10-Q 1 irdm-20220630.htm 10-Q irdm-20220630
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
 
(Mark One)
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2022
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)
DE26-1344998
(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 ClassTrading SymbolName of Each Exchange on Which Registered
Common Stock, $0.001 par valueIRDMThe 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 (§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  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 Filerx  Accelerated Filer¨
Non-Accelerated Filer¨ Smaller Reporting Company¨
  Emerging Growth Company¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
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 20, 2022 was 126,973,833.



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

2


PART I.
Iridium Communications Inc.
Condensed Consolidated Balance Sheets
(In thousands, except per share data)
 June 30,
2022
December 31, 2021
(Unaudited) 
Assets  
Current assets:
Cash and cash equivalents$227,197 $320,913 
Accounts receivable, net75,006 63,410 
Inventory27,793 29,044 
Prepaid expenses and other current assets12,827 11,043 
Total current assets342,823 424,410 
Property and equipment, net2,541,155 2,662,336 
Other assets149,582 50,050 
Intangible assets, net43,223 43,999 
Total assets$3,076,783 $3,180,795 
Liabilities and stockholders’ equity  
Current liabilities:  
Short-term secured debt$16,500 $16,500 
Accounts payable14,114 16,196 
Accrued expenses and other current liabilities40,559 48,122 
Deferred revenue34,817 28,018 
Total current liabilities105,990 108,836 
Long-term secured debt, net1,575,509 1,581,516 
Deferred income tax liabilities, net149,107 134,279 
Deferred revenue, net of current portion46,796 48,070 
Other long-term liabilities18,277 20,147 
Total liabilities1,895,679 1,892,848 
Commitments and contingencies
Stockholders’ equity:  
Common stock, $0.001 par value, 300,000 shares authorized, 127,179 and 131,342 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively127 131 
Additional paid-in capital1,128,103 1,154,058 
Retained earnings21,011 140,810 
Accumulated other comprehensive income (loss), net of tax31,863 (7,052)
Total stockholders’ equity1,181,104 1,287,947 
Total liabilities and stockholders’ equity$3,076,783 $3,180,795 











See notes to unaudited condensed consolidated financial statements.
3


Iridium Communications Inc.
Condensed Consolidated Statements of Operations and Comprehensive Income
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended June 30,Six Months Ended
June 30,
 2022202120222021
Revenue:
Services$132,861 $121,321 $258,970 $237,473 
Subscriber equipment33,759 21,756 67,503 45,709 
Engineering and support services8,299 6,842 16,665 13,272 
Total revenue174,919 149,919 343,138 296,454 
Operating expenses:  
Cost of services (exclusive of depreciation and amortization)25,320 23,391 49,418 46,598 
Cost of subscriber equipment21,471 12,671 41,976 25,699 
Research and development2,986 2,624 5,605 5,341 
Selling, general and administrative28,662 23,970 54,765 46,627 
Depreciation and amortization75,681 75,668 151,342 151,578 
Total operating expenses154,120 138,324 303,106 275,843 
Operating income20,799 11,595 40,032 20,611 
Other expense, net:  
Interest expense, net(14,780)(17,630)(29,357)(40,399)
Other expense, net(220)(116)(228)(144)
Total other expense, net(15,000)(17,746)(29,585)(40,543)
Income (loss) before income taxes5,799 (6,151)10,447 (19,932)
Income tax benefit (expense)(1,242)9,984 (3,066)18,582 
Net income (loss)$4,557 $3,833 $7,381 $(1,350)
Weighted average shares outstanding - basic128,351 133,367 129,355 134,215 
Weighted average shares outstanding - diluted129,611 134,981 130,811 134,215 
Net income (loss) attributable to common stockholders per share - basic and diluted$0.04 $0.03 $0.06 $(0.01)
Comprehensive income:
Net income (loss)$4,557 $3,833 $7,381 $(1,350)
Foreign currency translation adjustments(794)1,178 481 421 
Unrealized gain on cash flow hedges, net of tax (see Note 6)
10,442 239 38,434 4,082 
Comprehensive income$14,205 $5,250 $46,296 $3,153 

















See notes to unaudited condensed consolidated financial statements.
4


Iridium Communications Inc.
Condensed Consolidated Statements of Changes in Stockholders’ Equity
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended June 30, 2022Three Months Ended June 30, 2021
Additional Paid-In CapitalAccumulated
Other Comprehensive Income
Retained
Earnings
Total Stockholders' EquityAdditional Paid-In CapitalAccumulated
Other Comprehensive Loss
Retained
Earnings
Total Stockholders' Equity
Common StockCommon Stock
SharesAmountSharesAmount
Balances at beginning of period128,031 $128 $1,126,514 $22,215 $42,919 $1,191,776 133,476 $133 $1,152,569 $(14,094)$225,170 $1,363,778 
Stock-based compensation— — 10,440 — — 10,440 — — 8,404 — — 8,404 
Stock options exercised and awards vested130  147 — — 147 179  421 — — 421 
Stock withheld to cover employee taxes(13)— (466)— — (466)(14)— (542)— — (542)
Repurchases and retirements of common stock(969)(1)(8,532)— (26,465)(34,998)(1,713)(1)(14,692)— (48,440)(63,133)
Cumulative translation adjustments— — — (794)— (794)— — — 1,178 — 1,178 
Unrealized gain on cash flow hedges, net of tax— — — 10,442 — 10,442 — — — 239 — 239 
Net income— — — — 4,557 4,557 — — — — 3,833 3,833 
Balances at end of period127,179 $127 $1,128,103 $31,863 $21,011 $1,181,104 131,928 $132 $1,146,160 $(12,677)$180,563 $1,314,178 





Six Months Ended June 30, 2022Six Months Ended June 30, 2021
Additional Paid-In CapitalAccumulated
Other Comprehensive Income (Loss)
Retained
Earnings
Total Stockholders' EquityAdditional Paid-In CapitalAccumulated
Other Comprehensive Loss
Retained
Earnings
Total Stockholders' Equity
Common StockCommon Stock
SharesAmountSharesAmount
Balances at beginning of period131,342 $131 $1,154,058 $(7,052)$140,810 $1,287,947 134,056 $134 $1,160,570 $(17,180)$275,915 $1,419,439 
Stock-based compensation— — 19,379 — — 19,379 — — 13,979 — — 13,979 
Stock options exercised and awards vested736 1 669 — — 670 1,278 1 4,814 — — 4,815 
Stock withheld to cover employee taxes(104)— (4,024)— — (4,024)(115)— (4,740)— — (4,740)
Repurchases and retirements of common stock(4,795)(5)(41,979)— (127,180)(169,164)(3,291)(3)(28,463)— (94,002)(122,468)
Cumulative translation adjustments— — — 481 — 481 — — — 421 — 421 
Unrealized gain on cash flow hedge, net of tax— — — 38,434 — 38,434 — — — 4,082 — 4,082 
Net income (loss)— — — — 7,381 7,381 — — — — (1,350)(1,350)
Balances at end of period127,179 $127 $1,128,103 $31,863 $21,011 $1,181,104 131,928 $132 $1,146,160 $(12,677)$180,563 $1,314,178 














See notes to unaudited condensed consolidated financial statements.
5


Iridium Communications Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 Six Months Ended June 30,
20222021
Cash flows from operating activities:
Net income (loss)$7,381 $(1,350)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Deferred income taxes2,364 (18,922)
Depreciation and amortization151,342 151,578 
Stock-based compensation (net of amounts capitalized)17,924 12,539 
Amortization of deferred financing fees2,319 1,914 
All other items, net194 (558)
Changes in operating assets and liabilities:
Accounts receivable(11,230)(2,123)
Inventory1,545 4,351 
Prepaid expenses and other current assets(1,002)(656)
Other assets828 1,754 
Accounts payable(1,129)(4,153)
Accrued expenses and other current liabilities(6,732)(7,199)
Interest payable40 (46)
Deferred revenue3,577 (9,312)
Other long-term liabilities(1,856)(1,850)
Net cash provided by operating activities165,565 125,967 
Cash flows from investing activities:  
Capital expenditures(31,018)(19,229)
Investment in Aireon (see Note 12)
(50,000) 
Purchases of other investments (1,128)
Maturities of marketable securities 1,420 
Net cash used in investing activities(81,018)(18,937)
Cash flows from financing activities:  
Payments on the Term Loan(8,250)(8,829)
Repurchases of common stock(169,164)(122,468)
Proceeds from exercise of stock options670 4,815 
Tax payment upon settlement of stock awards(4,024)(4,740)
Net cash used in financing activities(180,768)(131,222)
Effect of exchange rate changes on cash and cash equivalents, and restricted cash2,505 422 
Net decrease in cash and cash equivalents, and restricted cash(93,716)(23,770)
Cash, cash equivalents, and restricted cash, beginning of period320,913 237,178 
Cash, cash equivalents, and restricted cash, end of period$227,197 $213,408 
Supplemental cash flow information:
Interest paid, net of amounts capitalized$27,587 $35,721 
Income taxes paid, net$938 $903 
Supplemental disclosure of non-cash investing and financing activities:  
Property and equipment received but not paid$4,747 $2,597 
Capitalized amortization of deferred financing costs$63 $65 
Capitalized stock-based compensation$1,455 $1,441 


See notes to unaudited condensed consolidated financial statements.
6


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


The fair value hierarchy consists of the following tiers:
Level 1, defined as observable inputs such as quoted prices in active markets for identical assets or liabilities;
Level 2, defined as observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and
Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.
The carrying values of the following financial instruments approximated their fair values as of June 30, 2022 and December 31, 2021: (1) cash and cash equivalents, (2) prepaid expenses and other current assets, (3) accounts receivable, (4) accounts payable, and (5) accrued expenses and other current liabilities. Fair values approximate their carrying values because of their short-term nature. The Level 2 cash equivalents may include money market funds, commercial paper and short-term U.S. agency securities. The Company also classifies its derivative financial instruments as Level 2. The Company did not hold any Level 3 assets as of June 30, 2022 or December 31, 2021.
The fair values of the Company’s Level 2 estimates are based upon certain market assumptions and information available to the Company. In determining fair value, the Company uses a market approach utilizing valuation models that incorporate observable inputs such as interest rates, bond yields and quoted prices for similar assets.
Leases
For new leases, the Company will determine if an arrangement is or contains a lease at inception. Leases are included as (1) right-of-use (“ROU”) assets within other assets, and (2) ROU liabilities within accrued expenses and other liabilities and are included within other long-term liabilities on the Company’s condensed consolidated balance sheets.
ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Certain leases contain variable contractual obligations as a result of future base rate escalations which are estimated based on observed trends and included within the measurement of present value. The Company’s leases do not provide an implicit rate. The Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The ROU assets also include any lease payments made and exclude lease incentives. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
The Company has lease agreements with lease and non-lease components, which are generally accounted for separately. For certain leases, such as teleport network facilities, the Company elected the practical expedient to combine lease and non-lease components as a single lease component. Taxes assessed on leases in which the Company is either a lessor or lessee are excluded from contract consideration and variable payments when measuring new lease contracts or remeasuring existing lease contracts.
Inventory
Inventory consists primarily of finished goods and raw materials from third-party manufacturers. The Company outsources manufacturing of subscriber equipment to a third-party manufacturer and purchases accessories from third-party suppliers. The Company’s cost of inventory includes an allocation of overhead, including payroll and payroll-related costs of employees directly involved in bringing inventory to its existing condition, and freight. Inventories are valued using the average cost method and are carried at the lower of cost or net realizable value.
The Company has a manufacturing agreement with Benchmark Electronics Inc. (“Benchmark”) to manufacture most of its subscriber equipment. Pursuant to the agreement, the Company may be required to purchase excess materials at cost plus a contractual markup if the materials are not used in production within the periods specified in the agreement. Benchmark will then repurchase such materials from the Company at the same price paid by the Company, as required for the production of the subscriber equipment.
The following table summarizes the Company's inventory balances:
 June 30, 2022December 31, 2021
 (In thousands)
Finished goods$11,455 $18,395 
Raw materials17,414 11,850 
Inventory valuation reserve(1,076)(1,201)
Total$27,793 $29,044 
8


Commitments
Launch and Related Services
In the second quarter of 2022, the Company entered into an agreement for launch and related services, to launch up to five of its ground spare satellites. The Company expects costs related to this launch to total approximately $35.0 million. As of June 30, 2022, the Company had made aggregate payments of $7.5 million related to these services, which were capitalized as construction in progress within property and equipment, net in the accompanying condensed consolidated balance sheets. The Company currently expects the launch to occur in 2023.
Derivative Financial Instruments
The Company uses derivatives (interest rate swap, swaption and cap) to manage its exposure to fluctuating interest rate risk on variable rate debt. Its derivatives are measured at fair value and are recorded on the condensed consolidated balance sheets within other current liabilities and other assets. When the Company’s derivatives are designated as cash flow hedges, the effective portion of the changes in fair value of the derivatives are recorded in accumulated other comprehensive income (loss) within the Company’s condensed consolidated balance sheets and subsequently recognized in earnings when the hedged items impact earnings. Any ineffective portion of a derivative's change in fair value will be recognized in earnings in the same period in which the hedged interest payments affect earnings. Within the condensed consolidated statements of operations and comprehensive income, the gains and losses related to cash flow hedges are recognized within interest income (expense), net, as this is the same financial statement line item used for any gains or losses associated with the hedged items. Cash flows from hedging activities are included in operating activities within the Company’s condensed consolidated statements of cash flows, which is the same category as the item being hedged. See Note 6 for further information.
3. Cash and Cash Equivalents
Cash and Cash Equivalents
The following table presents the Company’s cash and cash equivalents balances:
June 30, 2022December 31, 2021Recurring Fair
Value Measurement
 (In thousands) 
Cash and cash equivalents: 
Cash$33,067 $28,496  
Money market funds194,130 292,417 Level 2
Total cash and cash equivalents$227,197 $320,913  
4. Leases
Lessor Arrangements
Operating leases in which the Company is a lessor consist primarily of hosting agreements with Aireon (see Note 12) and L3Harris Technologies, Inc. (“L3Harris”) for space on the Company’s satellites. These agreements provide for a fee that will be recognized over the life of the satellites, currently estimated to be approximately 12.5 years. Lease income related to these agreements was $5.3 million for each of the three months ended June 30, 2022 and 2021, and $10.7 million for each of the six months ended June 30, 2022 and 2021. Lease income is recorded as hosted payload and other data service revenue within service revenue on the Company’s condensed consolidated statements of operations and comprehensive income.
Aireon has made payments to the Company pursuant to its hosting agreement, and the Company expects Aireon will continue to do so. L3Harris has prepaid all amounts owed to the Company pursuant to its hosting arrangement. The following table presents future income with respect to the Company’s operating leases in which it is the lessor existing at June 30, 2022, exclusive of the $10.7 million recognized during the six months ended June 30, 2022, by year and in the aggregate:
Year Ending December 31,Amount
(In thousands)
2022$10,722 
202321,445 
202421,445 
202521,445 
202621,445 
   Thereafter77,462 
Total lease income$173,964 
9


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


whether the designated derivative instruments are highly effective in offsetting changes in the cash flows of the hedged items. When the hedging instrument is sold, expires, is terminated, is exercised, no longer qualifies for hedge accounting, is de-designated, or is no longer probable, hedge accounting is discontinued prospectively.
Interest Rate Swap and Swaption
The Company previously entered into a long-term interest rate swap (“Swap”) to mitigate variability in forecasted interest payments on a portion of the Company’s borrowings under the Term Loan. The Swap expired in November 2021. Under the Swap, on the last business day of each month, the Company received variable interest payments based on one-month LIBOR from the counterparty. The Company paid a fixed rate of 1.565% per annum on the Swap.
The Company also entered into an interest rate swaption agreement (“Swaption”), for which the Company paid a fixed annual rate of 0.50%. At inception, the Swap and Swaption were designated as cash flow hedges for hedge accounting. The unrealized changes in market value were recorded in accumulated other comprehensive income (loss) and any remaining balance will be reclassified into earnings during the period in which the hedged transaction affects earnings. Due to the changes made to the Term Loan as a result of the July 2021 repricing, at that time the Company elected to de-designate the Swap as a cash flow hedge. Accordingly, as the related interest payments were still probable, the accumulated balance within other comprehensive income (loss) as of the de-designation date was amortized into earnings through the November 2021 expiration date.
The Company sold the Swaption in May 2021 for $0.7 million. The Company continued to pay the fixed annual rate for the Swaption through the term of the Swaption, which expired in November 2021.
Interest Rate Cap
In July 2021, the Company entered into the Cap that began in December 2021, following the expiration of the Swap. The Company entered into the Cap in order to manage its exposure to interest rate movements on a portion of the Term Loan through the maturity of the Term Loan in November 2026. The Cap provides the Company with the right to receive payment if one-month LIBOR exceeds 1.5%. As of December 2021, the Company began paying a fixed monthly premium based on an annual rate of 0.31% for the Cap. The Cap carried a notional amount of $1,000.0 million as of June 30, 2022 and December 31, 2021.
The Cap is designed to mirror the terms of the Term Loan and to offset the cash flows being hedged. The Company designated the Cap as a cash flow hedge of the variability of the LIBOR-based interest payments on the Term Loan. The effective portion of the Cap's change in fair value will be recorded in accumulated other comprehensive income (loss). Any ineffective portion of the Cap's change in fair value will be recorded in current earnings as interest expense.
Fair Value of Derivative Instruments
As of June 30, 2022 and December 31, 2021, the Company had an asset balance of $67.7 million and $19.7 million, respectively, for the fair value of the Cap and a liability balance of $12.7 million and $14.8 million, respectively, for the fair value of the Cap premium. Both the Cap and the Cap premium are recorded net within other assets.
During the three and six months ended June 30, 2022, the Company collectively incurred $0.8 million and $1.6 million, respectively, in net interest expense for the Swaption and Cap. During the three and six months ended June 30, 2021, the Company collectively incurred $2.1 million and $4.8 million, respectively, in net interest expense for the Swap and Swaption.
Gains and losses resulting from fair value adjustments to the Cap are recorded within accumulated other comprehensive income (loss) within the Company’s condensed consolidated balance sheets and reclassified to interest expense on the dates that interest payments become due. Cash flows related to the derivative contracts are included in cash flows from operating activities on the condensed consolidated statements of cash flows. Over the next 12 months, the Company expects any gains or losses for cash flow hedges amortized from accumulated other comprehensive income (loss) into earnings to have an immaterial impact on the Company’s consolidated financial statements.
The following table presents the amount of unrealized gain or loss and related tax impact associated with the derivative instruments that the Company recorded in its condensed consolidated statements of operations and comprehensive income:
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
(In thousands)(In thousands)
Unrealized gain, net of tax$10,442 $239 $38,434 $4,082 
Tax expense3,197 11 11,652 1,213 
11


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”). As of June 30, 2022, the remaining aggregate number of shares of the Company’s common stock available for future grants under the Amended 2015 Plan was 8,474,230. The Amended 2015 Plan provides for the grant of stock-based awards, including nonqualified stock options, incentive stock options, restricted stock, restricted stock units (“RSUs”), stock appreciation rights and other equity securities to employees, consultants and non-employee directors of the Company and its affiliated entities. The number of shares of common stock available for issuance under the Amended 2015 Plan is reduced by (i) 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 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. The fair value of stock options is determined at the grant date using the Black-Scholes option pricing model.
The Company historically granted stock options to newly hired and promoted employees but now exclusively utilizes RSUs. The Company did not grant any stock options during the three and six months ended June 30, 2022 or 2021.
Option Summary
A summary of the activity of the Company's stock options is as follows:
SharesWeighted-
Average
Exercise Price
Per Share
Weighted-
Average
Remaining
Contractual
Term (Years)
Aggregate
Intrinsic
Value
 (In thousands, except years and per share data)
Options outstanding at December 31, 20211,681 $9.35 3.28$53,698 
Exercised(71)9.34 $2,056 
Forfeited(2)14.24 
Options outstanding at June 30, 20221,608 $9.34 2.78$45,361 
Options exercisable at June 30, 20221,575 $9.09 2.70$44,851 
Options exercisable and expected to vest at June 30, 20221,607 $9.34 2.78$45,358 

SharesWeighted-
Average
Exercise Price
Per Share
Weighted-
Average
Remaining
Contractual
Term (Years)
Aggregate
Intrinsic
Value
 (In thousands, except years and per share data)
Options outstanding at December 31, 20202,554 $9.10 3.94$77,182 
Cancelled or expired(1)7.78 
Exercised(621)7.62 $23,806 
Forfeited(11)15.37 
Options outstanding at June 30, 20211,921 $9.55 3.73$58,492 
Options exercisable at June 30, 20211,783 $8.85 3.46$55,513 
Options exercisable and expected to vest at June 30, 20211,920 $9.54 3.73$58,457 
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. Some RSUs granted to employees for performance vest upon the completion of defined performance goals, subject to continued
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employment. The RSUs granted to non-employee members of the board of directors generally vest in full on the first anniversary of the grant date. The RSUs granted to non-employee consultants generally vest 50% on the first anniversary of the grant date, with the remaining 50% vesting quarterly thereafter through the second anniversary of the grant date. The Company’s RSUs are classified as equity awards because the RSUs will be settled in the Company’s common stock upon vesting. The fair value of the RSUs is determined at the grant date based on the closing price of the Company's common stock on the date of grant. The related compensation expense is recognized over the service period, or shorter periods based on the retirement eligibility of certain grantees, and is based on the grant date fair value of the Company’s common stock and the number of shares expected to vest. The fair value of the awards is not remeasured at the end of each reporting period. The RSUs do not carry voting rights until they are vested, and shares are issued upon settlement in accordance with the terms of the award.
RSU Summary
The following tables summarize the Company’s RSU activity:
Shares Underlying RSUsWeighted-
Average
Grant Date
Fair Value
Per RSU
 (In thousands) 
Outstanding at December 31, 20212,550 $25.80 
Granted1,219 38.97 
Forfeited(113)31.12 
Released(665)33.27 
Outstanding at June 30, 20222,991 $29.30 
Vested and unreleased at June 30, 2022 (1)
882  

Shares Underlying RSUsWeighted-
Average
Grant Date
Fair Value
Per RSU
 (In thousands) 
Outstanding at December 31, 20202,664 $18.96 
Granted843 41.67 
Forfeited(51)27.45 
Released(657)21.40 
Outstanding at June 30, 20212,799 $25.07 
Vested and unreleased at June 30, 2021 (1)
860 
(1)     These RSUs were granted to the Company's board of directors as a part of their compensation for board and committee service, as detailed below, and had vested but had not yet settled, meaning that the underlying shares of common stock had not been issued and released pursuant to the terms of the applicable compensation program.
Service-Based RSUs
The majority of the annual compensation the Company provides to non-employee members of its board of directors is paid in the form of RSUs. In addition, some members of the Company’s board of directors may elect to receive the remainder of their annual compensation, or a portion thereof, in the form of RSUs. An aggregate amount of approximately 54,000 and 39,000 service-based RSUs were granted to the Company’s non-employee members of the board of directors as a result of these payments and elections during the three and six months ended June 30, 2022 and 2021, respectively, with an estimated grant date fair value of $2.1 million and $1.6 million, respectively.
During the three and six months ended June 30, 2022 and 2021, the Company granted approximately 743,000 and 461,000 service-based RSUs, respectively, to its employees, with an estimated aggregate grant date fair value of $29.0 million and $19.2 million, respectively.
During the six months ended June 30, 2022 and 2021, the Company granted approximately 7,000 and 2,000 service-based RSUs, respectively, to non-employee consultants, with an estimated aggregate grant date fair value of $0.3 million and $0.1 million, respectively.
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Performance-Based RSUs
In March 2022 and 2021, the Company granted approximately 248,000 and 228,000 annual incentive, performance-based RSUs, respectively, to the Company’s executives and employees (the “Bonus RSUs”), with an estimated grant date fair value of $9.7 million and $9.5 million, respectively. Vesting of the Bonus RSUs is and was dependent upon the Company’s achievement of defined performance goals over the respective fiscal year. The Company records stock-based compensation expense related to performance-based RSUs when it is considered probable that the performance conditions will be met. Management believes it is probable that substantially all of the 2022 Bonus RSUs will vest. The level of achievement, if any, of performance goals will be determined by the compensation committee of the Company’s board of directors and, if such goals are achieved, the 2022 Bonus RSUs will vest, subject to continued employment, in March 2023. All of the 2021 Bonus RSUs vested in March 2022 upon the determination of the level of achievement of the performance goals.
Additionally, in March 2022 and 2021, the Company granted approximately 167,000 and 110,000 long-term, performance-based RSUs, respectively, to the Company’s executives (the “Executive RSUs”). The estimated aggregate grant date fair value of the Executive RSUs for the 2022 and 2021 grants was $6.5 million and $4.6 million, respectively. Vesting of the Executive RSUs is dependent upon the Company’s achievement of defined performance goals over a two-year period. The vesting of Executive RSUs will ultimately range from 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, which may be accelerated based on the retirement eligibility of certain grantees. During March 2022, approximately 50,000 shares underlying performance-based RSUs granted to the Company’s executives in 2020 were forfeited as a result of performance metrics not being fully achieved. During March 2021, the Company awarded approximately 3,000 additional shares related to performance-based RSUs granted in 2019 to the Company's executives for over-achievement of performance targets.
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, all of which have converted to common stock. The remaining 0.5 million authorized shares of preferred stock remain undesignated and unissued as of June 30, 2022 and December 31, 2021. As of June 30, 2022 and December 31, 2021, there were no outstanding shares of preferred stock.
Share Repurchases and Retirement
In February 2021, the Company implemented a stock repurchase program for up to $300.0 million of its common stock through December 31, 2022. In March 2022, the Company expanded the repurchase program to include up to an additional $300.0 million of its common stock through December 31, 2023. This timeframe can be extended or shortened by the board of directors. Repurchases may be made from time to time on the open market at prevailing prices or in negotiated transactions off the market. All shares are immediately retired upon repurchase in accordance with the board-approved policy. When treasury shares are retired, the Company’s policy is to allocate the excess of the repurchase price over the par value of shares acquired first, to additional paid-in capital, and then to retained earnings. The portion to be allocated to additional paid-in capital is calculated by applying a percentage, determined by dividing the number of shares to be retired by the number of shares outstanding, to the balance of additional paid-in capital as of the date of retirement.
The Company repurchased and subsequently retired 1.0 million and 4.8 million shares of its common stock during the three and six months ended June 30, 2022, respectively, for a total purchase price of $35.0 million and $169.2 million, respectively. The Company repurchased and subsequently retired 1.7 million and 3.3 million shares of its common stock during the three and six months ended June 30, 2021, respectively, for a total purchase price of $63.1 million and $122.5 million, respectively. As of June 30, 2022, $267.5 million remained available and authorized for repurchase under the stock repurchase program.
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9. Revenue
The following table summarizes the Company’s services revenue:
 Three Months Ended June 30,Six Months Ended June 30,
 2022202120222021
 (In thousands)(In thousands)
Commercial services revenue:
Voice and data $48,482 $43,283 $93,365 $84,707 
IoT data30,630 27,224 59,071 51,978 
Broadband12,097 10,636 23,611 20,070 
Hosted payload and other data15,152 14,428 29,923 29,218 
Total commercial services revenue106,361 95,571 205,970 185,973 
Government services revenue26,500 25,750 53,000 51,500 
Total services revenue$132,861 $121,321 $258,970 $237,473 
The following table summarizes the Company’s engineering and support services revenue:
 Three Months Ended June 30,Six Months Ended June 30,
 2022202120222021
 (In thousands)(In thousands)
Commercial$1,386 $983 $2,497 $1,729 
Government6,913 5,859