Company Quick10K Filing
Iridium Communications
Price22.10 EPS-0
Shares132 P/E-47
MCap2,910 P/FCF45
Net Debt-367 EBIT27
TEV2,544 TEV/EBIT93
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-06-30 Filed 2020-07-28
10-Q 2020-03-31 Filed 2020-04-28
10-K 2019-12-31 Filed 2020-02-25
10-Q 2019-09-30 Filed 2019-10-29
10-Q 2019-06-30 Filed 2019-07-23
10-Q 2019-03-31 Filed 2019-04-23
10-K 2018-12-31 Filed 2019-02-28
10-Q 2018-09-30 Filed 2018-10-25
10-Q 2018-06-30 Filed 2018-07-31
10-Q 2018-03-31 Filed 2018-04-26
10-K 2017-12-31 Filed 2018-02-22
10-Q 2017-09-30 Filed 2017-10-26
10-Q 2017-06-30 Filed 2017-07-27
10-Q 2017-03-31 Filed 2017-04-27
10-K 2016-12-31 Filed 2017-02-23
10-Q 2016-09-30 Filed 2016-10-27
10-Q 2016-06-30 Filed 2016-07-28
10-Q 2016-03-31 Filed 2016-04-28
10-K 2015-12-31 Filed 2016-02-25
10-Q 2015-09-30 Filed 2015-10-29
10-Q 2015-06-30 Filed 2015-07-30
10-Q 2015-03-31 Filed 2015-04-30
10-K 2014-12-31 Filed 2015-02-26
10-Q 2014-09-30 Filed 2014-10-30
10-Q 2014-06-30 Filed 2014-07-31
10-Q 2014-03-31 Filed 2014-05-01
10-K 2013-12-31 Filed 2014-03-04
10-Q 2013-09-30 Filed 2013-10-31
10-Q 2013-06-30 Filed 2013-08-01
10-Q 2013-03-31 Filed 2013-05-02
10-K 2012-12-31 Filed 2013-03-05
10-Q 2012-06-30 Filed 2012-08-02
10-Q 2012-03-31 Filed 2012-05-03
10-K 2011-12-31 Filed 2012-03-06
10-Q 2011-09-30 Filed 2011-11-08
10-Q 2011-06-30 Filed 2011-08-08
10-Q 2011-03-31 Filed 2011-05-10
10-K 2010-12-31 Filed 2011-03-07
10-Q 2010-09-30 Filed 2010-11-09
10-Q 2010-06-30 Filed 2010-08-09
10-Q 2010-03-31 Filed 2010-05-10
10-K 2009-12-31 Filed 2010-03-16
8-K 2020-07-28 Earnings, Exhibits
8-K 2020-05-14
8-K 2020-04-28
8-K 2020-02-28
8-K 2020-02-25
8-K 2020-02-13
8-K 2020-02-07
8-K 2020-02-03
8-K 2020-01-17
8-K 2019-11-04
8-K 2019-10-29
8-K 2019-10-21
8-K 2019-09-13
8-K 2019-08-21
8-K 2019-07-23
8-K 2019-07-19
8-K 2019-06-21
8-K 2019-05-21
8-K 2019-05-15
8-K 2019-04-26
8-K 2019-04-23
8-K 2019-04-22
8-K 2019-03-07
8-K 2019-02-28
8-K 2019-02-13
8-K 2019-01-30
8-K 2018-12-31
8-K 2018-10-25
8-K 2018-07-31
8-K 2018-05-17
8-K 2018-04-26
8-K 2018-03-16
8-K 2018-03-09
8-K 2018-03-09
8-K 2018-02-26
8-K 2018-02-26
8-K 2018-02-22

IRDM 10Q Quarterly Report

Part I.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Item 4. Controls and Procedures.
Part II.
Item 1. Legal Proceedings.
Item 1A. Risk Factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Item 3. Defaults Upon Senior Securities.
Item 4. Mine Safety Disclosures.
Item 5. Other Information.
Item 6. Exhibits.
EX-31.1 irdm10-q063020exx311.htm
EX-31.2 irdm10-q063020exx312.htm
EX-32.1 irdm10-q063020exx321.htm

Iridium Communications Earnings 2020-06-30

Balance SheetIncome StatementCash Flow
4.23.42.51.70.80.02012201420172020
Assets, Equity
907153351702012201420172020
Rev, G Profit, Net Income
0.30.20.0-0.1-0.3-0.42012201420172020
Ops, Inv, Fin

Document
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q
 
 
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 001-33963  
 
Iridium Communications Inc.
(Exact name of registrant as specified in its charter)
 
DE
 
26-1344998
(State or other jurisdiction of
incorporation or organization)
 
(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 Exchange Act:
Title of Each Class
 
Trading Symbol
 
Name of Each Exchange on Which Registered
Common Stock, $0.001 par value
 
IRDM
 
The Nasdaq Stock Market LLC
 
 
 
 
(Nasdaq Global Select Market)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. 
Large Accelerated Filer
x
 
 
Accelerated Filer
¨
Non-Accelerated Filer
¨
 
 
Smaller Reporting Company
¨
 
 
 
 
Emerging Growth Company
¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  x
The number of shares of the registrant’s common stock, par value $0.001 per share, outstanding as of July 22, 2020 was 132,526,785.
 




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


2



PART I.
Iridium Communications Inc.
Condensed Consolidated Balance Sheets
(In thousands, except per share data)
 
June 30, 2020
 
December 31, 2019
 
(Unaudited)
 
 
Assets
 

 
 

Current assets:
 
 
 
Cash and cash equivalents
$
119,115

 
$
223,561

Accounts receivable, net
60,397

 
68,697

Inventory
37,331

 
39,938

Prepaid expenses and other current assets
12,466

 
10,739

Total current assets
229,309

 
342,935

Property and equipment, net
3,046,062

 
3,180,799

Intangible assets, net
46,268

 
46,977

Other assets
52,215

 
52,846

Total assets
$
3,373,854

 
$
3,623,557

Liabilities and stockholders equity
 

 
 

Current liabilities:
 

 
 

Short-term secured debt
$
16,500

 
$
10,875

Accounts payable
8,519

 
6,713

Accrued expenses and other current liabilities
38,407

 
49,293

Interest payable
247

 
7,790

Deferred revenue
38,269

 
39,080

Total current liabilities
101,942

 
113,751

Long-term secured debt, net
1,603,624

 
1,412,501

Long-term senior unsecured notes, net

 
352,994

Deferred income tax liabilities, net
170,970

 
188,653

Deferred revenue, net of current portion
54,073

 
67,092

Other long-term liabilities
34,085

 
29,284

Total liabilities
1,964,694

 
2,164,275

Commitments and contingencies


 


Stockholders’ equity:
 

 
 

Common stock, $0.001 par value, 300,000 shares authorized; 132,526 and 131,632 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively
133

 
132

Additional paid-in capital
1,141,744

 
1,134,048

Retained earnings
287,845

 
331,969

Accumulated other comprehensive loss, net of tax
(20,562
)
 
(6,867
)
Total stockholders’ equity
1,409,160

 
1,459,282

Total liabilities and stockholders’ equity
$
3,373,854

 
$
3,623,557









See notes to unaudited condensed consolidated financial statements.

3



Iridium Communications Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(In thousands, except per share amounts)
(Unaudited)
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2020
 
2019
 
2020
 
2019
Revenue:
 
 
 
 
 
 
 
 
Services
 
$
113,350

 
$
110,797

 
$
229,325

 
$
217,748

Subscriber equipment
 
19,815

 
23,420

 
42,078

 
44,428

Engineering and support services
 
7,008

 
8,883

 
14,057

 
14,609

Total revenue
 
140,173

 
143,100

 
285,460

 
276,785

 
 
 
 
 
 
 
 
 
Operating expenses:
 
 

 
 

 
 
 
 
Cost of services (exclusive of depreciation and amortization)
 
23,134

 
25,607

 
45,112

 
48,128

Cost of subscriber equipment
 
12,069

 
13,370

 
24,343

 
25,801

Research and development
 
2,380

 
4,285

 
4,824

 
7,896

Selling, general and administrative
 
21,100

 
20,969

 
41,925

 
44,810

Depreciation and amortization
 
75,662

 
75,128

 
151,606

 
148,042

Total operating expenses
 
134,345

 
139,359

 
267,810

 
274,677

Operating income
 
5,828

 
3,741

 
17,650

 
2,108

 
 
 
 
 
 
 
 
 
Other expense, net:
 
 

 
 

 
 
 
 
Interest expense, net
 
(22,506
)
 
(28,986
)
 
(48,950
)
 
(54,583
)
Loss on extinguishment of debt
 

 

 
(30,209
)
 
(207
)
Other income (expense), net
 
(320
)
 
(626
)
 
127

 
(952
)
Total other expense, net
 
(22,826
)
 
(29,612
)
 
(79,032
)
 
(55,742
)
Loss before income taxes
 
(16,998
)
 
(25,871
)
 
(61,382
)
 
(53,634
)
Income tax benefit
 
4,576

 
7,765

 
17,258

 
17,504

Net loss
 
(12,422
)
 
(18,106
)
 
(44,124
)
 
(36,130
)
Series B preferred stock dividends, declared and paid excluding cumulative dividends
 

 
2,097

 

 
4,194

Net loss attributable to common stockholders
 
$
(12,422
)
 
$
(20,203
)
 
$
(44,124
)
 
$
(40,324
)
Weighted average shares outstanding - basic and diluted
 
133,118

 
123,315

 
132,882

 
118,282

Net loss attributable to common stockholders per share - basic and diluted
 
$
(0.09
)
 
$
(0.16
)
 
$
(0.33
)
 
$
(0.34
)
Comprehensive loss:
 

 

 
 
 
 
Net loss
 
$
(12,422
)
 
$
(18,106
)
 
$
(44,124
)
 
$
(36,130
)
Foreign currency translation adjustments, net of tax
 
1,093

 
1,441

 
(2,893
)
 
2,166

Unrealized gain (loss) on cash flow hedges, net of tax
(see Note 6)
 
1,086

 

 
(10,802
)
 

Comprehensive loss
 
$
(10,243
)
 
$
(16,665
)
 
$
(57,819
)
 
$
(33,964
)











See notes to unaudited condensed consolidated financial statements.

4



Iridium Communications Inc.
Condensed Consolidated Statements of Changes in Stockholders’ Equity
(In thousands, except per share amounts)
(Unaudited)
 
 
Three Months Ended
June 30,
 
Six Months Ended June 30,
 
 
2020
 
2019
 
2020
 
2019
 
 
 
 
 
 
 
 
 
Total stockholders equity, beginning balance
 
$
1,413,793

 
$
1,586,699

 
$
1,459,282

 
$
1,601,577

 
 
 
 
 
 
 
 
 
Common stock:
 
 
 
 
 
 
 
 
Beginning balance
 
132

 
113

 
132

 
112

Stock options exercised and awards vested
 
1

 
1

 
1

 
2

Preferred stock converted to common
 

 
17

 

 
17

Ending balance
 
133

 
131

 
133

 
131

 
 
 
 
 
 
 
 
 
Additional paid-in capital:
 
 
 
 
 
 
 
 
Beginning balance
 
1,136,135

 
1,110,970

 
1,134,048

 
1,108,550

Stock-based compensation
 
4,541

 
4,356

 
8,641

 
8,136

Stock options exercised and awards vested
 
1,440

 
6,660

 
2,611

 
8,786

Stock withheld to cover employee taxes
 
(372
)
 
(356
)
 
(3,556
)
 
(3,842
)
Preferred stock converted to common
 

 
(17
)
 

 
(17
)
Ending balance
 
1,141,744

 
1,121,613

 
1,141,744

 
1,121,613

 
 
 
 
 
 
 
 
 
Retained earnings:
 
 
 
 
 
 
 
 
Beginning balance
 
300,267

 
483,688

 
331,969

 
501,712

Net loss
 
(12,422
)
 
(18,106
)
 
(44,124
)
 
(36,130
)
Dividends on Series B preferred stock
 

 
(7,744
)
 

 
(7,744
)
Ending balance
 
287,845

 
457,838

 
287,845

 
457,838

 
 
 
 
 
 
 
 
 
Accumulated other comprehensive loss, net of tax:
 
 
 
 
 
 
 
 
Beginning balance
 
(22,741
)
 
(8,072
)
 
(6,867
)
 
(8,797
)
Cumulative translation adjustments, net of tax
 
1,093

 
1,441

 
(2,893
)
 
2,166

Unrealized gain (loss) on cash flow hedge, net of tax
 
1,086

 

 
(10,802
)
 

Ending balance
 
(20,562
)
 
(6,631
)
 
(20,562
)
 
(6,631
)
 
 
 
 
 
 
 
 
 
Total stockholders equity, ending balance
 
$
1,409,160

 
$
1,572,951

 
$
1,409,160

 
$
1,572,951

 
 
 
 
 
 
 
 
 
Dividends declared per share:
 
 
 
 
 
 
 
 
Series B preferred stock
 
$

 
$
16.88

 
$

 
$
16.88












See notes to unaudited condensed consolidated financial statements.

5



Iridium Communications Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 
 
Six Months Ended June 30,
 
 
2020
 
2019
Cash flows from operating activities:
 
 
 
 
Net loss
 
$
(44,124
)
 
$
(36,130
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
 
Deferred income taxes
 
(17,683
)
 
(17,741
)
Depreciation and amortization
 
151,606

 
148,042

Loss on extinguishment of debt
 
30,209

 
207

Stock-based compensation (net of amounts capitalized)
 
7,795

 
7,390

Amortization of deferred financing fees
 
1,799

 
10,029

All other items, net
 
593

 
166

Changes in operating assets and liabilities:
 
 
 
 
Accounts receivable
 
7,098

 
(20,403
)
Inventory
 
2,729

 
(9,708
)
Prepaid expenses and other current assets
 
(1,895
)
 
2,606

Other assets
 
2,526

 
1,518

Accounts payable
 
1,667

 
1,404

Accrued expenses and other current liabilities
 
(16,286
)
 
(16,842
)
Interest payable
 
(7,071
)
 
4,764

Deferred revenue
 
(13,291
)
 
(9,572
)
Other long-term liabilities
 
(1,140
)
 
(1,642
)
Net cash provided by operating activities
 
104,532

 
64,088

 
 
 
 
 
Cash flows from investing activities:
 
 

 
 

Capital expenditures
 
(18,655
)
 
(92,581
)
Purchase of other investments
 

 
(10,000
)
Net cash used in investing activities
 
(18,655
)
 
(102,581
)
 
 
 
 
 
Cash flows from financing activities:
 
 

 
 

Payments on the Credit Facility, including extinguishment costs
 

 
(54,000
)
Borrowings under the Term Loan
 
202,000

 

Payments on the Term Loan
 
(4,125
)
 

Repayments on the senior unsecured notes, including extinguishment costs
 
(383,451
)
 

Payment of deferred financing fees
 
(2,562
)
 

Proceeds from exercise of stock options
 
2,611

 
8,788

Tax payment upon settlement of stock awards
 
(3,556
)
 
(3,842
)
Payment of Series B preferred stock dividends
 

 
(8,387
)
Net cash used in financing activities
 
(189,083
)
 
(57,441
)
 
 
 
 
 
Effect of exchange rate changes on cash and cash equivalents
 
(1,240
)
 
622

Net decrease in cash and cash equivalents
 
(104,446
)
 
(95,312
)
Cash, cash equivalents, and restricted cash, beginning of period
 
223,561

 
465,287

Cash, cash equivalents, and restricted cash, end of period
 
$
119,115

 
$
369,975





See notes to unaudited condensed consolidated financial statements.

6



 
 
Six Months Ended June 30,
 
 
2020
 
2019
Supplemental cash flow information:
 

 

Interest paid, net of amounts capitalized
 
$
55,207

 
$
45,131

Income taxes paid, net
 
$
608

 
$
590

 
 
 
 
 
Supplemental disclosure of non-cash investing and financing activities:
 
 

 
 

Property and equipment received but not paid
 
$
2,249

 
$
1,871

Interest capitalized but not paid
 
$

 
$
2,922

Capitalized amortization of deferred financing costs
 
$
50

 
$
2,048

Capitalized stock-based compensation
 
$
846

 
$
745
































See notes to unaudited condensed consolidated financial statements.

7



Iridium Communications Inc.
Notes to Condensed Consolidated Financial Statements
1. Basis of Presentation and Principles of Consolidation
Iridium Communications Inc. (the “Company”) has prepared its condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). The accompanying condensed consolidated financial statements include the accounts of (i) the Company, (ii) its wholly owned subsidiaries, and (iii) all less than wholly owned subsidiaries that the Company controls. All material intercompany transactions and balances have been eliminated.
In the opinion of management, the condensed consolidated financial statements reflect all normal recurring adjustments that the Company considers necessary for the fair presentation of its results of operations and cash flows for the interim periods covered, and of the financial position of the Company at the date of the interim condensed consolidated balance sheet. The operating results for interim periods are not necessarily indicative of the operating results for the entire year. Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to instructions, rules and regulations prescribed by the U.S. Securities and Exchange Commission (“SEC”). These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10‑K for the year ended December 31, 2019, as filed with the SEC on February 25, 2020.

2. Significant Accounting Policies

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 Company is currently evaluating the effect ASU 2019-12 may have on its consolidated financial statements and related disclosures.

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 for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform. The amendments apply only to contracts and hedging relationships that reference London Inter-bank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued due to reference rate reform. The amendments are elective and are effective upon issuance through December 31, 2022. The Company is currently determining the impacts of reference rate reform and the effects ASU 2020-04 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.


8



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 value of the following financial instruments approximated their fair values as of June 30, 2020 and December 31, 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.

Derivative Financial Instruments

The Company uses interest rate swap agreements to manage its exposures to fluctuating interest rate risk on variable rate debt. Its derivatives are measured at fair value and are recorded on the balance sheet within other current 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 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 in operating activities within the company’s consolidated statements of cash flows, which is the same category as the items being hedged. See Note 6 for further information.


9



3. Cash and Cash Equivalents and Restricted Cash and Cash Equivalents

Cash and Cash Equivalents

The following table summarizes the Company’s cash and cash equivalents:
 
 
June 30, 2020
 
December 31, 2019
 
Recurring Fair
Value Measurement
 
 
(in thousands)
 
 
Cash and cash equivalents:
 
 
 
 
 
 
Cash
 
$
19,034

 
$
13,943

 
 
Money market funds
 
100,081

 
209,618

 
Level 2
Total cash and cash equivalents
 
$
119,115

 
$
223,561

 
 


4. Leases

Lessor Arrangements
Operating leases in which the Company is a lessor consist primarily of hosting agreements with Aireon LLC (“Aireon”) (see Note 11) 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 $5.3 million and $5.4 million for the three months ended June 30, 2020 and 2019, respectively, and $10.7 million and $10.9 million during the six months ended June 30, 2020 and 2019, 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.

Both Aireon and L3Harris have made payments pursuant to their hosting agreements and the Company expects they will continue to do so. Future income with respect to the Company’s operating leases in which it is the lessor existing at June 30, 2020, exclusive of the $10.7 million recognized during the six months ended June 30, 2020, by year and in the aggregate, is as follows:
Year Ending December 31,
 
Amount
 
 
(in thousands)
2020
 
$
10,722

2021
 
21,445

2022
 
21,445

2023
 
21,445

2024
 
21,445

   Thereafter
 
120,353

Total lease income
 
$
216,855



5. Debt

Term Loan and Revolving Facility

On November 4, 2019, pursuant to a new loan agreement (the “Credit Agreement”), the Company entered into a $1,450.0 million term loan with various lenders and Deutsche Bank AG New York Branch as the Administrative Agent and the Collateral Agent (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 the loan facility with Bpifrance Assurance Export S.A.S. (the “Credit Facility”) as well as related expenses. The Term Loan was issued at a price equal to 99.5% of its face value, bears interest at an annual rate of LIBOR plus 3.75%, with a 1.0% LIBOR floor, and matures in November 2026. Beginning on June 30, 2020, principal is payable quarterly at a rate of one percent of the original loan amount per annum, with the remaining principal due upon maturity. Interest is payable monthly on the last business day of the month. Borrowings under the Revolving Facility, if any, bear interest at the same rate (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 mature 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

10



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 June 30, 2020, the Company reported an aggregate of $1,645.9 million in borrowings under the Term Loan, before $25.8 million of net unamortized deferred financing costs, for a net principal balance of $1,620.1 million in borrowings in the accompanying condensed consolidated balance sheet. As of June 30, 2020, based upon over-the-counter bid levels (Level 2 - market approach), the fair value of the Company’s $1,645.9 million in borrowings under the Term Loan was $1,613.0 million. The Company had not borrowed under the Revolving Facility as of June 30, 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 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 Credit Agreement permits repayment, prepayment, and repricing transactions.

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.

Senior Unsecured Notes

As of June 30, 2020, the Company had fully paid down 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 was $23.5 million and $35.1 million during the three months ended June 30, 2020 and 2019, respectively, and $51.4 million and $71.5 million during the six months ended June 30, 2020 and 2019, respectively. Interest incurred includes amortization of deferred financing fees of $0.9 million and $5.8 million for the three months ended June 30, 2020 and 2019, respectively, and $1.8 million and $12.2 million for the six months ended June 30, 2020 and 2019, respectively. Interest capitalized was $0.8 million and $3.7 million during the three months ended June 30, 2020 and 2019, respectively, and $1.5 million and $11.3 million, respectively, during the six months ended June 30, 2020 and 2019. Accrued interest as of June 30, 2020 and December 31, 2019 was $0.2 million and $7.8 million, respectively.

6. 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 rates 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 Company’s Term Loan. This will reduce the negative impact of increases in the variable rate over the term of the 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.

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.


11



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 term of the 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 carry a notional amount of $1,000.0 million as of June 30, 2020. The Company has designated both the Swap and Swaption as qualifying hedging instruments and accounts 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 income (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 income (loss) into earnings to have an immaterial impact on the Company’s condensed consolidated financial statements.
 
Fair Value of Derivative Instruments

As of June 30, 2020, the Company had a current liability balance for the fair value of the Swap in the amount of $8.0 million, 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. As of June 30, 2020 and December 31, 2019, the Company had a long-term liability balance for the fair value of the Swaption in the amount of $6.7 million and $0.9 million, respectively, recorded in other long-term liabilities.

During the three and six months ended June 30, 2020, the Company incurred $2.7 million and $3.7 million, respectively, in net interest expense for the Swap and the Swaption, collectively. The Company did not hold any cash flow hedges during the comparable prior year periods. 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 $10.8 million as of June 30, 2020, net of a $3.8 million tax impact. There were no gains or losses related to derivative financial instruments during the comparable prior year period.

7. 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. As of June 30, 2020, the remaining aggregate number of shares of the Company’s common stock available for future grants under the Amended 2015 plan was 11,791,808. The Amended 2015 Plan provides for the grant of stock-based awards, including nonqualified stock options, incentive stock options, restricted stock, restricted stock units (“RSUs”), stock appreciation rights and other equity securities to 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.

Stock Option Awards

The fair value of stock options is determined at the grant date using the Black-Scholes option pricing model. The stock option awards granted to employees generally (i) have a term of ten years, (ii) vest over four years 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 market value of the underlying shares at the date of grant.


12



The Company did not grant any stock options during the six-month period ended June 30, 2020. During the six months ended June 30, 2019, the Company granted approximately 139,000 stock options to its employees, with an estimated aggregate grant date fair value of $1.3 million.

Restricted Stock Units

The RSUs granted to employees for service generally vest over four years, 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. 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.

Service-Based RSUs

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, certain members of the Company’s board of directors 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 and 76,000 service-based RSUs were granted to the Company’s directors as a result of these payments and elections during the six months ended June 30, 2020 and 2019, respectively, with an estimated grant date fair value of $1.4 million for each period.

During the six months ended June 30, 2020 and 2019, the Company granted approximately 683,000 and 651,000 service-based RSUs, respectively, to its employees, with an estimated aggregate grant date fair value of $18.3 million and $15.0 million, respectively.

During the six months ended June 30, 2020 and 2019, the Company granted approximately 10,000 and 11,000 RSUs to non-employee consultants that are generally subject to service-based vesting. The RSUs will vest 50% on the first anniversary of the grant date, and the remaining 50% will vest quarterly thereafter through the second anniversary of the grant date. The estimated aggregate grant date fair value of the RSUs granted to non-employee consultants during the six months ended June 30, 2020 and 2019 was $0.2 million for each period.

Performance-Based RSUs

In March 2020 and 2019, the Company granted approximately 115,000 and 125,000 annual incentive, performance-based RSUs, respectively, to the Company’s executives and employees (the “Bonus RSUs”), with an estimated grant date fair value of $3.1 million and $2.9 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. Substantially all of the 2019 Bonus RSUs vested in March 2020 upon the determination of the level of achievement of the performance goals.

Additionally, in March 2020 and 2019, the Company granted approximately 144,000 and 96,000 long-term, performance-based RSUs, respectively, to the Company’s executives (the “Executive RSUs”). The estimated aggregate grant date fair value of the Executive RSUs was $3.9 million for the 2020 grants and $2.2 million for the 2019 grants. Vesting of the Executive RSUs is dependent upon the Company’s achievement of specified performance goals over a two-year period (fiscal years 2020 and 2021 for the Executive RSUs granted in 2020 and fiscal years 2019 and 2020 for the Executive RSUs granted in 2019) and further subject to additional time-based vesting. Management believes it is probable that the Executive RSUs will vest at least in part. The vesting of Executive RSUs will ultimately range from 0% to 150% of the number of shares underlying the Executive RSUs granted based on the level of achievement of the performance goals. If the Company achieves the performance goals, 50% of the number of Executive RSUs earned based on performance 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 March 2020, the Company awarded approximately 20,000 additional shares underlying performance-based RSUs to the Company’s executives for over-achievement of performance goal targets during 2018 and 2019 related to the Executive RSUs granted in 2018.


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8. 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 remain undesignated and unissued as of June 30, 2020. As of June 30, 2020, there were no outstanding shares of preferred stock, as all preferred stock was converted into common stock according to its terms in prior periods.

Series B Cumulative Perpetual Convertible Preferred Stock

In May 2014, the Company issued 0.5 million 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 June 30, 2020 and December 31, 2019.

9. Revenue

The following table summarizes the Company’s services revenue:
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2020
 
2019
 
2020
 
2019
 
 
(in thousands)
Commercial services revenue:
 
 
 
 
 
 
 
 
Voice and data
 
$
41,772

 
$
43,029

 
$
84,012

 
$
84,809

Broadband
 
8,519

 
7,382

 
17,219

 
14,197

IoT data
 
22,626

 
23,903

 
46,392

 
46,394

Hosted payload and other data
 
15,433

 
11,969

 
31,702

 
25,834

Total commercial services revenue
 
88,350

 
86,283

 
179,325

 
171,234

Government services revenue
 
25,000

 
24,514

 
50,000

 
46,514

Total services revenue
 
$
113,350

 
$
110,797

 
$
229,325

 
$
217,748



The following table summarizes the Company’s engineering and support services revenue:
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2020
 
2019
 
2020
 
2019
 
 
(in thousands)
Commercial engineering and support services
 
$
1,140

 
$
831

 
$
2,137

 
$
1,056

Government engineering and support services
 
5,868

 
8,052

 
11,920

 
13,553

Total engineering and support services revenue
 
$
7,008

 
$
8,883

 
$
14,057

 
$
14,609




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The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (contract assets), and deferred revenue (contract liabilities) on the condensed consolidated balance sheets. The Company bills amounts under its agreed-upon contractual terms at periodic intervals (for services), upon shipment (for equipment), or upon achievement of contractual milestones or as work progresses (for engineering and support services). Billing may occur subsequent to revenue recognition, resulting in 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 $11.1 million and $10.8 million during the three months ended June 30, 2020 and 2019, respectively, and $23.5 million and $25.3 million during the six months ended June 30, 2020 and 2019, respectively. The Company has also recorded costs of obtaining contracts expected to be recovered in prepaid expenses and other current assets (contract assets or commissions), that are not separately disclosed on the condensed consolidated balance sheets. The commissions are recognized over the estimated prepaid usage period. The contract assets not separately disclosed are as follows:
 
 
June 30, 2020
 
December 31, 2019
 
 
(in thousands)
Contract Assets:
 
 
 
 
Commissions
 
$
926

 
$
1,116

Other contract costs
 
$
3,078

 
$
3,231



10. 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. In periods of net income, diluted net income per share takes into account the effect of potential dilutive common shares when the effect is dilutive. Potentially dilutive common shares include (i) 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 share for the three and six months ended June 30, 2020 and 2019 are as follows:
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2020
 
2019
 
2020
 
2019
 
 
(in thousands, except per share data)
Numerator:
 
 
 
 
 
 
 
 
Net loss - basic and diluted
 
$
(12,422
)
 
$
(20,203
)
 
$
(44,124
)
 
$
(40,324
)
 
 
 
 
 
 
 
 
 
Denominator:
 
 
 
 
 
 
 
 
Weighted average common shares - basic and diluted
 
133,118

 
123,315

 
132,882

 
118,282

 
 
 
 
 
 
 
 
 
Net loss per share - basic and diluted
 
$
(0.09
)
 
$
(0.16
)
 
$
(0.33
)
 
$
(0.34
)


Due to the Company’s net loss position for the three and six months ended June 30, 2020 and 2019, all potential common stock equivalents were anti-dilutive and therefore excluded from the calculation of diluted net loss per share. The unvested shares of restricted common stock, as well as the anti-dilutive effects of stock options and RSUs outstanding, for the three and six months ended June 30, 2020 and 2019, are as follows:

 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2020
 
2019
 
2020
 
2019
 
 
(in thousands, except per share data)
Anti-dilutive contingent performance-based RSUs
 
354

 
371

 
270

 
342

Anti-dilutive service-based RSUs
 
633