There must be excitement buzzing at Iridium Communications (NASDAQ:IRDM) these days. The final launch of the NEXT satellite constellation is scheduled for December 30, 2018, completing a multi-year and multi-billion dollar project to upgrade the company's communications network. When the final launch via SpaceX is done, Iridium will go from a company preoccupied with development to a communications service provider with cutting edge capabilities.

However, that doesn't mean positive results aren't being realized now. Third quarter results yielded new records for Iridium as existing and new customers gear up for new services once the NEXT constellation is finished.

2018 (so far) in review


Nine Months Ended September 30, 2018

Nine Months Ended September 30, 2017

Year-Over-Year % Change

Total Revenues

$390.8 million

$332.6 million


Total Operating Expenses

$349.0 million

$217.3 million


Operational EBITDA*

$226.5 million

$201.9 million


Net Income (Loss)

($5.8 million)

$92.0 million


*EBITDA = earnings before interest, tax, depreciation, and amortization. Data source: Iridium Communications quarterly earnings.

Iridium's revenues have been on the rise all year as Internet of Things (IoT) service fees and new equipment shipments have increased. Equipment revenues specifically were up 20% in the quarter, foreshadowing a future rise in service revenues once the NEXT satellites are fully deployed. More on that shortly.

As for operating expenses, those are also up sharply year-over-year because of the new satellites. Selling, general, and admin expense notched a 48% increase through the end of the third quarter. But the biggest share of the overall expense advance came from depreciation on all of those new satellites, which Iridium starts to write down once they enter orbit. Depreciation in the third quarter was $62.1 million compared with $22.9 million the same period a year ago, and was also the primary reason for the net loss so far this year.

Despite those numbers, though, operational EBITDA -- which Iridium uses to measure profitability by backing out the depreciation numbers and interest expenses -- grew 12% year-over-year. Full-year 2018 operational EBITDA is expected to be $300 million, which would be a 13% increase over 2017.

Subscriber growth advances unabated

Iridium's strong top-line growth is due to a larger list of billable subscribers, particularly for IoT, as asset tracking and other device connectivity becomes increasingly important.


End of Quarter Billable Subscribers

Subscribers in Comparable Period of 2017

Year-Over- Year % Change

Commercial Voice and Data




Commercial IoT




Government Voice and Data




Government IoT




Data source: Iridium Communications quarterly earnings.

Even though all of the services the new NEXT satellites will eventually power aren't online yet, the satellite constellation is already handling most of Iridium's network traffic. Iridium boasts 100% coverage of the globe, and NEXT provides better voice quality and lower data latency (the amount of time it takes information to travel between two locations). That explains the big increase Iridium has been getting in subscribers, even though all of the satellite launches haven't been completed: The space hardware upgrade has upped overall quality, and new customers are giving it a try.

Management thinks its new subscriber additions and associated revenue increases will continue, because the new equipment sales mentioned earlier are for services that don't yet exist. 2019 is when that changes and the full range of capabilities of those devices will be turned on.

A picture of Earth at night taken from space. Nighttime lights from Europe light up the Earth's surface.

Image source: Getty Images.

What the future holds

First is CERTUS, Iridium's broadband internet offering that will go live by the beginning of 2019. CERTUS will eventually boast the fastest broadband speeds available on a satellite network, and will have the same unrivaled global coverage as the rest of Iridium's suite of services.

Management said its internet service revenues are currently about $25 million a year, but expects to eventually grow that number to $100 million using CERTUS. That's because the company estimates the current satellite-based broadband industry to be worth about $700 million a year, and thinks that Iridium's superior offering will be able to steal some of that business.

Other positive developments include the Federal Aviation Administration's approval of a phased rollout of space-based aircraft surveillance via Aireon (an Iridium subsidiary). A similar go-ahead for testing in the maritime industry was also issued over the summer. And a key partnership was recently struck with Amazon (NASDAQ:AMZN) Web Services to integrate Iridium's network into cloud services, making it easier for IoT developers to get global access for the devices they work with. In total, there are now over 400 partners working with and promoting Iridium's satellite network.

2018 has been a good year for this satellite company, and the new NEXT satellites aren't even fully deployed yet. With a completion date right around the corner and new services set to go live soon, business should get even better for Iridium Communications in 2019.

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