Image: Iridium Communications.

Satellite communications remain the only way for people to keep in touch in remote areas without access to other forms of communication, and despite the growth of ground-based communication services, there will always be some applications where satellites provide better solutions. Iridium Communications (NASDAQ:IRDM) has been a key driver of satellite communication technology and services for years, and its fortunes have ebbed and flowed with prevailing conditions in the industries that need those services the most. Coming into Thursday's third-quarter financial report, Iridium investors had mixed views on the company's recent performance, expecting declining sales but slightly higher earnings. Iridium did better than most had expected on both fronts, and it updated its timeline for its key Iridium NEXT network in a way that should give investors some excitement about the long-term future for the company and its ability to compete effectively with Globalstar (NYSEMKT:GSAT). Let's take a closer look at Iridium Communications and what it said this quarter.

Iridium launches earnings higher
Iridium Communications' third-quarter results reflected a nice turnaround from last quarter's disappointment. Revenue was once again down slightly, falling 1% to $106 million, but that was actually better than the nearly 3% decline that investors were prepared to see. The bottom line was where Iridium shined during the quarter, soaring 45% to $29.5 million and producing earnings of $0.24 per share, topping the consensus forecast by a full nickel per share.

Iridium's detailed numbers showed the successes that helped drive earnings higher. Subscriber counts climbed 55,000 year over year to 781,000, with Iridium adding 15,000 new users in just the past three months. Service-based revenue didn't manage to avoid the pressure on the top line, but it dropped at a slower pace than the rest of Iridium's business, falling to $81.2 million.

Among Iridium's primary sources of business, the company once again saw better performance from its Government Services division. There, revenue climbed 13%, with Iridium's airtime services contract with the Defense Information Systems Agency being primarily responsible for the increase. Government user counts jumped to a record 69,000 subscribers, and the trends favoring data subscription growth continued. Unfortunately for Iridium, its Commercial Services division was unable to keep up the pace, as sales fell 4% despite a 1% increase in customer counts to 360,000. Iridium said that device usage fell from year-ago levels, sending average revenue per user down by $4 to $43 per user. Commercial data subscriptions jumped 12%, but a similar drop in revenue per user offset the gains. Commercial data subscriptions now make up almost half of the segment's overall subscriber base.

Iridium's other businesses had mixed results. Equipment sales rose 3% on higher handset sales, but engineering and support revenue fell by nearly a third.

CEO Matt Desch was still happy with the overall performance from the company. "Iridium continues to succeed in a challenging macroeconomic environment," Desch said. The CEO noted that the strong U.S. dollar and weakness in the energy industry weighed on short-term results but remained confident about the company's long-term future.

What's next for Iridium NEXT
In particular, Iridium has generated excitement about its NEXT program, and it gave updated timelines for its deployment. The company now expects to launch the first two satellites in April, and it's pegged the end of 2017 as the projected completion date for full operational capacity. "Once deployed," Desch said, "Iridium NEXT will offer advanced satellite services like Aireon and Iridium Certus broadband, which will drive revenue growth in 2018 and beyond." Based on the timeline, Iridium affirmed all of its future guidance, both for the full 2015 year and for its long-range 2018 projections.

Yet Iridium still has to deal with competition. Globalstar has made its own advances, partnering with ADS-B Technologies to provide technology for two-way communications requirements for NASA's Langley Research Center. With the aviation industry moving to ADS-B technology more broadly in order to upgrade air traffic control systems to make them more efficient and able to handle higher traffic loads, Globalstar has identified ADS-B as a high-growth opportunity, with both ground-based and satellite networks having a role to play in its global implementation. Globalstar's efforts will compete directly with Iridium's Aireon service, with NEXT satellites having ADS-B receivers built in that will help it offer air-traffic surveillance capabilities as well.

Iridium has done a good job essentially treading water with its existing service capability, but Iridium NEXT will be the key driver of long-term success for the company. Over the next couple of years, Iridium will need to do a good job in getting the NEXT network up and running in order to demonstrate to investors what its full potential will be going forward.