What changed in this filing

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Item 1A. Risk Factors

2024-02-15 compared with 2023-02-16 · 67 added, 54 removed, 419 unchanged (22% of the section changed)

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From time to time, we experience temporary intermittent losses of signal cutting off calls in progress, preventing completions of calls when made, or disrupting the transmission of data.

If the magnitude or frequency of such problems increase and we are no longer able to provide a commercially acceptable level of service, our business and financial results and our reputation would be hurt and our ability to pursue our business plan would be compromised.

If the magnitude or frequency of such problems increases and we are no longer able to provide a commercially acceptable level of service, our business and financial results and our reputation would be hurt, and our ability to pursue our business plan would be compromised.

We may be required in the future to make changes to our constellation to maintain or improve its performance.

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Any system failures, repeated product failures or shortened product life, or extended reduced levels of service could reduce our sales, increase costs, or result in warranty or liability claims or litigation, cause us to extend our warranty period, and seriously harm our business.

We do not maintain in-orbit satellite insurance for our satellites, and do not plan to insure the launch of our remaining spare satellites, as a result of which we may be subject to increased costs.

We obtained insurance for our satellites covering launch and in-orbit failures of our satellites for a period of twelve months from the date of launch.

All of our satellites were launched more than twelve months ago, and we have no plans to purchase further in-orbit insurance.

We also do not plan to purchase launch insurance for the planned launch of our remaining spare satellites.

As a result, a failure of one or more of our satellites, the occurrence of equipment failures and other related problems, or a failure of the planned launch of our spare satellites would constitute an uninsured loss and could harm our financial condition.

Our satellites have a limited life and may fail prematurely, which could cause our network to be compromised and materially and adversely affect our business, prospects and profitability, or cause us to incur additional expense to launch replacement satellites.

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Other factors that could affect the useful lives of our satellites include the quality of construction, gradual degradation of solar panels and the durability of components.

We do not have and have no plans to obtain in-orbit insurance.

As a result, a failure of one or more of our satellites, the occurrence of equipment failures and other related problems would constitute an uninsured loss.

Although we do not incur any direct cash costs related to the failure of a single satellite, if a satellite fails, we record an impairment charge in our statement of operations to reduce the remaining net book value of that satellite to zero, and any such impairment charges could depress our net income for the period in which the failure occurs.

Further, a large number of such failures could shorten the

expected life of our constellation, which would increase our depreciation expense, or require us to launch our ground spare satellites or even replace our constellation sooner than currently planned, either of which would increase our projected capital expenditures.

Further, a large number of such failures could shorten the expected life of our constellation, which would increase our depreciation expense, or require us to replace our constellation sooner than currently planned, either of which would increase our projected capital expenditures.

If operations at our commercial gateways or operations center were to be disrupted, we may experience interruptions in our ability to provide service to our customers.

Our commercial satellite network traffic is supported by a gateway in Tempe, Arizona, as well as a gateway in Izhevsk, Russia for traffic within Russian boundaries, and we operate our satellite constellation from our satellite network operations center in Leesburg, Virginia.

Our commercial satellite network traffic is supported by a gateway in Tempe, Arizona, as well as a gateway in Izhevsk, Russia, for traffic within Russian boundaries, and we operate our satellite constellation from our satellite network operations center in

Leesburg, Virginia.

If we are unable to use our primary commercial gateway in Tempe, it could take us from one to eight hours to switch operations to our backup facility for most services, and potentially longer for some services.

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Any failure on our part to implement new technology within our system may compromise our ability to compete.

Our networks and those of our third-party service providers may be vulnerable to security risks.

Our networks and those of our third-party service providers may be vulnerable to cybersecurity risks.

We expect the secure transmission of confidential information over public networks to continue to be a critical element of our ability to compete for business, manage our risks, and protect our customers and our reputation.

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Persons who circumvent security measures could wrongfully access and obtain or use information on our network or cause service interruptions, delays or malfunctions in our devices, services or operations, any of which could harm our reputation, cause demand for our products and services to fall, and compromise our ability to pursue our business plans.

Recently, there have been reported a number of significant, widespread security attacks and breaches that have compromised network integrity for many companies and governmental agencies, in some cases reportedly originating from outside the United States.

Recently, there have been reported several significant, widespread security attacks and breaches that have compromised network integrity for many companies and governmental agencies, in some cases reportedly originating from outside the United States.

In addition, there are reportedly private products available in the market today that may attempt to unlawfully intercept communications made using our network.

We may be required to expend significant resources to respond to, contain, remediate, and protect against these attacks and threats, including compliance with applicable data breach and security laws and regulations, and to alleviate problems, including reputational harm and litigation, caused by these security incidents.

in the event of such a security incident, our customer contracts may not adequately protect us against liability to third parties with whom our customers conduct business.

In addition, in the event of such a security incident, our customer contracts may not adequately protect us against liability to third parties with whom our customers conduct business.

Although we have implemented and intend to continue to implement security measures, these measures may prove to be inadequate.

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government customers, particularly the DoD, which represent a significant portion of our revenue, are subject to termination and renewal.

government, through a dedicated gateway owned and operated by the DoD, has been and continues to be, directly and indirectly, our largest customer, representing 21% of our revenue for each of the years ended December 31, 2022 and 2021.

provide the majority of our services to the U.S.

government, through a dedicated gateway owned and operated by the DoD, has been and continues to be, directly and indirectly, our largest customer, representing 25% and 21% of our revenue for the years ended December 31, 2023 and 2022, respectively.

We provide the majority of our services to the U.S.

government pursuant to our GMSS, EMSS, and SDA contracts.

We entered into these contracts in April 2019, September 2019, and June 2022, respectively.

The GMSS contract continues through September 2023, the EMSS contract continues through September 2026, and the SDA contract provides for a two and a half year base term and up to five one-year options exercisable at the election of the U.S.

The GMSS contract had an initial term through September 2023 and has been extended through March 31, 2024, as we negotiate renewal of the agreement.

The EMSS contract continues through September 2026, and the SDA contract has a base term until January 2025 and up to five one-year options exercisable at the election of the U.S.

government may terminate these agreements, in whole or in part, at any time for its convenience.

Our relationship with the U.S.

government is also subject to the overall U.S.

government is also subject to the

government budget and appropriation decisions and processes.

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Lower subscriber use may negatively affect our ability to negotiate a renewal of the EMSS contract on favorable terms in 2026.

If we fail to comply with the terms of our U.S.

government contracts, including applicable federal acquisition regulations, we may be subject to contract price adjustments, civil or criminal penalties, or debarment from future U.S.

government contracts.

government contractor or subcontractor, we are subject to federal acquisition regulations, which govern, among other things, the allowability of costs incurred by us in the performance of U.S.

government contracts.

The pricing of some contracts, including the SDA contract, is based on estimated direct and indirect costs.

government is entitled to examine our cost records with respect to such contracts and to seek a downward adjustment to the price of the contract if it determines that we failed to furnish complete, accurate and current cost or pricing data in connection with the negotiation of the price of the contract.

We may also be subject to government audits and to review and approval of our policies, procedures and internal controls for compliance with procurement regulations and other applicable laws.

If we do not comply with the terms of a contract or with regulations or statutes, we could be subject to downward contract price adjustments or refund obligations or could be assessed civil and criminal penalties or be debarred or suspended from obtaining future contracts for a specified period.

Any such suspension or debarment or other sanction could have an adverse effect on our business.

In addition, if we are unable to comply with security clearance requirements, we may be unable to perform these contracts or compete for other projects of this nature, which could adversely affect our revenue.

Aireon, our primary hosted payload customer, may not successfully grow its business, which could reduce or eliminate the value of our agreements with, and ownership interest in, Aireon.

Aireon is our primary hosted payload customer, and we expect annual revenue to us from Aireon hosting, data services and power fees to be approximately $32.6 million.

In addition, if and when funds are available following a planned refinancing of its credit facility, Aireon’s parent company, Aireon Holdings, is required to redeem a portion of our ownership interest for a payment of $120.0 million, and we would then retain a common ownership interest of approximately 27% in Aireon Holdings.

In addition, we currently hold a substantial ownership interest in Aireon’s parent company, Aireon Holdings, and, if and when funds are available following a planned refinancing of its credit facility, Aireon’s parent company, Aireon Holdings is required to redeem a portion of our ownership interest for a payment of $120.0 million.

Based on Aireon’s business plan and restrictions under Aireon’s debt facility, we do not expect this redemption of our ownership interest to occur for several years.

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In connection with the development of new devices and services, we may be required to obtain additional intellectual property rights from third parties.

We can offer no assurance that we will be able to obtain such intellectual property rights on commercially reasonable terms or at all.

We can offer no assurance that we will be able to obtain such

intellectual property rights on commercially reasonable terms or at all.

If we are unable to obtain such intellectual property rights on commercially reasonable terms, we may not be able to develop some new devices and services.

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Consequently, we may further strain our management and other company resources with the increased complexities and administrative burdens associated with a larger, more complex portfolio of products and services.

For example, we have in the past experienced quality issues and incorrect

market assessments in connection with the introduction of new products and services, and we may experience such issues in the future.

For example, we have in the past experienced quality issues and incorrect market assessments in connection with the introduction of new products and services, and we may experience such issues in the future.

Our failure to meet these challenges as a result of insufficient management or other resources could significantly impede our ability to execute our business plan, which relies in part on our ability to leverage our largely fixed-cost infrastructure.

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The provision of satellite-based services and products is subject to downward price pressure when capacity exceeds demand or as a result of aggressive discounting by some operators under financial pressure to expand their respective market share.

In addition, we may face competition from new competitors, new technologies or new equipment, including proposed new LEO constellations.

In addition, we may face competition from new competitors, new technologies or new equipment, including new and proposed LEO constellations.

For example, we may face competition for our services in the United States from service providers with ancillary terrestrial component, or ATC, authorities who are designing a satellite operating business and a terrestrial component around their spectrum holdings, or from service providers developing satellite direct to terrestrial phone capabilities.

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If our distributors develop faulty or poorly performing products using our technology or services, we may be subject to claims, and our reputation could be harmed.

If current or future distributors do not perform adequately, or if we are unable to locate competent distributors in particular countries and secure their services on favorable terms, we may be unable to increase or maintain our revenue in these markets or enter new markets, we may not realize our expected growth, and our brand image and reputation could be hurt.

markets or enter new markets, we may not realize our expected growth, and our brand image and reputation could be hurt.

For example, in 2023, we announced an arrangement with Qualcomm Technologies, Inc., or Qualcomm, to include our services on a processor for use in smartphones and act as our VAM and service provider with smartphone manufacturers.

Although Qualcomm successfully developed and demonstrated the service, they were unable to market the processor successfully to smartphone manufacturers.

As a result, Qualcomm elected to terminate our arrangement with them.

This arrangement included large penalties had we marketed a similar technology with another partner;

as a result, we expect a substantial delay in our ability to develop a similar service with a different third party.

In addition, we may lose distributors due to competition, industry consolidation, regulatory developments, business developments affecting our distributors or their customers, or for other reasons.

In 2009, one of our largest competitors, Inmarsat, acquired our then largest distributor, Stratos Global Wireless, Inc., and in 2014, Inmarsat acquired Globe Wireless, one of our service providers.

Following each acquisition, Inmarsat essentially stopped promoting sales of our products and services, and they may further reduce their efforts in the future.

In 2009, one of our largest competitors, Inmarsat (now Viasat), acquired our then largest distributor, Stratos Global Wireless, Inc., and in 2014, Inmarsat acquired Globe Wireless, one of our service providers.

Following each acquisition, Inmarsat essentially stopped promoting sales of our products and services, and they and other competitors could further reduce their distribution efforts with respect to our products and services in the future.

Any future consolidation of our distributors would further increase our reliance on a few key distributors of our services and the amount of volume discounts that we may have to give those distributors.

Our two largest distributors, Marlink Group and Garmin, together represented approximately 10% of our revenue for the year ended December 31, 2023, and our ten largest distributors represented, in the aggregate, 27% of our revenue for the year ended December 31, 2023.

The loss or consolidation of any of these distributors, or a decrease in the level

of effort expended by any of them to promote our products and services, could reduce the distribution of our products and services as well as the development of new products and applications, which would negatively affect our revenue.

The loss or consolidation of any of these distributors, or a decrease in the level of effort expended by any of them to promote our products and services, could reduce the distribution of our products and services as well as the development of new products and applications, which would negatively affect our revenue.

Our business was negatively affected by the COVID-19 pandemic, actions taken to mitigate the pandemic, and the economic disruptions that resulted, and a resurgence or similar pandemic in the future could harm our business.

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the loss of any such supplier, or shortages experienced by such suppliers, could cause us to incur additional costs and delays in the production and delivery of our products, which could reduce the sales of those products and use of the related services.

We currently rely on two manufacturers of our devices, including our mobile handsets, L-band transceivers and SBD devices.

We currently rely on a limited number of manufacturers of our devices, including our mobile handsets, L-band transceivers and SBD devices.

We also utilize sole source suppliers for some of the component parts of our devices.

If any of our suppliers were to terminate its relationship with us, we may not be able to find a replacement supplier in a timely manner, at an acceptable price or at all.

Further, our manufacturers and suppliers may cease production of our components or products or become capacity-constrained, or could face financial difficulties as a result of a surge in demand, a natural disaster or other event, including the impacts of the COVID-19 pandemic.

For example, several of our suppliers have experienced production delays as a result of the global silicon chip shortage.

As a result, we have experienced and expect to continue to experience delays in fulfilling some product orders and are evaluating replacement components and product changes.

These delays have increased our costs and reduced our sales of those products and use of the related services, and we expect these effects to continue into 2023.

For example, several of our suppliers experienced production delays as a result of the recent global silicon chip shortage.

As a result, we experienced delays in fulfilling some product orders and are evaluating replacement components and product changes.

These delays increased our costs and reduced our sales of those products and use of the related services.

Any future delay in production or delivery of our products or components by our suppliers could similarly adversely affect our business.

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In 2023, revenue from our operations in Russia represented approximately 1.8% of our total revenue, all of which was service revenue.

As a result of Russia’s invasion of Ukraine in February 2022, we have ceased shipments of equipment to Russia and made other adjustments to our operations in light of U.S.

As a result of Russia’s invasion of Ukraine in February 2022, we ceased shipments of equipment to Russia and made other adjustments to our operations in light of U.S.

and international sanctions.

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We have significant operations outside the United States.

We estimate that commercial data traffic originating outside the United States accounted for 78% and 74% of total commercial data traffic for the years ended December 31, 2022 and 2021,

respectively, while commercial voice traffic originating outside the United States accounted for 91% and 90% of total commercial voice traffic for the years ended December 31, 2022 and 2021.

We estimate that commercial data traffic originating outside the United States accounted for 96% and 95% of total commercial data traffic for the years ended December 31, 2023 and 2022, respectively, while commercial voice traffic originating outside the United States accounted for 91% and 90% of total commercial voice traffic for the years ended December 31, 2023 and 2022.

We cannot provide the precise geographical distribution of revenue from end users because we do not contract directly with them.

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Conducting operations outside the United States involves numerous risks and, while expanding our international operations would advance our growth, it would also increase our exposure to these risks.

Risks associated with the proposed expansion of our international operations include:

Risks associated with the potential expansion of our international operations include:

• difficulties in penetrating new markets due to established and entrenched competitors;

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• instability of international economies and governments;

• effects of the ongoing COVID-19 pandemic, including on international economies, supply chains and travel;

• effects of a global pandemic, such as COVID-19, including on international economies, supply chains and travel;

• changes in laws and policies affecting trade and investment in other jurisdictions;

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These risks may include adverse legal, organizational and financial consequences, loss of key customers and distributors, and diversion of management’s time.

In addition, any major business combination or similar strategic transaction may require significant additional financing, and our ability to obtain such financing may be restricted by the credit agreement governing our currently outstanding Term Loan.

Further, depending on market conditions, investor perceptions of our company and other factors, we might not be able to obtain financing on acceptable terms, in acceptable amounts, or at appropriate times to implement any such transaction.

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If we do not generate sufficient cash flows, we may be unable to repay our Term Loan when it matures.

We will need to repay our Term Loan in full at maturity in November 2026.

We will need to repay our Term Loan in full at maturity in September 2030.

If our cash flows and capital resources are insufficient to repay the Term Loan when it matures, we may have to undertake alternative financing plans, such as refinancing or restructuring our debt, selling assets or operations, reducing or delaying capital investments, or seeking to raise additional capital.

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If we experience an event of default, the lenders may require repayment in full of all principal and interest outstanding under the Term Loan.

If we fail to repay such amounts, the lenders may foreclose on the assets we have pledged under the Term Loan, which includes substantially all of the assets of our domestic subsidiaries, including our principal operating subsidiary, Iridium Satellite.

Certain provisions in the credit agreement governing our Term Loan limit our financial and operating flexibility.

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In April 2020, the FCC announced that it had approved Ligado’s waiver request.

We filed a petition for reconsideration opposing this waiver out of concern for the interference that we believe Ligado’s proposed operations would cause to our operations in adjacent L-band spectrum.

Our petition remains pending.

We, along with a variety of other private parties and the National Telecommunications and Information Administration on behalf of federal government users, filed petitions for reconsideration opposing this waiver out of concern for the interference that we believe Ligado’s proposed operations would cause.

These petitions remain pending.

In October 2023, Ligado brought suit against the U.S.

government in the Federal Court of Claims alleging that the Department of Defense, the Department of Commerce, and Congress unlawfully prevented Ligado from using its exclusively licensed services and seeking damages based on their inability to deploy ATC services in the band.

Ligado’s implementation of these services would result in terrestrial use of L-band spectrum in the 1.6 GHz band, which we use to provide our services, and such implementation may affect the performance of our system for customers of our existing and future services.

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Through our distributors, we offer several services and devices aimed at individual consumers, and we and our distributors continue to introduce additional services and devices for use with our services.

For example, we recently entered into an agreement with Qualcomm to enable satellite messaging and emergency services in smartphones using our services, which may dramatically increase the number of devices that use our services.

For example, we are working to enable satellite messaging and emergency services directly in smartphones and other devices using our services, which may dramatically increase the number of devices that use our services.

These services and devices aimed at individual consumers, such as location-based services, emergency services, satellite handsets, smartphones, and personal locator devices, may contain design and manufacturing defects.

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There can be no assurance we or our distributors will be able to detect and fix all defects in the services, hardware and software that we or our distributors sell.

These services and devices may be used in isolated and dangerous locations, including emergency response situations, and users who suffer property damage, personal injury or death while using such services or devices may seek to assert claims or bring lawsuits against us.

These services and devices could be used in isolated and dangerous locations, including emergency response situations, and users who suffer property damage, personal injury or death while using such services or devices may seek to assert claims or bring lawsuits against us.

Further, it is possible that our distributors’ devices could become the subject of consumer protection investigations, enforcement actions or litigation, including class actions.

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Product liability insurance could become more expensive and difficult to maintain and might not be available on acceptable terms or at all.

In addition, it is possible that our distributors’ devices could become the subject of a product recall as a result of a device defect.

In addition, it is possible that our or our distributors’ devices could become the subject of a product recall as a result of a device defect.

We do not maintain recall insurance, nor do we have control over our distributors’ devices, and any recall could have a significant effect on our financial results.

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The legal standards for processing, storing and using this personal information continue to evolve, impose additional obligations and risk on our business, and have the potential to make some of our business processes more costly or less feasible.

For example, the California Consumer Privacy Act, or the CCPA, went into effect on January 1, 2020, and gives California residents expanded rights to access and delete their personal information, opt out of certain personal information sharing and receive detailed information about how their personal information is used by requiring companies to provide new disclosures to California consumers (as that term is broadly defined) and provide such consumers new ways to opt out of certain sales of personal information.

In Europe, the European Commission enacted the General Data Protection Regulation, or GDPR, which became effective in May 2018.

The GDPR superseded prior EU data protection legislation, imposes more stringent EU data protection requirements, and provides for greater penalties for noncompliance.

For example, numerous U.S.

states have adopted consumer privacy laws that gives residents expanded rights to access and delete their personal information, opt out of certain personal information sharing and receive detailed information about how their personal information is used by requiring companies to provide new disclosures to consumers and provide such consumers new ways to opt out of certain sales of personal information.

In Europe, the European Commission enacted the General Data Protection Regulation, or GDPR, which since 2018 has imposed more stringent EU data protection requirements and provided for greater penalties for noncompliance.

In addition, the interpretation of privacy and data protection laws and regulations regarding the collection, storage, transmission, use and disclosure of such information in some jurisdictions remains unclear.

These laws may be interpreted, applied and enforced in conflicting ways from country to country and in a manner that is not consistent with our current business practices.

These laws may be interpreted, applied and enforced in conflicting ways from state to state and country to country and in a manner that is not consistent with our current business practices.

Complying with these varying privacy and data security legal requirements could cause us to incur additional costs and change our business practices.

Further, our services are accessible in many foreign jurisdictions, and some of these jurisdictions may claim that we are required to comply with their laws, even where we have no operating entity, employees or infrastructure located in that jurisdiction.

We could face direct expenses related to a variety of enforcement

actions, government investigations, or litigation, and an interruption to our business and adverse publicity because of such enforcement actions, government investigations, or litigation.

We could face direct expenses related to a variety of enforcement actions, government investigations, or litigation, and an interruption to our business and adverse publicity because of such

enforcement actions, government investigations, or litigation.

Such enforcement actions, government investigations, or litigation could also cause us to incur significant expenses if we were required to modify our products, our services, our infrastructure, or our existing security and privacy procedures in order to comply with new or expanded privacy and security regulations.

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Any of these developments could limit, delay or otherwise interfere with our ability to construct gateways or other infrastructure or network solutions around the world.

Security and emergency services regulations in the U.S.

and other countries may affect our ability to operate our system and to expand into new markets.

Security and emergency services regulations in the United States and other countries may affect our ability to operate our system and to expand into new markets.

Our operations are subject to regulations of the U.S.

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Similar rules may apply under state tax laws.

If an “ownership change” were to occur, Section 382 of the Code would impose an annual limit on the amount of pre-ownership change net operating loss carryforwards and other tax attributes we could use to reduce our taxable income.

If such an ownership change were to occur, Section 382 of the Code would impose an annual limit on the amount of pre-ownership change net operating loss carryforwards and other tax attributes we could use to reduce our taxable income.

It is possible that such an ownership change could materially reduce our ability to use our net operating loss carryforwards or other tax attributes to offset taxable income, which could impact our profitability.

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If we fail to maintain such controls, it could result in a material misstatement of our financial statements that would not be prevented or detected on a timely basis, which could cause investors and other users to lose confidence in our financial statements.

Unresolved Staff Comments

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 1A. Risk Factors