5,017)
—
16
(18,385)
See notes to consolidated financial statements
63
Iridium Communications Inc.
Consolidated Statements of Changes in Stockholders’ Equity
(In thousands)
Series A
Convertible
Series B
Convertible
Preferred Stock
Preferred Stock
Common Stock
Shares
Amount
Shares
Amount
Shares
Amount
Balance at December 31, 2017
Stock-based compensation
Stock options exercised and awards vested
Stock withheld to cover employee taxes
Net loss
Dividends on Series A preferred stock
Dividends on Series B preferred stock
Cumulative translation adjustments, net of
tax
Changes from adoption of ASC 606, net of
tax
Unrealized gain on marketable securities, net
of tax
Preferred stock converted to common
Balance at December 31, 2018
Stock-based compensation
Stock issued in connection with employee
stock plan
Stock withheld to cover employee taxes
Net loss
Dividends on Series B Preferred Stock
Cumulative translation adjustments, net of
tax
Unrealized loss on cash flow hedges, net of
tax
Preferred stock converted to common
Balance at December 31, 2019
Stock-based compensation
Stock issued in connection with employee
stock plan
Stock withheld to cover employee taxes
Net loss
Cumulative translation adjustments, net of
tax
Unrealized loss on marketable securities, net
of tax
Unrealized loss on cash flow hedges, net of
tax
1,000
—
—
—
—
—
—
—
—
—
(1,000)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Balance at December 31, 2020
—
$
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
500
—
—
—
—
—
—
—
—
—
(3)
497
—
—
—
—
—
—
—
(497)
—
—
—
—
—
—
—
—
—
$
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
98,203
—
3,443
(148)
—
—
—
—
—
—
10,702
112,200
—
3,003
(199)
—
—
—
—
16,628
131,632
—
2,588
(164)
—
—
—
—
98
—
4
(1)
—
—
—
—
—
—
11
112
—
3
—
—
—
—
—
17
132
—
2
—
—
—
—
—
Additional
Paid-In
Capital
1,081,373
16,727
12,441
(1,980)
—
—
—
—
—
—
(11)
1,108,550
16,641
13,468
(4,594)
—
—
—
—
(17)
1,134,048
18,322
12,713
(4,513)
—
—
—
—
Accumulated
Other
Comprehensive
Income (Loss)
Retained
Earnings
Total
Stockholders'
Equity
(3,796)
—
—
—
—
—
—
(5,017)
—
16
—
(8,797)
—
—
—
—
—
2,051
(121)
—
(6,867)
—
—
—
—
(3,272)
(5)
(7,036)
518,794
—
—
—
(13,384)
(7,000)
(8,427)
—
11,729
—
—
501,712
—
—
—
(161,999)
(7,744)
—
—
—
331,969
(56,054)
—
—
—
1,596,469
16,727
12,445
(1,981)
(13,384)
(7,000)
(8,427)
(5,017)
11,729
16
—
1,601,577
16,641
13,471
(4,594)
(161,999)
(7,744)
2,051
(121)
—
1,459,282
18,322
12,715
(4,513)
(56,054)
(3,272)
(5)
(7,036)
134,056
$
134
$
1,160,570
$
(17,180)
$
275,915
$
1,419,439
See notes to consolidated financial statements
64
Iridium Communications Inc.
Consolidated Statements of Cash Flows
(In thousands)
Cash flows from operating activities:
Net loss
Adjustments to reconcile net loss to net cash provided by operating activities:
Deferred income taxes
Depreciation and amortization
Loss on extinguishment of debt and Thales Alenia Space bills of exchange
Stock-based compensation (net of amounts capitalized)
Amortization of deferred financing fees
All other items, net
Changes in operating assets and liabilities:
Accounts receivable
Inventory
Prepaid expenses and other current assets
Other assets
Accounts payable
Accrued expenses and other current liabilities
Interest payable
Deferred revenue
Other long-term liabilities
Net cash provided by operating activities
Cash flows from investing activities:
Capital expenditures
Purchases of other investments
Purchases of marketable securities
Sales and maturities of marketable securities
Net cash used in investing activities
Cash flows from financing activities:
Repayments on the Credit Facility, including extinguishment costs
Borrowings under the Term Loan
Payments on the Term Loan
Borrowings under the senior unsecured notes
Repayments on the senior unsecured notes, including extinguishment costs
Repayment of the Thales Alenia Space bills of exchange
Payment of deferred financing fees
Proceeds from exercise of stock options
Tax payment upon settlement of stock awards
Payment of Series A preferred stock dividends
Payment of Series B preferred stock dividends
Net cash (used in) provided by financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents and restricted cash
Cash, cash equivalents and restricted cash, beginning of period
Cash, cash equivalents and restricted cash, end of period
Year Ended December 31,
2020
2019
2018
$
(56,054) $
(161,999) $
(13,384)
(33,684)
303,174
30,209
16,714
3,658
1,124
6,380
7,234
1,119
3,241
7,410
(8,590)
(7,072)
(21,692)
(3,404)
249,767
(38,689)
(152)
(7,629)
—
(46,470)
—
202,000
(12,375)
—
(383,451)
—
(2,562)
12,715
(4,513)
—
—
(188,186)
(53,897)
297,705
111,710
15,138
18,904
952
2,509
(12,951)
7,973
3,097
(4,300)
(4,174)
(12,919)
(6,435)
(3,170)
198,143
(117,819)
(10,000)
—
—
(127,819)
(1,734,965)
1,450,000
—
—
—
—
(28,803)
13,471
(4,596)
—
(8,387)
(313,280)
(1,494)
13,617
223,561
237,178 $
1,230
(241,726)
465,287
223,561 $
$
(8,334)
218,207
7,292
14,490
10,145
174
(12,783)
(7,579)
5,705
(1,417)
(732)
17,560
20,237
13,530
598
263,709
(391,390)
—
(235,528)
248,006
(378,912)
(80,359)
—
—
360,000
—
(59,936)
(21,239)
12,445
(1,981)
(7,000)
(8,427)
193,503
(1,270)
77,030
388,257
465,287
See notes to consolidated financial statements
Iridium Communications Inc.
Consolidated Statements of Cash Flows, continued
(In thousands)
Supplemental cash flow information:
Interest paid, net of amounts capitalized
Income taxes paid (refund received), net
Supplemental disclosure of non-cash investing and financing activities:
Property and equipment received but not paid for yet
Interest capitalized but not paid
Capitalized amortization of deferred financing fees
Capitalized stock-based compensation
Credit Facility repayment in exchange for the settlement of hosting
Cost basis investment in exchange for the settlement of accounts receivable
Unrealized loss on cash flow hedge, net of tax
Year Ended December 31,
2019
2020
2018
98,714 $
(661) $
119,464 $
(606) $
35,690
931
3,721 $
— $
115 $
1,608 $
— $
— $
(7,036) $
3,975 $
— $
2,416 $
1,503 $
— $
— $
(118) $
11,900
9,194
16,306
2,237
35,000
3,300
—
$
$
$
$
$
$
$
$
$
See notes to consolidated financial statements
65
Iridium Communications Inc.
Notes to Consolidated Financial Statements
December 31, 2020
1. Organization and Business
Iridium Communications Inc. (the “Company”), a Delaware corporation, offers voice and data communications services and products to businesses, U.S.
and international government agencies and other customers on a global basis. The Company is a provider of mobile voice and data communications
services via a constellation of low earth orbiting satellites. The Company holds various licenses and authorizations from the U.S. Federal Communications
Commission (the “FCC”) and from foreign regulatory bodies that permit the Company to conduct its business, including the operation of its satellite
constellation.
The Company’s operations are 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 subsidiaries. As a result, there are no material differences between the information presented
in these consolidated financial statements of the Company and the financial information of Iridium Holdings, Iridium Satellite and their subsidiaries, on a
consolidated basis, other than as a result of (i) tax provision as result of Iridium Holdings, Iridium Satellite and their subsidiaries being classified as flow-
through entities for U.S. federal income tax purposes and (ii) senior unsecured notes (fully repaid February 15, 2020, see Note 7), related interest expense
and loss on extinguishment of debt.
2. Significant Accounting Policies and Basis of Presentation
Principles of Consolidation and Basis of Presentation
The Company has prepared the consolidated financial statements in accordance with accounting principles generally accepted in the United States (“U.S.
GAAP”). The accompanying 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.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of
income and expenses during the reporting period. On an ongoing basis, the Company evaluates its estimates and assumptions, including those related to
revenue recognition, the useful lives and recoverability of long-lived and intangible assets, income taxes, stock-based compensation, estimating the
Company's incremental borrowing rate for its leases, and contingencies, among others. The Company bases these estimates on historical and anticipated
results, trends, and various other assumptions that it believes are reasonable, including assumptions as to future events. These estimates form the basis for
making judgments about the carrying values of assets and liabilities and recorded revenues and expenses. Actual results could differ materially from those
estimates.
Adopted Accounting Pronouncements
Effective January 1, 2020, the Company adopted Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments - Credit Losses (Topic 326):
Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). This guidance introduces a revised approach to the recognition and
measurement of credit losses, emphasizing an updated model based on expected losses rather than incurred losses. Adoption of ASU 2016-13 did not have
a material impact on the Company’s consolidated financial statements and related disclosures and no cumulative adjustment was recorded.
Recent Accounting Developments Not Yet Adopted
In December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting
for Income Taxes (“ASU 2019-12”). This guidance amends certain aspects of the accounting for income taxes. The Company intends to apply the new
guidance effective January 1, 2021, as required. The impact of the adoption of ASU 2019-12 on the Company's consolidated financial statements and
related disclosures is not expected to be material.
In March 2020, the 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”). This guidance provides optional expedients and exceptions
66
for applying U.S. GAAP to contracts, hedging relationships, and other transactions that reference London Inter-bank Offered Rate (“LIBOR”) or another
reference rate expected to be discontinued. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur.
The Company will continue to evaluate ASU 2020-04 and consider the possible adoption of expedients as well as the impacts they may have on its
consolidated financial statements and related disclosures.
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.
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 fair value estimates are based upon certain market assumptions and information available to the Company. The carrying values of the following
financial instruments approximated their fair values as of December 31, 2020 and 2019: cash and cash equivalents, prepaid expenses and other current
assets, accounts receivable, accounts payable, and accrued expenses and other current liabilities. Fair values approximate their carrying values because of
their short-term nature. The Level 2 cash equivalents include money market funds, commercial paper and short-term U.S. agency securities. The Company
also classifies its derivative financial instruments as Level 2.
Leases
For new leases, the Company will determine if an arrangement is or contains a lease at inception. Leases are included as right-of-use (“ROU”) assets within
other assets and ROU liabilities within accrued expenses and other liabilities and 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 asset also includes any lease payments made
and excludes 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 (“TPN”) 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.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents and receivables.
The majority of cash is invested into a money market fund with U.S. treasuries, Agency Mortgage Backed Securities and/or U.S. government guaranteed
debt. While the Company maintains its cash and cash equivalents with financial institutions with high credit ratings, it often maintains those deposits in
federally insured financial institutions in excess of federally insured limits. The Company performs credit evaluations of its customers’ financial condition
and records reserves to provide for estimated credit losses. Accounts receivable are due from both domestic and international customers.
67
Cash and Cash Equivalents
The Company considers all highly liquid investments with original maturities of ninety days or less to be cash equivalents. These investments, along with
cash deposited in institutional money market funds, regular interest bearing depository accounts and non-interest bearing depository accounts, are classified
as cash and cash equivalents on the accompanying consolidated balance sheets.
Marketable Securities
Marketable securities consist of fixed-income debt securities with an original maturity in excess of ninety days. These investments are classified as
available-for-sale and are carried at fair value. Unrealized gains and losses, net of taxes, are reported as a component of other comprehensive income or
loss. The specific identification method is used to determine the cost basis of the marketable securities sold. There were no realized gains or losses on the
sale of marketable securities for the years ended December 31, 2020 and 2019. The Company regularly monitors and evaluates the fair value of its
investments to identify other-than-temporary declines in value. The Company determined that any decline in fair value of these investments is temporary as
the Company does not intend to sell these securities and it is not likely that the Company will be required to sell the securities before the recovery of their
amortized cost basis.
Accounts Receivable
Trade accounts receivable are recorded at the invoiced amount and are subject to late fee penalties. Management develops its estimate of an allowance for
uncollectible receivables based on the Company’s experience with specific customers, aging of outstanding invoices, its understanding of customers’
current economic circumstances and its own judgment as to the likelihood that the Company will ultimately receive payment. The Company writes off its
accounts receivable when balances ultimately are deemed uncollectible. The allowance for doubtful accounts was not material as of December 31, 2020
and 2019.
Foreign Currencies
Generally, the functional currency of the Company’s foreign consolidated subsidiaries is the local currency. Assets and liabilities of its foreign subsidiaries
are translated to U.S. dollars based on exchange rates at the end of the reporting period. Income and expense items are translated at the weighted-average
exchange rates prevailing during the reporting period. Translation adjustments are accumulated in a separate component of stockholders’
equity. Transaction gains or losses are classified as other income (expense), net in the accompanying consolidated statements of operations and
comprehensive loss. In instances where the financial statements of a foreign entity in a highly inflationary economy are material, they are remeasured as if
the functional currency were the reporting currency. In these instances, the financial statements of those entities are remeasured into the reporting currency.
A highly inflationary economy is one that has cumulative inflation of approximately 100% or more over a three-year period.
Deferred Financing Costs
Direct and incremental costs incurred in connection with securing debt financing are deferred and are amortized as additional interest expense using the
effective interest method over the term of the related debt.
Capitalized Interest
During the development and construction periods of a project, including the financing of the Company's upgraded satellite constellation, the Company
capitalizes interest. Capitalization ceases when the asset is ready for its intended use or when these activities are substantially suspended. If some portions
of a project are substantially complete and ready for use and other portions have not yet reached that stage, the Company ceases capitalizing costs on the
completed portion of the project but continues to capitalize for the incomplete portion of the project.
Inventory
Inventory consists primarily of finished goods, although the Company at times also maintains an inventory of 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 expense for excess and obsolete inventory was not material as of December 31, 2020, 2019 and 2018.
68
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.
Stock-Based Compensation
The Company accounts for stock-based compensation at fair value. The fair value of stock options is determined at the grant date using the Black-Scholes-
Merton option pricing model. The fair value of restricted stock units (“RSUs”) is equal to the closing price of the underlying common stock on the grant
date. The fair value of an award that is ultimately expected to vest is recognized on a straight-line basis over the requisite service or performance period and
is classified in the consolidated statements of operations and comprehensive income in a manner consistent with the classification of the recipient’s
compensation. The expected vesting of the Company’s performance-based RSUs is based upon the probability that the Company achieves the defined
performance goals. The level of achievement of performance goals, if any, is determined by the Compensation Committee. Stock-based awards to non-
employee consultants are expensed at their grant-date fair value as services are provided according to the terms of their agreements and are classified in
selling, general and administrative expenses in the accompanying consolidated statements of operations and comprehensive income. Classification of
stock-based compensation by line item on the balance sheet and statement of operations is presented below:
Property and equipment, net
Inventory
Prepaid and other current assets
Cost of subscriber equipment
Cost of services (exclusive of depreciation and amortization)
Research and development
Selling, general and administrative
Total stock-based compensation
Property and Equipment
Year Ended December 31,
2020
2019
(In thousands)
1,319 $
261
28
29
5,037
305
11,343
18,322 $
1,187
237
79
23
4,326
243
10,546
16,641
$
$
Property and equipment is carried at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the following
estimated useful lives:
Satellites
Ground system
Equipment
Internally developed software and purchased software
Building
Building improvements
Leasehold improvements
12.5 years
5-7 years
3-5 years
3-7 years
39 years
5-39 years
shorter of useful life or remaining lease term
The Company calculates depreciation expense using the straight-line method and evaluates the appropriateness of the useful life used in this calculation on
a quarterly basis or as events occur that require additional assessment.
Repairs and maintenance costs are expensed as incurred.
Derivative Financial Instruments
The Company uses an interest rate swap agreement to manage its exposures to fluctuating interest rate risk on variable rate debt. Derivatives are measured
at fair value and are recorded on the balance sheet within other assets and other long-term liabilities. The Company’s derivatives are designated as cash
flow hedges, with the effective portion of the changes in fair value of the
69
derivatives recorded in accumulated other comprehensive loss within the Company’s consolidated balance sheets and subsequently recognized in earnings
when the hedged items impact earnings. Any ineffective portion of cash flow hedges would be recorded in current earnings. Within the consolidated
statement 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 as operating activities within the Company’s consolidated statements of cash flows, which is the same category as the items being hedged. See
Note 8 for further information.
Long-Lived Assets
The Company assesses its long-lived assets for impairment when indicators of impairment exist. Recoverability of assets is measured by comparing the
carrying amounts of the assets to the future undiscounted cash flows expected to be generated by the assets. Any impairment loss would be measured as the
excess of the assets’ carrying amount over their fair value.
Intangible Assets
The Company’s intangible assets with finite lives are amortized over their useful lives and reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of the asset may not be recoverable. If any indicators were present, the Company would test for
recoverability by comparing the carrying amount of the asset to the net undiscounted cash flows expected to be generated from the asset. If those net
undiscounted cash flows do not exceed the carrying amount (i.e., the asset is not recoverable), the Company would perform the next step, which is to
determine the fair value of the asset and record an impairment loss, if any. The Company evaluates the useful lives for these intangible assets each reporting
period to determine whether events and circumstances warrant a revision in their remaining useful lives.
Amortization is calculated using the straight-line method over the following estimated useful lives:
Intellectual property
Assembled workforce
Patents
Revenue Recognition
20 years
7 years
14 - 20 years
The Company derives its revenue primarily as a wholesaler of satellite communications products and services. The primary types of revenue include
(i) service revenue (access and usage-based airtime fees), (ii) subscriber equipment revenue, and (iii) revenue generated by providing engineering and
support services to commercial and government customers. In addition to the discussion immediately below, see Note 12 for further discussion of the
Company's revenue recognition.
Wholesaler of satellite communications products and services
Pursuant to wholesale agreements, the Company sells its products and services to service providers who, in turn, sell the products and services to other
distributors or directly to the end users. The Company recognizes revenue when an arrangement exists, services or equipment are transferred, the
transaction price is determined, the arrangement has commercial substance, and collection of consideration is probable.
Contracts with multiple performance obligations
At times, the Company sells services and equipment through arrangements that bundle equipment, airtime and other services. For these revenue
arrangements when the Company sells services and equipment in bundled arrangements and determines that it has separate distinct performance
obligations, the Company allocates the bundled contract price among the various performance obligations based on each deliverable’s stand-alone selling
price. If the stand-alone selling price is not directly observable, the Company estimates the amount to be allocated for each performance obligation based
on observable market transactions or the residual approach. When the Company determines the performance obligations are not distinct, the Company
recognizes revenue on a combined basis as the last obligation is satisfied. To the extent the Company's contracts include variable consideration, the
transaction price includes both fixed and variable consideration. The variable consideration contained within the Company's contracts with customers may
include discounts, credits and other similar items. When a contract includes variable consideration, the Company evaluates the estimate of the variable
consideration to determine whether the estimate needs to be constrained; therefore, the Company includes the variable consideration in the transaction price
only to
70
the extent that it is probable that a significant reversal of the amount of cumulative revenue recognized will not occur when the uncertainty associated with
the variable consideration is subsequently resolved. Variable consideration estimates are updated at the end of each quarter.
Service revenue sold on a stand-alone basis
Service revenue is generated from the Company’s service providers through usage of its satellite system and through fixed monthly access fees per user
charged to service providers. Revenue for usage is recognized when usage occurs. Revenue for fixed-per-user access fees is recognized over the usage
period in which the services are provided to the end user. The Company sells prepaid services in the form of e-vouchers and prepaid cards. A liability is
established equal to the cash paid upon purchase for the e-voucher or prepaid card. Beginning January 1, 2018, upon the adoption of ASU 2014-09, the
Company recognizes revenue from (i) the prepaid services upon the use of the e-voucher or prepaid card by the customer and (ii) the estimated pattern of
use. The Company does not offer refunds for unused prepaid services.
Services sold to the U.S. government
The Company provides airtime and airtime support to U.S. government and other authorized customers pursuant to the Enhanced Mobile Satellite Services
(“EMSS”) contract managed by the U.S. Space Force. Under the terms of this agreement, authorized customers continue to utilize airtime services,
provided through the U.S. government’s dedicated gateway. These services include unlimited global standard and secure voice, low and high-speed data,
paging, broadcast and Distributed Tactical Communications Services (“DTCS”) services for an unlimited number of Department of Defense (“DoD”) and
other federal subscribers. Under this contract, revenue is based on the annual fee for the fixed-price contract with unlimited subscribers, and is recognized
on a straight-line basis over each contractual year. The U.S. government purchases its subscriber equipment from third-party distributors and not directly
from the Company.
Subscriber equipment sold on a stand-alone basis
The Company recognizes subscriber equipment sales and the related costs when title to the equipment (and the risks and rewards of ownership) passes to
the customer, typically upon shipment. Customers do not have rights of return without prior consent from the Company.
Government engineering and support services
The Company provides maintenance services to the U.S. government’s dedicated gateway. This revenue is recognized ratably over the periods in which the
services are provided; the related costs are expensed as incurred.
Other government and commercial engineering and support services
The Company also provides engineering services to assist customers in developing new technologies for use on the Company’s satellite system. The
revenue associated with fixed-fee contracts is recognized over time using costs incurred to date relative to total estimated costs at completion to measure
progress toward satisfying its performance obligation. The Company does not include purchases of goods from a third party in its evaluation of costs
incurred. Incurred costs represent work performed, which corresponds with, and thereby best depicts, the transfer of control to the customer. Revenue on
cost-plus-fixed-fee contracts is recognized to the extent of estimated costs incurred plus the applicable fees earned. The Company considers fixed fees
under cost-plus-fixed-fee contracts to be earned in proportion to the allowable costs incurred in performance of the contract.
Research and Development
Research and development costs are charged to expense in the period in which they are incurred.
Advertising Costs
Costs associated with advertising and promotions are expensed as incurred. Advertising expenses were $1.2 million, $0.9 million and $0.4 million for the
years ended December 31, 2020, 2019 and 2018, respectively.
71
Income Taxes
The Company accounts for income taxes using the asset and liability approach, which requires the recognition of tax benefits or expenses for temporary
differences between the financial reporting and tax bases of assets and liabilities. A valuation allowance is established when necessary to reduce deferred
tax assets to the amounts expected to be realized. The Company also recognizes a tax benefit from uncertain tax positions only if it is “more likely than
not” that the position is sustainable based on its technical merits. The Company’s policy is to recognize interest and penalties on uncertain tax positions as a
component of income tax expense.
Net Loss Per Share
The Company calculates basic net loss per share by dividing net loss attributable to common stockholders by the weighted-average number of shares of
common stock outstanding during the period. Diluted net loss per share takes into account the effect of potentially dilutive common shares when the effect
is dilutive. The effect of potentially dilutive common shares, including common stock issuable upon exercise of outstanding stock options, is computed
using the treasury stock method. The effect of potentially dilutive common shares from the conversion of outstanding convertible preferred securities was
computed using the as-if converted method at the stated conversion rate. The Company’s unvested RSUs awarded to the board of directors contain non-
forfeitable rights to dividends and therefore are considered to be participating securities in periods of net income. The calculation of basic and diluted net
loss per share excludes net income attributable to these unvested RSUs from the numerator and excludes the impact of these unvested RSUs from the
denominator.
3. Cash and Cash Equivalents and Marketable Securities
Cash and Cash Equivalents
The following table summarizes the Company’s cash and cash equivalents:
Cash and cash equivalents:
Cash
Money market funds
Fixed income debt securities
Total cash and cash equivalents
Marketable Securities
December 31,
2020
2019
(In thousands)
Recurring Fair
Value Measurement
$
$
27,168 $
208,005
2,005
237,178 $
13,943
209,618
—
223,561
Level 2
Level 2
As of December 31, 2020, the Company's marketable securities consisted of only fixed-income securities. The amortized cost of these securities amounted
to $7.6 million and the estimated fair value amounted to $7.5 million as of December 31, 2020. The gross unrealized gains and gross unrealized losses on
these marketable securities were not material as of December 31, 2020. All marketable securities are measured as Level 2 investments.
The following table presents the contractual maturities of the Company's fixed income debt securities, as of December 31, 2020:
Mature within one year
Mature after one year and within three years
Total
December 31, 2020
Amortized Cost
Fair Value
$
$
(In thousands)
5,530
2,024
7,554
$
$
5,525
2,023
7,548
As of December 31, 2019, the Company did not hold any investment positions in marketable securities.
72
4. Property and Equipment
Property and equipment consisted of the following:
Satellite system
Ground system
Equipment
Internally developed software and purchased software
Building and leasehold improvements
Total depreciable property and equipment
Less: accumulated depreciation
Total depreciable property and equipment, net of accumulated depreciation
Land
Construction-in-process:
Ground spares
Other construction-in-process
Total property and equipment, net of accumulated depreciation
Other construction-in-process consisted of the following:
Internally developed software
Equipment
Ground system
Total other construction-in-process
December 31,
2020
2019
(In thousands)
3,197,460 $
64,581
44,871
251,320
29,924
3,588,156
(959,606)
2,628,550
8,037
225,254
55,235
2,917,076 $
3,197,460
66,789
45,406
241,793
31,050
3,582,498
(682,130)
2,900,368
8,037
225,254
47,140
3,180,799
December 31,
2020
2019
(In thousands)
44,444 $
10,388
403
55,235 $
38,064
8,983
93
47,140
$
$
$
$
Depreciation expense was $301.7 million, $296.1 million and $216.6 million for the years ended December 31, 2020, 2019 and 2018, respectively. The
increase in depreciation from 2018 to 2019 was primarily due to the increased number of upgraded satellites in service as the Company completed the
replacement of its first-generation satellites in the first quarter of 2019.
73
5. Intangible Assets
The Company had identifiable intangible assets as follows:
Indefinite life intangible assets:
Trade names
Spectrum and licenses
Total
Definite life intangible assets:
Intellectual property
Assembled workforce
Patents
Total
Total intangible assets
Indefinite life intangible assets:
Trade names
Spectrum and licenses
Total
Definite life intangible assets:
Intellectual property
Assembled workforce
Patents
Total
Total intangible assets
Useful
Life
Gross
Carrying Value
Accumulated
Amortization
Net
Carrying Value
December 31, 2020
Indefinite
Indefinite
$
20 years
7 years
14 - 20 years
$
(In thousands)
21,195 $
14,030
35,225
16,439
5,678
396
22,513
57,738 $
— $
—
—
(8,927)
(3,244)
(63)
(12,234)
(12,234) $
21,195
14,030
35,225
7,512
2,434
333
10,279
45,504
Useful
Life
Gross
Carrying Value
Accumulated
Amortization
Net
Carrying Value
December 31, 2019
Indefinite
Indefinite
20 years
7 years
14 - 20 years
$
$
(In thousands)
21,195 $
14,030
35,225
16,439
5,678
324
22,441
57,666 $
— $
—
—
(8,217)
(2,433)
(39)
(10,689)
(10,689) $
21,195
14,030
35,225
8,222
3,245
285
11,752
46,977
Amortization expense was $1.5 million, $1.6 million, and $1.6 million for the years ended December 31, 2020, 2019 and 2018, respectively.
Future amortization expense with respect to intangible assets existing at December 31, 2020, by year and in the aggregate, was as follows:
Year ending December 31,
2021
2022
2023
2024
2025
Thereafter
Total estimated future amortization expense
74
Amount
(In thousands)
1,548
1,548
1,548
737
737
4,161
10,279
$
$
6. Leases
The Company has operating leases for land, office space, satellite network operations center (“SNOC”) facilities, system gateway facilities, a warehouse
and a distribution center. The Company also has operations and maintenance (“O&M”) agreements that include leases associated with two TPN facilities.
Some of the Company's leases include options to extend the leases for up to 10 years and some include options to terminate the lease within 1 year. The
Company does not include term extension options as part of its present value calculation of lease liabilities unless it is reasonably certain to exercise those
options. As of December 31, 2020, the Company’s weighted-average remaining lease term relating to its operating leases was 6.7 years, and the weighted-
average discount rate used to calculate the operating lease liability payment was 6.7%.
The table below summarizes the Company’s lease-related assets and liabilities:
Leases
Classification
December 31, 2020
December 31, 2019
Operating lease assets
Noncurrent
Total lease assets
Operating lease liabilities
Current
Noncurrent
Total lease liabilities
Other assets
Accrued expenses and other current liabilities
Other long-term liabilities
(in thousands)
23,974
23,974
3,838
23,258
27,096
$
$
$
$
27,007
27,007
3,397
26,859
30,256
$
$
$
$
During the years ended December 31, 2020, 2019 and 2018, the Company incurred lease expense of $5.6 million, $5.1 million and $5.1 million,
respectively. A portion of rent expense during these comparable periods was derived from leases that were not included within the ROU asset and liability
balances shown above as they had terms shorter than twelve months and were therefore excluded from balance sheet recognition under ASU 2016-02.
Future payment obligations with respect to the Company's operating leases in which it was the lessee at December 31, 2020, by year and in the aggregate,
were as follows:
Year Ending December 31,
2021
2022
2023
2024
2025
Thereafter
Total lease payments
Lessor Arrangements
Amount
(in thousands)
5,700
5,145
4,974
4,970
5,088
8,209
34,086
$
$
Operating leases in which the Company is a lessor consist primarily of hosting agreements with Aireon LLC (see Note 14) and L3Harris Technologies, Inc.
(“L3Harris”) for space on the Company’s upgraded satellites. These agreements provide for a fee that will be recognized over the life of the satellites,
currently expected to be approximately 12.5 years. Lease income related to these agreements was $21.4 million, $21.6 million and $17.1 million for the
years ended December 31, 2020, 2019 and 2018, respectively. 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 loss.
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Both Aireon and L3Harris have made payments for their hosting agreements and will continue to do so. Future income with respect to the Company's
operating leases in which it was the lessor at December 31, 2020, by year and in the aggregate, is as follows:
Year Ending December 31,
2021
2022
2023
2024
2025
Thereafter
Total lease income
7. Debt
Term Loan and Revolving Facility
Amount
(in thousands)
21,445
21,445
21,445
21,445
21,445
98,907
206,132
$
$
On November 4, 2019, pursuant to a loan agreement (as amended to date, the “Credit Agreement”) the Company entered into a $1,450.0 million term loan
with Deutsche Bank AG (the “Term Loan”) and an accompanying $100.0 million revolving loan (the “Revolving Facility”). The Company used the
proceeds of the Term Loan, along with its debt service reserve account and cash on hand, to prepay all of the indebtedness outstanding under its $1.8 billion
loan facility with Bpifrance Assurance Export S.A.A., as well as related expenses. The Term Loan was issued at a price equal to 99.5% of its face value and
initially bore interest at an annual rate of LIBOR plus 3.75%, with a 1.0% LIBOR floor, with a maturity date in November 2026. Subsequent to December
31, 2020, the Company repriced the Term Loan to reduce the interest rate (see Note 18 for more information). Interest on the Term Loan is paid monthly on
the last business day of the month. Principal payments, which are payable quarterly and began on June 30, 2020, equal $16.5 million per annum (one
percent of the full amount of the loan following the additional $200.0 million drawn on February 7, 2020, as noted below), with the remaining principal due
upon maturity. Borrowings under the Revolving Facility, if any, bear interest at LIBOR plus 3.75% without a LIBOR floor, if and as drawn, with no
original issue discount, a commitment fee of 0.5% per year on the undrawn amount, and a maturity date in November 2024.
On February 7, 2020, the Company closed on an additional $200.0 million under its Term Loan. On February 13, 2020, the Company used these proceeds,
together with cash on hand, to prepay and retire all of the indebtedness outstanding under the senior unsecured notes (the “Notes”), including premiums for
early prepayment. The additional amount is fungible with the original $1,450.0 million, having the same maturity date, interest rate and other terms, but
was issued at a 1.0% premium to face value. To prepay the Notes, the Company paid a call price equal to the present value at the redemption rate of (i)
105.125% of the $360.0 million principal amount of the Notes plus (ii) all interest due through the first call date in April 2020, representing a total call
premium of $23.5 million, plus all accrued and unpaid interest to the redemption date.
As of December 31, 2020 and 2019, the Company reported an aggregate of $1,637.6 million and $1,450.0 million in borrowings under the Term Loan,
respectively. These amounts are before $24.0 million and $26.6 million of net unamortized deferred financing costs as of December 31, 2020 and 2019,
respectively. The net principal balance in borrowings in the accompanying consolidated balance sheets as of December 31, 2020 and 2019 amounted to
$1,613.6 million and $1,423.4 million, respectively. As of December 31, 2020 and 2019, based upon over-the-counter bid levels (Level 2 - market
approach), the fair value of the borrowings under the Term Loan due in 2026 was $1,647.9 million and $1,468.1 million, respectively. The Company had
not borrowed under the Revolving Facility as of December 31, 2020.
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, and 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). The Credit Agreement
provides for specified exceptions, baskets measured as a percentage of trailing twelve months of earnings before interest, taxes, depreciation and
amortization (“EBITDA”), and unlimited exceptions in the case of incurring indebtedness and liens and making investments, dividend payments, and
payments of subordinated indebtedness, as well as a phase-out of the mandatory excess cash flow prepayments, based on achievement and maintenance of
specified leverage ratios. The Company’s mandatory excess cash flow prepayment, as specified in the Credit Agreement, was $12.6 million as of
December 31, 2020. This amount will be paid in 2021 and counts
76
towards the Company's required quarterly principal payments. As such, it was classified under current short-term secured debt in the Company’s
consolidated balance sheet as of December 31, 2020. The Credit Agreement permits repayment, prepayment, and repricing transactions. The Company was
in compliance with all other covenants as of December 31, 2020.
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 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.
The effective interest rate on outstanding principal of the Term Loan was 5.7% during the year ended December 31, 2020.
Senior Unsecured Notes
As of December 31, 2020, the Company had fully repaid and retired the total gross outstanding principal balance of the Notes, as discussed above. As of
December 31, 2019, the Company reported an aggregate of $360.0 million in borrowings under the Notes, before $7.0 million of net unamortized deferred
financing costs, for a net principal balance of $353.0 million in borrowings in the accompanying condensed consolidated balance sheet.
Interest on Debt
Total interest incurred during the years ended December 31, 2020, 2019 and 2018 was $98.6 million, $140.1 million and $142.7 million, respectively.
Interest incurred includes amortization of deferred financing fees of $3.8 million, $21.6 million and $26.5 million for the years ended December 31, 2020,
2019 and 2018 respectively. Interest capitalized during the years ended December 31, 2020 and 2019 was $3.2 million and $15.1 million, respectively.
Interest accrued for the years ended December 31, 2020 and 2019 was $0.2 million and $7.8 million, respectively.
Total Debt
Future minimum principal repayments with respect to the Company's debt balances, including the mandatory excess cash flow prepayment, existing at
December 31, 2020, by year and in the aggregate, are as follows:
Year ending December 31,
2021
2022
2023
2024
2025
Thereafter
Total debt commitments
Less: Original issuance discount
Less: Total short-term debt
Total long-term debt, net
Amount
(In thousands)
16,766
16,234
16,500
16,500
16,500
1,555,125
1,637,625
23,966
16,766
1,596,893
$
$
$
The repayment schedule above excludes future amounts that may be required to be prepaid pursuant to the excess cash flow sweep provision of the Credit
Agreement, as those amounts are not determinable in advance.
8. 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 swap contracts which result in
recognizing a fixed interest rate for the portion of the Term Loan. This will reduce the negative impact of increases in the variable rate over the term of the
interest rate swap contracts. These financial instruments 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.
77
Hedge effectiveness of interest rate swap 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, 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 or is exercised, or no
longer qualifies for hedge accounting, or is no longer probable, hedge accounting is discontinued prospectively.
Interest Rate Swaps
On November 27, 2019, the Company executed a long-term interest rate swap (“Swap”) effective through November 2021 to mitigate variability in
forecasted interest payments on a portion of the Company’s borrowings under its Term Loan. On the last business day of each month, the Company
receives variable interest payments based on one-month LIBOR from the counterparty. The Company also entered into an interest rate swaption agreement
(“Swaption”) that, if executed on November 22, 2021, would extend the Company's Swap through November 2026. The Company pays a fixed annual rate
of 0.50% for the Swaption and a fixed rate of 1.565% on the Swap. Both the Swap and the Swaption derivative instruments carried a notional amount of
$1,000.0 million as of December 31, 2020 and 2019. The Company designated both the Swap and Swaption as qualifying hedging instruments and
accounted for these derivatives as cash flow hedges.
At inception, the Swap and Swaption were designated as cash flow hedges for hedge accounting. The unrealized changes in market value are recorded in
accumulated other comprehensive loss and reclassified into earnings during the period in which the hedged transaction affects earnings. Over the next 12
months, the Company expects any gains or losses for cash flow hedges reclassified from accumulated other comprehensive loss into earnings to have an
immaterial impact on the Company’s condensed consolidated financial statements.
Fair Value of Derivative Instruments
As of December 31, 2020, the Company had a current liability balance of $5.2 million and $4.4 million, for the fair value of the Swap and Swaption,
respectively, recorded in other current liabilities. As of December 31, 2019, the Company had a long-term asset balance for the fair value of the Swap in the
amount of $0.8 million, recorded in other long-term assets, and a long-term liability balance for the fair value of the Swaption in the amount of $0.9 million
recorded in other long-term liabilities.
During the years ended December 31, 2020 and 2019, the Company collectively incurred $9.1 million and $0.3 million in net interest expense, respectively,
for both the Swap and the Swaption. The Company did not hold any cash flow hedges during 2018. Gains and losses resulting from fair value adjustments
to the Swap and Swaption are recorded within accumulated other comprehensive 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 Swap are included in cash flows from operating
activities on the condensed consolidated statements of cash flows. The amount of unrealized loss related to the Swap and Swaption that was recorded in
accumulated other comprehensive loss in the condensed consolidated balance sheets was $7.0 million as of December 31, 2020, net of a $2.5 million tax
impact, and $0.1 million as of December 31, 2019. There were no gains or losses related to derivative financial instruments during the year ended
December 31, 2018.
9. 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”), primarily to increase the number of shares available under the plan. The Company registered with the SEC an
additional 2,542,664 shares of common stock made available for issuance pursuant to the Amended 2015 Plan, bringing the total to 30,944,912 shares
registered. Through December 31, 2020, the remaining aggregate number of shares of the Company's common stock available for future grants under the
Amended 2015 plan was 11,883,391. The Amended 2015 Plan provides for the grant of stock-based awards, including nonqualified stock options, incentive
stock options, restricted stock, RSUs, stock appreciation rights and other equity securities as incentives and rewards for 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) 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 100% of the fair market value of the underlying common stock on the date of grant, and (ii) 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.
78
Stock Option Awards
The stock option awards granted to employees generally (i) have a term of ten years, (ii) vest over a four-year period with 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 value of the underlying shares at the date of grant.
Fair Value Determination
The Company uses the Black-Scholes-Merton option pricing model to determine the fair value of its stock option awards on the date of grant. The
Company will reconsider the use of the Black-Scholes-Merton model if additional information becomes available in the future that indicates another model
would be more appropriate or if grants issued in future periods have characteristics that cannot be reasonably estimated under this model.
The Black-Scholes-Merton option pricing model incorporates the following assumptions:
•
•
•
Volatility - The expected volatility of the options granted was estimated based upon historical volatility of the Company's share price of its
common stock through daily observations of its trading history.
Expected life of options - The expected life of options granted to employees was determined from the simplified method.
Risk-free interest rate - The yield on zero-coupon U.S. Treasury strips was used to extrapolate a forward-yield curve. This “term structure” of
future interest rates was then input into a numeric model to provide the equivalent risk-free rate to be used in the Black-Scholes-Merton model
based on the expected term of the underlying grants.
• Dividend yield - The Black-Scholes-Merton valuation model requires an expected dividend yield as an input. The Company does not anticipate
paying dividends during the expected term of the grants; therefore, the dividend rate is assumed to be zero.
The Company has historically granted stock options to newly hired and promoted employees. During 2019 and 2018, the Company granted approximately
139,000 and 364,000 stock options, respectively, with an estimated aggregate grant date fair value of $1.3 million and $2.4 million, respectively. The
Company did not grant any stock options during the year ended December 31, 2020.
The following table summarizes weighted-average assumptions used in the Company's calculations of fair value during the years ended December 31, 2019
and 2018:
Expected volatility
Expected term (years)
Expected dividends
Risk free interest rate
Year Ended December 31,
2019
40.78%
6.11
—%
2.59%
2018
39.53%
6.11
—%
2.68%
79
A summary of the activity of the Company’s stock options is as follows:
Options outstanding at December 31, 2017
Granted
Cancelled or expired
Exercised
Forfeited
Options outstanding at December 31, 2018
Granted
Cancelled or expired
Exercised
Forfeited
Options outstanding at December 31, 2019
Cancelled or expired
Exercised
Forfeited
Options outstanding at December 31, 2020
Options exercisable at December 31, 2020
Options exercisable and expected to vest at December 31, 2020
Weighted-
Average
Exercise Price
Per Share
Weighted-
Average
Remaining
Contractual
Term (Years)
Aggregate
Intrinsic
Value
(In thousands, except years and per share data)
Shares
6,856 $
364
(1)
(1,477)
(39)
5,703 $
139
(1)
(1,670)
(18)
4,153 $
(5)
(1,581)
(13)
2,554 $
2,330 $
2,550 $
7.94
15.56
8.59
8.42
9.97
8.29
21.12
11.80
8.11
11.74
8.78
20.17
8.14
18.17
9.10
8.31
9.09
$
16,614
4.38 $
57,956
$
29,584
4.03 $
65,887
$
33,836
3.94 $
3.59 $
3.93 $
77,182
72,266
77,107
The Company recognized $1.1 million, $1.4 million and $1.5 million of stock-based compensation expense related to stock options in the years ended
December 31, 2020, 2019 and 2018, respectively.
The weighted-average grant date fair value of options granted during the years ended December 31, 2019 and 2018 was $9.18 and $6.63 per share,
respectively. The total fair value of the shares vested during the years ended December 31, 2020, 2019 and 2018 was $1.4 million for each period.
As of December 31, 2020, the total unrecognized cost related to non-vested options was approximately $1.5 million. This cost is expected to be recognized
over a weighted-average period of 1.5 years.
Restricted Stock Units
The RSUs granted to newly hired and promoted employees, as well as to employees for on-going service, vest over a four-year period, with 25% vesting on
the first anniversary of the grant date and the remainder vesting ratably on a quarterly basis thereafter, subject to continued employment. The RSUs granted
to non-employee directors generally vest in full on the first anniversary of the grant date. The RSUs granted to non-employee consultants generally vest
50% on the first anniversary of the grant date and ratably on a quarterly basis through the second anniversary of the grant date. Some RSUs granted to
employees for performance vest upon the completion of defined performance goals, subject to continued employment. The Company’s RSUs are generally
classified as equity awards because the RSUs will be paid in the Company's common stock upon vesting. The related compensation expense is recognized
over the service period 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 awards do not carry voting rights until they are vested and released in accordance
with the terms of the award.
80
Service-Based Awards
The majority of the annual compensation the Company provides to members of its board of directors is paid in the form of RSUs. In addition, members of
the Company’s board of directors can elect to receive the remainder of their annual compensation, or a portion thereof, in the form of RSUs. An aggregate
amount of approximately 58,000, 76,000 and 110,000 service-based RSUs were granted to the Company's directors as a result of these elections during the
years ended December 31, 2020, 2019 and 2018, respectively, with an estimated grant date fair value of $1.4 million, $1.4 million and $1.3 million,
respectively.
During the years ended December 31, 2020, 2019 and 2018, the Company granted approximately 713,000, 740,000 and 900,000 service-based RSUs,
respectively, to its employees, with an estimated grant date fair value of $19.1 million, $16.9 million and $10.7 million, respectively.
During the years ended December 31, 2020, 2019 and 2018, the Company granted approximately 10,000, 11,000 and 14,000 service-based RSUs,
respectively, to non-employee consultants, with an estimated grant date fair value of $0.2 million for each period.
Performance-Based Awards
In March 2020, 2019 and 2018, the Company awarded approximately 115,000, 125,000 and 474,000 performance-based RSUs, respectively, to the
Company’s executives and employees (the “Bonus RSUs”), with an estimated grant date fair value of $3.1 million, $2.9 million and $5.6 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 2020 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 2020 Bonus
RSUs will vest, subject to continued employment, in March 2021. A portion of the March 2019 Bonus RSUs vested in March 2020 upon the determination
of the level of achievement of the performance goals.
Additionally, during 2020, 2019 and 2018, the Company awarded approximately 144,000, 96,000 and 134,000 performance-based RSUs, respectively, to
the Company’s executives (the “Executive RSUs”). The estimated aggregate grant date fair values of the Executive RSUs granted in 2020, 2019 and 2018
was $3.9 million, $2.2 million and $1.6 million, respectively. Vesting of the Executive RSUs is and was dependent upon the Company’s achievement of
defined performance goals over a two-year period. The vesting of Executive RSUs will ultimately range from 0% to 150% of the number of shares
underlying the Executive RSU grant based on the level of achievement of the performance goals. If the Company achieves the performance goals, 50% of
the Executive RSUs will vest on the second anniversary of the grant date and the remaining 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. During 2020, 2019 and 2018, the Company awarded additional shares underlying
performance-based RSUs to the Company's executives for over-achievement of performance goal targets related to the Executive RSU grants originally
awarded in 2018, 2017 and 2016 in the amounts of 20,000 shares, 11,000 shares and 1,000 shares, respectively.
81
Award Summary
A summary of the Company’s activity for outstanding RSUs is as follows:
Outstanding at December 31, 2017
Granted
Forfeited
Released
Outstanding at December 31, 2018
Granted
Forfeited
Released
Outstanding at December 31, 2019
Granted
Forfeited
Released
Outstanding at December 31, 2020
Vested and unreleased at December 31, 2020
(1)
Weighted-
Average
Grant Date
Fair Value
Per RSU
RSUs
(In thousands)
3,548 $
1,632
(163)
(1,940)
3,077 $
1,058
(102)
(1,331)
2,702 $
1,061
(92)
(1,007)
2,664 $
802
8.50
11.87
9.69
8.64
10.13
22.50
14.86
10.52
14.62
26.73
17.72
15.63
18.96
(1)
These RSUs were granted to the Company's board of directors as a part of their compensation for board and committee service and had vested but had
not yet been issued and released.
As of December 31, 2020, the total unrecognized cost related to non-vested RSUs was approximately $17.8 million. This cost is expected to be recognized
over a weighted-average period of 1.31 years. The Company recognized $17.2 million, $15.2 million and $15.2 million of stock-based compensation
expense related to RSUs in the years ended December 31, 2020, 2019 and 2018, respectively.
10. Equity Transactions
Preferred Stock
The Company is authorized to issue 2.0 million shares of preferred stock with a par value of $0.0001 per share. The Company previously issued 1.5 million
shares of preferred stock, and the remaining 0.5 million authorized shares of preferred stock were undesignated and unissued as of December 31, 2020 and
2019. As of December 31, 2020 and 2019, there were no outstanding shares of preferred stock, as all preferred stock was converted in prior periods into
common stock according to its terms.
Series B Cumulative Perpetual Convertible Preferred Stock
In May 2014, the Company issued 500,000 shares of its 6.75% Series B Cumulative Perpetual Convertible Preferred Stock (the “Series B Preferred Stock”)
in an underwritten public offering. Holders of Series B Preferred Stock were entitled to receive cumulative cash dividends at a rate of 6.75% per annum of
the $250 liquidation preference per share (equivalent to an annual rate of $16.875 per share). Dividends were payable quarterly in arrears on each March
15, June 15, September 15 and December 15.
During the three months ended June 30, 2019, the Company's daily volume-weighted average stock price remained at or above $11.21 per share for a
period of 20 out of 30 trading days, allowing for the conversion of the Series B Preferred Stock at the election of the Company. On May 15, 2019, the
Company converted all outstanding shares of its Series B Preferred Stock into shares of common stock, resulting in the issuance of 16,627,632 shares of
common stock. To convert the stock, the Company declared and paid all current and cumulative dividends to holders of record of Series B Preferred Stock
as of May 8, 2019, resulting in a dividend payment of $8.4 million. As a result, the Company did not have any shares of Series B Preferred Stock
outstanding as of December 31, 2020 and 2019.
82
Share Repurchase Program
In February 2021, the Company announced that its Board of Directors had authorized the repurchase of up to $300.0 million of its common stock through
December 31, 2022. This time frame can be extended or shortened by the Board of Directors. Repurchases, if any, will be made from time-to-time on the
open market at prevailing prices or in negotiated transactions off the market. There were no repurchases of common stock during the year ended December
31, 2020.
11. Revenue
The following table summarizes the Company’s services revenue:
Commercial services:
Voice and data
IoT data
Broadband
Hosted payload and other data
Total commercial services
Government services
Total services
The following table summarizes the Company’s engineering and support services revenue:
Commercial
Government
Total
2020
Year Ended December 31,
2019
(in thousands)
2018
168,668 $
96,981
35,959
60,600
362,208
100,887
463,095 $
173,167 $
96,435
30,455
49,969
350,026
97,132
447,158 $
168,107
85,054
25,069
40,527
318,757
88,000
406,757
2020
Year Ended December 31,
2019
(in thousands)
2018
4,529 $
29,696
34,225 $
2,852 $
27,578
30,430 $
716
17,687
18,403
$
$
$
$
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 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 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 $41.1 million, $43.0 million and $18.0 million for the years ended December 31, 2020, 2019 and 2018, respectively.
The Company has also recorded costs of obtaining contracts expected to be recovered in prepaid expenses and other 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. The contract assets not separately disclosed are as follows:
Contract Assets:
Commissions
Other contract costs
Year Ended December 31,
2019
2020
(in thousands)
$
$
993 $
2,860 $
1,116
3,231
83
12. Income Taxes
U.S. and foreign components of income before income taxes are presented below:
U.S. loss
Foreign income
Total loss before income taxes
The components of the Company’s income tax provision were as follows:
Current taxes:
Federal tax (benefit) expense
State tax (benefit) expense
Foreign tax expense
Total current tax (benefit) expense
Deferred taxes:
Federal tax benefit
State tax expense (benefit)
Foreign tax benefit
Total deferred tax benefit
Total income tax benefit
2020
Year Ended December 31,
2019
(In thousands)
(89,251) $
287
(88,964) $
(218,391) $
272
(218,119) $
2018
(22,147)
1,498
(20,649)
2020
Year Ended December 31,
2019
(In thousands)
2018
(688) $
70
1,387
769
(27,701)
(5,869)
(109)
(33,679)
(32,910) $
(3,796) $
37
1,481
(2,278)
(50,690)
(1,850)
(1,302)
(53,842)
(56,120) $
17
(91)
1,163
1,089
(9,159)
904
(99)
(8,354)
(7,265)
$
$
$
$
On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) was signed into law making significant changes to the Internal Revenue Code.
Changes include, but are not limited to, a corporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017, the
transition of U.S. international taxation from a worldwide tax system to a territorial system, and a one-time transition tax on the mandatory deemed
repatriation of cumulative foreign earnings as of December 31, 2017.
The Securities and Exchange Commission issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of U.S. GAAP in situations
when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the
accounting for certain income tax effects of the Tax Act. SAB 118 was effective for reporting periods that include December 22, 2017. Due to the timing of
the enactment and the complexity involved in applying the provisions of the Tax Act, the Company made reasonable estimates of the material effects of the
Tax Act and recorded provisional amounts in its December 31, 2017 financial statements including the remeasurement of its deferred tax assets/liabilities
for an estimated net tax benefit of $150.9 million. In the fourth quarter of 2018, the Company completed its accounting for the income tax effects of the
Tax Act. No material adjustments were required to the provisional amounts initially recorded.
84
A reconciliation of the U.S. federal statutory income tax expense to the Company’s effective income tax provision is below. Any amounts that do not have
a meaningful impact on this reconciliation are not separately disclosed.
Expected tax benefit at U.S. federal statutory tax rate
State taxes, net of federal benefit
State tax valuation allowance
Deferred impact of state tax law changes and elections
Equity-based compensation
Limitation on executive compensation deduction
Other nondeductible items
Tax credits
Foreign taxes and other adjustments
Total income tax benefit
The components of deferred tax assets and liabilities are as follows:
Deferred tax assets
Long-term contracts
Federal, state and foreign net operating losses, other carryforwards and tax credits
Other
Total deferred tax assets
Valuation allowance
Net deferred tax assets
Deferred tax liabilities
Fixed assets, intangibles and research and development expenditures
Investment in joint venture
Other
Total deferred tax liabilities
Net deferred income tax liabilities
2020
Year Ended December 31,
2019
(In thousands)
2018
$
$
(18,811) $
(6,723)
2,561
(1,684)
(8,451)
960
206
(1,048)
80
(32,910) $
(45,790) $
(15,608)
16,216
(2,414)
(8,227)
792
873
(995)
(967)
(56,120) $
(4,336)
(3,361)
10,651
(6,481)
(3,807)
1,568
298
(2,872)
1,075
(7,265)
December 31,
2020
2019
(In thousands)
$
$
64,738 $
430,273
22,493
517,504
(32,218)
485,286
(577,955)
(52,203)
(6,283)
(636,441)
(151,155) $
69,188
382,392
24,137
475,717
(29,554)
446,163
(565,897)
(60,374)
(7,095)
(633,366)
(187,203)
Pursuant to ASC 740, the Company nets deferred tax assets and liabilities within the same jurisdiction. As of December 31, 2020, the Company had a net
deferred tax asset of $3.9 million that is included in other assets on the balance sheet and a net deferred tax liability of $155.1 million.
The Company recognizes valuation allowances to reduce deferred tax assets to the amount that is more likely than not to be realized. In assessing the
likelihood of realization, management considers: (i) future reversals of existing taxable temporary differences; (ii) future taxable income exclusive of
reversing temporary differences and carryforwards; (iii) taxable income in prior carryback year(s) if carryback is permitted under applicable tax law; and
(iv) tax planning strategies.
The Company had deferred tax assets related to cumulative U.S. federal net operating loss carryforwards of approximately $319.9 million and $280.5
million as of December 31, 2020 and 2019, respectively. The pre-2018 U.S. federal net operating loss carryforwards if unutilized, will expire in various
amounts from 2031 through 2037. Pursuant to the Tax Act, the post-2017 U.S. federal net operating loss carryforwards do not expire. The Company
believes that the U.S. federal net operating losses will be utilized before the expiration dates and, as such, no valuation allowance has been established for
these deferred tax assets. The Company had deferred tax assets related to the state net operating loss carryforwards of approximately $69.7 million
85
and $54.5 million as of December 31, 2020 and 2019, respectively, that expire from 2025 through 2040. The Company does not expect to fully utilize all of
its state net operating losses within the respective carryforward periods and as such reflects a partial valuation allowance of $30.2 million and $27.7 million
as of December 31, 2020 and 2019, respectively, against these deferred tax assets on its consolidated balance sheet. The Company had deferred tax assets
related to the foreign net operating loss carryforwards of approximately $0.7 million and $0.9 million, as of December 31, 2020 and 2019, respectively, that
begin to expire in 2023. The Company does not expect to fully utilize all of its foreign net operating losses within the carryforward periods. As such had
recorded a partial valuation allowance of $0.5 million and $0.8 million as of December 31, 2020 and 2019, respectively, against these deferred tax assets on
its consolidated balance sheets. The timing and manner in which the Company will utilize the net operating loss carryforwards in any year, or in total, may
be limited in the future as a result of changes in the Company’s ownership and any limitations imposed by the jurisdictions in which the Company operates.
The Company had approximately $10.0 million and $9.5 million of deferred tax assets related to research and development tax credits as of December 31,
2020 and 2019, respectively, that expire in various amounts from 2029 through 2040. The Company had approximately $5.7 million and $5.2 million of
deferred tax assets related to foreign tax credits as of December 31, 2020 and 2019, respectively, that expire in various amounts from 2020 through 2030.
The Company does not expect to utilize all of its foreign tax credits within the respective carryforward periods. As such, the Company had a partial
valuation allowance of $1.1 million as of December 31, 2020, which is unchanged from December 31, 2019. The Company had $3.6 million of deferred
tax assets related to Alternative Minimum Tax (“AMT”) credits as of December 31, 2018. Pursuant to the Tax Act, the Company received a refund of
$1.8 million in 2019 and pursuant to the Coronavirus Aid, Relief, and Economic Security Act received the remaining $1.8 million in 2020.
The Company has provided for U.S. income taxes on all undistributed earnings of its significant foreign subsidiaries since the Company does not
indefinitely reinvest these undistributed earnings. The Company measures deferred tax assets and liabilities using tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be recovered or settled. The Company recognizes the effect on deferred tax assets
and liabilities of a change in tax rates in income in the period that includes the enactment date.
Uncertain Income Tax Positions
The Company is subject to income taxes in the U.S. and various state and foreign jurisdictions. Significant judgment is required in evaluating tax positions
and determining the provision for income taxes. The Company establishes liabilities for tax-related uncertainties based on estimates of whether, and the
extent to which, additional taxes may be due. These liabilities are established when the Company believes that certain positions might be challenged
despite its belief that its tax return positions are fully supportable. The Company adjusts these liabilities in light of changing facts and circumstances, such
as the outcome of a tax audit. The provision for income taxes includes the impact of changes to these liabilities.
The amount of unrecognized tax benefits was $0.5 million and $1.0 million as of December 31, 2020 and 2019, respectively. Any changes in the next
twelve months are not anticipated to have a significant impact on the results of operations, financial position or cash flows of the Company. All of the
Company’s uncertain tax positions, if recognized, would affect its income tax expense.
The Company has elected an accounting policy to classify interest and penalties related to unrecognized tax benefits as a component of income tax expense.
As of December 31, 2020 and 2019, potential interest and penalties on unrecognized tax benefits were not significant.
The Company is subject to tax audits in all jurisdictions for which it files tax returns. Tax audits by their very nature are often complex and can require
several years to complete. Currently, there are no U.S. federal, state or foreign jurisdiction tax audits pending. The Company’s corporate U.S. federal and
state tax returns from 2010 to 2019 remain subject to examination by tax authorities and the Company’s foreign tax returns from 2012 to 2019 remain
subject to examination by tax authorities.
86
The following is a tabular reconciliation of the total amounts of unrecognized tax benefits which includes related interest and penalties:
Balance at January 1,
Change attributable to tax positions taken in a prior period
Change attributable to final assessment
Decrease attributable to lapse of statute of limitations
Balance at December 31,
13. Net Loss Per Share
2020
2019
(In thousands)
953 $
(416)
—
—
537 $
1,112
38
(176)
(21)
953
$
$
The Company calculates basic net loss per common share by dividing net 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 potentially
dilutive common shares when the effect is dilutive. Potentially dilutive common shares include (i) 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 computations of basic and diluted net loss per common share are set forth below:
Numerator:
Net loss attributable to common stockholders - basic and diluted
Denominator:
Weighted average common shares - basic and diluted
Net loss attributable to common stockholders per share - basic and diluted
$
$
2020
Year Ended December 31,
2019
(In thousands, except per share data)
2018
(56,054) $
(166,193) $
(23,533)
133,491
125,167
108,975
(0.42) $
(1.33) $
(0.22)
Due to the Company’s net losses for the years ended December 31, 2020, 2019 and 2018 all potential common stock equivalents were anti-dilutive and
therefore excluded from the calculation of diluted net loss per share.
The incremental number of shares underlying stock options and RSUs outstanding with anti-dilutive effects were as follows:
Anti-dilutive contingent performance-based RSUs
Anti-dilutive stock options
Anti-dilutive preferred shares
2020
Year Ended December 31,
2019
(In thousands)
2018
311
95
—
285
198
6,104
328
87
16,693
87
14. 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. 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 agreements with Aireon, Aireon will pay the Company fees of $200.0 million to host the ADS-B receivers, of which $54.5
million had been paid as of December 31, 2020. Aireon also pays power fees of up to approximately $3.7 million per year (the “Hosting Agreement”), as
well as data services fees of approximately $19.8 million per year for the delivery of the air traffic surveillance data (the “Data Services Agreement”). The
Aireon ADS-B receivers were activated on an individual basis as the satellite on which the receiver is hosted began carrying traffic. Pursuant to ASU 2016-
02, the Company considers the agreement with Aireon related to the hosting as an operating lease. The Company recognized $16.1 million, $16.0 million
and $13.9 million of revenue from hosting fees during the years ended December 31, 2020, 2019 and 2018, respectively.
In December 2018, in connection with Aireon's entry into a debt facility, the Company and the other Aireon investors contributed their respective interests
in Aireon into a new holding company, Aireon Holdings LLC, and entered into an Amended and Restated Aireon Holdings LLC Agreement. Aireon
Holdings LLC holds 100% of the membership interests in Aireon LLC, which remains the operating entity. At December 31, 2020 and 2019, the
Company's fully diluted ownership stake in Aireon Holdings LLC of approximately 35.7% remained unchanged, subject to certain redemption provisions
contained in the Amended and Restated Limited Liability Company Agreement. In addition, pursuant to a debt facility for Aireon LLC provided by the
Company and the other Aireon investors, the Company will participate pro-rata, based on its fully diluted ownership stake, in an investor bridge loan. As
such, in December 2020, the Company invested $0.2 million in Aireon LLC. The Company expects future funding by it and the other Aireon investors to
be required in 2021 and 2022. The Company’s maximum commitment under the investor bridge loan is $10.7 million.
Under the Data Services Agreement, Aireon pays the Company monthly data service payments on a per satellite basis. The Company recorded data service
revenue from Aireon of $23.9 million, $12.6 million and $9.1 million for the years ended December 31, 2020, 2019 and 2018, respectively.
Under two services agreements, the Company also provides administrative services and support services, the fees for which are paid monthly. Aireon
receivables due to the Company under all agreements totaled $2.3 million and $1.4 million at December 31, 2020 and 2019, respectively.
15. Segments, Significant Customers, Supplier and Service Providers and Geographic Information
The Company operates in one business segment, providing global satellite communications services and products.
The Company derived approximately 22%, 22% and 20% of its total revenue in the years ended December 31, 2020, 2019 and 2018, respectively, from
prime contracts or subcontracts with agencies of the U.S. government. For the years ended December 31, 2020, 2019 and 2018, no single commercial
customer accounted for more than 10% of the Company’s total revenue.
Approximately 35% and 39% of the Company’s accounts receivable balance at December 31, 2020 and 2019, respectively, was due from prime contracts
or subcontracts with agencies of the U.S. government. As of December 31, 2020 and 2019, no single commercial customer accounted for more than 10% of
the Company’s total accounts receivable balance.
The Company contracts for the manufacture of its subscriber equipment primarily from a limited number of manufacturers and utilizes other sole source
suppliers for certain component parts of its devices. Should events or circumstances prevent the manufacturer or the suppliers from producing the
equipment or component parts, the Company’s business could be adversely affected until the Company is able to move production to other facilities of the
manufacturer or secure a replacement manufacturer or an alternative supplier for such component parts.
88
Net property and equipment by geographic area was as follows:
United States
Satellites in orbit
All others
Total
Revenue by geographic area was as follows:
United States
United Kingdom
Other countries
(1)
Total
December 31,
2020
2019
(In thousands)
$
$
421,930 $
2,487,220
7,926
2,917,076 $
421,253
2,744,356
15,190
3,180,799
2020
Year Ended December 31,
2019
(In thousands)
2018
$
$
323,605 $
47,487
212,347
583,439 $
300,494 $
50,401
209,549
560,444 $
276,398
51,344
195,266
523,008
(1)
No single country in this group represented more than 10% of revenue.
Revenue is attributed to geographic area based on the billing address of the distributor. Service location and the billing address are often not the same. The
Company’s distributors sell services directly or indirectly to end users, who may be located or use the Company’s products and services elsewhere. The
Company cannot provide the geographical distribution of end users because it does not contract directly with them. The Company is exposed to foreign
currency exchange fluctuations as foreign currency exchange rate movements create a degree of risk by affecting the U.S. dollar value of sales made and
costs incurred in foreign currencies.
16. Employee Benefit Plan
The Company sponsors a defined-contribution 401(k) retirement plan (the “Plan”) that covers all employees. Employees are eligible to participate in the
Plan on the first day of the month following the date of hire, and participants are 100% vested from the date of eligibility. The Company matches
employees’ contributions equal to 100% of the salary deferral contributions up to 5% of the employees’ eligible compensation each pay period. Company
matching contributions to the Plan were $3.1 million, $3.1 million and $3.0 million for the years ended December 31, 2020, 2019 and 2018, respectively.
17. Selected Quarterly Information (Unaudited)
The following represents the Company’s unaudited quarterly results of operations:
Revenue
Operating income
Net loss
Net loss per common share - basic and diluted
$
$
$
$
Quarter Ended
March 31, 2020
June 30, 2020
September 30, 2020
December 31, 2020
(In thousands, except per share data)
145,287 $
11,822 $
(31,702) $
(0.24) $
140,173 $
5,828 $
(12,422) $
(0.09) $
151,472 $
12,733 $
(4,005) $
(0.03) $
146,507
5,100
(7,925)
(0.06)
89
March 31, 2019
June 30, 2019
September 30, 2019
December 31, 2019
(In thousands, except per share data)
Quarter Ended
Revenue
Operating income (loss)
Net loss
Net loss per common share - basic and diluted
$
$
$
$
133,685 $
(1,633) $
(18,024) $
(0.18) $
143,100 $
3,741 $
(18,106) $
(0.16) $
144,785 $
8,011 $
(18,012) $
(0.14) $
138,874
1
(107,857)
(0.82)
The sum of the per share amounts does not equal the annual amounts due to changes in the weighted-average number of common shares outstanding during
the year.
18. Subsequent Events
On January 20, 2021, the Company closed on a repricing of its $1,637.6 million in gross borrowings under its Term Loan, with Deutsche Bank AG, which
resulted in a 1.0% reduction in the borrowing rate. The Term Loan now bears interest at an annual rate of LIBOR plus 2.75% with a 1.00% LIBOR floor,
having the same maturity date, and other terms of the Credit Agreement. The interest rate on the Revolving Facility remained at LIBOR plus 3.75% with
no LIBOR floor. To reprice the Term Loan, the Company incurred financing costs of $3.4 million. The Company is currently evaluating the accounting
treatment of this transaction.
90
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. 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.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting
is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, our principal
executive and principal financial officers and effected by our board of directors, management and other personnel, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted
accounting principles. Such internal control includes those policies and procedures that:
•
•
•
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets
of our company;
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with
authorizations of management and directors of our company; and
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our company’s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2020. In making this assessment, our
management used the criteria set forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (2013 Framework). Based on its assessment, our management has determined that, as of December 31, 2020, our internal control over
financial reporting was effective based on those criteria.
91
Our independent registered public accounting firm, Ernst & Young LLP, has audited our 2020 financial statements. Ernst & Young LLP was given
unrestricted access to all financial records and related data, including minutes of all meetings of stockholders, the Board of Directors and committees of the
Board. Ernst & Young LLP has issued an unqualified report on our 2020 financial statements as a result of the audit and also has issued an unqualified
report on our internal controls over financial reporting which is attached hereto.
Changes in Internal Control Over Financial Reporting
During the quarter ended December 31, 2020, 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.
92
Report of Ernst & Young LLP, Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Iridium Communications Inc.
Opinion on Internal Control over Financial Reporting
We have audited Iridium Communications Inc.’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal
Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).
In our opinion, Iridium Communications Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of
December 31, 2020, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated
balance sheets of Iridium Communications Inc. as of December 31, 2020 and 2019, the related consolidated statements of operations and comprehensive
loss, changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2020, and the related notes and our
report dated February 11, 2021 expressed an unqualified report thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our
responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm
registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definitions and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control
over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial
statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Tysons, Virginia
February 11, 2021
93
Item 9B. Other Information
None.
94
PART III
We will file a definitive Proxy Statement for our 2021 Annual Meeting of Stockholders (the “2021 Proxy Statement”) with the SEC, pursuant to
Regulation 14A, not later than 120 days after the end of our fiscal year. Accordingly, certain information required by Part III has been omitted as permitted
by General Instruction G (3) to Form 10-K. Only those sections of the 2021 Proxy Statement that specifically address the items set forth herein are
incorporated by reference.
Item 10. Directors, Executive Officers and Corporate Governance
The information required by this Item is incorporated by reference to the sections of our 2021 Proxy Statement entitled “Board of Directors and
Committees,” “Election of Directors” and “Management.”
Item 11. Executive Compensation
The information required by this Item is incorporated by reference to the sections of our 2021 Proxy Statement entitled “Compensation Discussion and
Analysis,” “Executive Compensation” and “Director Compensation.”
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this Item is incorporated by reference to the sections of our 2021 Proxy Statement entitled “Security Ownership of Certain
Beneficial Owners and Management” and “Securities Authorized for Issuance under Equity Compensation Plans.”
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this Item is incorporated by reference to the sections of our 2021 Proxy Statement entitled “Transactions with Related Parties”
and “Director Independence.”
Item 14. Principal Accountant Fees and Services
The information required by this Item is incorporated by reference to the section of our 2021 Proxy Statement entitled “Independent Registered Public
Accounting Firm Fees.”
95
Item 15. Exhibits, Financial Statement Schedules
(a) The following documents are filed as part of this Form 10-K:
PART IV
(1) Financial Statements
Iridium Communications Inc.:
Report of Ernst & Young LLP, Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Operations and Comprehensive Loss
Consolidated Statements of Changes in Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules
60
62
63
64
65
66
The financial statement schedules are not included here because required information is included in the consolidated financial statements.
(3) Exhibits
The following list of exhibits includes exhibits submitted with this Form 10-K as filed with the Securities and Exchange Commission.
Exhibit No.
3.1
3.2
3.3
4.1
4.2
10.1#
10.2
10.3
10.4
Document
Amended and Restated Certificate of Incorporation dated September 29, 2009, incorporated by reference to Exhibit 3.1 of the
Registrant’s Current Report on Form 8-K filed with the SEC on September 29, 2009.
Certificate of Amendment to Amended and Restated Certificate of Incorporation dated May 12, 2015, incorporated by reference to
Exhibit 3.1 of the Registrant’s Current Report on Form 8-K filed with the SEC on May 15, 2015.
Amended and Restated Bylaws, incorporated by reference to Exhibit 3.2 of the Registrant’s Current Report on Form 8-K filed with the
SEC on May 15, 2015.
Specimen Common Stock Certificate, incorporated by reference to Exhibit 4.2 of the Registrant’s Registration Statement on Form S-1
(Registration No. 333-147722) filed with the SEC on February 4, 2008.
Description of the Registrant's securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended,
incorporated by reference to Exhibit 4.2 to the Registrant's Annual Report on Form 10-K filed with the SEC on February 25, 2020.
Credit Agreement dated November 4, 2019 among Iridium Holdings LLC, Iridium Communications Inc., Iridium Satellite LLC,
Various Lenders, and Deutsche Bank AG New York Branch, as Administrative Agent and Collateral Agent, incorporated by reference
to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on November 4, 2019.
Amendment No. 1 to Credit Agreement dated November 4, 2019 among Iridium Holdings LLC, Iridium Communications Inc.,
Iridium Satellite LLC, Various Lenders, and Deutsche Bank AG New York Branch, as Administrative Agent and Collateral Agent,
dated as of February 7, 2020, incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed with the
SEC on February 10, 2020.
Security Agreement dated November 4, 2019 among Iridium Carrier Holdings LLC, Iridium Carrier Services LLC, Iridium
Constellation LLC, Iridium Government Services LLC, Iridium Holdings LLC, Iridium Satellite LLC, and Deutsche Bank AG New
York Branch, as Collateral Agent, incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with
the SEC on November 4, 2019.
Guaranty Agreement dated November 4, 2019 among Iridium Holdings LLC, Iridium Satellite LLC, Iridium Carrier Holdings LLC,
Iridium Carrier Services LLC, Iridium Constellation LLC, Iridium Government Services LLC, and Deutsche Bank AG New York
Branch, as Administrative Agent, incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed with
the SEC on November 4, 2019.
96
Exhibit No.
10.5
10.6
10.7†
10.8
10.9
10.10
10.11
10.12††
10.13
10.14
10.15*
10.16*
10.17*
10.18*
10.19*
10.20*
10.21*
10.22
10.23*
10.24*
Document
Amended and Restated Transition Services, Products and Asset Agreement, between Iridium Satellite LLC, Iridium Holdings LLC and
Motorola, Inc., dated as of September 30, 2010, incorporated by reference to Exhibit 10.9 to the Registrant’s Annual Report on Form
10-K filed with the SEC on March 7, 2011.
Amendment No. 1 to Amended and Restated Transition Services, Products and Asset Agreement, between Iridium Satellite LLC,
Iridium Holdings LLC and Motorola, Inc., dated as of December 30, 2010, incorporated by reference to Exhibit 10.10 to the
Registrant’s Annual Report on Form 10-K filed with the SEC on March 7, 2011.
System Intellectual Property Rights Amendment and Agreement, between Iridium Satellite LLC and Motorola, Inc., dated as of
September 30, 2010, incorporated by reference to Exhibit 10.11 to the Registrant’s Annual Report on Form 10-K filed with the SEC on
March 7, 2011.
Supplemental Subscriber Equipment Technology Amendment and Agreement, between Iridium Satellite LLC and Motorola, Inc.,
dated as of September 30, 2010, incorporated by reference to Exhibit 10.12 to the Registrant’s Annual Report on Form 10-K filed with
the SEC on March 7, 2011.
Intellectual Property Rights Agreement, dated December 11, 2000, among Motorola Inc. and Iridium Satellite LLC, incorporated by
reference to Exhibit 10.3 of the Registrant’s Current Report on Form 8-K filed with the SEC on September 29, 2009.
Subscriber Equipment Technology Agreement (Design), dated as of September 30, 2002, by and among Motorola Inc. and SE
Licensing LLC, incorporated by reference to Exhibit 10.4 of the Registrant’s Current Report on Form 8-K filed with the SEC on
September 29, 2009.
Subscriber Equipment Technology Agreement (Manufacturing), dated as of September 30, 2002, by and among Motorola Inc. and SE
Licensing LLC, incorporated by reference to Exhibit 10.5 of the Registrant’s Current Report on Form 8-K filed with the SEC on
September 29, 2009.
Contract for Enhanced Satellite Services between Iridium Government Services LLC and Air Force Space Command, effective
September 15, 2019, incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC
on October 29, 2019.
Form of Registration Rights Agreement, incorporated by reference to Annex D of the Registrant’s Proxy Statement filed with the SEC
on August 28, 2009.
Amendment No. 1 to Registration Rights Agreement, dated as of March 29, 2011, by and among Iridium Communications Inc. and the
parties listed on the signature pages thereto, incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K,
filed with the SEC on March 30, 2011.
Amended and Restated Employment Agreement, dated as of March 30, 2011, by and between the Registrant and Matthew J. Desch,
incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed with the SEC on April 5, 2011.
Employment Agreement, dated as of March 31, 2010, by and between the Registrant and Thomas J. Fitzpatrick, incorporated by
reference to Exhibit 10.1 of the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on May 10, 2010.
Amendment to Employment Agreement by and between the Registrant and Thomas J. Fitzpatrick, dated as of December 31, 2010,
incorporated by reference to Exhibit 10.34 to the Registrant’s Annual Report on Form 10-K filed with the SEC on March 7, 2011.
Executive Employment Agreement between the Registrant and Suzanne E. McBride, dated as of February 11, 2019, incorporated by
reference to Exhibit 10.5 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on April 23, 2019.
Employment Agreement between the Registrant and Bryan J. Hartin, dated as of December 10, 2012, incorporated by reference to
Exhibit 10.69 to the Registrant’s Annual Report on Form 10-K filed with the SEC on March 4, 2014.
Employment Agreement between the Registrant and Scott T. Scheimreif, dated as of December 11, 2012, incorporated by reference to
Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on April 28, 2020.
2009 Iridium Communications Inc. Stock Incentive Plan, incorporated by reference to Annex E of the Registrant’s Proxy Statement
filed with the SEC on August 28, 2009.
Form of Indemnity Agreement between the Registrant and each of its directors and officers, incorporated by reference to Exhibit 10.5
to the Registrant’s Form S-1/A filed with the SEC on February 4, 2008.
Form of Stock Option Award Agreement for use in connection with the 2009 Iridium Communications Inc. Stock Incentive Plan,
incorporated by reference to Exhibit 10.42 to the Registrant’s Annual Report on Form 10-K filed with the SEC on March 7, 2011.
Form of Restricted Stock Unit Agreement for use in connection with the 2009 Iridium Communications Inc. Stock Incentive Plan,
incorporated by reference to Exhibit 10.48 to the Registrant’s Annual Report on Form 10-K filed with the SEC on March 6, 2012.
97
Exhibit No.
10.25*
10.26*
10.27*
10.28*
10.29*
10.30*
10.31*
10.32*
10.33*
10.34*
10.35*
10.36*
10.37*
10.38*
10.39*
10.40*
10.41*
10.42*
10.43*
10.44*
21.1
23.1
Document
Amended and Restated Performance Share Program established under the Iridium Communications Inc. Amended and Restated 2015
Equity Incentive Plan, incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC
on April 23, 2019.
Form of Performance Share Award Grant Notice and Performance Share Award Agreement for use in connection with the
Performance Share Program established under the Iridium Communications Inc. 2015 Equity Incentive Plan, incorporated by reference
to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on March 3, 2016.
Form of Stock Option Agreement for Non-Employee Directors for use in connection with the 2009 Iridium Communications Inc.
Stock Incentive Plan, incorporated by reference to Exhibit 10.46 to the Registrant’s Annual Report on Form 10-K filed with the SEC
on March 7, 2011.
Form of Restricted Stock Award Agreement for Non-Employee Directors for use in connection with the 2009 Iridium
Communications Inc. Stock Incentive Plan, incorporated by reference to Exhibit 10.47 to the Registrant’s Annual Report on Form 10-
K filed with the SEC on March 7, 2011.
Form of Restricted Stock Unit Agreement for Non-Employee Directors for use in connection with the 2009 Iridium Communications
Inc. Stock Incentive Plan, incorporated by reference to Exhibit 10.48 to the Registrant’s Annual Report on Form 10-K filed with the
SEC on March 7, 2011.
Iridium Communications Inc. 2012 Equity Incentive Plan, incorporated by reference to Appendix A to the Registrant’s Proxy
Statement filed with the SEC on April 10, 2012.
Forms of Stock Option Grant Notice and Stock Option Agreement for use in connection with the Iridium Communications Inc. 2012
Equity Incentive Plan, incorporated by reference to Exhibit 99.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on
May 23, 2012.
Forms of Restricted Stock Unit Grant Notice and Restricted Stock Unit Agreement for use in connection with the Iridium
Communications Inc. 2012 Equity Incentive Plan, incorporated by reference to Exhibit 99.3 to the Registrant’s Current Report on
Form 8-K filed with the SEC on May 23, 2012.
Non-Employee Director Compensation Plan dated December 16, 2020.
Iridium Communications Inc. 2020 Performance Bonus Plan, incorporated herein by reference to Exhibit 10.3 of the Registrant’s
Quarterly Report on Form 10-Q filed with the SEC on April 28, 2020.
Iridium Communications Inc. Amended and Restated 2015 Equity Incentive Plan, incorporated herein by reference to Exhibit 10.1 to
the Registrant's registration statement on Form S-8 filed on May 23, 2019.
Forms of Option Grant Notice and Option Agreement for use in connection with the Iridium Communications Inc. Amended and
Restated 2015 Equity Incentive Plan, incorporated by reference to Exhibit 10.2 of the Registrant’s Current Report on Form 8-K filed
with the SEC on May 15, 2015.
Forms of Restricted Stock Unit Award Grant Notice and Restricted Stock Unit Award Agreement for use in connection with the
Iridium Communications Inc. Amended and Restated 2015 Equity Incentive Plan.
Forms of Non-Employee Director Option Grant Notice and Non-Employee Director Option Agreement for use in connection with the
Iridium Communications Inc. Amended and Restated 2015 Equity Incentive Plan, incorporated by reference to Exhibit 10.4 of the
Registrant’s Current Report on Form 8-K filed with the SEC on May 15, 2015.
Forms of Non-Employee Director Restricted Stock Unit Award Grant Notice and Non-Employee Director Restricted Stock Unit
Award Agreement for use in connection with the Iridium Communications Inc. 2015 Equity Incentive Plan, incorporated by reference
to Exhibit 10.5 of the Registrant’s Current Report on Form 8-K filed with the SEC on May 15, 2015.
UK Sub-Plan of the Iridium Communications Inc. 2015 Equity Incentive Plan.
Forms of UK Option Grant Notice and UK Option Agreement for use in connection with the Iridium Communications Inc. Amended
and Restated 2015 Equity Incentive Plan, incorporated by reference to Exhibit 10.7 of the Registrant’s Current Report on Form 8-K
filed with the SEC on May 15, 2015.
Forms of UK Restricted Stock Unit Award Grant Notice and UK Restricted Stock Unit Award Agreement for use in connection with
the Iridium Communications Inc. Amended and Restated 2015 Equity Incentive Plan.
Forms of UK Non-Employee Director Option Grant Notice and UK Non-Employee Director Option Agreement for use in connection
with the Iridium Communications Inc. Amended and Restated 2015 Equity Incentive Plan, incorporated by reference to Exhibit 10.9
of the Registrant’s Current Report on Form 8-K filed with the SEC on May 15, 2015.
Forms of UK Non-Employee Director Restricted Stock Unit Award Grant Notice and UK Non-Employee Director Restricted Stock
Unit Award Agreement for use in connection with the Iridium Communications Inc. Amended and Restated 2015 Equity Incentive
Plan, incorporated by reference to Exhibit 10.10 of the Registrant’s Current Report on Form 8-K filed with the SEC on May 15, 2015.
List of Subsidiaries.
Consent of Ernst & Young LLP, independent registered public accounting firm.
98
Exhibit No.
31.1
31.2
32.1**
101.INS
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE
104
Document
Certification of Chief Executive Officer pursuant to Section 302 of The Sarbanes-Oxley Act of 2002.
Certification of Chief Financial Officer pursuant to Section 302 of The Sarbanes-Oxley Act of 2002.
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of The Sarbanes-Oxley Act of 2002.
XBRL Instance Document
XBRL Taxonomy Extension Schema
XBRL Taxonomy Extension Calculation Linkbase
XBRL Taxonomy Extension Definition Linkbase
XBRL Taxonomy Extension Label Linkbase
XBRL Taxonomy Extension Presentation Linkbase
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
# Exhibits and schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K and will be furnished on a supplemental basis to the Securities
and Exchange Commission upon request.
† Confidential treatment has been granted for certain portions omitted from this exhibit pursuant to Rule 24b-2 under the Securities Exchange Act of
1934, as amended. Confidential portions of this exhibit have been separately filed with the Securities and Exchange Commission.
† † Certain confidential portions of this exhibit, marked by asterisks, were omitted because the identified confidential portions (i) are not material and (ii)
would be competitively harmful if publicly disclosed.
* Denotes management contract or compensatory plan or arrangement.
** These certifications are being furnished solely to accompany this Annual 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.
99
Item 16. Form 10-K Summary
Not applicable.
100
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: February 11, 2021
By:
/s/ Thomas J. Fitzpatrick
Thomas J. Fitzpatrick
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant
and in the capacities and on the dates indicated:
Name
Title
Date
/s/ Matthew J. Desch
Matthew J. Desch
Chief Executive Officer and Director
(Principal Executive Officer)
February 11, 2021
/s/ Thomas J. Fitzpatrick
Thomas J. Fitzpatrick
/s/ Timothy P. Kapalka
Timothy P. Kapalka
/s/ Robert H. Niehaus
Robert H. Niehaus
/s/ Thomas C. Canfield
Thomas C. Canfield
/s/ Jane L. Harman
Jane L. Harman
/s/ Alvin B. Krongard
Alvin B. Krongard
/s/ Suzanne E. McBride
Suzanne E. McBride
/s/ Eric T. Olson
Eric T. Olson
/s/ Steven B. Pfeiffer
Steven B. Pfeiffer
/s/ Parker W. Rush
Parker W. Rush
/s/ Henrik O. Schliemann
Henrik O. Schliemann
/s/ Barry J. West
Barry J. West
Chief Financial Officer, Chief Administrative Officer and Director
February 11, 2021
(Principal Financial Officer)
Vice President and Corporate Controller, Iridium Satellite LLC
February 11, 2021
(Principal Accounting Officer)
Director and Chairman of the Board
February 11, 2021
Director
Director
Director
Chief Operations Officer and Director
Director
Director
Director
Director
Director
101
February 11, 2021
February 11, 2021
February 11, 2021
February 11, 2021
February 11, 2021
February 11, 2021
February 11, 2021
February 11, 2021
February 11, 2021
December 16, 2020
TO: The Board of Directors of Iridium Communications Inc. (the “Board”)
RE: Compensation Program for Non-Employee Directors
Adoption of 2021 Compensation Program for Non-Employee Directors
The Board is being requested to adopt the 2021 compensation program for its non-employee members, which program
will be effective as of January 1, 2021. The terms of the program are set forth in the Compensation Program for Non-
Employee Directors (the “Program”) and are briefly summarized below.
Annual Board Retainer (Amount and Default Payment Mechanic): The Program provides that each non-employee director
will receive an Annual Board Retainer in the amount of $175,000, which amount is payable: (i) $50,000 in cash (unless the
director makes a timely election to receive all or a portion of this cash component of the Annual Board Retainer in the form of
Restricted Stock Units (“RSUs”), or in any mix of cash and RSUs, subject to the limitations described below); and (ii) $125,000
in RSUs. Cash will be paid quarterly in arrears on or as soon as practicable after the last day of each calendar quarter in which
service occurred.
Annual Chairman of the Board and Committee Chair Retainers (Amounts and Default Payment Mechanic): The
Chairman of the Board will receive an additional annual retainer of $50,000 and the Chairs of the Audit, Compensation, and
Nominating and Corporate Governance Committees will receive an additional annual retainer of $40,000, $15,000 and $10,000,
respectively, all of which amounts are payable in cash quarterly in arrears on or as soon as practicable after the last day of each
calendar quarter in which service occurred (unless the director makes a timely election to receive all or a portion of such retainer
in the form of RSUs, or in any mix of cash and RSUs, subject to the limitations described below).
Annual Committee Member Retainers (Amounts and Default Payment Mechanic): The members of the Audit,
Compensation, and Nominating and Corporate Governance Committees who are not serving as the chairperson of the committee
will receive an additional annual retainer of $20,000, $7,500 and $5,000, respectively, all of which amounts are payable in cash
quarterly in arrears on or as soon as practicable after the last day of each calendar quarter in which service occurred (unless the
director makes a timely election to receive all or a portion of such retainer in the form of RSUs, or in any mix of cash and RSUs,
subject to the limitations described below).
Annual Government Advisory Committee Retainer (Amounts and Payment Mechanic): Non-employee directors serving
on the Government Advisory Committee during 2021 will receive an additional annual retainer of $15,000 in the form of RSUs,
subject to vesting and the limitations described below regarding RSU grants. Non-employee directors serving on the Government
Advisory Committee may not make an election to receive the Annual Government Advisory Committee Retainer in any other
form.
Compensation Elections: Elections must be made annually. Please complete the 2021 Election Form. This Election
Form must be submitted by December 31, 2020 to be valid for 2021. Once the Election Form is submitted for a year, the
elections made are irrevocable for that year.
Annual Board Retainer Elections: Non-employee directors may elect to receive all or a portion of $50,000 of the Annual
Board Retainer in cash or RSUs (elections to receive cash or RSUs must be made in 5% increments). The remaining $125,000 of
the Annual Board Retainer is paid in the form of RSUs and no election may be made with respect to such amount.
Annual Chairman of the Board, Committee Chair and Committee Member Retainers Elections: Non-employee directors
may elect to receive all or a portion of the Annual Chairman of the Board Retainer, Annual Committee Chair Retainers and/or
Annual Committee Member Retainers, if any, in cash or RSUs (elections to receive cash or RSUs must be made in 25%
increments).
RSUs: All RSUs are governed by our Amended and Restated 2015 Equity Incentive Plan (the “Plan”) and the applicable
Non-Employee Director Restricted Stock Unit Agreement and will be granted on the third business day in January.
Deferral Election: Non-employee directors may elect to either (a) defer delivery of the shares to be issued upon settlement
of vested RSUs to a later date, as has been Iridium’s past practice, or (b) receive such shares at the time the RSUs vest. This
“deferral election” must be made with respect to all or none of the RSUs granted pursuant to the Program (i.e., the election may
not be made with respect to only a portion of the RSUs granted pursuant to the Program). Consistent with our past practice, any
vested RSUs that are subject to a deferral election will be settled in Iridium stock on the earlier of (i) the date that is six months
and one day after “separation from service” (as defined in Treasury Regulations Section 1.409A-1(h), without regard to alternate
definitions thereunder) as a director (a “Separation from Service”) and (ii) a Change in Control, as defined in the Plan, that also
constitutes a “change in control event” (as determined under Treasury Regulations Section 1.409A-3(i)(5)) (a “Change in
Control”). RSUs are taxable at ordinary income rates when shares are issued, based on the fair market value (“FMV”) of the
shares at the time of issuance.
Vesting: All RSUs granted as Annual Board Retainers, Annual Chairman of the Board Retainer, Annual Committee Chair
Retainers, Annual Committee Member Retainers and Annual Government Advisory Committee Retainers will vest on the first
anniversary of the date of grant, subject to the non-employee director’s continuous service as a director through such date. All
RSUs granted to non-employee directors are subject to full acceleration of vesting upon a termination for death or disability. Any
unvested RSUs are forfeited upon a termination as a director for any reason other than death or disability.
IRIDIUM COMMUNICATIONS INC.
COMPENSATION PROGRAM FOR NON-EMPLOYEE DIRECTORS
EFFECTIVE DATE: January 1, 2021
GENERAL: Each member of the board of directors (the “Board”) of Iridium Communications Inc. (the “Company”) who is not
an Employee (as defined in the Iridium Communications Inc. Amended and Restated 2015 Equity Incentive Plan (the “Equity
Incentive Plan”)) (each, a “Non-Employee Director”) will be eligible to receive cash and equity-based compensation as set forth
in this Iridium Communications Inc. Compensation Program for Non-Employee Directors (this “Program”). Capitalized terms
not explicitly defined in this Program but defined in the Equity Incentive Plan will have the same definitions as in the Equity
Incentive Plan.
ANNUAL COMPENSATION:
• Annual Board Retainer: $175,000 will be payable for each calendar year to each Non-Employee Director as follows:
•
$50,000 in the form of cash (the “Annual Cash Retainer”), unless the Non-Employee Director makes a timely election to
receive all or a portion of the Annual Cash Retainer in the form of restricted stock units (“RSUs”) (subject to the
limitations described below); and
•
$125,000 in the form of RSUs (the “Annual Stock Retainer”).
• Annual Committee Chair Retainers: The following amounts will be payable for each calendar year to each chairperson of the
following committees of the Board (each, a “Committee”) in the form of cash, unless the Non-Employee Director makes a
timely election to receive all or a portion of the Annual Committee Chair Retainer in the form of RSUs (subject to the
limitations described below):
• Audit – $40,000;
• Compensation – $15,000; and
• Nominating and Corporate Governance – $10,000.
• Annual Committee Member Retainers: The following amounts will be payable for each calendar year to each member of the
following Committees who is not serving as the chairperson of the Committee in the form of cash, unless the Non-Employee
Director makes a timely election to receive all or a portion of the Annual Committee Member Retainer in the form of RSUs
(subject to the limitations described below):
• Audit – $20,000;
• Compensation – $7,500; and
• Nominating and Corporate Governance – $5,000.
• Annual Chairman of the Board Retainer: $50,000 will be payable for each calendar year to the chairman of the Board in the
form of cash, unless the Non-Employee Director makes a timely election to receive all or a portion of the Annual Chairman
of the Board Retainer in the form of RSUs (subject to the limitations described below).
• Annual Government Advisory Committee Retainer: $15,000 will be payable for each calendar year in the form of RSUs to
each Non-Employee Director serving on the Company’s Government Advisory Committee during a calendar year (subject to
the limitations described below). Non-Employee Directors serving on the Government Advisory Committee may not make an
election to receive the Annual Government Advisory Committee Retainer in any other form.
•
Partial Year of Service: Notwithstanding the foregoing or anything in this Program to the contrary, if a Non-Employee
Director’s service as a Non-Employee Director (for purposes of any Annual Cash Retainer or Annual Stock Retainer) or as a
chairperson of a Committee (for purposes of any Annual Committee Chair Retainer) or as a member of a Committee (for
purposes of any Annual Committee Member Retainer) or as a chairman of the Board (for purposes of any Annual Chairman
of the Board Retainer) or as a member of the Government Advisory Committee (for purposes of the Annual Government
Advisory Committee Retainer) commences or terminates after the beginning of a calendar year, then the Non-Employee
Director will only be eligible to receive 25% of the full amount of the applicable retainer (each as set forth above), in the
applicable form, for each partial or full calendar quarter of such service completed during such calendar year.
Notwithstanding the foregoing, upon termination of service as a Director any portion of any retainer paid in the form of RSUs
will be forfeited to the extent not vested on the date of or as a result of such termination in accordance with the terms of this
Program.
TIMING OF ELECTIONS; timing and form of PAYMENTS (OTHER THAN ANNUAL GOVERNMENT ADVISORY
COMMITTEE RETAINER):
• Current Non-Employee Directors:
Annual Cash Retainer, Annual Committee Chair Retainer, Annual Committee Member Retainer and Annual Chairman of the
Board Retainer: If a Non-Employee Director’s service as a Non-Employee Director commences prior to the beginning of a
calendar year, then the Non-Employee Director must make an election, prior to the beginning of such calendar year, with
respect to (i) his or her Annual Cash Retainer for such calendar year and (ii) any Annual Committee Chair Retainer, Annual
Committee Member Retainer or Annual Chairman of the Board Retainer that is or may become payable for such calendar
year. Each Annual Cash Retainer, Annual Committee Chair Retainer, Annual Committee Member Retainer and Annual
Chairman of the Board Retainer will be paid or granted as follows:
• Cash: The portion (if any) of each Annual Cash Retainer, Annual Committee Chair Retainer, Annual Committee Member
Retainer and Annual Chairman of the Board
Retainer that is to be paid in the form of cash will be determined based on such election. Such portion will be paid in the
form of cash in arrears in equal installments over the applicable number of calendar quarters during such calendar year,
with payment occurring on or as soon as practicable after the last day of the applicable calendar quarter and in all cases
not later than March 15 of the calendar year following the calendar year in which it was earned.
•
Stock: The portion (if any) of each Annual Cash Retainer, Annual Committee Chair Retainer, Annual Committee Member
Retainer and Annual Chairman of the Board Retainer that is to be granted in the form of RSUs will be determined based
on such election. Such portion will be granted in the form of RSUs on the third business day in January of such calendar
year. Any such award will vest in full on the first anniversary of the date of grant of the award, provided that the Non-
Employee Director is in service as a Director on such vesting date.
Notwithstanding the foregoing, if the Non-Employee Director becomes a chairperson of a Committee, a member of a
Committee or chairman of the Board after the third business day in January of such calendar year, then the portion (if any)
of his or her Annual Committee Chair Retainer, Annual Committee Member Retainer or Annual Chairman of the Board
Retainer, as applicable, that is to be granted in the form of RSUs will be granted on the third business day after the date
that the Non-Employee Director becomes a chairperson of a Committee, a member of a Committee or chairman of the
Board, as applicable. Any such award will vest in full on the first anniversary of the date of grant of the award, provided
that the Non-Employee Director is in service as a Director on such vesting date.
Annual Stock Retainer: A Non-Employee Director may not make an election regarding the form of payment of his or her
Annual Stock Retainer; the Annual Stock Retainer is paid in the form of RSUs. If a Non-Employee Director’s service as a
Non-Employee Director commences prior to the beginning of a calendar year, then the RSUs will be granted on the third
business day in January of the calendar year. The RSUs will vest in full on the first anniversary of the date of grant, provided
that the Non-Employee Director is in service as a Director on such vesting date.
• New Non-Employee Directors:
Annual Cash Retainer, Annual Committee Chair Retainer, Annual Committee Member Retainer and Annual Chairman of the
Board Retainer: If a Non-Employee Director’s service as a Non-Employee Director commences on or after the beginning of a
calendar year, then the Non-Employee Director must make an election, within 30 days following the commencement of such
service, with respect to (i) his or her Annual Cash Retainer for such calendar year and (ii) any Annual Committee Chair
Retainer, Annual Committee Member Retainer or Annual Chairman of the Board Retainer that is or may become payable for
such calendar year; provided, however, that (a) such election will be applicable only to the portion of the applicable Annual
Cash Retainer, Annual Committee Chair Retainer, Annual Committee Member Retainer or Annual Chairman of the Board
Retainer payable for any calendar quarter during such calendar year that begins after the date of such election, and (b)
no such election may be made if such service commences during the final calendar quarter of such calendar year. Each such
Annual Cash Retainer, Annual Committee Chair Retainer, Annual Committee Member Retainer and Annual Chairman of the
Board Retainer will be paid or granted as follows:
• Cash: 25% of the full amount of an Annual Cash Retainer (and Annual Committee Chair Retainer, Annual Committee
Member Retainer and Annual Chairman of the Board Retainer, if applicable), as set forth under “Annual Compensation”
above, will be paid in the form of cash for (i) the calendar quarter in which the Non-Employee Director’s service as a
Non-Employee Director, chairperson of a Committee, member of a Committee or chairman of the Board, as applicable,
commences and, (ii) if later, for the calendar quarter in which such election is made, with payment occurring on or as soon
as practicable after the last day of the applicable calendar quarter and in all cases not later than March 15 of the calendar
year following the calendar year in which it was earned.
With respect to any calendar quarter during such calendar year that begins after the date of such election, the portion (if
any) of the Annual Cash Retainer, Annual Committee Chair Retainer, Annual Committee Member Retainer or Annual
Chairman of the Board Retainer that is to be paid in the form of cash will be determined based on such election. Such
portion will be paid in the form of cash in arrears in equal installments over the applicable number of calendar quarters
during such calendar year, with payment occurring on or as soon as practicable after the last day of the applicable
calendar quarter and in all cases not later than March 15 of the calendar year following the calendar year in which it was
earned.
•
Stock: With respect to any calendar quarter during such calendar year that begins after the date of such election, the
portion (if any) of an Annual Cash Retainer, Annual Committee Chair Retainer, Annual Committee Member Retainer or
Annual Chairman of the Board Retainer that is to be granted in the form of RSUs will be determined based on such
election. Such portion will be granted in the form of RSUs on the first business day of the first calendar quarter that
begins after the date of such election. Any such award will vest in full on the first anniversary of the date of grant of the
award, provided that the Non-Employee Director is in service as a Director on such vesting date.
Notwithstanding the foregoing, if the Non-Employee Director becomes a chairperson of a Committee, a member of a
Committee or chairman of the Board after the first business day of the first calendar quarter that begins after the date of
such election, then the portion (if any) of his or her Annual Committee Chair Retainer, Annual Committee Member
Retainer or Annual Chairman of the Board Retainer, as applicable, that is to be granted in the form of RSUs, will be
granted on the third business day after the date that the Non-Employee Director becomes a chairperson of a Committee, a
member of a Committee or chairman of the Board, as applicable. Any such award will vest in full on the first anniversary
of the date of grant of the award, provided that the Non-Employee Director is in service as a Director on such vesting
date.
Annual Stock Retainer: A Non-Employee Director may not make an election regarding the form of payment of his or her
Annual Stock Retainer; the Annual Stock Retainer is paid in
the form of RSUs. If a Non-Employee Director’s service as a Non-Employee Director commences on or after the beginning
of a calendar year, a pro-rated portion of the Annual Stock Retainer for a partial year of service, as set forth under “Annual
Compensation” above, will be granted in the form of RSUs on the first business day of the first calendar quarter that begins
after the date such Non-Employee Director commences service; provided, however, that if such service commences during
the final calendar quarter of such calendar year, such award will be granted on the last day of such calendar year. The Annual
Stock Retainer will be pro-rated based on the number of calendar quarters during the year during which the Non-Employee
Director will serve on the Board. Any such award will vest in full on the first anniversary of the date of grant of the award,
provided that the Non-Employee Director is in service as a Director on such vesting date.
TERMS OF ELECTIONS:
• Once an election is submitted for a calendar year, it will be irrevocable with respect to such calendar year.
• A Non-Employee Director must submit a new election for each calendar year.
• Elections must be allocated in multiples as follows:
• Allocation of the Annual Cash Retainer must be made among cash and RSUs in multiples of 5%.
• Allocation of the Annual Committee Chair Retainer, Annual Committee Member Retainer and/or Annual Chairman of the
Board Retainer must be made among cash and RSUs in multiples of 25%.
• The election to defer delivery of shares to be issued upon settlement of vested RSUs must be with respect to either 0% or
100% of such shares.
TIMING OF ANNUAL GOVERNMENT ADVISORY COMMITTEE RETAINER
• Current Non-Employee Directors Serving on Government Advisory Committee: If a Non-Employee Director’s service on the
Government Advisory Committee commences prior to the beginning of a calendar year, then the Non-Employee Director’s
Annual Government Advisory Committee Retainer paid in the form of RSUs will be granted on the third business day in
January of such calendar year and will vest on the first anniversary of the date of grant, provided that the Non-Employee
Director is in service as a Director on such vesting date.
• Non-Employee Directors Commencing Service on Government Advisory Committee: If a Non-Employee Director
commences service on the Government Advisory Committee on or after the beginning of a calendar year, then the Non-
Employee Director’s Annual Government Advisory Committee Retainer paid in the form of RSUs, as set forth under “Annual
Compensation” above, will be pro-rated based on the number of calendar quarters during the year during which the Non-
Employee Director will serve on the Committee and
will be granted on the first business day of the first calendar quarter that begins after the date the Non-Employee Director
commences service on the Government Advisory Committee provided, however, that if such service commences during the
final calendar quarter of such calendar year, such award will be granted on the last business day of such calendar year. The
RSUs will vest in full on the first anniversary of the date of grant, provided that the Non-Employee Director is in service as a
Director on such vesting date.
TERMS OF EQUITY-BASED AWARDS:
• Any RSUs described in this Program will be granted under the Equity Incentive Plan and will be subject to the terms and
conditions of (i) this Program, (ii) the Equity Incentive Plan and (iii) the forms of RSU grant notice and agreement approved
by the Board for the grant of such awards to Non-Employee Directors.
• Unless a number of units is otherwise set forth in this Program, the actual number of units subject to any RSUs granted
pursuant to this Program will be determined by dividing the dollar amount allocated to such award by the Fair Market Value
of a share of the Company’s common stock on the day on which the RSU is granted (with the resulting number of units
rounded down to the nearest whole unit).
•
•
If a Non-Employee Director timely elects to defer delivery of shares to be issued upon settlement of vested RSUs (or such
Non-Employee Director does not make a timely election as to the timing for delivery of such shares), any vested RSUs
granted pursuant to this Program will be settled in shares of the Company’s common stock on the earlier of (i) six months and
one day after a Non-Employee Director’s “separation from service” (as such term is defined in Treasury Regulations Section
1.409A-1(h) without regard to any alternative definition thereunder) as a Director (a “Separation from Service”) for any
reason or (ii) a Change in Control that also constitutes a “change in control event” (as determined under Treasury Regulations
Section 1.409A-3(i)(5)) (a “Change in Control”).
If a Non-Employee Director does not elect to defer delivery of shares to be issued upon settlement of vested RSUs and
instead timely elects to be issued such shares upon vesting, any RSUs granted pursuant to this Program will be settled in
shares of the Company’s common stock on the applicable vesting date (or as soon as practicable thereafter), subject to the
terms and conditions of the applicable form of RSU grant notice and agreement approved by the Board; provided, that such
shares shall be delivered no later than the date that is the 15th day of the third calendar month of the year following the year
in which such shares are no longer subject to a “substantial risk of forfeiture” within the meaning of Treasury Regulations
Section 1.409A-1(d).
• With respect to any outstanding RSUs granted pursuant to this Program, if a Non-Employee Director’s service as a Director is
terminated:
•
due to the Non-Employee Director’s death or Disability, any unvested portion of any such award will become fully vested
upon such termination; or
•
due to any reason other than death or Disability or Cause, any unvested portion of any such award will be forfeited to the
Company.
EXPENSES: Each Non-Employee Director will be eligible for reimbursement from the Company for all reasonable out-of-
pocket expenses incurred by the Non-Employee Director in connection with his or her attendance at Board and Committee
meetings. To the extent that any taxable reimbursements are provided to a Non-Employee Director, they will be provided in
accordance with Section 409A of the Code and any applicable state law of similar effect, including, but not limited to, the
following provisions: (i) the amount of any such expenses eligible for reimbursement during the Non-Employee Director’s
taxable year may not affect the expenses eligible for reimbursement in any other taxable year; (ii) the reimbursement of an
eligible expense must be made no later than the last day of the Non-Employee Director’s taxable year that immediately follows
the taxable year in which the expense was incurred; and (iii) the right to any reimbursement may not be subject to liquidation or
exchange for another benefit.
SECTION 409A: Notwithstanding anything to the contrary in this Program, if a Director is deemed by the Company at the time
of such Director’s “separation from service” (as such term is defined in Treasury Regulations Section 1.409A-1(h) without regard
to any alternative definition thereunder) with the Company to be a “specified employee” for purposes of Section 409A(a)(2)(B)(i)
of the Code, and if any of the payments upon such separation from service set forth herein and/or under any other agreement with
the Company are deemed to be “deferred compensation,” then to the extent delayed commencement of any portion of such
payments is required to avoid a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code and the related adverse
taxation under Section 409A of the Code, such payments shall not be provided to such Director prior to the earliest of (i) the date
that is six months and one day after the date of such separation from service, (ii) the date of the Director’s death, or (iii) such
earlier date as permitted under Section 409A of the Code without the imposition of adverse taxation. Upon the first business day
following the expiration of such applicable Code Section 409A(a)(2)(B)(i) period, all payments deferred pursuant to this
paragraph shall be paid in a lump sum to the Director, and any remaining payments due shall be paid as otherwise provided
herein or in the applicable agreement.
IRIDIUM COMMUNICATIONS INC.
Compensation Program for Non-Employee Directors
2021 Election Form
Name (Last, First, Middle Initial)
Social Security Number
Date of Birth
Address
City
State
Zip Code
Date of Election to Board of Directors
Date of Participation in Program
Primary Phone Number
By signing below, I certify that I have read and understand the terms of the Iridium Communications Inc. Compensation Program for Non-
Employee Directors (the “Program”) and voluntarily elect the compensation allocations listed below.
By signing below, I also understand that (i) to be valid, my election must be received by Iridium by no later than December 31, 2020, (ii) my
election may not be revoked or changed once made, (iii) if I do not make a timely election, I will be paid my Annual Board Retainer $50,000 in
cash and $125,000 in restricted stock units and 100% of any other retainer I am eligible to receive in cash, with all restricted stock units granted
pursuant to the Program deemed to be subject to the “Deferred Settlement” alternative below under the “Deferral Election” section, and (iv) if I
select “Deferred Settlement” below under the “Deferral Election” section, any compensation I elect to receive as restricted stock units (if vested)
will not be paid out to me until six months and one day after my separation from service (as defined under Treasury Regulations Section 1.409A-
1(h)) as a director (or, if earlier, on a Change in Control (as defined in the Iridium Communications Inc. Amended and Restated 2015 Equity
Incentive Plan) that also constitutes a “change in control event” (as determined under Treasury Regulations Section 1.409A-3(i)(5)).
2021 Compensation Allocation — Annual Board Retainer
The Annual Board Retainer ($175,000) consists of (i) an Annual Cash Retainer ($50,000) and (ii) an Annual Stock Retainer ($125,000).
The election for the Annual Cash Retainer may be allocated among cash and restricted stock units in multiples of 5%.
Note: This election will apply only to the Annual Cash Retainer. An election may not be made with respect to the Annual Stock Retainer. The Annual
Stock Retainer will be paid 100% in restricted stock unit.
I hereby elect the following allocation for my 2021 Annual Cash Retainer:
Annual Cash Retainer ($50,000):
Cash ___%
Restricted Stock Units ___%
Total Percentage = 100%
2021 Compensation Allocation — Annual Committee Chair Retainer, Annual Committee Member Retainer or Annual Chairman of Board
Retainer
The election for the Annual Committee Chair Retainer, Annual Committee Member Retainer and/or Annual Chairman of the Board Retainer may be
allocated among cash and restricted stock units in multiples of 25%.
Note: This election will apply to any Annual Committee Chair Retainer, Annual Committee Member Retainer and/or Annual Chairman of the Board
Retainer that is or may become payable for 2021. An election may not be made with respect to the Annual Government Advisory Committee Retainer, if
applicable.
I hereby elect the following allocation for my 2021 Annual Committee Chair Retainer, Annual Committee Member Retainer and/or
Annual Chairman of the Board Retainer (if any):
Annual Committee Chair Retainer:
Annual Committee Member Retainer:
Cash ___%
Restricted Stock Units ___%
Cash ___%
Restricted Stock Units ___%
Total Percentage = 100%
Total Percentage = 100%
Annual Committee Member Retainer:
Cash ___%
Restricted Stock Units ___%
Total Percentage = 100%
2021 Compensation Allocation — Deferral Election
The election to defer delivery of shares to be issued upon settlement of vested restricted stock units must be with respect to either 0% or 100% of shares to
be issued upon settlement of vested restricted stock units.
By selecting “Deferred Settlement” below, I am electing to receive restricted stock units (if vested) that will not be paid out to me until six months and one
day after my “separation from service” (as defined under Treasury Regulations Section 1.409A-1(h)) as a director (or, if earlier, on a Change in Control (as
defined in the Iridium Communications Inc. Amended and Restated 2015 Equity Incentive Plan) that also constitutes a “change in control event” (as
determined under Treasury Regulations Section 1.409A-3(i)(5)).
By selecting “Settlement Upon Vesting” below, I am electing to receive restricted stock units (if vested) that will be paid out to me on the applicable
vesting date (or as soon as practicable thereafter), subject to the terms and conditions of the applicable form of RSU grant notice and agreement; provided,
that payout will occur no later than the date that is the 15th day of the third calendar month of the year following the year in which such restricted stock
units are no longer subject to a “substantial risk of forfeiture” within the meaning of Treasury Regulations Section 1.409A-1(d).
Note: This deferral election will apply to all restricted stock units granted pursuant to the Program in 2021.
I hereby make the following deferral election with respect to the 2021 restricted stock units granted pursuant to the Program (select only
one):
Deferred Settlement __
Settlement Upon Vesting __
SIGNATURE
Director Date
Iridium Communications Inc.
Amended and Restated 2015 Equity Incentive Plan
Restricted Stock Unit Award Grant Notice
Iridium Communications Inc. (the “Company”) hereby grants to Participant a Restricted Stock Unit Award (the “Award”) under the Iridium
Communications Inc. Amended and Restated 2015 Equity Incentive Plan (the “Plan”) for the number of restricted stock units (the “RSUs”) set forth below.
This Award is subject to all of the terms and conditions set forth in this Restricted Stock Unit Award Grant Notice (the “Grant Notice”) and in the
Restricted Stock Unit Award Agreement (the “Agreement”) and the Plan, both of which are attached hereto and incorporated herein in their entirety.
Capitalized terms not explicitly defined in this Grant Notice but defined in the Plan or the Agreement will have the same definitions as in the Plan or the
Agreement.
Participant:
Date of Grant:
Vesting Commencement Date:
Number of RSUs Subject to Award:
Vesting Schedule: Subject to Section 2 of the Agreement, this Award will vest as follows: 25% of the total number of RSUs (rounded down to the
nearest whole RSU) on the first anniversary of the Vesting Commencement Date, and as to 6.25% of the total number of RSUs
(rounded down to the nearest whole RSU, except for the last vesting installment) each quarter thereafter, subject to Participant’s
Continuous Service with the Company through each such vesting date. Each installment of RSUs that vests under this Award is
a “separate payment” for purposes of Treasury Regulations Section 1.409A-2(b)(2).
Issuance Schedule: Subject to any change upon a Capitalization Adjustment, one share of Common Stock will be issued for each RSU that vests at the
time set forth in Section 6 of the Agreement.
Additional Terms/Acknowledgments: By clicking “Accept,” Participant acknowledges receipt of, and understands and agrees to, this Grant Notice, the
Agreement, the Plan and the stock plan prospectus for the Plan. Participant further acknowledges that as of the Date of Grant, this Grant Notice, the
Agreement and the Plan set forth the entire understanding between Participant and the Company regarding this Award and supersede all prior oral and
written agreements, promises and/or representations regarding this Award, with the exception, if applicable, of (i) any written employment, offer letter or
severance agreement, or any written severance plan or policy specifying the terms that should govern this Award, (ii) the Company’s Stock Ownership
Guidelines, and (iii) any compensation recovery policy that is adopted by the Company or is otherwise required by applicable law. By accepting this
Award, Participant consents to receive this Grant Notice, the Agreement, the Plan, the stock plan prospectus for the Plan and any other Plan-related
documents by electronic delivery and to participate in the Plan through an on-line or electronic system established and maintained by the Company or
another third party designated by the Company.
IRIDIUM COMMUNICATIONS INC.
By:
Signature
Title: Chief Executive Officer Date:
Attachments: Restricted Stock Unit Award Agreement, Amended and Restated 2015 Equity Incentive Plan, Prospectus
Iridium Communications Inc.
Amended and Restated 2015 Equity Incentive Plan
Restricted Stock Unit Award Agreement
Pursuant to the accompanying Restricted Stock Unit Award Grant Notice (the “Grant Notice”) and this Restricted Stock
Unit Award Agreement (the “Agreement”), Iridium Communications Inc. (the “Company”) has granted you a Restricted Stock
Unit Award (the “Award”) under the Iridium Communications Inc. Amended and Restated 2015 Equity Incentive Plan (the
“Plan”) for the number of restricted stock units (the “Restricted Stock Units”) set forth in the Grant Notice. This Award is
granted to you effective as of the date of grant set forth in the Grant Notice (the “Date of Grant”). Capitalized terms not
explicitly defined in this Agreement but defined in the Plan or the Grant Notice will have the same definitions as in the Plan or
the Grant Notice.
1.
Grant of the Award. This Award represents your right to be issued on a future date (as set forth in Section 6) one
share of Common Stock for each Restricted Stock Unit subject to this Award that vests in accordance with the Grant Notice and
this Agreement. This Award was granted in consideration of your services to the Company or an Affiliate.
2.
Vesting. This Award will vest, if at all, in accordance with the vesting schedule set forth in the Grant Notice.
Vesting will cease upon the termination of your Continuous Service. Upon such termination of your Continuous Service, you will
forfeit (at no cost to the Company) any Restricted Stock Units subject to this Award that have not vested as of the date of such
termination and you will have no further right, title or interest in such Restricted Stock Units.
3.
Number of Restricted Stock Units and Shares of Common Stock.
a.
The number of Restricted Stock Units subject to this Award, as set forth in the Grant Notice, will be
adjusted for Capitalization Adjustments, if any, as provided in the Plan.
b.
Any additional Restricted Stock Units and any shares of Common Stock, cash or other property that
become subject to this Award pursuant to this Section 3 will be subject, in a manner determined by the Board, to the same
forfeiture restrictions, restrictions on transferability, and time and manner of issuance as applicable to the other Restricted Stock
Units subject to this Award to which they relate.
c.
No fractional shares or rights for fractional shares of Common Stock will be created pursuant to this
Section 3. Any fractional shares that may be created by the adjustments referred to in this Section 3 will be rounded down to the
nearest whole share.
4.
Securities Law Compliance. You will not be issued any shares of Common Stock in respect of this Award unless
either (i) such shares are registered under the Securities Act or (ii) the Company has determined that such issuance would be
exempt from the registration requirements of the Securities Act. This Award also must comply with all other applicable laws
and regulations governing this Award, and you will not receive any shares of Common Stock in respect of this Award if the
Company determines that such receipt would not be in material compliance with such laws and regulations.
5.
Transferability. Except as otherwise provided in this Section 5, this Award is not transferable, except by will or
by the laws of descent and distribution and prior to the time that shares of Common Stock in respect of this Award have been
issued to you, you may not transfer, pledge, sell or otherwise dispose of any portion of the Restricted Stock Units or the shares of
Common Stock in respect of this Award. For example, you may not use any shares of Common Stock that may be issued in
respect of this Award as security for a loan, nor may you transfer, pledge, sell or otherwise dispose of such shares. This restriction
on transfer will lapse upon issuance to you of the shares of Common Stock in respect of this Award.
a.
Beneficiary Designation. Upon receiving written permission from the Board or its duly authorized
designee, you may, by delivering written notice to the Company, in a form approved by the Company and any broker designated
by the Company to effect transactions under the Plan, designate a third party who, in the event of your death, will thereafter be
entitled to receive any distribution of Common Stock or other consideration to which you were entitled at the time of your death
pursuant to this Agreement. In the absence of such a designation, in the event of your death, the executor or administrator of your
estate will be entitled to receive, on behalf of your estate, such Common Stock or other consideration.
b.
Domestic Relations Orders. Upon receiving written permission from the Board or its duly authorized
designee, and provided that you and the designated transferee enter into transfer and other agreements required by the Company,
you may transfer your right to receive any distribution of Common Stock or other consideration under this Award, pursuant to the
terms of a domestic relations order, official marital settlement agreement or other divorce or separation instrument as permitted
by applicable law that contains the information required by the Company to effectuate the transfer. You are encouraged to discuss
with the Company’s General Counsel the proposed terms of any such transfer prior to finalizing such domestic relations order,
marital settlement agreement or other divorce or separation instrument to help ensure the required information is contained within
the domestic relations order, marital settlement agreement or other divorce or separation instrument.
6.
Date of Issuance.
a.
The issuance of any shares of Common Stock in respect of this Award is (i) subject to satisfaction of the
tax withholding obligations set forth in Section 10 and (ii) intended to comply with Treasury Regulations Section 1.409A-1(b)(4)
and will be construed and administered in such a manner. The form of such issuance (e.g., a stock certificate or electronic entry
evidencing such shares) will be determined by the Company.
b.
In the event one or more Restricted Stock Units subject to this Award vests, the Company will issue to you,
on the applicable vesting date, one share of Common Stock for each Restricted Stock Unit that vests on such date (and for
purposes of this Agreement, such issuance date is referred to as the “Original Issuance Date”); provided, however, that if the
Original Issuance Date falls on a date that is not a business day, such shares will instead be issued to you on the next following
business day.
c.
Notwithstanding the foregoing, if (i) the Original Issuance Date does not occur (1) during an “open
window period” applicable to you, as determined by the Company in accordance with the Company’s then-effective policy on
trading in Company securities, or (2) on a date when you are otherwise permitted to sell shares of Common Stock on an
established stock exchange or stock market (including, but not limited to, under a previously established 10b5-1 trading plan
entered into in compliance with the Company’s policies), and (ii) the Board elects, prior to the Original Issuance Date, (1) not to
satisfy the Withholding Taxes described in Section 10 by withholding shares of Common Stock from the shares of Common
Stock otherwise due, on the Original Issuance Date, to you under this Award, (2) not to permit you to enter into a “same day sale”
commitment with a broker-dealer pursuant to Section 10 (including, but not limited to, a commitment under a previously
established 10b5-1 trading plan entered into in compliance with the Company’s policies) and (3) not to permit you to pay the
Withholding Taxes in cash, then the shares that would otherwise be issued to you on the Original Issuance Date will not be issued
on such Original Issuance Date and will instead be issued on the first business day when you are not prohibited from selling
shares of Common Stock in the open public market, but in no event later than December 31 of the calendar year in which the
Original Issuance Date occurs (that is, the last day of your taxable year in which the Original Issuance Date occurs), or, if and
only if permitted in a manner that complies with Treasury Regulations Section 1.409A-1(b)(4), no later than the date that is the
15th day of the third calendar month of the year following the year in which the shares of Common Stock in respect of this
Award are no longer subject to a “substantial risk of forfeiture” within the meaning of Treasury Regulations Section 1.409A-1(d).
7.
Dividends. You may become entitled to receive payments equal to any cash dividends and other distributions paid
with respect to a corresponding number of shares of Common Stock to be issued in respect of the Restricted Stock Units covered
by this Award. Any such dividends or distributions shall be subject to the same forfeiture restrictions as apply to the Restricted
Stock Units and shall be paid at the same time that the corresponding shares are issued in respect of your vested Restricted Stock
Units provided, however that to the extent any such dividends or distributions are paid in shares of Common Stock, then you will
automatically be granted a corresponding number of additional Restricted Stock Units subject to this Award (the “Dividend
Units”), and further provided that such Dividend Units shall be subject to the same forfeiture restrictions and restrictions on
transferability, and same timing requirements for issuance of shares, as apply to the Restricted Stock Units subject to this Award
with respect to which the Dividend Units relate.
8.
Restrictive Legends. The shares of Common Stock issued in respect of this Award will be endorsed with
appropriate legends, if any, as determined by the Company.
9.
Award Not a Service Contract. Your Continuous Service is not for any specified term and may be terminated by
you or by the Company or an Affiliate at any time, for any reason, with or without cause and with or without notice. This Award
is not an employment or service contract, and nothing in this Award (including, but not limited to, the vesting of the Restricted
Stock Units subject to this Award or the issuance of shares of Common Stock in respect of this Award), this Agreement, the Plan
or any covenant of good faith and fair dealing
that may be found implicit in this Award or Agreement or the Plan will: (i) create or confer upon you any right or obligation to
continue in the employ or service of, or affiliation with, the Company or an Affiliate; (ii) constitute any promise or commitment
by the Company or an Affiliate regarding the fact or nature of future positions, future work assignments, future compensation or
any other term or condition of employment, service or affiliation; (iii) create or confer upon you any right or benefit under this
Award unless such right or benefit has specifically accrued under the terms of this Agreement or the Plan; or (iv) deprive the
Company of the right to terminate you at will and without regard to any future vesting opportunity that you may have. In
addition, nothing in this Award will obligate the Company or an Affiliate, their respective stockholders, boards of directors,
Officers or Employees to continue any relationship that you might have as an Employee, Director or Consultant for the Company
or an Affiliate.
10.
Tax Withholding Obligations.
a.
On or before the time you receive a distribution of any shares of Common Stock in respect of this Award,
and at any other time as reasonably requested by the Company in accordance with applicable tax laws, you agree to make
adequate provision for any sums required to satisfy the federal, state, local and foreign tax withholding obligations of the
Company or any Affiliate that arise in connection with this Award (the “Withholding Taxes”). Specifically, the Company or an
Affiliate may, in its sole discretion, satisfy all or any portion of the Withholding Taxes relating to this Award by any of the
following means or by a combination of such means: (i) withholding from any compensation otherwise payable to you by the
Company or an Affiliate; (ii) causing you to tender a cash payment; (iii) permitting you to enter into a “same day sale”
commitment with a broker-dealer that is a member of the Financial Industry Regulatory Authority (a “FINRA Dealer”) whereby
you irrevocably elect to sell a portion of the shares of Common Stock to be issued in connection with this Award to satisfy the
Withholding Taxes and whereby the FINRA Dealer irrevocably commits to forward the proceeds necessary to satisfy the
Withholding Taxes directly to the Company and/or its Affiliates; or (iv) withholding shares of Common Stock from the shares of
Common Stock issued or otherwise issuable to you in connection with this Award with a Fair Market Value (measured as of the
date the shares of Common Stock are issued to you) equal to the amount of such Withholding Taxes; provided, however, that the
number of such shares of Common Stock so withheld will not exceed the amount necessary to satisfy the Company’s required tax
withholding obligations using the minimum statutory withholding rates for federal, state, local and, if applicable, foreign tax
purposes, including payroll taxes, that are applicable to supplemental taxable income.
b.
Unless the Withholding Taxes of the Company and/or any Affiliate are satisfied, the Company will have no
obligation to issue to you any Common Stock.
c.
In the event the Company’s obligation to withhold arises prior to the issuance to you of Common Stock or
it is determined after the issuance of Common Stock to you that the amount of the Company’s withholding obligation was greater
than the amount withheld by the Company, you agree to indemnify and hold the Company harmless from any failure by the
Company to withhold the proper amount.
11.
Tax Consequences. The Company has no duty or obligation to minimize the tax consequences to you of this
Award and will not be liable to you for any adverse tax
consequences to you arising in connection with this Award. You are hereby advised to consult with your own personal tax,
financial and/or legal advisors regarding the tax consequences of this Award and by accepting this Award, you have agreed that
you have done so or knowingly and voluntarily declined to do so.
12.
Notices. Any notices provided for in this Agreement or the Plan will be given in writing (including electronically)
and will be deemed effectively given upon receipt or, in the case of notices delivered by mail by the Company to you, five days
after deposit in the United States mail, postage prepaid, addressed to you at the last address you provided to the Company. The
Company may, in its sole discretion, decide to deliver any documents related to this Award or participation in the Plan by
electronic means or to request your consent to participate in the Plan by electronic means. By accepting this Award, you consent
to receive such documents by electronic delivery and to participate in the Plan through an on-line or electronic system established
and maintained by the Company or another third party designated by the Company.
13.
Governing Plan Document. This Award is subject to all the provisions of the Plan, the provisions of which are
hereby made a part of this Award, and is further subject to all interpretations, amendments, rules and regulations which may from
time to time be promulgated and adopted pursuant to the Plan. Except as otherwise expressly provided in the Grant Notice or this
Agreement, in the event of any conflict between the terms in the Grant Notice or this Agreement and the terms of the Plan, the
terms of the Plan will control.
14.
Other Documents. You hereby acknowledge receipt of and the right to receive a document providing the
information required by Rule 428(b)(1) promulgated under the Securities Act, which includes the Plan prospectus. In addition,
you acknowledge receipt of the Company’s policy permitting certain individuals to sell shares of Common Stock only during
certain “window” periods in effect from time to time and the Company’s insider trading policy.
15.
Effect on Other Employee Benefit Plans. The value of this Award will not be included as compensation,
earnings, salaries, or other similar terms used when calculating your benefits under any employee benefit plan sponsored by the
Company or any Affiliate, except as such plan otherwise expressly provides. The Company expressly reserves its rights to
amend, modify, or terminate any of the Company’s or any Affiliate’s employee benefit plans.
16.
Stockholder Rights. You will not have voting or any other rights as a stockholder of the Company with respect to
the shares of Common Stock to be issued pursuant to this Award until such shares are issued to you. Upon such issuance, you will
obtain full voting and other rights as a stockholder of the Company. Nothing contained in this Agreement, and no action taken
pursuant to its provisions, will create or be construed to create a trust of any kind or a fiduciary relationship between you and the
Company or any other person.
17.
Severability. If any part of this Agreement or the Plan is declared by any court or governmental authority to be
unlawful or invalid, such unlawfulness or invalidity will not invalidate any portion of this Agreement or the Plan not declared to
be unlawful or invalid. Any Section of this Agreement (or part of such a Section) so declared to be unlawful or invalid will, if
possible, be construed in a manner which will give effect to the terms of such Section or part of a Section to the fullest extent
possible while remaining lawful and valid.
18.
Amendment. Any amendment to this Agreement must be in writing, signed by a duly authorized representative of
the Company. Notwithstanding anything in the Plan to the contrary, the Board reserves the right to amend this Agreement in any
way it may deem necessary or advisable to carry out the purpose of the grant as a result of any change in applicable laws or
regulations or any future law, regulation, interpretation, ruling, or judicial decision.
19.
Clawback/Recovery. This Award (and any compensation paid or shares of Common Stock issued under this
Award) will be subject to recoupment in accordance with the Company’s Policy for Recoupment of Incentive Compensation, as
may be amended, including to comply with the listing standards of any national securities exchange or association on which the
Company’s securities are listed or as is otherwise required by the Dodd-Frank Wall Street Reform and Consumer Protection Act
or other applicable law. No recovery of compensation under such a clawback policy will be an event giving rise to a right to
resign for “good reason” or “constructive termination” (or similar term) under any agreement with the Company.
20.
Unsecured Obligation. This Award is unfunded, and as a holder of vested Restricted Stock Units, you will be
considered an unsecured creditor of the Company with respect to the Company’s obligation, if any, to issue shares of Common
Stock or other property pursuant to this Agreement.
21.
Compliance with Section 409A of the Code. This Award is intended to comply with the “short-term deferral”
rule set forth in Treasury Regulations Section 1.409A-1(b)(4). However, if (i) this Award fails to satisfy the requirements of the
short-term deferral rule and is otherwise not exempt from, and therefore deemed to be deferred compensation subject to, Section
409A of the Code, (ii) you are deemed by the Company at the time of your “separation from service” (as such term is defined in
Treasury Regulations Section 1.409A-1(h) without regard to any alternative definition thereunder) to be a “specified employee”
for purposes of Section 409A(a)(2)(B)(i) of the Code, and (iii) any of the payments set forth herein are issuable upon such
separation from service, then to the extent delayed commencement of any portion of such payments is required to avoid a
prohibited distribution under Section 409A(a)(2)(B)(i) of the Code and the related adverse taxation under Section 409A of the
Code, such payments will not be provided to you prior to the earliest of (a) the date that is six months and one day after the date
of such separation from service, (b) the date of your death, or (c) such earlier date as permitted under Section 409A of the Code
without the imposition of adverse taxation. Upon the first business day following the expiration of such applicable Code Section
409A(a)(2)(B)(i) period, all payments deferred pursuant to this Section 21 will be paid in a lump sum to you, and any remaining
payments due will be paid as otherwise provided herein. Each installment of Restricted Stock Units that vests under this Award is
a “separate payment” for purposes of Treasury Regulations Section 1.409A-2(b)(2).
22. Miscellaneous.
a.
The rights and obligations of the Company under this Award will be transferable to any one or more
persons or entities, and all covenants and agreements hereunder will inure to the benefit of, and be enforceable by, the Company’s
successors and assigns.
b.
You agree upon request to execute any further documents or instruments necessary or desirable in the sole
determination of the Company to carry out the purposes or intent of this Award.
c.
You acknowledge and agree that you have reviewed this Award in its entirety, have had an opportunity to
obtain the advice of counsel prior to executing and accepting this Award, and fully understand all provisions of this Award.
d.
This Agreement will be subject to all applicable laws, rules, and regulations, and to such approvals by any
governmental agencies or national securities exchanges as may be required.
e.
All obligations of the Company under the Plan and this Agreement will be binding on any successor to the
Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or
otherwise, of all or substantially all of the business and/or assets of the Company.
This Restricted Stock Unit Award Agreement will be deemed to be accepted by you upon your acceptance of the
Restricted Stock Unit Award Grant Notice to which it is attached.
* * *
UK Sub-Plan of the Iridium Communications Inc.
Amended and Restated 2015 Equity Incentive Plan
(June 2020)
1.
2.
3.
This UK Sub-Plan (the “Sub-Plan”) of the Iridium Communications Inc. Amended and Restated 2015 Equity Incentive
Plan (the “Plan”) provides additional terms and conditions applicable to Awards granted to Employees, Directors and
Consultants who are resident in the UK for tax purposes.
The purpose of this Sub-Plan is to provide incentives for present and future Employees, Directors and Consultants who
are resident in the UK for tax purposes.
This Sub-Plan is governed by the Plan and all the provisions of this Sub-Plan shall be identical to those of the Plan SAVE
THAT (i) “Sub-Plan” shall be substituted for “Plan” where applicable and (ii) the amendments set out in the following
provisions shall be treated as having been made. Capitalized terms not explicitly defined in this Sub-Plan but defined in
the Plan shall have the same definitions as in the Plan.
1.
SECTION 1 – GENERAL
Section 1(b) of the Plan shall be deleted in its entirety and replaced with the following:
(b) Eligible Award Recipients. Employees, Directors and Consultants are eligible to receive Awards; provided, however,
that this Sub-Plan is exclusively for Employees, Directors and Consultants who are resident in the UK for tax
purposes.
2. SECTION 8 – MISCELLANEOUS
2.1. Section 8(h) of the Plan shall be deleted in its entirety and replaced with the following:
(h) Withholding Obligations. If, on the acquisition or disposal of, or the exercise or release of an Award an Award Tax
Liability arises, the Participant shall indemnify the Constituent Company against the Award Tax Liability and the
Award may not be acquired, disposed of, exercised or released unless either:
(i) the Constituent Company is authorised to and is able to deduct an amount equal to the Award Tax Liability
from the Participant’s salary for the current pay period; or
(ii) the Participant makes a payment to the Constituent Company of an amount equal to the Award Tax Liability at
the time that the Award is made; or
(iii) the Participant has given an irrevocable authority to the Constituent Company to instruct a third party
approved by the Constituent Company
146081727 v3
as agent for the Participant to dispose of a sufficient number of the shares to realise a sum which is
sufficient after the payment of all expenses and commissions payable in connection with the sale of such
shares to discharge the Award Tax Liability and to pay a sum equal to the Award Tax Liability to the
Constituent Company; or
(iv) the Participant enters into other arrangements acceptable to the Constituent Company for the payment to the
Constituent Company of a sum sufficient to discharge the Award Tax Liability.
2.2. The following provisions shall have effect as Sections 8(m), 8(n) and 8(o) of the Plan:
(m) S.431 ITEPA Election. Should the Constituent Company, in its absolute discretion, decide it is appropriate, it is a
term of the grant of any Award that the Participant agrees that the Participant shall join with the Constituent
Company in electing under section 431 ITEPA to disapply in whole or in part the provisions of Part 7 Chapter 2
ITEPA, which election shall be in such form as may be approved by HMRC, and that such election once made
shall not be revoked by the Participant.
(n) Relationship with Employment Contract.
(i) The rights and obligations of any Participant under the terms of his/her office or employment with any
Constituent Company or former Constituent Company shall not be affected by being a Participant.
(ii) The value of any benefit realised under the Sub-Plan by Participants shall not be taken into account in
determining any pension or similar entitlements.
(iii) Participants shall have no rights to compensation or damages on account of any loss in respect of Awards or
the Sub-Plan where such loss arises (or is claimed to arise), in whole or in part, from:
(A) termination of office or employment with; or
(B) notice to terminate office or employment given by or to,
any Constituent Company or any former Constituent Company. This exclusion of liability shall apply
howsoever the termination of office or employment, or the giving of notice, is caused, and howsoever
compensation or damages may be claimed.
(iv) Participants shall have no rights to compensation or damages from any Constituent Company or any former
Constituent Company on account of any loss in respect of any Award under this Sub-Plan where such loss
arises (or is claimed to arise), in whole or in part, from:
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(A) any company ceasing to be a Constituent Company; or
(B) the transfer of any business from a Constituent Company to any person which is not a Constituent
Company.
This exclusion of liability shall apply howsoever the change of status of the relevant Constituent Company, or the
transfer of the relevant business, is caused, and howsoever compensation or damages may be claimed.
(o) Data Protection. For the purposes of operating the Sub-Plan in the European Union and the United Kingdom, the
Company will collect and process information relating to Participants in accordance with the privacy notice which
is in force from time to time.
3. SECTION 13 – DEFINITIONS
3.1. The following definitions shall be added:
“Award Tax Liability”
“Constituent Company”
“Employee’s NICs”
“HMRC”
“ITEPA”
“NICs”
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means any liability of the Participant’s Employer to account to
HMRC or any other tax authority for any amount of, or
representing, income tax or Employee’s NICs or any equivalent
charge in the nature of tax or social security contributions
(whether under the laws of the United Kingdom or otherwise)
which may arise on the acquisition or disposal of, or the exercise
or release of any Award.
means any of the following: (a) the Company; and (b) any
company which is an Affiliate of the Company
means primary Class 1 NICs arising on the acquisition or disposal
of, or the exercise or release of any Award.
means Her Majesty’s Revenue and Customs.
means the Income Tax (Earnings and Pensions) Act 2003.
means National Insurance Contributions.
“N.I. Regulations”
“Participant’s Employer”
“PAYE Regulations”
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means the laws, regulations and practices currently in force
relating to liability for, and the collection of, NICs.
means such Constituent Company as is a Participant’s employer
or, if he/she has ceased to be employed by a Constituent Company,
was his/her employer or such other Constituent Company, or other
person as, under the PAYE Regulations or, as the case may be, the
N.I. Regulations, or any other statutory or regulatory enactment
(whether in the United Kingdom or otherwise) is obliged to
account for any Award Tax Liability.
means the regulations made under section 684 of ITEPA.
Iridium Communications Inc.
Amended and Restated 2015 Equity Incentive Plan (UK Sub-Plan)
UK Restricted Stock Unit Award Grant Notice
Iridium Communications Inc. (the “Company”) hereby grants to Participant a Restricted Stock Unit Award (the “Award”) under the Iridium
Communications Inc. Amended and Restated 2015 Equity Incentive Plan (the “Plan”) for the number of restricted stock units (the “RSUs”) set forth
below. This Award is subject to all of the terms and conditions set forth in this UK Restricted Stock Unit Award Grant Notice (the “Grant Notice”) and
in the UK Restricted Stock Unit Award Agreement (the “Agreement”), the Plan and the UK Sub-Plan of the Plan (the “Sub-Plan”), all of which are
attached hereto and incorporated herein in their entirety. Capitalized terms not explicitly defined in this Grant Notice but defined in the Plan, the Sub-Plan
or the Agreement will have the same definitions as in the Plan, the Sub-Plan or the Agreement.
Participant:
Date of Grant:
Vesting Commencement Date:
Number of RSUs Subject to Award:
Vesting Schedule: Subject to Section 2 of the Agreement, this Award will vest as follows: 25% of the total number of RSUs subject to this Award (rounded
down to the nearest whole RSU) will vest on the first anniversary of the Vesting Commencement Date, and 6.25% of the total
number of RSUs subject to this Award (rounded down to the nearest whole RSU, except for the last vesting installment) will vest
each quarter thereafter, subject to Participant’s Continuous Service through each such vesting date. Each installment of RSUs that
vests under this Award is a “separate payment” for purposes of US Treasury Regulations Section 1.409A-2(b)(2) (if applicable).
Issuance Schedule: Subject to any change upon a Capitalization Adjustment, one share of Common Stock will be issued for each RSU that vests at the
time set forth in Section 6 of the Agreement.
Additional Terms/Acknowledgements: By clicking “Accept,” Participant acknowledges receipt of, and understands and agrees to, this Grant Notice, the
Agreement, the Plan, the Sub-Plan and the stock plan prospectus for the Plan. Participant further acknowledges that as of the Date of Grant, this Grant
Notice, the Agreement, the Plan and the Sub-Plan set forth the entire understanding between Participant and the Company regarding this Award and
supersede all prior oral and written agreements, promises and/or representations regarding this Award, with the exception, if applicable, of (i) any written
employment, offer letter or severance agreement, or any written severance plan or policy specifying the terms that should govern this Award, (ii) the
Company’s Stock Ownership Guidelines, and (iii) any compensation recovery policy that is adopted by the Company or is otherwise required by applicable
law. By accepting this Award, Participant consents to receive this Grant Notice, the Agreement, the Plan, the Sub-Plan, the stock plan prospectus for the
Plan and any other Plan-related documents by electronic delivery and to participate in the Plan through an on-line or electronic system established and
maintained by the Company or another third party designated by the Company.
Iridium Communications Inc.
By: /s/ Matthew Desch
Signature
Title:
Date:
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Attachments: UK Restricted Stock Unit Award Agreement, Amended and Restated 2015 Equity Incentive Plan, UK Sub-Plan, Prospectus
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Iridium Communications Inc.
Amended and Restated 2015 Equity Incentive Plan (UK Sub-Plan)
UK Restricted Stock Unit Award Agreement
Pursuant to the accompanying UK Restricted Stock Unit Award Grant Notice (the “Grant Notice”) and this UK Restricted
Stock Unit Award Agreement (the “Agreement”), Iridium Communications Inc. (the “Company”) has granted you a Restricted
Stock Unit Award (the “Award”) under the UK Sub-Plan of the Iridium Communications Inc. Amended and Restated 2015
Equity Incentive Plan (the “Plan”) for the number of restricted stock units (the “Restricted Stock Units”) set forth in the Grant
Notice. This Award is granted to you effective as of the date of grant set forth in the Grant Notice (the “Date of Grant”).
Capitalized terms not explicitly defined in this Agreement but defined in the Plan, the UK Sub-Plan of the Plan (the “Sub-Plan”)
or the Grant Notice will have the same definitions as in the Plan, the Sub-Plan or the Grant Notice.
1.
Grant of the Award. This Award represents your right to be issued on a future date (as set forth in Section 6) one
share of Common Stock for each Restricted Stock Unit subject to this Award that vests in accordance with the Grant Notice and
this Agreement. This Award was granted in consideration of your services to the Company or an Affiliate.
2.
Vesting. This Award will vest, if at all, in accordance with the vesting schedule set forth in the Grant Notice.
Vesting will cease upon the termination of your Continuous Service. Upon such termination of your Continuous Service, you will
forfeit (at no cost to the Company) any Restricted Stock Units subject to this Award that have not vested as of the date of such
termination and you will have no further right, title or interest in such Restricted Stock Units.
3.
Number of Restricted Stock Units and Shares of Common Stock.
(a) The number of Restricted Stock Units subject to this Award, as set forth in the Grant Notice, will be adjusted
for Capitalization Adjustments, if any, as provided in the Plan.
(b) Any additional Restricted Stock Units and any shares of Common Stock, cash or other property that become
subject to this Award pursuant to this Section 3 will be subject, in a manner determined by the Board, to the same forfeiture
restrictions, restrictions on transferability, and time and manner of issuance as applicable to the other Restricted Stock Units
subject to this Award to which they relate.
(c) No fractional shares or rights for fractional shares of Common Stock will be created pursuant to this Section
3. Any fractional shares that may be created by the adjustments referred to in this Section 3 will be rounded down to the nearest
whole share.
4.
Securities Law Compliance. You will not be issued any shares of Common Stock in respect of this Award unless
either (i) such shares are registered under the Securities Act
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or (ii) the Company has determined that such issuance would be exempt from the registration requirements of the Securities Act.
This Award also must comply with all other applicable laws and regulations governing this Award, and you will not receive any
shares of Common Stock in respect of this Award if the Company determines that such receipt would not be in material
compliance with such laws and regulations.
5.
Transferability. This Award is not transferable, except to your personal representative on your death and prior to
the time that shares of Common Stock in respect of this Award have been issued to you, you may not transfer, pledge, sell or
otherwise dispose of any portion of the Restricted Stock Units or the shares of Common Stock in respect of this Award. For
example, you may not use any shares of Common Stock that may be issued in respect of this Award as security for a loan, nor
may you transfer, pledge, sell or otherwise dispose of such shares. This restriction on transfer will lapse upon issuance to you of
the shares of Common Stock in respect of this Award.
6.
Date of Issuance.
(a) The issuance of any shares of Common Stock in respect of this Award (i) is subject to satisfaction of any
Award Tax Liability as set forth in Section 10 and (ii) if applicable, is intended to comply with US Treasury Regulations Section
1.409A-1(b)(4) and will be construed and administered in such a manner. The form of such issuance (e.g., a stock certificate or
electronic entry evidencing such shares) will be determined by the Company.
(b) Should the Company or an Affiliate, in its absolute discretion decide it is appropriate, it is a condition to the
issuance of any shares of Common Stock in respect of this Award that you agree that you shall join with the Company or an
Affiliate in electing under section 431 ITEPA to disapply in whole or in part the provisions of Part 7 Chapter 2 ITEPA (which
election shall be in such form as may be approved by the Board of HMRC) and that such election once made shall not be revoked
by you.
(c) In the event one or more Restricted Stock Units subject to this Award vests, the Company will issue to you,
on the applicable vesting date, one share of Common Stock for each Restricted Stock Unit that vests on such date (and for
purposes of this Agreement, such issuance date is referred to as the “Original Issuance Date”); provided, however, that if the
Original Issuance Date falls on a date that is not a business day, such shares will instead be issued to you on the next following
business day.
(d) Notwithstanding the foregoing, if (i) the Original Issuance Date does not occur (1) during an “open window
period” applicable to you, as determined by the Company in accordance with the Company’s then-effective policy on trading in
Company securities, or (2) on a date when you are otherwise permitted to sell shares of Common Stock on an established stock
exchange or stock market (including, but not limited to, under a previously established 10b5-1 trading plan entered into in
compliance with the Company’s policies), and (ii) the Board elects, prior to the Original Issuance Date, (1) not to satisfy the
Award Tax Liability described in Section 10 by withholding shares of Common Stock from the shares of Common Stock
otherwise due, on the Original Issuance Date, to you under this Award, (2) not to permit you to enter into a “same day sale”
commitment with a broker-dealer pursuant to Section 10 (including,
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but not limited to, a commitment under a previously established 10b5-1 trading plan entered into in compliance with the
Company’s policies) and (3) not to permit you to pay the Award Tax Liability in cash, then the shares that would otherwise be
issued to you on the Original Issuance Date will not be issued on such Original Issuance Date and will instead be issued on the
first business day when you are not prohibited from selling shares of Common Stock in the open public market, but in no event
later than December 31 of the calendar year in which the Original Issuance Date occurs (that is, the last day of your taxable year
in which the Original Issuance Date occurs), or, if and only if permitted in a manner that complies with US Treasury Regulations
Section 1.409A-1(b)(4) (if applicable), no later than the date that is the 15th day of the third calendar month of the year following
the year in which the shares of Common Stock in respect of this Award are no longer subject to a “substantial risk of forfeiture”
within the meaning of US Treasury Regulations Section 1.409A-1(d).
7.
Dividends. You may become entitled to receive payments equal to any cash dividends and other distributions paid
with respect to a corresponding number of shares of Common Stock to be issued in respect of the Restricted Stock Units covered
by this Award. Any such dividends or distributions shall be subject to the same forfeiture restrictions as apply to the Restricted
Stock Units and shall be paid at the same time that the corresponding shares are issued in respect of your vested Restricted Stock
Units, provided, however that to the extent any such dividends or distributions are paid in shares of Common Stock, then you will
automatically be granted a corresponding number of additional Restricted Stock Units subject to this Award (the “Dividend
Units”), and further provided that such Dividend Units shall be subject to the same forfeiture restrictions and restrictions on
transferability, and same timing requirements for issuance of shares, as apply to the Restricted Stock Units subject to this Award
with respect to which the Dividend Units relate.
8.
Restrictive Legends. The shares of Common Stock issued in respect of this Award will be endorsed with
appropriate legends, if any, as determined by the Company.
9.
Award Not a Service Contract. Your Continuous Service is not for any specified term and may be terminated by
you or by the Company or an Affiliate in accordance with applicable law and the terms of your employment agreement, if any.
This Award is not an employment or service contract, and nothing in this Award (including, but not limited to, the vesting of the
Restricted Stock Units subject to this Award or the issuance of shares of Common Stock in respect of this Award), this
Agreement, the Plan or any covenant of good faith and fair dealing that may be found implicit in this Award or Agreement or the
Plan will: (i) create or confer upon you any right or obligation to continue in the employ or service of, or affiliation with, the
Company or an Affiliate; (ii) constitute any promise or commitment by the Company or an Affiliate regarding the fact or nature
of future positions, future work assignments, future compensation or any other term or condition of employment, service or
affiliation; (iii) create or confer upon you any right or benefit under this Award unless such right or benefit has specifically
accrued under the terms of this Agreement or the Plan; or (iv) deprive the Company of any right to terminate you without regard
to any future vesting opportunity that you may have. In addition, nothing in this Award will obligate the Company or an Affiliate,
their respective stockholders, boards of directors, Officers or Employees to continue any relationship that you might have as an
Employee, Director or Consultant for the Company or an Affiliate. By accepting this Award, you acknowledge, understand and
agree that:
146081767 v3
suspended or terminated by the Company at any time, to the extent permitted under the Plan;
(i) the Plan is established voluntarily by the Company, it is discretionary in nature, and may be amended,
(ii) the grant of your Award is voluntary and occasional and does not create any contractual or other right
to receive future grants of awards (whether on the same or different terms), or benefits in lieu of awards, even if awards have
been granted in the past;
(iii) your Award and any shares of Common Stock acquired under the Plan, and the income and value of
same, are not part of normal or expected compensation for any purpose, including, without limitation, calculating any severance,
resignation, termination, redundancy, dismissal, end-of-service payments, bonuses, holiday pay, long-service awards, pension or
retirement or welfare benefits or similar payments;
and cannot be predicted with certainty;
(iv) the future value of the shares of Common Stock underlying the Award is unknown, indeterminable,
(v) neither the Company nor any Affiliate shall be liable for any foreign exchange rate fluctuation
between your local currency and the United States Dollar that may affect the value of your Award or of any amounts due to you
pursuant to the vesting of your Award or the subsequent sale of any shares of Common Stock received;
(vi) no claim or entitlement to compensation or damages shall arise from forfeiture of, or you ceasing to
hold or being able to vest this Award resulting from the termination of your Continuous Service (for any reason whatsoever,
whether or not later found to be invalid or in breach of employment laws in the jurisdiction where you are employed or the terms
of your employment or service agreement, if any and including, without prejudice to the foregoing, in circumstances giving rise
to a claim for wrongful dismissal) or from the loss or diminution in value of any rights or entitlements in connection with the
Plan, and in consideration of the grant of this Award to which you are otherwise not entitled, you irrevocably agree never to
institute any claim against the Company or any Affiliate, waive your ability, if any, to bring any such claim, and release the
Company and any Affiliate from any such claim; if, notwithstanding the foregoing, any such claim is allowed by a court of
competent jurisdiction, then, by participating in the Plan, you shall be deemed irrevocably to have agreed not to pursue such
claim and agree to execute any and all documents necessary to request dismissal or withdrawal of such claim.
10.
Award Tax Liability.
(a) On or before the time you receive a distribution of any shares of Common Stock in respect of this Award,
and at any other time as reasonably requested by the Company in accordance with applicable tax laws, you agree to make
adequate provision for any sums required to satisfy the Award Tax Liability arising in connection with this Award. Specifically,
the Company or an Affiliate may, in its sole discretion, satisfy all or any portion of the Award Tax Liability relating to this Award
by any of the following means or by a combination of such means: (i) withholding from any compensation otherwise payable to
you by the Company or an
146081767 v3
Affiliate; (ii) causing you to tender a cash payment; (iii) permitting you to enter into a “same day sale” commitment with a
broker-dealer that is a member of the US Financial Industry Regulatory Authority (a “FINRA Dealer”) whereby you irrevocably
elect to sell a portion of the shares of Common Stock to be issued in connection with this Award to satisfy the Award Tax
Liability and whereby the FINRA Dealer irrevocably commits to forward the proceeds necessary to satisfy the Award Tax
Liability directly to the Company and/or its Affiliates; or (iv) withholding shares of Common Stock from the shares of Common
Stock issued or otherwise issuable to you in connection with this Award with a Fair Market Value (measured as of the date the
shares of Common Stock are issued to you) equal to the amount of such Award Tax Liability; provided, however, that the number
of such shares of Common Stock so withheld will not exceed the amount necessary to satisfy the Company’s required tax
withholding obligations in respect of the Award Tax Liability using the minimum statutory withholding rates for federal, state,
local and, if applicable, foreign tax purposes, including payroll and social security taxes and contributions, that are applicable to
supplemental taxable income.
(b) Unless the Award Tax Liability of the Company and/or any Affiliate is satisfied, the Company will have no
obligation to issue to you any Common Stock.
(c) In the event the Company’s obligation to withhold arises prior to the issuance to you of Common Stock or it
is determined after the issuance of Common Stock to you that the amount of the Company’s withholding obligation was greater
than the amount withheld by the Company, you agree to indemnify and hold the Company harmless from any failure by the
Company to withhold the proper amount.
(d) Notwithstanding the above, as a condition of the vesting of your Award, you unconditionally and irrevocably
agree:
(i) to place the Company in funds and indemnify the Company in respect of the Award Tax Liability; or
(ii) to permit the Company to sell at the best price which it can reasonably obtain such number of shares
of Common Stock allocated or allotted to you following vesting as will provide the Company with an amount equal to the Award
Tax Liability; and to permit the Company to withhold an amount not exceeding the Award Tax Liability from any payment made
to you (including, but not limited to salary); and
references in this provision to “the Company” shall, if applicable, be construed as also referring to any Affiliate.
(iii) to sign, promptly, all documents required by the Company to effect the terms of this provision, and
11.
Tax Consequences. The Company has no duty or obligation to minimize the tax or social security consequences
to you of this Award and will not be liable to you for any adverse tax social security consequences to you arising in connection
with this Award. You are hereby advised to consult with your own personal tax, financial and/or legal advisors regarding the tax
consequences of this Award and by accepting this Award, you have agreed that you have done so or knowingly and voluntarily
declined to do so.
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12.
Notices. Any notices provided for in this Agreement or the Plan will be given in writing (including electronically)
and will be deemed effectively given upon receipt or, in the case of notices delivered by mail by the Company to you, ten days
after deposit in the national mail, postage prepaid, addressed to you at the last address you provided to the Company. The
Company may, in its sole discretion, decide to deliver any documents related to this Award or participation in the Plan by
electronic means or to request your consent to participate in the Plan by electronic means. By accepting this Award, you consent
to receive such documents by electronic delivery and to participate in the Plan through an on-line or electronic system established
and maintained by the Company or another third party designated by the Company.
13.
Governing Plan Document. This Award is subject to all the provisions of the Plan and the Sub-Plan, the
provisions of which are hereby made a part of this Award, and is further subject to all interpretations, amendments, rules and
regulations which may from time to time be promulgated and adopted pursuant to the Plan or the Sub-Plan. Except as otherwise
expressly provided in the Grant Notice or this Agreement, in the event of any conflict between the terms in the Grant Notice or
this Agreement and the terms of the Plan or the Sub-Plan, the terms of the Plan and the Sub-Plan (as applicable) will control.
14.
Other Documents. You hereby acknowledge receipt of and the right to receive a document providing the
information required by Rule 428(b)(1) promulgated under the Securities Act, which includes the Plan prospectus. In addition,
you acknowledge receipt of the Company’s policy permitting certain individuals to sell shares of Common Stock only during
certain “window” periods in effect from time to time and the Company’s insider trading policy.
15.
Effect on Other Employee Benefit Plans. The value of this Award will not be included as compensation,
earnings, salaries, or other similar terms used when calculating your benefits under any employee benefit plan sponsored by the
Company or any Affiliate, except as such plan otherwise expressly provides. The Company expressly reserves its rights to
amend, modify, or terminate any of the Company’s or any Affiliate’s employee benefit plans.
16.
Stockholder Rights. You will not have voting or any other rights as a stockholder of the Company with respect to
the shares of Common Stock to be issued pursuant to this Award until such shares are issued to you. Upon such issuance, you will
obtain full voting and other rights as a stockholder of the Company. Nothing contained in this Agreement, and no action taken
pursuant to its provisions, will create or be construed to create a trust of any kind or a fiduciary relationship between you and the
Company or any other person.
17.
Severability. If any part of this Agreement or the Plan is declared by any court or governmental authority to be
unlawful or invalid, such unlawfulness or invalidity will not invalidate any portion of this Agreement or the Plan not declared to
be unlawful or invalid. Any Section of this Agreement (or part of such a Section) so declared to be unlawful or invalid will, if
possible, be construed in a manner which will give effect to the terms of such Section or part of a Section to the fullest extent
possible while remaining lawful and valid.
18.
Amendment. Any amendment to this Agreement must be in writing, signed by a duly authorized representative of
the Company. Notwithstanding anything in the Plan to the contrary, the Board reserves the right to amend this Agreement in any
way it may deem
146081767 v3
necessary or advisable to carry out the purpose of the grant as a result of any change in applicable laws or regulations or any
future law, regulation, interpretation, ruling, or judicial decision.
19.
Clawback/Recovery. You acknowledge and agree that this Award (and any compensation paid or shares of
Common Stock issued under this Award) will be subject to recoupment in accordance with the Company’s Policy for
Recoupment of Incentive Compensation, as may be amended, including to comply with the listing standards of any national
securities exchange or association on which the Company’s securities are listed or as is otherwise required by the US Dodd-Frank
Wall Street Reform and Consumer Protection Act 2010 or other applicable law. No recovery of compensation under such a
clawback policy will be an event giving rise to a right to resign for “good reason” or “constructive termination” (or similar term)
under any agreement with the Company.
20.
Unsecured Obligation. This Award is unfunded, and as a holder of vested Restricted Stock Units, you will be
considered an unsecured creditor of the Company with respect to the Company’s obligation, if any, to issue shares of Common
Stock or other property pursuant to this Agreement.
21.
Compliance with Section 409A of the Code. If you are subject to taxation in the US, this Award is intended to
comply with the “short-term deferral” rule set forth in US Treasury Regulations Section 1.409A-1(b)(4). However, if (i) this
Award fails to satisfy the requirements of the short-term deferral rule and is otherwise not exempt from, and therefore deemed to
be deferred compensation subject to, Section 409A of the Code, (ii) you are deemed by the Company at the time of your
“separation from service” (as such term is defined in US Treasury Regulations Section 1.409A-1(h) without regard to any
alternative definition thereunder) to be a “specified employee” for purposes of Section 409A(a)(2)(B)(i) of the Code, and (iii) any
of the payments set forth herein are issuable upon such separation from service, then to the extent delayed commencement of any
portion of such payments is required to avoid a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code and the related
adverse taxation under Section 409A of the Code, such payments will not be provided to you prior to the earliest of (a) the date
that is six months and one day after the date of such separation from service, (b) the date of your death, or (c) such earlier date as
permitted under Section 409A of the Code without the imposition of adverse taxation. Upon the first business day following the
expiration of such applicable Code Section 409A(a)(2)(B)(i) period, all payments deferred pursuant to this Section 21 will be
paid in a lump sum to you, and any remaining payments due will be paid as otherwise provided herein. Each installment of
Restricted Stock Units that vests under this Award is a “separate payment” for purposes of US Treasury Regulations Section
1.409A-2(b)(2).
22.
Data Protection. For the purposes of operating the Plan and the UK Sub-Plan in the European Union and the
United Kingdom, the Company will collect and process information relating to you in accordance with the privacy notice which
is provided to you from time to time.
23.
Relationship with Employment Contract. You hereby acknowledge that your rights and obligations under the
terms of your office or employment with the Company or any Affiliate shall not be affected by your participation in the Plan.
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24. Miscellaneous.
(a) The rights and obligations of the Company under this Award will be transferable to any one or more persons
or entities, and all covenants and agreements hereunder will inure to the benefit of, and be enforceable by, the Company’s
successors and assigns.
(b) You agree upon request to execute any further documents or instruments necessary or desirable in the sole
determination of the Company to carry out the purposes or intent of this Award.
(c) You acknowledge and agree that (i) you have reviewed this Award in its entirety, have had an opportunity to
obtain the advice of counsel prior to executing and accepting this Award, and fully understand all provisions of this Award; and
(ii) the Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding
your participation in the Plan, or your acquisition or sale of the underlying shares of Common Stock.
(d) This Agreement will be subject to all applicable laws, rules, and regulations, and to such approvals by any
governmental agencies or national securities exchanges as may be required.
(e) All obligations of the Company under the Plan and this Agreement will be binding on any successor to the
Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or
otherwise, of all or substantially all of the business and/or assets of the Company.
This UK Restricted Stock Unit Award Agreement will be deemed to be accepted by you upon your acceptance of the UK
Restricted Stock Unit Award Grant Notice to which it is attached.
* * *
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SUBSIDIARIES OF IRIDIUM COMMUNICATIONS INC.
EXHIBIT 21.1
Subsidiary
Iridium Blocker-B Inc.
Syncom-Iridium Holdings Corp.
Iridium Holdings LLC
Iridium Satellite LLC
Iridium Constellation LLC
Iridium Carrier Holdings LLC
Iridium Carrier Services LLC
Iridium Government Services LLC
Iridium Satellite SA LLC
OOO Iridium Services
OOO Iridium Communications
Iridium Chile SpA
Jurisdiction of Organization
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Russia
Russia
Chile
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the Registration Statements (Form S-3 Nos. 333-162206 and 333-165513 and Form S-8 Nos. 333-165508,
333-181744, 333-204236, 333-218073 and 333-231699) of Iridium Communications Inc. of our reports dated February 11, 2021, with respect to the
consolidated financial statements of Iridium Communications Inc. and the effectiveness of internal control over financial reporting of Iridium
Communications Inc. included in this Annual Report (Form 10-K) of Iridium Communications Inc. for the year ended December 31, 2020.
Tysons, Virginia
February 11, 2021
/s/ Ernst & Young LLP
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
Pursuant to Section 302 of The Sarbanes-Oxley Act of 2002
Exhibit 31.1
I, Matthew J. Desch, certify that:
1.
2.
3.
4.
I have reviewed this annual report on Form 10-K of Iridium Communications Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by
this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) for the registrant and have:
a)
b)
c)
d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s
most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting,
to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
a)
b)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting.
Date: February 11, 2021
/s/ Matthew J. Desch
Matthew J. Desch
Chief Executive Officer
(principal executive officer)
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
Pursuant to Section 302 of The Sarbanes-Oxley Act of 2002
Exhibit 31.2
I, Thomas J. Fitzpatrick, certify that:
1.
2.
3.
4.
I have reviewed this annual report on Form 10-K of Iridium Communications Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by
this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) for the registrant and have:
a)
b)
c)
d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s
most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting,
to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
a)
b)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting.
Date: February 11, 2021
/s/ Thomas J. Fitzpatrick
Thomas J. Fitzpatrick
Chief Financial Officer
(principal financial officer)
CERTIFICATIONS OF
PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the Chief Executive Officer and the Chief
Financial Officer of Iridium Communications Inc. (the “Company”) each hereby certifies that, to the best of his knowledge:
1.
2.
The Company’s Quarterly Report on Form 10-K for the fiscal year ended December 31, 2020, to which this Certification is attached as Exhibit
32.1 (the “Form 10-K”), fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as
amended; and
The information contained in the Form 10-K fairly presents, in all material respects, the financial condition of the Company at the end of the
period covered by the Form 10-K and results of operations of the Company for the periods covered in the financial statements in the Form 10-K.
Dated: February 11, 2021
Matthew J. Desch
Chief Executive Officer
Thomas J. Fitzpatrick
Chief Financial Officer
This certification accompanies the Form 10-K and shall not be deemed “filed” by the Company for purposes of Section 18 of the Securities Exchange Act
of 1934, as amended.