2018 was a pivotal year for Iridium Communications (NASDAQ:IRDM). As the only communications provider to cover 100% of the globe, the completion of its new satellite constellation puts it in prime position to build on that leadership with global broadband internet and other connected services. With its space infrastructure buildout finished, it's now about adding connections -- and Iridium already has momentum on its side as far as that metric goes.

The final touch on next-gen services

Last year was an exceptionally good one for Iridium. Financial results were excellent, driven by plenty of new subscribers signing up. The crowning achievement, though, was the completion of the NEXT satellite constellation, which allowed for the launch of new global broadband and data services. CEO Matt Desch summarized it this way:

On February 5th, the final Iridium NEXT satellites went operational, completing our network of 66 new satellites. This historic event completes a decade long design, construction and launch program, retires a lot of execution risk and allows Iridium to move from a period of capital investment to a new exciting area of free cash flow. As I reflect on this milestone, I'm reminded that nothing in space comes easily, and this journey has not been without its fair share of challenges. 

Despite the challenges with launching dozens of new satellites into orbit, the company notched a 16% growth rate in active subscribers to 1.1 million, which led to 17% revenue growth -- the best rate ever for Iridium as a public company. Operational EBITDA (earnings before interest, tax, depreciation, and amortization) also notched a healthy 14% growth rate.

Metric

Full-Year 2018

Full-Year 2017

YOY Change

Revenue

$523 million

$448 million

17%

Operating expenses

$481 million

$347 million

39%

Operational EBITDA

$302 million

$266 million

14%

Net income (loss)

($13.4 million)

$234 million

N/A

YOY = year over year. Data source: Iridium Communications.

The one blight on the year was the swing to a net loss. The big decrease was due to a one-time $114 million tax benefit in 2017 from U.S. corporate tax reform and a $96 million increase in depreciation on the NEXT satellites in 2018. However, operational EBITDA is the key measure Iridium uses for profitability as it backs out the depreciation on its hardware upgrades. With that metric on the rise, there was a lot to like in business results last year.

Check out the latest earnings call transcript for Iridium Communications.

A shot of the European continent at night from space.

Image source: Getty Images.

Now what?

With the NEXT satellites in place, Iridium's first new service just recently launched: CERTUS, voice and data for a multitude of uses ranging from government and military applications to the maritime and aviation industries. Iridium also recently got on board with Amazon's lucrative Amazon Web Services network, offering its globe-spanning connectivity to developers on the cloud platform.

Desch said initial reactions to CERTUS have been positive, but as 2019 is an introductory year the company expects sales to ramp up over the next three years -- to the tune of $100 million a year in broadband revenues by 2021. Investors will likely need to exercise patience here, though, as getting data services up and running to new partners isn't as easy as activating a smartphone at your local mobile store.

Another area to keep an eye on is the company's subsidiary Aireon, a global air traffic surveillance system that should begin running later this year. It could take time for results to start showing up here as well. Nevertheless, initial results from all of Iridium's work is already rolling in and expected to keep climbing in the year ahead. Service revenue and operational EBITDA should notch another increase in 2019 -- $440 million for the former (an 8% increase) and $325 to $335 million for the latter (an 8% to 11% increase). That's a forecast slowdown from 2018, but progress nonetheless in an "introductory" period with new capabilities just now coming on line.

As Iridium Communications transitions from a focus on getting new satellites into orbit to a communications services company, some growing pains are to be expected; but there was plenty to like in the company's closeout on 2018. With the years ahead looking rosy with its new tech now up and running, Iridium is worth keeping on your radar.