What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-02-17 compared with 2021-02-11 · 257 added, 291 removed, 765 unchanged (42% of the section changed)

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Iridium Communications Inc.:

Report of Ernst & Young LLP, Independent Registered Public Accounting Firm

Report of Ernst & Young LLP, Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Balance Sheets

Consolidated Statements of Operations and Comprehensive Loss

Consolidated Statements of Operations and Comprehensive Income (Loss)

Consolidated Statements of Changes in Stockholders’ Equity

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We have audited the accompanying consolidated balance sheets of Iridium Communications Inc.

(the Company) as of December 31, 2020 and 2019, the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2020 and the related notes (collectively referred to as the “consolidated financial statements”).

(the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive (income) loss, changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2021 and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with U.S.

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Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

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Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

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(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or in the account or disclosures to which it relates.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.

Useful life of upgraded satellites

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Accrued expenses and other current liabilities 48,122 49,504

Interest payable 246 7,790

Deferred revenue 28,018 32,412

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Long-term secured debt, net 1,581,516 1,596,893

Long-term senior unsecured notes, net — 352,994

Deferred income tax liabilities, net 134,279 155,084

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Stockholders' equity:

Series A preferred stock, $0.0001 par value, 1,000 shares authorized and issued, zero outstanding — —

Series B preferred stock, $0.0001 par value, 500 shares authorized and issued, zero outstanding — —

Common stock, $0.001 par value, 300,000 shares authorized, 134,056 and 131,632

shares issued and outstanding at December 31, 2020 and 2019, respectively 134 132

Common stock, $0.001 par value, 300,000 shares authorized, 131,342 and 134,056 shares issued and outstanding at December 31, 2021 and 2020, respectively 131 134

Additional paid-in capital 1,154,058 1,160,570

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Iridium Communications Inc.

Consolidated Statements of Operations and Comprehensive Loss

Consolidated Statements of Operations and Comprehensive Income (Loss)

(In thousands, except per share amounts)

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Net loss ( 9,319 ) ( 56,054 ) ( 161,999 )

Series A preferred stock dividends, declared and paid excluding

cumulative dividends — — 1,750

Series B preferred stock dividends, declared and paid excluding

cumulative dividends — 4,194 2,109

Series B preferred stock dividends, undeclared — — 6,290

Series B preferred stock dividends, declared and paid excluding cumulative dividends — — 4,194

Net loss attributable to common stockholders $ ( 9,319 ) $ ( 56,054 ) $ ( 166,193 )

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Net loss attributable to common stockholders per share - basic and diluted $ ( 0.07 ) $ ( 0.42 ) $ ( 1.33 )

Comprehensive loss:

Comprehensive income (loss):

Net loss $ ( 9,319 ) $ ( 56,054 ) $ ( 161,999 )

Foreign currency translation adjustments, net of tax ( 3,272 ) 2,051 ( 5,017 )

Unrealized loss on cash flow hedges, net of tax (see Note 8 )

Foreign currency translation adjustments ( 280 ) ( 3,277 ) 2,051

Unrealized gain (loss) on cash flow hedges, net of tax (see Note 8 )

10,408 ( 7,036 ) ( 121 )

Unrealized gain (loss) on marketable securities, net of tax ( 5 ) — 16

Comprehensive loss $ ( 66,367 ) $ ( 160,069 ) $ ( 18,385 )

Comprehensive income (loss) $ 809 $ ( 66,367 ) $ ( 160,069 )

See notes to consolidated financial statements

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(In thousands)

Convertible Series B

Convertible Additional Paid-In Capital Accumulated

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Earnings Total Stockholders' Equity

Preferred Stock Preferred Stock Common Stock

Shares Amount Shares Amount Shares Amount

Preferred Stock Common Stock

Shares Amount Shares Amount

Balance at December 31, 2018 497 $ — 112,200 $ 112 $ 1,108,550 $ ( 8,797 ) $ 501,712 $ 1,601,577

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Net loss — — — — — — ( 161,999 ) ( 161,999 )

Dividends on Series A preferred stock — — — — — — — — ( 7,000 ) ( 7,000 )

Dividends on Series B preferred stock — — — — — — ( 7,744 ) ( 7,744 )

Cumulative translation adjustments, net of tax — — — — — — — ( 5,017 ) — ( 5,017 )

Changes from adoption of ASC 606, net of tax — — — — — — — — 11,729 11,729

Unrealized gain on marketable securities, net of tax — — — — — — — 16 — 16

Cumulative translation adjustments — — — — — 2,051 — 2,051

Unrealized loss on cash flow hedges, net of tax — — — — — ( 121 ) — ( 121 )

Preferred stock converted to common ( 497 ) — 16,628 17 ( 17 ) — — —

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Stock-based compensation — — — — 18,322 — — 18,322

Stock issued in connection with employee stock plan — — — — 3,003 3 13,468 — — 13,471

Stock options exercised and awards vested — — 2,588 2 12,713 — — 12,715

Stock withheld to cover employee taxes — — ( 164 ) — ( 4,513 ) — — ( 4,513 )

Net loss — — — — — — ( 56,054 ) ( 56,054 )

Dividends on Series B Preferred Stock — — — — — — — — ( 7,744 ) ( 7,744 )

Cumulative translation adjustments, net of tax — — — — — — — 2,051 — 2,051

Cumulative translation adjustments — — — — — ( 3,277 ) — ( 3,277 )

Unrealized loss on cash flow hedges, net of tax — — — — — ( 7,036 ) — ( 7,036 )

Preferred stock converted to common — — ( 497 ) — 16,628 17 ( 17 ) — — —

Balance at December 31, 2020 — — 134,056 134 1,160,570 ( 17,180 ) 275,915 1,419,439

Stock-based compensation — — — — 29,616 — — 29,616

Stock issued in connection with employee stock plan — — — — 2,588 2 12,713 — 12,715

Stock options exercised and awards vested — — 1,769 1 7,442 — — 7,443

Stock withheld to cover employee taxes — — ( 144 ) — ( 5,918 ) — — ( 5,918 )

Repurchases and retirements of common stock — — ( 4,339 ) ( 4 ) ( 37,652 ) — ( 125,786 ) ( 163,442 )

Net loss — — — — — — ( 9,319 ) ( 9,319 )

Cumulative translation adjustments, net of tax — — — — — — — ( 3,272 ) — ( 3,272 )

Unrealized loss on marketable securities, net of tax — — — — — — — ( 5 ) — ( 5 )

Unrealized loss on cash flow hedges, net of tax — — — — — — — ( 7,036 ) — ( 7,036 )

Cumulative translation adjustments — — — — — ( 280 ) — ( 280 )

Unrealized gain on cash flow hedges, net of tax — — — — — 10,408 — 10,408

Balance at December 31, 2021 — $ — 131,342 $ 131 $ 1,154,058 $ ( 7,052 ) $ 140,810 $ 1,287,947

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Depreciation and amortization 305,431 303,174 297,705

Loss on extinguishment of debt and Thales Alenia Space bills of exchange 30,209 111,710 7,292

Loss on extinguishment of debt 879 30,209 111,710

Stock-based compensation (net of amounts capitalized) 26,782 16,714 15,138

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Accrued expenses and other current liabilities 7,170 ( 15,662 ) ( 17,093 )

Interest payable ( 7,072 ) ( 12,919 ) 20,237

Deferred revenue ( 7,531 ) ( 21,692 ) ( 6,435 )

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Payments on the Term Loan ( 195,785 ) ( 12,375 ) —

Borrowings under the senior unsecured notes — — 360,000

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

Repayment of the Thales Alenia Space bills of exchange — — ( 59,936 )

Repayments on the Notes, including extinguishment costs — ( 383,451 ) —

Repurchases of common stock ( 163,442 ) — —

Payment of deferred financing fees ( 4,052 ) ( 2,562 ) ( 28,803 )

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Tax payment upon settlement of stock awards ( 5,918 ) ( 4,513 ) ( 4,596 )

Payment of Series A preferred stock dividends — — ( 7,000 )

Payment of Series B preferred stock dividends — — ( 8,387 )

Net cash (used in) provided by financing activities ( 188,186 ) ( 313,280 ) 193,503

Net cash used in financing activities ( 182,469 ) ( 188,186 ) ( 313,280 )

Effect of exchange rate changes on cash and cash equivalents ( 288 ) ( 1,494 ) 1,230

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Property and equipment received but not paid for yet $ 8,225 $ 3,721 $ 3,975

Interest capitalized but not paid $ — $ — $ 9,194

Capitalized amortization of deferred financing fees $ 115 $ 2,416 $ 16,306

Capitalized amortization of deferred financing costs $ 115 $ 115 $ 2,416

Capitalized stock-based compensation $ 2,834 $ 1,608 $ 1,503

Credit Facility repayment in exchange for the settlement of hosting $ — $ — $ 35,000

Cost basis investment in exchange for the settlement of accounts receivable $ — $ — $ 3,300

Unrealized loss on cash flow hedge, net of tax $ ( 7,036 ) $ ( 118 ) $ —

See notes to consolidated financial statements

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Federal Communications Commission (the “FCC”) and from foreign regulatory bodies that permit the Company to conduct its business, including the operation of its satellite constellation.

The Company’s operations are 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 subsidiaries.

As a result, there are no material differences between the information presented in these consolidated financial statements of the Company and the financial information of Iridium Holdings, Iridium Satellite and their subsidiaries, on a consolidated basis, other than as a result of (i) tax provision as result of Iridium Holdings, Iridium Satellite and their subsidiaries being classified as flow-through entities for U.S.

The Company’s operations are conducted through, and its operating assets are owned by, its principal operating subsidiary, Iridium Satellite LLC (“Iridium Satellite”), Iridium Satellite’s immediate parent, Iridium Holdings LLC, and their subsidiaries.

As a result, there are no material differences between the information presented in these consolidated financial statements of the Company and the financial information of Iridium Holdings, Iridium Satellite and their subsidiaries, on a consolidated basis, other than as a result of (i) tax provision as a result of Iridium Holdings, Iridium Satellite and their subsidiaries being classified as flow-through entities for U.S.

federal income tax purposes and (ii) senior unsecured notes (fully repaid February 15, 2020, see Note 7 ), related interest expense and loss on extinguishment of debt.

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GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period.

On an ongoing basis, the Company evaluates its estimates and assumptions, including those related to revenue recognition, the useful lives and recoverability of long-lived and intangible assets, income taxes, stock-based compensation, estimating the Company's incremental borrowing rate for its leases, and contingencies, among others.

On an ongoing basis, the Company evaluates its estimates and assumptions, including those related to revenue recognition, the useful lives and recoverability of long-lived and intangible assets, income taxes, stock-based compensation, the incremental borrowing rate for its leases, and contingencies, among others.

The Company bases these estimates on historical and anticipated results, trends, and various other assumptions that it believes are reasonable, including assumptions as to future events.

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Actual results could differ materially from those estimates.

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

Adopted and Recently Issued Accounting Pronouncements

In December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU No.

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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 impact of the adoption of ASU 2019-12 on the Company's consolidated financial statements and related disclosures is not expected to be material.

The Company's adoption of ASU 2019-12 on January 1, 2021 had no impact on its consolidated financial statements and related disclosures.

In March 2020, the FASB issued ASU No.

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Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”).

This guidance provides optional expedients and exceptions

for applying U.S.

GAAP to contracts, hedging relationships, and other transactions that reference London Inter-bank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued.

The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur.

The Company will continue to evaluate ASU 2020-04 and consider the possible adoption of expedients as well as the impacts they may have on its consolidated financial statements and related disclosures.

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.

As of December 31, 2021 , the Company elected to apply the optional expedient for hedge accounting specifically to the interest rate cap agreement (the "Cap") which was executed in July 2021.

This allowed the Company to assume that the index upon which future interest payments on the hedged portion of the Term Loan (see Note 8 ) will be based matches the index on the Cap.

Adoption of this

practical expedient had no impact on the Company's 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.

Fair Value Measurements

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The Company also classifies its derivative financial instruments as Level 2.

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.

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.

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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.

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.

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These investments, along with cash deposited in institutional money market funds, regular interest bearing depository accounts and non-interest bearing depository accounts, are classified as cash and cash equivalents on the accompanying consolidated balance sheets.

Marketable Securities

Marketable securities consist of fixed-income debt securities with an original maturity in excess of ninety days.

These investments are classified as available-for-sale and are carried at fair value.

Unrealized gains and losses, net of taxes, are reported as a component of other comprehensive income or loss.

The specific identification method is used to determine the cost basis of the marketable securities sold.

There were no realized gains or losses on the sale of marketable securities for the years ended December 31, 2020 and 2019.

The Company regularly monitors and evaluates the fair value of its investments to identify other-than-temporary declines in value.

The Company determined that any decline in fair value of these investments is temporary as the Company does not intend to sell these securities and it is not likely that the Company will be required to sell the securities before the recovery of their amortized cost basis.

Accounts Receivable

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Translation adjustments are accumulated in a separate component of stockholders’ equity.

Transaction gains or losses are classified as other income (expense), net in the accompanying consolidated statements of operations and comprehensive loss.

Transaction gains or losses are classified as other income (expense), net in the accompanying consolidated statements of operations and comprehensive income (loss).

In instances where the financial statements of a foreign entity in a highly inflationary economy are material, they are remeasured as if the functional currency were the reporting currency.

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Inventories are valued using the average cost method and are carried at the lower of cost or net realizable value.

The expense for excess and obsolete inventory was not material as of December 31, 2020, 2019 and 2018.

The Company's expense for excess and obsolete inventory was not material during the years ended December 31, 2021, 2020 or 2019.

The Company has a manufacturing agreement with Benchmark Electronics Inc.

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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 Company's inventory balance consisted of the following:

Year Ended December 31,

(In thousands)

Finished Goods $ 18,395 $ 27,936

Raw Materials 11,850 5,983

Inventory Valuation Reserve ( 1,201 ) ( 1,439 )

Total $ 29,044 $ 32,480

Stock-Based Compensation

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The fair value of restricted stock units (“RSUs”) is equal to the closing price of the underlying common stock on the grant date.

The fair value of an award that is ultimately expected to vest is recognized on a straight-line basis over the requisite service or performance period and is classified in the consolidated statements of operations and comprehensive income in a manner consistent with the classification of the recipient’s compensation.

The fair value of an award that is ultimately expected to vest is recognized on a straight-line basis over the requisite service or performance period and is classified in the consolidated statements of operations and comprehensive income (loss) in a manner consistent with the classification of the recipient’s compensation.

The expected vesting of the Company’s performance-based RSUs is based upon the probability that the Company achieves the defined performance goals.

The level of achievement of performance goals, if any, is determined by the Compensation Committee.

Stock-based awards to non-employee consultants are expensed at their grant-date fair value as services are provided according to the terms of their agreements and are classified in selling, general and administrative expenses in the accompanying consolidated statements of operations and comprehensive income.

Classification of stock-based compensation by line item on the balance sheet and statement of operations is presented below:

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Property and equipment is carried at cost less accumulated depreciation.

The Company applies judgment in determining the useful lives based on factors such as engineering data, long-term strategy for using the assets, the manufacturer's estimated design life for the assets, laws and regulations that could impact the useful lives of the assets and other economic factors.

The Company assesses the current estimated operational life of the satellites, including the potential impact of environmental factors on the satellites, ongoing operational enhancements and software upgrades when evaluating the useful lives of its satellites.

Additionally, the Company reviews engineering data relating to the operation and performance of its satellite network.

Depreciation is calculated using the straight-line method over the following estimated useful lives:

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Derivative Financial Instruments

The Company uses an interest rate swap agreement to manage its exposures to fluctuating interest rate risk on variable rate debt.

Derivatives are measured at fair value and are recorded on the balance sheet within other assets 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 as operating activities within the Company’s consolidated statements of cash flows, which is the same category as the items being hedged.

The Company uses derivatives (interest rate swap, swaption, 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 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 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 consolidated statements of operations and comprehensive income (loss), 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 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 item being hedged.

See Note 8 for further information.

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Wholesaler of satellite communications products and services

Pursuant to wholesale agreements, the Company sells its products and services to service providers who, in turn, sell the products and services to other distributors or directly to the end users.

Pursuant to wholesale agreements, the Company sells its products and services to service providers and recognizes revenue as it fulfills its performance obligations to the service providers, based an amount that reflects the consideration to which it expects to be entitled to in exchange for those products and services.

The service providers, in turn, sell the products and services to other distributors or directly to the end users.

The Company recognizes revenue when an arrangement exists, services or equipment are transferred, the transaction price is determined, the arrangement has commercial substance, and collection of consideration is probable.

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If the stand-alone selling price is not directly observable, the Company estimates the amount to be allocated for each performance obligation based on observable market transactions or the residual approach.

When the Company determines the performance obligations are not distinct, the Company recognizes revenue on a combined basis as the last obligation is satisfied.

When the Company determines the performance obligations are not distinct, the Company recognizes revenue on a combined basis.

To the extent the Company's contracts include variable consideration, the transaction price includes both fixed and variable consideration.

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When a contract includes variable consideration, the Company evaluates the estimate of the variable consideration to determine whether the estimate needs to be constrained;

therefore, the Company includes the variable consideration in the transaction price only to

the extent that it is probable that a significant reversal of the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

therefore, the Company includes the variable consideration in the transaction price only to the extent that it is probable that a significant reversal of the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

Variable consideration estimates are updated at the end of each quarter.

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Service revenue is generated from the Company’s service providers through usage of its satellite system and through fixed monthly access fees per user charged to service providers.

Revenue for usage is recognized when usage occurs.

Revenue for fixed-per-user access fees is recognized over the usage period in which the services are provided to the end user.

Revenue for usage is recognized when usage occurs and billed in arrears with payments generally submitted within 30 days.

Revenue for fixed-per-user access fees is billed monthly in advance and generally recognized over the month, or related usage period, in which the services are provided to the end user.

The Company sells prepaid services in the form of e-vouchers and prepaid cards.

A liability is established equal to the cash paid upon purchase for the e-voucher or prepaid card.

Beginning January 1, 2018, upon the adoption of ASU 2014-09, the Company recognizes revenue from (i) the prepaid services upon the use of the e-voucher or prepaid card by the customer and (ii) the estimated pattern of use.

The Company recognizes revenue from (i) the prepaid services upon the use of the e-voucher or prepaid card by the customer and (ii) the estimated pattern of use.

The Company does not offer refunds for unused prepaid services.

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These services include unlimited global standard and secure voice, low and high-speed data, paging, broadcast and Distributed Tactical Communications Services (“DTCS”) services for an unlimited number of Department of Defense (“DoD”) and other federal subscribers.

Under this contract, revenue is based on the annual fee for the fixed-price contract with unlimited subscribers, and is recognized on a straight-line basis over each contractual year.

Under this contract, revenue is based on the annual fee for the fixed-price contract with unlimited

subscribers and is recognized on a straight-line basis over each contractual year, with equal payments submitted monthly.

government purchases its subscriber equipment from third-party distributors and not directly from the Company.

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The Company recognizes subscriber equipment sales and the related costs when title to the equipment (and the risks and rewards of ownership) passes to the customer, typically upon shipment.

Customers are billed when inventory is shipped, and payment is generally due within 30 days.

Customers do not have rights of return without prior consent from the Company.

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The Company also provides engineering services to assist customers in developing new technologies for use on the Company’s satellite system.

Fees to customers under these agreements are generally based on milestones and payments are submitted as milestones are achieved.

The revenue associated with fixed-fee contracts is recognized over time using costs incurred to date relative to total estimated costs at completion to measure progress toward satisfying its performance obligation.

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Incurred costs represent work performed, which corresponds with, and thereby best depicts, the transfer of control to the customer.

Revenue on cost-plus-fixed-fee contracts is recognized to the extent of estimated costs incurred plus the applicable fees earned.

The revenue associated with cost-plus-fixed-fee contracts is recognized to the extent of estimated costs incurred plus the applicable fees earned.

The Company considers fixed fees under cost-plus-fixed-fee contracts to be earned in proportion to the allowable costs incurred in performance of the contract.

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Marketable Securities

As of December 31, 2021, the Company did not hold any investment positions in marketable securities.

As of December 31, 2020, the Company's marketable securities consisted of only fixed-income securities.

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The gross unrealized gains and gross unrealized losses on these marketable securities were not material as of December 31, 2020.

All marketable securities are measured as Level 2 investments.

The following table presents the contractual maturities of the Company's fixed income debt securities, as of December 31, 2020:

All marketable securities were classified as Level 2 investments in the fair value hierarchy.

The following table presents the contractual maturities of the Company's fixed income debt securities:

December 31, 2020

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Total $ 7,554 $ 7,548

As of December 31, 2019, the Company did not hold any investment positions in marketable securities.

Property and Equipment

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(In thousands)

Internally developed software $ 44,444 $ 38,064

Internally developed and purchased software $ 29,443 $ 44,444

Equipment 11,558 10,388

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Depreciation expense was $ 303.8 million, $ 301.7 million and $ 296.1 million for the years ended December 31, 2021, 2020 and 2019, respectively.

The increase in depreciation from 2018 to 2019 was primarily due to the increased number of upgraded satellites in service as the Company completed the replacement of its first-generation satellites in the first quarter of 2019.

Intangible Assets

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The Company has operating leases for land, office space, satellite network operations center (“SNOC”) facilities, system gateway facilities, a warehouse and a distribution center.

The Company also has operations and maintenance (“O&M”) agreements that include leases associated with two TPN facilities.

Some of the Company's leases include options to extend the leases for up to 10 years and some include options to terminate the lease within 1 year.

The Company also has operations and maintenance (“O&M”) agreements that include leases associated with two teleport network facilities.

Some of the Company's leases include options to extend the leases for up to 10 years.

The Company does not include term extension options as part of its present value calculation of lease liabilities unless it is reasonably certain to exercise those options.

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Lessor Arrangements

Operating leases in which the Company is a lessor consist primarily of hosting agreements with Aireon LLC (see Note 1 4 ) 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.

Operating leases in which the Company is a lessor consist primarily of hosting agreements with Aireon LLC (“Aireon”) (see Note 14 ) 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 $ 21.4 million, $ 21.4 million and $ 21.6 million for the years ended December 31, 2021, 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 for their hosting agreements and will continue to do so.

Lease income is recorded as hosted payload and other data service revenue within service revenue on the Company’s consolidated statements of operations and comprehensive income (loss).

Both Aireon and L3Harris have made payments for 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 was the lessor at December 31, 2021, by year and in the aggregate, is as follows:

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Term Loan and Revolving Facility

On November 4, 2019, pursuant to a loan agreement (as amended to date, the “Credit Agreement”) the Company entered into a $ 1,450.0 million term loan with Deutsche Bank AG (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 its $1.8 billion loan facility with Bpifrance Assurance Export S.A.A., as well as related expenses.

The Term Loan was issued at a price equal to 99.5 % of its face value and initially bore interest at an annual rate of LIBOR plus 3.75 %, with a 1.0 % LIBOR floor, with a maturity date in November 2026.

Subsequent to December 31, 2020, the Company repriced the Term Loan to reduce the interest rate (see Note 18 for more information).

Interest on the Term Loan is paid monthly on the last business day of the month.

Principal payments, which are payable quarterly and began on June 30, 2020, equal $16.5 million per annum (one percent of the full amount of the loan following the additional $200.0 million drawn on February 7, 2020, as noted below), with the remaining principal due upon maturity.

Borrowings under the Revolving Facility, if any, bear interest at LIBOR plus 3.75 % 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 a maturity date 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 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.

On November 4, 2019, pursuant to a loan agreement (as amended to date, the “Credit Agreement”), the Company entered into a $ 1,450.0 million term loan with Deutsche Bank AG (the “Original Term Loan”) and an accompanying $ 100.0 million revolving loan (the “Revolving Facility”).

The Original Term Loan was issued at a price equal to 99.5 % of its face value, with a maturity date in November 2026.

On February 7, 2020, the Company closed on an additional $ 200.0 million under its Credit Agreement for a total borrowing of $ 1,650.0 million (as expanded, the “Term Loan”).

The additional amount is fungible with the Original Term Loan, having the same maturity date, interest rate and other terms, but was issued at a 1.0 % premium to face value.

The Term Loan initially bore interest at an annual rate of LIBOR plus 3.75 %, with a 1.0 % LIBOR floor.

The Term Loan was repriced in January 2021 for an annual interest rate of LIBOR plus 2.75 %, with a 1.0 % LIBOR floor.

The Term Loan was repriced again in July 2021 for a new annual interest rate of LIBOR plus 2.50 %, with a 0.75 % LIBOR floor.

The maturity date remains unchanged in November 2026.

The interest rate on the Revolving Facility remained unchanged at LIBOR plus 3.75 % with no LIBOR floor, and a maturity date in November 2024.

Principal payments, which are payable quarterly and began on June 30, 2020, equal $ 16.5 million per annum (one percent of the full principal amount of the Term Loan), with the remaining principal due upon maturity.

In July 2021, the Company paid $ 4.1 million of original issuance costs to reprice the Term Loan.

Lenders making up approximately $ 65.2 million of the Term Loan did not participate in the repricing.

Those portions of the Term Loan were replaced by new or existing lenders.

This resulted in a $ 0.9 million loss on extinguishment of debt during the year ended December 31, 2021, as the Company wrote off the unamortized debt issuance costs related to the lenders who were fully repaid in an exchange of principal.

In February 2020, the Company used the proceeds of the additional $ 200.0 million borrowed under the Term Loan, together with cash on hand, to prepay and retire all of the indebtedness outstanding under then outstanding senior unsecured promissory notes (the “Notes”), including premiums for early prepayment.

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 a result of the prepayment, the Company also wrote off the remaining unamortized debt issuance costs, which resulted in a $ 30.2 million loss on extinguishment of debt during the year ended December 31, 2020.

As of December 31, 2021 and 2020, the Company reported an aggregate of $ 1,621.1 million and $ 1,637.6 million in borrowings under the Term Loan, respectively.

These amounts are before $ 24.0 million and $ 26.6 million of net unamortized deferred financing costs as of December 31, 2020 and 2019, respectively.

These amounts do not include $ 23.1 million and $ 24.0 million of net unamortized deferred financing costs as of December 31, 2021 and 2020, respectively.

The net principal balance in borrowings in the accompanying consolidated balance sheets as of December 31, 2021 and 2020 amounted to $ 1,598.0 million and $ 1,613.6 million, respectively.

As of December 31, 2021 and 2020, based upon over-the-counter bid levels (Level 2 - market approach), the fair value of the borrowings under the Term Loan due in 2026 was $ 1,622.1 million and $ 1,647.9 million, respectively.

The Company had not borrowed under the Revolving Facility as of December 31, 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 sweep 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 Company’s mandatory excess cash flow prepayment, as specified in the Credit Agreement, was $ 12.6 million as of December 31, 2020.

This amount will be paid in 2021 and counts

towards the Company's required quarterly principal payments.

As such, it was classified under current short-term secured debt in the Company’s consolidated balance sheet as of December 31, 2020.

The Credit Agreement permits repayment, prepayment, and repricing transactions.

The Company was in compliance with all other covenants as of December 31, 2020.

The Company had not borrowed under the Revolving Facility as of December 31, 2021 or 2020.

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”) 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.

The Credit Agreement contains no financial maintenance covenants with respect to the Term Loan.

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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 December 31, 2021.

The effective interest rate on outstanding principal of the Term Loan was 4.3 % during the year ended December 31, 2021.

Senior Unsecured Notes

As of December 31, 2020, the Company had fully repaid 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 during the years ended December 31, 2020, 2019 and 2018 was $ 98.6 million, $ 140.1 million and $ 142.7 million, respectively.

Interest incurred includes amortization of deferred financing fees of $ 3.8 million, $ 21.6 million and $ 26.5 million for the years ended December 31, 2020, 2019 and 2018 respectively.

Interest capitalized during the years ended December 31, 2020 and 2019 was $ 3.2 million and $ 15.1 million, respectively.

Interest accrued for the years ended December 31, 2020 and 2019 was $ 0.2 million and $ 7.8 million, respectively.

Future minimum principal repayments with respect to the Company's debt balances, including the mandatory excess cash flow prepayment, existing at December 31, 2020, by year and in the aggregate, are as follows:

Total interest incurred includes amortization of deferred financing fees and capitalized interest.

To reprice the Term Loan in January 2021 and July 2021, the Company incurred third-party financing costs of $ 3.6 million and $ 1.3 million, respectively.

These costs were expensed and are included within interest expense on the consolidated statements of operations and comprehensive income (loss) for the year ended December 31, 2021.

All third-party financing costs incurred during the years ended December 31, 2020 and 2019 were also expensed and are included within interest expense on the consolidated statements of operations and comprehensive income (loss).

The following table presents the interest and amortization of deferred financing fees related to the Term Loan:

Year Ended December 31,

2021 2020 2019

(In thousands)

Total interest incurred $ 72,816 $ 99,155 $ 140,532

Amortization of deferred financing fees $ 4,316 $ 3,773 $ 21,320

Capitalized interest $ 2,146 $ 3,225 $ 15,055

As of December 31, 2021 and 2020, accrued interest under the Term Loan was $ 0.1 million and $ 0.2 million, respectively.

Future minimum principal repayments with respect to the Company's debt balances existing at December 31, 2021, by year and in the aggregate, are as follows:

Year ending December 31, Amount

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2022 $ 16,500

Thereafter 1,555,125

2026 1,555,125

Total debt commitments 1,621,125

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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 swap contracts which result in recognizing a fixed interest rate for the portion of the Term Loan.

This will reduce the negative impact of increases in the variable rate over the term of the interest rate swap contracts.

These financial instruments are not used for trading or other speculative purposes.

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 swap and interest rate cap contracts which result in recognizing a fixed interest rate for a portion of the Term Loan.

This will 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 contracts is based on a long-haul hypothetical derivative methodology and includes all changes in value.

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, 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.

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 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 Company's 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 carried a notional amount of $ 1,000.0 million as of December 31, 2020 and 2019.

The Company designated both the Swap and Swaption as qualifying hedging instruments and accounted 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 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 loss into earnings to have an immaterial impact on the Company’s condensed consolidated financial statements.

On November 27, 2019, the Company executed a long-term interest rate swap (“Swap”) 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 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 until its expiration in November 2021.

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 (collectively, the "swap contracts") 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.

As of December 31, 2020, the Swap carried a notional amount of $ 1.0 billion and had a current liability balance of $ 5.2 million in other current liabilities related to the fair value of the Swap.

The Swaption carried a notional amount of $ 1.0 billion as of December 31, 2020.

At December 31, 2020, the premium liability was netted with the Swaption, for a fair value of $ 4.4 million which was recorded in other current liabilities.

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

On July 21, 2021, the Company entered into the Cap that began in December 2021 upon the expiration of the Swap.

The Cap manages the Company's exposure to interest rate movements on a portion of the Term Loan from the Cap's inception 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 %.

Beginning in December 2021, the Company began to pay a fixed monthly premium based on an annual rate of 0.31 % for the Cap.

The Cap carried a notional amount of $ 1.0 billion as of 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 December 31, 2020, the Company had a current liability balance of $ 5.2 million and $ 4.4 million, for the fair value of the Swap and Swaption, respectively, 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, and a long-term liability balance for the fair value of the Swaption in the amount of $ 0.9 million recorded in other long-term liabilities.

During the years ended December 31, 2020 and 2019, the Company collectively incurred $ 9.1 million and $ 0.3 million in net interest expense, respectively, for both the Swap and the Swaption.

The Company did not hold any cash flow hedges during 2018.

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 $ 7.0 million as of December 31, 2020, net of a $ 2.5 million tax impact, and $ 0.1 million as of December 31, 2019.

There were no gains or losses related to derivative financial instruments during the year ended December 31, 2018.

As of December 31, 2021, the Company had an asset balance of $ 4.9 million recorded in other assets for the fair value of the Cap.

During the years ended December 31, 2021, 2020, and 2019 the Company collectively incurred $ 8.5 million, $ 9.1 million, and $ 0.3 million, respectively, in net interest expense for the swap contracts and the Cap.

Gains and losses resulting from fair value adjustments to the Cap are recorded within accumulated other comprehensive income (loss) within the Company’s consolidated balance sheet 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 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 consolidated statements of operations and comprehensive income (loss):

Year Ended December 31,

2021 2020 2019

(In thousands)

Unrealized gain (loss), net of tax $ 10,408 $ ( 7,036 ) $ ( 121 )

Tax benefit (expense) $ ( 3,316 ) $ 2,464 $ ( 41 )

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.

Through December 31, 2020, the remaining aggregate number of shares of the Company's common stock available for future grants under the Amended 2015 plan was 11,883,391 .

The Amended 2015 Plan provides for the grant of stock-based awards, including nonqualified stock options, incentive stock options, restricted stock, RSUs, stock appreciation rights and other equity securities as incentives and rewards for 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.

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 December 31, 2021, the remaining aggregate number of shares of the Company’s common stock available for future grants under the Amended 2015 Plan was 10,462,457 .

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 referred to 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 a four -year period 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 value of the underlying shares at the date of grant.

Fair Value Determination

Stock Options

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 Company uses the Black-Scholes-Merton option pricing model to determine the fair value of its stock option awards on the date of grant.

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The Company has historically granted stock options to newly hired and promoted employees.

During 2019 and 2018, the Company granted approximately 139,000 and 364,000 stock options, respectively, with an estimated aggregate grant date fair value of $ 1.3 million and $ 2.4 million, respectively.

The Company did not grant any stock options during the year ended December 31, 2020.

The following table summarizes weighted-average assumptions used in the Company's calculations of fair value during the years ended December 31, 2019 and 2018:

During 2019, the Company granted approximately 139,000 stock options with an estimated aggregate grant date fair value of $ 1.3 million.

The Company did not grant any stock options during the years ended December 31, 2021 and 2020.

The following table summarizes weighted-average assumptions used in the Company's calculations of fair value:

Year Ended December 31,

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Options outstanding at December 31, 2019 4,153 $ 8.78 4.03 $ 65,887

Granted 139 21.12

Cancelled or expired ( 5 ) 20.17

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The Company recognized $ 0.8 million, $ 1.0 million and $ 1.3 million of stock-based compensation expense related to stock options in the years ended December 31, 2021, 2020 and 2019, respectively.

The weighted-average grant date fair value of options granted during the years ended December 31, 2019 and 2018 was $ 9.18 and $ 6.63 per share, respectively.

The total fair value of the shares vested during the years ended December 31, 2020, 2019 and 2018 was $ 1.4 million for each period.

The weighted-average grant date fair value of options granted during the year ended December 31, 2019 was $ 9.18 .

The total fair value of the shares vested during the years ended December 31, 2021, 2020 and 2019 was $ 2.3 million, $ 1.4 million and $ 1.4 million, respectively.

As of December 31, 2021, the total unrecognized cost related to non-vested options was approximately $ 0.6 million.

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Restricted Stock Units

The RSUs granted to newly hired and promoted employees, as well as to employees for on-going service, vest over a four-year period, 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.

RSUs represent the right to receive a share of common stock at a future date.

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.

The RSUs granted to non-employee consultants generally vest 50 % on the first anniversary of the grant date and ratably on a quarterly basis through the second 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.

RSUs are classified as equity awards because the RSUs will be paid in the Company’s common stock upon vesting.

The fair value of 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 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 Awards

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, members of the Company’s board of directors can 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 , 76,000 and 110,000 service-based RSUs were granted to the Company's directors as a result of these elections during the years ended December 31, 2020, 2019 and 2018, respectively, with an estimated grant date fair value of $ 1.4 million, $ 1.4 million and $ 1.3 million, respectively.

During the years ended December 31, 2020, 2019 and 2018, the Company granted approximately 713,000 , 740,000 and 900,000 service-based RSUs, respectively, to its employees, with an estimated grant date fair value of $ 19.1 million, $ 16.9 million and $ 10.7 million, respectively.

During the years ended December 31, 2020, 2019 and 2018, the Company granted approximately 10,000 , 11,000 and 14,000 service-based RSUs, respectively, to non-employee consultants, with an estimated grant date fair value of $ 0.2 million for each period.

Performance-Based Awards

In March 2020, 2019 and 2018, the Company awarded approximately 115,000 , 125,000 and 474,000 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, $ 2.9 million and $ 5.6 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.

A portion of the March 2019 Bonus RSUs vested in March 2020 upon the determination of the level of achievement of the performance goals.

Additionally, during 2020, 2019 and 2018, the Company awarded approximately 144,000 , 96,000 and 134,000 performance-based RSUs, respectively, to the Company’s executives (the “Executive RSUs”).

The estimated aggregate grant date fair values of the Executive RSUs granted in 2020, 2019 and 2018 was $ 3.9 million, $ 2.2 million and $ 1.6 million, respectively.

Vesting of the Executive RSUs is and was 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 RSU grant based on the level of achievement of the performance goals.

If the Company achieves the performance goals, 50 % of the Executive RSUs 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 2020, 2019 and 2018, the Company awarded additional shares underlying performance-based RSUs to the Company's executives for over-achievement of performance goal targets related to the Executive RSU grants originally awarded in 2018, 2017 and 2016 in the amounts of 20,000 shares, 11,000 shares and 1,000 shares, respectively.

Award Summary

A summary of the Company’s activity for outstanding RSUs is as follows:

RSUs do not carry voting rights until the RSUs are vested and the underlying shares are released in accordance with the terms of the award.

A summary of the Company’s activity for RSUs is as follows:

RSUs Weighted-

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Vested and unreleased at December 31, 2021 (1)

(1) These RSUs were granted to the Company's board of directors as a part of their compensation for board and committee service and had vested but had not yet been issued and released.

(1) These RSUs were granted to the Company's board of directors as a part of their compensation for board and committee service and had vested but had not yet settled, meaning that the underlying shares of common stock had not been issued and released.

As of December 31, 2021, the total unrecognized cost related to non-vested RSUs was approximately $ 22.2 million.

1 unchanged sentence

The Company recognized $ 26.0 million, $ 15.7 million and $ 13.8 million of stock-based compensation expense related to RSUs in the years ended December 31, 2021, 2020 and 2019, respectively.

Service-Based RSU Awards

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 elect to receive the remainder of their annual compensation, or a portion thereof, in the form of RSUs.

An aggregate amount of approximately 39,000 , 58,000 and 76,000 service-based RSUs were granted to the Company’s non-employee directors as a result of these payments and elections during the years ended December 31, 2021, 2020 and 2019, respectively, with an estimated grant date fair value of $ 1.6 million, $ 1.4 million and $ 1.4 million, respectively.

During the years ended December 31, 2021, 2020 and 2019, the Company granted approximately 531,000 , 713,000 and 740,000 service-based RSUs, respectively, to its employees, with an estimated aggregate grant date fair value of $ 22.0 million, $ 19.1 million and $ 16.9 million, respectively.

During the years ended December 31, 2021, 2020 and 2019, the Company granted approximately 2,000 , 10,000 and 11,000 service-based RSUs, respectively, to non-employee consultants, with an estimated grant date fair value of $ 0.1 million, $ 0.2 million and $ 0.2 million, respectively.

Performance-Based RSU Awards

In March 2021, 2020 and 2019, the Company awarded approximately 228,000 , 115,000 and 125,000 performance-based RSUs, respectively, to the Company’s executives and employees (the “Bonus RSUs”), with an estimated grant date fair value of $ 9.5 million, $ 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 2021 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 2021 Bonus RSUs will vest, subject to continued employment, in March 2022.

Substantially all of the Bonus RSUs awarded in 2019 and 2020 vested in March 2020 and March 2021, respectively, upon the determination of the level of achievement of the respective performance goals.

Additionally, during 2021, 2020 and 2019, the Company awarded approximately 110,000 , 144,000 and 96,000 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 2021, 2020 and 2019 grants was $ 4.6 million, $ 3.9 million and $ 2.2 million, respectively.

Vesting of the Executive RSUs is and was 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.

During March 2021, 2020 and 2019, the Company awarded additional shares underlying performance-based RSUs to the Company’s executives for over-achievement of performance targets related to the Executive RSUs originally awarded in 2019, 2018 and 2017 in the amounts of 3,000 , 20,000 and 11,000 shares, respectively.

Equity Transactions

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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 were undesignated and unissued as of December 31, 2020 and 2019.

As of December 31, 2020 and 2019, there were no outstanding shares of preferred stock, as all preferred stock was converted in prior periods into common stock according to its terms.

Series B Cumulative Perpetual Convertible Preferred Stock

In May 2014, the Company issued 500,000 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 December 31, 2020 and 2019.

The Company previously issued 1.5 million shares of preferred stock.

The remaining 0.5 million authorized shares of preferred stock remain undesignated and unissued as of December 31, 2021 and 2020.

As of December 31, 2021 and 2020, there were no outstanding shares of preferred stock, as all preferred stock was converted into common stock in prior periods according to its terms.

Share Repurchase Program

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This time-frame can be extended or shortened by the Board of Directors.

Repurchases, if any, will be made from time-to-time on the open market at prevailing prices or in negotiated transactions off the market.

There were no repurchases of common stock during the year ended December 31, 2020.

Repurchases are 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 4.3 million shares of its common stock during the year ended December 31, 2021, for a total purchase price of $ 163.4 million.

As of December 31, 2021, $ 136.6 million remained available and authorized for repurchase under this program.

As the share repurchases were authorized in 2021, no shares were permitted to be repurchased during the year ended December 31, 2020.

The following table summarizes the Company’s services revenue:

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Total $ 30,438 $ 34,225 $ 30,430

The Company's contracts with customers generally do not contain performance obligations with terms in excess of one year.

As such, the Company does not disclose details related to the value of performance obligations that are unsatisfied as of the end of the reporting period.

The total value of any performance obligations that extend beyond a year is immaterial to the financial statements.

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 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).

Billing may occur subsequent to revenue recognition, resulting in unbilled 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 $ 43.0 million, $ 41.1 million and $ 43.0 million for the years ended December 31, 2021, 2020 and 2019, respectively.

The Company has also recorded costs of obtaining contracts expected to be recovered in prepaid expenses and other assets (contract assets or commissions), that are not separately disclosed on the condensed consolidated balance sheets.

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 consolidated balance sheets.

The commissions are recognized over the estimated usage period.

The contract assets not separately disclosed are as follows:

The following table presents contract assets not separately disclosed:

Year Ended December 31,

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Other contract costs $ 2,558 $ 2,860

Unbilled receivables $ 10,752 $ 9,132

and foreign components of income before income taxes are presented below:

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Current taxes:

Federal tax (benefit) expense $ ( 688 ) $ ( 3,796 ) $ 17

State tax (benefit) expense 70 37 ( 91 )

Federal tax benefit $ ( 537 ) $ ( 688 ) $ ( 3,796 )

State tax expense 42 70 37

Foreign tax expense 2,240 1,387 1,481

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Federal tax benefit ( 14,109 ) ( 27,701 ) ( 50,690 )

State tax expense (benefit) ( 5,869 ) ( 1,850 ) 904

State tax benefit ( 6,686 ) ( 5,869 ) ( 1,850 )

Foreign tax benefit ( 519 ) ( 109 ) ( 1,302 )

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Total income tax benefit $ ( 19,569 ) $ ( 32,910 ) $ ( 56,120 )

On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) was signed into law making significant changes to the Internal Revenue Code.

Changes include, but are not limited to, a corporate tax rate decrease from 35 % to 21 % effective for tax years beginning after December 31, 2017, the transition of U.S.

international taxation from a worldwide tax system to a territorial system, and a one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings as of December 31, 2017.

The Securities and Exchange Commission issued Staff Accounting Bulletin No.

118 (“SAB 118”) to address the application of U.S.

GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Act.

SAB 118 was effective for reporting periods that include December 22, 2017.

Due to the timing of the enactment and the complexity involved in applying the provisions of the Tax Act, the Company made reasonable estimates of the material effects of the Tax Act and recorded provisional amounts in its December 31, 2017 financial statements including the remeasurement of its deferred tax assets/liabilities for an estimated net tax benefit of $ 150.9 million.

In the fourth quarter of 2018, the Company completed its accounting for the income tax effects of the Tax Act.

No material adjustments were required to the provisional amounts initially recorded.

A reconciliation of the U.S.

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Tax credits ( 1,278 ) ( 1,048 ) ( 995 )

Foreign taxes and other adjustments 80 ( 967 ) 1,075

Foreign taxes 1,100 723 1,217

Other adjustments 251 ( 386 ) ( 2,312 )

Total income tax benefit $ ( 19,569 ) $ ( 32,910 ) $ ( 56,120 )

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The Company had deferred tax assets related to cumulative U.S.

federal net operating loss carryforwards of approximately $ 319.9 million and $ 280.5 million as of December 31, 2020 and 2019, respectively.

The pre-2018 U.S.

federal net operating loss carryforwards if unutilized, will expire in various amounts from 2031 through 2037.

Pursuant to the Tax Act, the post-2017 U.S.

federal net operating loss carryforwards do not expire.

federal net operating loss carryforwards and interest expense carryforwards of approximately $ 330.2 million and $ 337.1 million as of December 31, 2021 and 2020, respectively.

federal net operating loss carryforwards for periods prior to 2018, if unutilized, will expire in various amounts from 2031 through 2037.

The Company believes that the U.S.

federal net operating losses will be utilized before the expiration dates and, as such, no valuation allowance has been established for these deferred tax assets.

The Company had deferred tax assets related to the state net operating loss carryforwards of approximately $ 69.7 million

and $ 54.5 million as of December 31, 2020 and 2019, respectively, that expire from 2025 through 2040.

federal net operating loss carryforwards for 2018 and thereafter and interest expense carryforwards do not expire.

The Company had deferred tax assets related to the state net operating loss carryforwards of approximately $ 61.3 million and $ 69.7 million as of December 31, 2021 and 2020, respectively, that expire from 2025 through 2043.

The Company does not expect to fully utilize all of its state net operating losses within the respective carryforward periods and as such reflects a partial valuation allowance of $ 32.6 million and $ 30.2 million as of December 31, 2021 and 2020, respectively, against these deferred tax assets on its consolidated balance sheet.

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The Company does not expect to fully utilize all of its foreign net operating losses within the carryforward periods.

As such had recorded a partial valuation allowance of $ 0.5 million and $ 0.8 million as of December 31, 2020 and 2019, respectively, against these deferred tax assets on its consolidated balance sheets.

As such, the Company had recorded a partial valuation allowance of $ 0.5 million as of December 31, 2021 , which is unchanged from December 31, 2020, against these deferred tax assets on its consolidated balance sheets.

The timing and manner in which the Company will utilize the net operating loss carryforwards in any year, or in total, may be limited in the future as a result of changes in the Company’s ownership and any limitations imposed by the jurisdictions in which the Company operates.

The Company had approximately $ 11.1 million and $ 10.0 million of deferred tax assets related to research and development tax credits as of December 31, 2021 and 2020, respectively, that expire in various amounts from 2029 through 2041.

The Company had approximately $ 5.7 million and $ 5.2 million of deferred tax assets related to foreign tax credits as of December 31, 2020 and 2019, respectively, that expire in various amounts from 2020 through 2030.

The Company had approximately $ 5.6 million and $ 5.7 million of deferred tax assets related to foreign tax credits as of December 31, 2021 and 2020, respectively, that expire in various amounts through 2031.

The Company does not expect to utilize all of its foreign tax credits within the respective carryforward periods.

As such, the Company had a partial valuation allowance of $ 1.1 million as of December 31, 2020 , which is unchanged from December 31, 2019.

The Company had $ 3.6 million of deferred tax assets related to Alternative Minimum Tax (“AMT”) credits as of December 31, 2018.

Pursuant to the Tax Act, the Company received a refund of $ 1.8 million in 2019 and pursuant to the Coronavirus Aid, Relief, and Economic Security Act received the remaining $ 1.8 million in 2020.

As such, the Company had a partial valuation allowance of $ 0.8 million and $ 1.1 million as of December 31, 2021 and 2020, respectively.

The Company has provided for U.S.

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The provision for income taxes includes the impact of changes to these liabilities.

The amount of unrecognized tax benefits was $ 0.5 million and $ 1.0 million as of December 31, 2020 and 2019, respectively.

There were no unrecognized tax benefits as of December 31, 2021 , and the amount of unrecognized tax benefits was $ 0.5 million as of December 31, 2020.

Any changes in the next twelve months are not anticipated to have a significant impact on the results of operations, financial position or cash flows of the Company.

1 unchanged sentence

The Company has elected an accounting policy to classify interest and penalties related to unrecognized tax benefits as a component of income tax expense.

As of December 31, 2020 and 2019, potential interest and penalties on unrecognized tax benefits were not significant.

As of December 31, 2021 , there were no interest and penalties on unrecognized tax benefits, and as of December 31, 2020, potential interest and penalties on unrecognized tax benefits were not significant.

The Company is subject to tax audits in all jurisdictions for which it files tax returns.

8 unchanged sentences

Change attributable to tax positions taken in a prior period ( 537 ) ( 416 )

Change attributable to final assessment — ( 176 )

Decrease attributable to lapse of statute of limitations — ( 21 )

Balance at December 31, $ — $ 537

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In periods of net income, diluted net income per share takes into account the effect of potentially 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.

Potentially dilutive common shares include (i) common stock issuable upon exercise of outstanding stock options and (ii) contingent 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.

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Net loss attributable to common stockholders per share - basic and diluted $ ( 0.07 ) $ ( 0.42 ) $ ( 1.33 )

Due to the Company’s net losses for the years ended December 31, 2020 , 2019 and 2018 all potential common stock equivalents were anti-dilutive and therefore excluded from the calculation of diluted net loss per share.

The incremental number of shares underlying stock options and RSUs outstanding with anti-dilutive effects were as follows:

Due to the Company’s net loss position for the years ended December 31, 2021 , 2020 and 2019 all potential common stock equivalents were anti-dilutive and therefore excluded from the calculation of diluted net loss per share.

The incremental number of shares underlying stock options and RSUs outstanding with anti-dilutive effects are presented below:

Year Ended December 31,

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(In thousands)

Anti-dilutive contingent performance-based RSUs 311 285 328

Anti-dilutive stock options 95 198 87

Anti-dilutive preferred shares — 6,104 16,693

Performance-based RSUs 183 127 295

Service-based RSUs 536 567 678

Stock options 1,189 1,946 2,522

Related Party Transactions

2 unchanged sentences

The Company formed Aireon in 2011, with subsequent investments from the air navigation service providers (“ANSPs”) of Canada, Italy, Denmark, Ireland and the United Kingdom, to develop and market this service.

The Company and the other Aireon investors hold their interests in Aireon through an amended and restated LLC agreement (the “Amended and Restated Limited Liability Company Agreement”).

Aireon Holdings LLC holds 100% of the membership interests in Aireon LLC, which is the operating entity.

At each of December 31, 2021 and 2020, the Company's fully diluted ownership stake in Aireon Holdings LLC was approximately 35.7 %, subject to certain redemption provisions contained in the Amended and Restated Limited Liability Company Agreement.

The Company's investment in Aireon is accounted for as an equity method investment, with a carrying value of zero.

Aireon has contracted to pay the Company a fee to host the ADS-B receivers on its constellation, as well as fees for power and data services in connection with the delivery of the air traffic surveillance data.

Pursuant to agreements with Aireon, Aireon will pay the Company fees of $ 200.0 million to host the ADS-B receivers, of which $ 54.5 million had been paid as of December 31, 2020.

Aireon also pays power fees of up to approximately $ 3.7 million per year (the “Hosting Agreement”), as well as data services fees of approximately $ 19.8 million per year for the delivery of the air traffic surveillance data (the “Data Services Agreement”).

The Aireon ADS-B receivers were activated on an individual basis as the satellite on which the receiver is hosted began carrying traffic.

Pursuant to ASU 2016-02, the Company considers the agreement with Aireon related to the hosting as an operating lease.

The Company recognized $ 16.1 million, $ 16.0 million and $ 13.9 million of revenue from hosting fees during the years ended December 31, 2020, 2019 and 2018, respectively.

In December 2018, in connection with Aireon's entry into a debt facility, the Company and the other Aireon investors contributed their respective interests in Aireon into a new holding company, Aireon Holdings LLC, and entered into an Amended and Restated Aireon Holdings LLC Agreement.

Aireon Holdings LLC holds 100% of the membership interests in Aireon LLC, which remains the operating entity.

At December 31, 2020 and 2019, the Company's fully diluted ownership stake in Aireon Holdings LLC of approximately 35.7 % remained unchanged, subject to certain redemption provisions contained in the Amended and Restated Limited Liability Company Agreement.

In addition, pursuant to a debt facility for Aireon LLC provided by the Company and the other Aireon investors, the Company will participate pro-rata, based on its fully diluted ownership stake, in an investor bridge loan.

As such, in December 2020, the Company invested $ 0.2 million in Aireon LLC.

The Company expects future funding by it and the other Aireon investors to be required in 2021 and 2022.

Pursuant to an agreement with Aireon (the “Hosting Agreement”), Aireon will pay the Company fees of $ 200.0 million to host the ADS-B receivers, of which $ 62.5 million had been paid as of December 31, 2021, as well as power fees of up to approximately $ 3.7 million per year.

Aireon also pays data services fees of approximately $ 19.8 million per year for the delivery of the air traffic surveillance data under a data transmission services agreement.

Pursuant to ASU 2016-02, the Company considers the Hosting Agreement an operating lease.

The Company recognized $ 16.1 million, $ 16.1 million and $ 16.0 million of hosting fee revenue under the Hosting Agreement for the years ended December 31, 2021, 2020 and 2019, respectively.

There were no receivables due under the Hosting Agreement as of December 31, 2021 and 2020.

The Company recorded power fee and data service fee revenue from Aireon of $ 23.5 million, $ 23.9 million and $ 12.6 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Under two services agreements, the Company also provides Aireon with administrative services and support services, the fees for which are paid monthly.

Aireon receivables due to the Company under these two agreements totaled $ 2.2 million and $ 2.3 million at December 31, 2021 and 2020, respectively.

The Company and the other Aireon investors have agreed to participate pro rata, based on their fully diluted ownership stakes, in funding an investor bridge loan to Aireon.

The Company’s maximum commitment under the investor bridge loan is $ 10.7 million.

Under the Data Services Agreement, Aireon pays the Company monthly data service payments on a per satellite basis.

The Company recorded data service revenue from Aireon of $ 23.9 million, $ 12.6 million and $ 9.1 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Under two services agreements, the Company also provides administrative services and support services, the fees for which are paid monthly.

Aireon receivables due to the Company under all agreements totaled $ 2.3 million and $ 1.4 million at December 31, 2020 and 2019, respectively.

In December 2020, the Company loaned $ 0.2 million to Aireon, which was subsequently repaid in June 2021.

Segments, Significant Customers, Supplier and Service Providers and Geographic Information

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United States $ 330,948 $ 323,605 $ 300,494

United Kingdom 47,487 50,401 51,344

Other countries (1)

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Company matching contributions to the Plan were $ 3.5 million, $ 3.1 million, and $ 3.1 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Selected Quarterly Information (Unaudited)

The following represents the Company’s unaudited quarterly results of operations:

Quarter Ended

March 31, 2020 June 30, 2020 September 30, 2020 December 31, 2020

(In thousands, except per share data)

Revenue $ 145,287 $ 140,173 $ 151,472 $ 146,507

Operating income $ 11,822 $ 5,828 $ 12,733 $ 5,100

Net loss $ ( 31,702 ) $ ( 12,422 ) $ ( 4,005 ) $ ( 7,925 )

Net loss per common share - basic and diluted $ ( 0.24 ) $ ( 0.09 ) $ ( 0.03 ) $ ( 0.06 )

Quarter Ended

March 31, 2019 June 30, 2019 September 30, 2019 December 31, 2019

(In thousands, except per share data)

Revenue $ 133,685 $ 143,100 $ 144,785 $ 138,874

Operating income (loss) $ ( 1,633 ) $ 3,741 $ 8,011 $ 1

Net loss $ ( 18,024 ) $ ( 18,106 ) $ ( 18,012 ) $ ( 107,857 )

Net loss per common share - basic and diluted $ ( 0.18 ) $ ( 0.16 ) $ ( 0.14 ) $ ( 0.82 )

The sum of the per share amounts does not equal the annual amounts due to changes in the weighted-average number of common shares outstanding during the year.

Subsequent Events

On January 20, 2021, the Company closed on a repricing of its $ 1,637.6 million in gross borrowings under its Term Loan, with Deutsche Bank AG, which resulted in a 1.0% reduction in the borrowing rate.

The Term Loan now bears interest at an annual rate of LIBOR plus 2.75 % with a 1.00 % LIBOR floor, having the same maturity date, and other terms of the Credit Agreement.

The interest rate on the Revolving Facility remained at LIBOR plus 3.75% with no LIBOR floor.

To reprice the Term Loan, the Company incurred financing costs of $ 3.4 million.

The Company is currently evaluating the accounting treatment of this transaction.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data