What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-02-15 compared with 2023-02-16 · 277 added, 290 removed, 782 unchanged (42% of the section changed)

13 unchanged sentences

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

and subsidiaries (the Company) as of December 31, 2022, the related consolidated statements of operations and comprehensive income (loss), changes in stockholders’ equity, and cash flows for the year then ended, and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022, and the results of its operations and its cash flows for the year then ended, in conformity with U.S.

and subsidiaries (the Company) as of December 31, 2023 and December 31, 2022, the related consolidated statements of operations and comprehensive income (loss), changes in stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and December 31, 2022, and the results of its operations and its cash flows for each of the years then ended, in conformity with U.S.

generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 16, 2023 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

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.

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Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

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

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

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

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

We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:

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

The communication of critical audit matters 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 matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Changes in estimated useful lives of upgraded satellites

As discussed in Note 2 to the consolidated financial statements, the Company’s upgraded satellites are depreciated using the straight-line method over their respective estimated useful lives, which are currently estimated to be 12.5 years.

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

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

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

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

The communication of a 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 accounts or disclosures to which it relates.

Changes in estimated useful lives of satellites

As discussed in Note 2 to the consolidated financial statements, the Company’s satellites are depreciated using the straight-line method over their respective estimated useful lives, which was extended from 12.5 years to 17.5 years during the fourth quarter of 2023.

The Company applied judgment in determining the useful lives based on factors such as engineering data relating to the operation and performance of its satellite network, the Company’s long-term strategy for using the assets, and the manufacturer’s estimated design life for the assets.

As discussed in Note 4, as of December 31, 2022, the Company had recorded $2,112.5 million in total depreciable property and equipment, net of accumulated depreciation, which included its upgraded satellites.

We identified the evaluation of the determination of changes in estimated useful lives of upgraded satellites as a critical audit matter.

A high degree of subjective auditor judgment was required to evaluate the Company’s estimated useful lives of the upgraded satellites.

Specifically, assessing the factors used to determine the estimated useful lives required subjective auditor judgment.

Changes to the estimated useful lives of upgraded satellites could have a significant impact on the timing of recognition of depreciation expense and hosted payload revenue.

As discussed in Note 4, as of December 31, 2023, the Company had recorded $1,926,487 thousand in total depreciable property and equipment, net of accumulated depreciation, which included its satellites.

We identified the evaluation of the determination of changes in estimated useful lives of satellites as a critical audit matter.

A high degree of subjective auditor judgment was required to evaluate the Company’s estimated useful lives of the satellites.

Specifically, assessing the factors used to determine the estimated useful lives required subjective auditor judgment due to the degree of uncertainty associated with the outcome of uncertain future events which required forward looking assumptions.

Changes to the estimated useful lives of satellites could have a significant impact on the timing of recognition of depreciation expense and hosted payload revenue.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of an internal control related to the Company’s process to determine changes in the estimated useful lives of its upgraded satellites.

We evaluated the factors the Company used to determine the estimated useful lives of the upgraded satellites by:

We evaluated the design and tested the operating effectiveness of an internal control related to the Company’s process to determine changes in the

estimated useful lives of its satellites.

We involved valuation professionals with specialized skills and knowledge, who assisted in evaluating the estimated useful lives of the satellites by:

• comparing the Company’s useful life estimates to the manufacturer’s estimated design life, and the lives of its first-generation satellite constellation

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• inquiring of operations and engineering management personnel regarding satellite operation and performance

• evaluating the Company’s longevity assessment for the satellites

• evaluating the effect of changes, if any, in the Company’s long-term strategy for use of the assets on the useful life estimates.

Accounting for investment in Aireon

As discussed in Note 14 to the consolidated financial statements, in June 2022, the Company entered into a subscription agreement with Aireon and invested $50 million in exchange for an approximate 6% preferred interest.

The Company's investment in Aireon is accounted for as an equity method investment.

As of December 31, 2022, the Company's fully diluted ownership stake in Aireon Holdings, a related party, was approximately 39.5%, and is subject to redemption provisions contained in the Aireon Holdings LLC Agreement.

As of December 31, 2022, the carrying value of the Company's investment in Aireon was $48.8 million.

We identified the evaluation of the accounting for the investment in Aireon as an equity method investment as a critical audit matter.

A high degree of complex auditor judgment was required to evaluate the unique terms and conditions of the investment, specifically those related to the subscription agreement and acquired preferred interest.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of an internal control related to the Company’s process to determine the accounting for investments, including the investment in Aireon.

We evaluated the investment structure and terms and conditions of the agreement, including those related to the preferred interest, by obtaining and inspecting the executed subscription agreement and other related documents.

We assessed the significant terms and conditions of the investment and evaluated the Company’s application of relevant accounting literature in its determination of whether the investment in Aireon was an equity method investment.

We have served as the Company’s auditor since 2022.

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Opinion on the Financial Statements

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

(the Company) as of December 31, 2021, the related consolidated statements of operations and comprehensive income (loss), changes in stockholders’ equity, and cash flows for each of the two 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 the results of its operations and its cash flows for each of the two years in the period ended December 31, 2021, in conformity with U.S.

We have audited the accompanying consolidated statements of operations and comprehensive income (loss), changes in stockholders’ equity, and cash flows for the year ended December 31, 2021 and the related notes (collectively referred to as the “consolidated financial statements”) of Iridium Communications Inc.

(the Company).

In our opinion, the consolidated financial statements present fairly, in all material respects, the results of the Company’s operations and its cash flows for the year ended December 31, 2021, in conformity with U.S.

generally accepted accounting principles.

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These financial statements are the responsibility of the Company’s management.

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

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

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.

We conducted our audits in accordance with the standards of the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

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.

Our audit 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 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.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(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 a separate opinion on the critical audit matter or on the account or disclosure to which it relates.

Useful life of upgraded satellites

Description of the Matter At December 31, 2021, the Company had $2.2 billion in Property and Equipment related to its upgraded satellites.

As discussed in Note 2 to the consolidated financial statements, the Company’s upgraded satellites are depreciated on a straight-line basis over their estimated useful life, which is currently estimated to be 12.5 years.

The Company’s useful life estimate is based on judgments made by management using the manufacturer’s estimated design life for the assets, engineering data relating to the operation and performance of its satellite network, and the Company’s long-term strategy for use of the assets.

Auditing the Company's estimate of the useful life of the upgraded satellites involved a high degree of subjectivity due to the application of management’s judgment when evaluating the available information to determine the estimated useful life.

The resulting estimated useful life has a significant effect on the timing of recognition of depreciation expense given the magnitude of the carrying amount of the upgraded satellites.

How We Addressed the Matter in Our Audit We tested the design and operating effectiveness of controls over the Company's processes to determine the estimated useful life of its upgraded satellites, including controls over management's evaluation of the available information to determine the estimated useful life.

To test the Company's estimated useful life of the upgraded satellites, our audit procedures included, among others, evaluating the application of available information to determine the estimated useful life of the upgraded satellites.

For example, we compared management’s useful life estimate to the manufacturer’s estimated design life, publicly available information on the estimated useful life of similar assets, satellite operation and performance, and the life of its first-generation satellite constellation.

Additionally, we evaluated the effect of changes, if any, in the Company’s long-term strategy for use of the assets on the useful life estimate.

Our audit 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 audit provides a reasonable basis for our opinion.

/s/ Ernst & Young LLP

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Additional paid-in capital 1,089,466 1,124,610

Retained earnings (accumulated deficit) ( 47,744 ) 140,810

Accumulated other comprehensive income (loss), net of tax 51,563 ( 7,052 )

Accumulated deficit ( 235,397 ) ( 47,744 )

Accumulated other comprehensive income, net of tax 33,907 51,563

Total stockholders’ equity

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Loss on extinguishment of debt — ( 1,187 ) ( 879 )

Loss on equity method investments ( 1,496 ) — —

Other income (expense), net 4,012 107 ( 417 )

Total other expense ( 86,375 ) ( 66,169 ) ( 75,202 )

Income (loss) before income taxes 9,014 ( 28,888 ) ( 88,964 )

Income (loss) before income taxes and equity in net earnings of affiliates

( 4,747 ) 10,510 ( 28,888 )

Income tax benefit (expense) 26,251 ( 292 ) 19,569

Loss on equity method investments ( 6,089 ) ( 1,496 ) —

Net income (loss) 15,415 8,722 ( 9,319 )

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Net income (loss) attributable to common stockholders per share - basic and diluted

$ 0.12 $ 0.07 $ ( 0.07 )

Comprehensive income (loss):

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Comprehensive income (loss)

$ ( 2,241 ) $ 67,337 $ 809

See notes to consolidated financial statements

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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 — — — ( 280 ) — ( 280 )

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

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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Repurchases and retirements of common stock ( 6,794 ) ( 7 ) ( 59,776 ) — ( 197,276 ) ( 257,059 )

Net loss — — — — ( 9,319 ) ( 9,319 )

— — — — 8,722 8,722

Dividends declared — — ( 16,616 ) — — ( 16,616 )

Cumulative translation adjustments — — — ( 53 ) — ( 53 )

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Repurchases and retirements of common stock ( 4,752 ) ( 5 ) ( 43,946 ) — ( 203,068 ) ( 247,019 )

Net income — — — — 8,722 8,722

— — — — 15,415 15,415

Dividends declared — — ( 49,613 ) — — ( 49,613 )

Cumulative translation adjustments — — — ( 58 ) — ( 58 )

Unrealized gain on cash flow hedges, net of tax — — — 58,668 — 58,668

Unrealized loss on cash flow hedges, net of tax

— — — ( 17,598 ) — ( 17,598 )

Balance at December 31, 2023 122,776 $ 123 $ 1,089,466 $ 33,907 $ ( 235,397 ) $ 888,099

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Amortization of deferred financing fees 3,739 4,602 4,201

Loss on equity method investments

6,089 1,496 —

All other items, net 732 638 ( 160 )

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Capital expenditures ( 73,487 ) ( 71,267 ) ( 42,147 )

Investment in Aireon (see Note 14 )

Investment in related parties

( 10,000 ) ( 50,000 ) —

Purchases of other investments — — ( 1,635 )

Purchases of marketable securities — — ( 7,629 )

Sales and maturities of marketable securities — — 7,400

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Payments on the Term Loan ( 72,315 ) ( 116,500 ) ( 195,785 )

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

Repurchases of common stock ( 247,019 ) ( 257,059 ) ( 163,442 )

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Tax payments upon settlement of stock awards ( 9,680 ) ( 5,293 ) ( 5,918 )

Payment of common stock dividends

( 64,774 ) — —

Net cash used in financing activities ( 327,052 ) ( 374,980 ) ( 182,469 )

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Interest paid, net of amounts capitalized $ 91,936 $ 63,880 $ 72,195

Income taxes paid (refund received), net $ 2,224 $ 1,784 $ ( 661 )

Income taxes paid, net

$ 4,225 $ 2,224 $ 1,784

Supplemental disclosure of non-cash investing and financing activities:

Property and equipment received but not paid for yet $ 7,070 $ 5,697 $ 8,225

Capitalized amortization of deferred financing costs $ 158 $ 115 $ 115

Capitalized stock-based compensation $ 6,684 $ 4,635 $ 2,834

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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.

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 tax provisions as a result of Iridium Holdings, Iridium Satellite and their subsidiaries being classified as flow-through entities for U.S.

federal income tax purposes.

Significant Accounting Policies and Basis of Presentation

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All material intercompany transactions and balances have been eliminated.

The Company has reclassified certain items in the consolidated financial statements for the prior periods to be comparable with the classification for the year ended December 31, 2023.

These reclassifications had no effect on previously reported net income (loss).

Use of Estimates

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Actual results could differ materially from those estimates.

Adopted and Recently Issued Accounting Pronouncements

In March 2020, the FASB issued ASU No.

2020-04, Reference Rate Reform (Topic 848):

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

The guidance provided optional expedients and exceptions for contracts, hedging relationships, and other transactions that referenced the London Inter-bank Offered Rate (“LIBOR”), which was 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 were effective prospectively through December 31, 2022.

The guidance in ASU 2020-04 and ASU 2021-01 was optional and could be elected over time as reference rate reform activities occurred.

During the year ended December 31, 2022, the Company adopted the amendments required in these ASUs by modifying agreements referencing LIBOR;

the initial adoption of these amendments did not have a significant impact on its consolidated financial statements.

During the year ended December 31, 2021, the Company applied the optional expedient for hedge accounting specifically to the interest rate cap agreement (the “Cap” (see Note 8 )) 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 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.

Recent Accounting Pronouncements Not Yet Adopted

In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU No.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures (“ASU 2023-07”).

This guidance improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.

The Company intends to apply the new guidance effective for the year ending December 31, 2024, as required.

The Company is assessing the potential effects of the standard but has not yet completed its review of the impact of this guidance.

In December 2023, the FASB issued ASU No.

2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures (“ASU 2023-09”).

The amendments in ASU 2023-09 address investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information.

The Company intends to apply the new guidance effective for the year ending December 31, 2025, as required.

The Company is currently evaluating the effect ASU 2023-09 may have on its consolidated financial statements and related disclosures.

Fair Value Measurements

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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.

Investments where we have the ability to exercise significant influence, but we do not control, are accounted for under the equity method of accounting and are included in Other assets on our consolidated balance sheets.

Significant influence typically exists if we have a 20% to 50% ownership interest in the investee.

Under this method of accounting, our share of the net earnings (losses) of the investee is included in loss on equity method investments on our consolidated statement of income.

Investments where we have less than 20% ownership interest in the investee and lack the ability to exercise significant influence are accounted for under ASC 321-10-35, Investments - Equity Securities.

Under this topic, our investment equals our cost, less impairment, if any.

For investments without a readily determinable fair value, we perform a qualitative assessment to determine if any impairment indicator is present.

If an indicator is present, we estimate the fair value to determine if the fair value was less than its carrying value.

If the fair value is less than its carrying value or if there is an observable price change through a similar security from the same issuer, we would record an impairment.

Investments where the Company has the ability to exercise significant influence, but does not control, are accounted for under the equity method of accounting and are included in Equity Method Investments on the Company’s consolidated balance sheets.

Significant influence typically exists if the Company’s has a 20% to 50% ownership interest in the investee.

Under this method of accounting, the Company’s share of the net earnings (losses) of the investee is included in loss on equity method investments on the consolidated statement of operations and comprehensive income (loss).

Investments where the Company has less than 20% ownership interest in the investee and lacks the ability to exercise significant influence are accounted for under ASC 321-10-35, Investments - Equity Securities.

Under this topic, the Company’s investment equals its cost, less impairment, if any.

For investments without a readily determinable fair value, the Company performs a qualitative assessment to determine if any impairment indicator is present.

If an indicator is present, the Company determines whether fair value was less than the investment’s carrying value.

If the fair value is less than its carrying value or if there is an observable price change through a similar security from the same issuer, the Company would record an impairment charge.

Accounts Receivable

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Inventory consists primarily of finished goods, although the Company also maintains an inventory of raw materials from third-party manufacturers.

The Company outsources manufacturing of subscriber equipment to a third-party manufacturer and purchases accessories from third-party suppliers.

The Company’s cost of inventory includes an allocation of overhead,

including payroll and payroll-related costs of employees directly involved in bringing inventory to its existing condition, and freight.

The Company outsources manufacturing of subscriber equipment to a third-party manufacturer and

purchases accessories from third-party suppliers.

The Company’s cost of inventory includes an allocation of overhead, including payroll and payroll-related costs of employees directly involved in bringing inventory to its existing condition, and freight.

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

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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:

The following table summarizes the Company’s inventory balance:

(In thousands)

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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 (loss).

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

The following table presents the classification of stock-based compensation by line item on the balance sheet and statement of operations:

As of and For Year Ended December 31,

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Inventory 721 617

Prepaid and other current assets — 22

Cost of subscriber equipment 60 69

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Property and equipment is carried at cost less accumulated depreciation.

The Company calculates depreciation expense using the straight-line method over the useful lives of each asset.

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.

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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:

Satellites 12.5 years

Ground system 5-7 years

Equipment 3-5 years

Internally developed software and purchased software 3-7 years

Building 39 years

Building improvements 5-39 years

Leasehold improvements shorter of useful life or remaining lease term

The Company calculates depreciation expense using the straight-line method and evaluates the appropriateness of the useful life used in this calculation on a quarterly basis or as events occur that require additional assessment.

During the fourth quarter of 2023, the Company updated its estimate of the satellites’ remaining useful lives based on the health of the constellation and related engineering data.

As a result, the estimated useful lives of the satellites were extended by five years, from 12.5 years to 17.5 years.

The impact of this change for the year ended December 31, 2023 was a decrease in depreciation expense of approximately $ 27.8 million and a decrease in hosted payload and other service revenue of approximately $ 2.3 million.

For the year ended December 31, 2023, the impact of the change in useful lives of the satellites resulted in an increase in basic and diluted net income per share of $ 0.21 and $ 0.20 , respectively.

During the quarter ended June 30, 2023, the Company launched five of its remaining six ground spare satellites.

Following completion of successful on-orbit testing of the five launched satellites, the Company has no plans to use, develop or launch the remaining ground spare.

As the Company believed the construction-in-progress associated with the remaining ground spare satellite would no longer be used, the Company wrote off the full amount remaining in construction-in-progress for that satellite by recording accelerated depreciation expense of $ 37.5 million, which more than offset the decrease in depreciation expense related to the increase in estimated useful lives of the satellites described above.

Repairs and maintenance costs are expensed as incurred.

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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.

Its derivatives are measured at fair value and are recorded on the consolidated balance sheets within assets and other current liabilities.

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.

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The Company evaluates the useful lives for these intangible assets each reporting period to determine whether events and circumstances warrant a revision in their remaining useful lives.

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

Intellectual property 20 years

Assembled workforce 7 years

Patents 14 - 20 years

The Company’s intangible assets with indefinite lives are not amortized but are tested for impairment annually, or more frequently if events or changes in circumstances indicate the asset may be impaired.

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government and other authorized customers pursuant to the Enhanced Mobile Satellite Services (“EMSS”) contract managed by the U.S.

Under the terms of this agreement,

authorized customers continue to utilize airtime services, provided through the U.S.

Under the terms of this agreement, authorized customers continue to utilize airtime services, provided through the U.S.

government’s dedicated gateway.

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Advertising expenses were $ 1.4 million, $ 1.7 million and $ 1.9 million for the years ended December 31, 2023, 2022 and 2021, respectively.

The Company accounts for income taxes using the asset and liability approach, which requires the recognition of tax benefits or expenses for temporary differences between the financial reporting and tax bases of assets and liabilities.

The Company accounts for income taxes using the asset and liability approach, which requires the recognition of tax benefits or

expenses for temporary differences between the financial reporting and tax bases of assets and liabilities.

A valuation allowance is established when necessary to reduce deferred tax assets to the amounts expected to be realized.

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The effect of potentially dilutive common shares from the conversion of outstanding convertible preferred securities was computed using the as-if converted method at the stated conversion rate.

The Company’s unvested RSUs awarded to the board of directors contain non-forfeitable rights to dividends and therefore are considered to be participating

securities in periods of net income.

The Company’s unvested RSUs awarded to the board of directors contain non-forfeitable rights to dividends and therefore are considered to be participating securities in periods of net income.

The calculation of basic and diluted net income (loss) per share excludes net income attributable to these unvested RSUs from the numerator and excludes the impact of these unvested RSUs from the denominator.

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Property and Equipment

Property and equipment consisted of the following:

The following table presents the composition of property and equipment:

(In thousands)

Satellite system $ 3,197,460 $ 3,197,460

Ground system 73,890 75,899

Equipment 49,423 46,461

Internally developed software and purchased software 297,538 290,979

Building and leasehold improvements 32,695 30,198

Satellite system 17.5 years $ 3,242,829 $ 3,197,460

Ground system 5-7 years 70,497 73,890

Equipment 3-5 years 51,788 49,423

Internally developed software and purchased software 3-7 years 332,824 297,538

Building and leasehold improvements 5-39 years 33,433 32,695

Total depreciable property and equipment

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Total depreciable property and equipment, net of accumulated depreciation 1,926,487 2,112,471

2,112,471 2,387,643

Land 8,037 8,037

Construction-in-process:

Ground spares 225,254 225,254

Spare satellites

181,557 225,254

Other construction-in-process 79,677 87,543

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$ 2,195,758 $ 2,433,305

Other construction-in-process consisted of the following:

(In thousands)

Internally developed and purchased software $ 46,714 $ 29,443

Equipment 40,423 11,558

Ground system 406 401

Total other construction-in-process $ 87,543 $ 41,402

Depreciation expense was $ 318.5 million, $ 301.9 million and $ 303.8 million for the years ended December 31, 2023, 2022 and 2021, respectively.

See “Property and Equipment” in Note 2 above for more information with respect to depreciation expense incurred in the year ended December 31, 2023.

Intangible Assets

The Company had identifiable intangible assets as follows:

The following table presents identifiable intangible assets:

December 31, 2023

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Amortization expense was $ 1.5 million, $ 1.6 million and $ 1.6 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Future amortization expense with respect to intangible assets existing at December 31, 2022, by year and in the aggregate, is as follows:

The following table presents future amortization expense with respect to intangible assets existing at December 31, 2023, by year and in the aggregate:

Year ending December 31, Amount

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As of December 31, 2023, the Company’s weighted-average remaining lease term relating to its operating leases was 4.7 years, and the weighted-average discount rate used to calculate the operating lease liability payment was 6.7 %.

The table below summarizes the Company’s lease-related assets and liabilities:

The following table summarizes the Company’s lease-related assets and liabilities:

Leases Classification December 31, 2023 December 31, 2022

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During the years ended December 31, 2023, 2022 and 2021, the Company incurred lease expense of $ 5.2 million, $ 5.2 million and $ 5.6 million, respectively.

A portion of rent expense during these comparable periods was derived from leases that were not included within the ROU asset and liability balances shown above as they had terms shorter than twelve months and were therefore excluded from balance sheet recognition under ASU 2016-02.

Future payment obligations with respect to the Company’s operating leases in which it was the lessee at December 31, 2022, by year and in the aggregate, are as follows:

A portion of lease expense during these comparable periods was derived from leases that were not included within the ROU asset and liability balances shown above as they had terms shorter than twelve months and were therefore excluded from balance sheet recognition under ASU 2016-02.

The following table presents future payment obligations with respect to the Company’s operating leases in which it was the lessee at December 31, 2023, by year and in the aggregate:

Year Ending December 31, Amount

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(“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 from their in-service date.

Lease income related to these agreements was $ 21.4 million for each of the years ended December 31, 2022, 2021 and 2020.

These agreements provide for a fee that will be recognized over the estimated useful lives of the satellites, which is now approximately 17.5 years, prospectively from the change in estimated useful lives of the satellites that occurred in the fourth quarter of 2023.

Lease income related to these agreements was $ 19.2 million for the year ended December 31, 2023 and $ 21.4 million for each of the years ended December 31, 2022 and 2021.

The decrease for 2023 as compared to 2022 was solely the result of the change in estimated useful life of the satellites.

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).

Future income with respect to the Company’s operating leases in which it was the lessor at December 31, 2022, by year and in the aggregate, is as follows:

The following table presents future income, after giving effect to the extension of estimated useful lives of the satellites, with respect to the Company’s operating leases in which it was the lessor at December 31, 2023, by year and in the aggregate:

Year Ending December 31, Amount

(In thousands)

2023 $ 21,445

2024 $ 21,445

2025 $ 21,445

2026 $ 21,445

2027 $ 21,445

Thereafter 82,106

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Term Loan and Revolving Facility

In November 2019 and February 2020, pursuant to a loan agreement (as amended to date, the “Credit Agreement”), the Company entered into a term loan totaling $ 1,650.0 million in aggregate principal amount with various lenders administered by Deutsche Bank AG (the “Term Loan”) and an accompanying $ 100.0 million revolving loan (the “Revolving Facility”).

The Term Loan was repriced twice in 2021.

In December 2022, the Company amended the Term Loan to replace the original LIBOR base rate with the Secured Overnight Financing Rate (“SOFR”).

The Term Loan now bears interest at an annual rate of adjusted SOFR (SOFR plus 0.10%) plus 2.50 %, with a 0.75 % adjusted SOFR floor.

In September 2023, pursuant to an amended and restated credit agreement (the “Credit Agreement”), the Company refinanced its previously existing term loan resulting in total borrowing of $ 1,500.0 million (as so amended and restated, the “Term Loan”) in aggregate principal amount with various lenders administered by Deutsche Bank AG and an accompanying $ 100.0 million revolving loan (the “Revolving Facility”).

The Term Loan was issued at a price equal to 99.75% of its face value and bears interest at an annual rate equal to the Secured Overnight Financing Rate (“SOFR”) plus 2.50 %, with a 0.75 % SOFR floor.

The maturity of the Term Loan is in September 2030.

The Company typically selects a one-month interest period, with the result that interest is calculated using one-month SOFR.

All other terms of the Term Loan remain the same, including maturity in November 2026.

The interest rate on the Revolving Facility was also modified to use adjusted SOFR as the base rate beginning December 30, 2022.

All other material terms remain unchanged.

The Revolving Facility now bears interest at an annual rate of adjusted SOFR plus 3.75 %, but without an adjusted SOFR 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.

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

Principal payments, payable quarterly beginning with the quarter ending March 31, 2024, equal $ 15.0 million per annum (one percent of the full principal amount of the Term Loan), with the remaining principal due upon maturity.

The Revolving Facility bears interest at the same rate (but without a SOFR floor) if and as drawn, with no original issue discount, a commitment fee of 0.5 % per year on the undrawn amount, which will be reduced to 0.375 % if the Company has a consolidated first lien net leverage ratio (as defined in the Credit Agreement) of less than 3.5 to 1, and a maturity date in September 2028.

The Company paid $ 3.8 million of issuance costs to refinance the Term Loan in September 2023, which were deferred and will be amortized through the term of the loan.

Lenders making up approximately $ 16.8 million of the Term Loan did not participate in the refinancing.

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

This resulted in an immaterial loss on extinguishment of debt, as the Company wrote off the unamortized debt issuance costs related to the lenders who were fully repaid in an exchange of principal.

The Company deferred an additional $ 1.2 million of third-party fees associated with the refinancing of the Term Loan and the Revolving Facility.

In the fourth quarter of 2022, the Company elected to prepay $ 100.0 million of principal on the Term Loan.

This resulted in a $ 1.2 million loss on extinguishment of debt during the year ended December 31, 2022, as the Company wrote off the unamortized debt issuance costs related to this prepayment.

In the third quarter of 2021, the Company repriced the Term Loan.

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 Term Loan, together with cash on hand, to prepay and retire all of the indebtedness outstanding under then outstanding senior unsecured promissory notes, including premiums for early prepayment.

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

This resulted in a $ 1.2 million loss on extinguishment of debt, as the Company wrote off the unamortized debt issuance costs related to this prepayment.

In the third quarter of 2021, the Company repriced the Term Loan and incurred a $ 0.9 million loss on extinguishment of debt, as the Company wrote off the unamortized debt issuance costs related to the lenders who were fully repaid in an exchange of principal.

As of December 31, 2023 and 2022, the Company reported an aggregate of $ 1,500.0 million and $ 1,504.6 million in borrowings under the Term Loan, respectively.

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The net principal balance in borrowings in the accompanying consolidated balance sheets as of December 31, 2023 and 2022 amounted to $ 1,482.5 million and $ 1,487.2 million, respectively.

As of December 31, 2022 and 2021, 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 $1,494.3 million and $ 1,622.1 million, respectively.

As of December 31, 2023 and 2022, based upon over-the-counter bid levels (Level 2 - market approach), the fair value of the borrowings under the Term Loan was $ 1,506.6 million and $ 1,494.3 million, respectively.

The Company had not borrowed under the Revolving Facility as of December 31, 2023 or 2022.

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.

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, 2022, the Company was below the specified leverage ratio and a mandatory prepayment sweep was therefore not required.

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 in the case of incurring indebtedness and liens and making investments, dividend payments, and payments of subordinated indebtedness, based on achievement and maintenance of specified leverage ratios.

The Credit Agreement also contains an annual mandatory prepayment sweep mechanism with respect to a portion of the Company’s excess cash flow (as defined in the Credit Agreement) in the event the Company’s net leverage ratio rises above 3.5 to 1.

As of December 31, 2023, the Company was below the specified leverage ratio and therefore no mandatory prepayment sweep was not required.

The Credit Agreement permits repayment, prepayment and repricing transactions, subject, in the case of the Term Loan, to a 1% penalty in the event the Term Loan is prepaid or repriced within the first six months from the refinancing date.

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

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The Company was in compliance with all covenants as of December 31, 2023.

The effective interest rate on outstanding principal of the Term Loan was 5.0 % during the year ended December 31, 2022.

Interest on Debt

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

All third-party financing costs incurred during the years ended December 31, 2021 and 2020 were expensed and are included within interest expense on the consolidated statements of operations and comprehensive income (loss).

The Company incurred third-party financing costs of $ 15.9 million in connection with the refinancing of the Term Loan in September 2023, of which $ 14.7 million was expensed.

All third-party financing costs incurred during the years ended December 31, 2022 and 2021 were expensed.

All amounts expensed 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:

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As of December 31, 2023 and 2022, accrued interest under the Term Loan was $ 1.0 million and $ 0.3 million, respectively.

Future minimum principal repayments with respect to the Company’s debt balances existing at December 31, 2022, by year and in the aggregate, are as follows:

The following table presents future minimum principal repayments with respect to the Term Loan existing at December 31, 2023, by year and in the aggregate:

Year ending December 31, Amount

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2024 $ 15,000

2026 1,455,125

Total debt commitments 1,500,000

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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 the current interest rate cap contract is based on a long-haul hypothetical derivative methodology and includes all changes in value.

Hedge effectiveness of the current interest rate cap agreement (the “Cap”) 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, is exercised, no longer qualifies for hedge accounting, is de-designated, 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 designated, or is no longer probable, hedge accounting is discontinued prospectively.

Interest Rate Cap

In July 2021, the Company entered into the Cap, which had an effective date of December 2021 upon the expiration of the Company’s long-term interest rate swap (the “Swap”).

The Cap manages the Company’s exposure to interest rate movements on a portion of the Term Loan through the maturity of the Term Loan in November 2026.

In December 2022, the Company modified the Cap to replace the LIBOR base rate with SOFR, consistent with the amendment to the Term Loan.

With the replacement of LIBOR to SOFR, the Company receives a credit risk adjustment from the counterparty of 0.064 %.

The adjusted Cap now provides the Company the right to receive payment from the counterparty if one-month SOFR exceeds 1.436 % ( 1.5 % less 0.064 %).

Prior to the amendment, the Company received payment under the terms of the Cap if one-month LIBOR exceeded 1.5 %.

Since December 2021, the Company pays a fixed monthly premium based on an annual rate of 0.31 % for the Cap.

The Cap manages the Company’s exposure to interest rate movements on a portion of the Term Loan through November 2026.

In December 2022, the Company modified the Cap to replace the previous LIBOR base rate with SOFR and received a credit risk adjustment of 0.064 %.

The modified Cap provides the Company the right to receive payment from the counterparty if one-month SOFR exceeds 1.436 %.

Prior to the modification, the Company received payment under the terms of the Cap if one-month LIBOR exceeded 1.5%.

The Company pays 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, 2023 and 2022.

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 base rate interest payments on the Term Loan.

The Cap, which was not affected by the refinancing of the Term Loan in September 2023, 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 SOFR-based rate 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).

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Interest Rate Swaps

The Company entered into the Swap in November 2019, which had a term through November 2021 and was intended to mitigate variability in forecasted interest payments on a portion of the Term Loan.

In November 2019, the Company entered into the Swap which had a term through November 2021 and was intended to mitigate variability in forecasted interest payments on a portion of the Term Loan.

On the last business day of each month, the Company received variable interest payments based on one-month LIBOR from the counterparty.

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Fair Value of Derivative Instruments

As of December 31, 2022, the Company had an asset balance of $ 81.3 million recorded in other assets for the fair value of the Cap.

As of December 31, 2023 and 2022, the Company had an asset balance of $ 66.5 million and $ 92.3 million, respectively, for the fair value of the Cap, and a liability balance of $ 8.4 million and $ 11.0 million, respectively, for the fair value of the Cap premium.

Both the Cap and the Cap premium are recorded within other assets on the consolidated balance sheet.

During the years ended December 31, 2023, 2022, and 2021 the Company collectively incurred $ 3.3 million, $ 3.3 million, and $ 8.5 million, respectively, in net interest expense for the Cap and Swap contracts.

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.

Interest expense was reduced by $ 36.2 million and $ 7.2 million for the years ended December 31, 2023 and 2022, respectively, for payments received related to the Cap.

There were no such interest payments received for the year ended December 31, 2021.

Gains and losses resulting from fair value adjustments to the Cap are recorded within accumulated other comprehensive income 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.

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Unrealized gain (loss), net of tax

$ ( 17,598 ) $ 58,668 $ 10,408

Tax benefit (expense)

$ 5,379 $ ( 17,834 ) $ ( 3,316 )

Stock-Based Compensation

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The Company accounts for stock-based compensation at estimated fair value.

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

The Company will reconsider the use of the Black-Scholes-Merton model if additional information becomes available in the future that indicates another model would be more appropriate or if grants, if any, issued in future periods have characteristics that cannot be reasonably estimated under this model.

The Black-Scholes-Merton option pricing model incorporates the following assumptions:

• Volatility - The expected volatility of the options granted was estimated based upon historical volatility of the Company’s share price of its common stock through daily observations of its trading history.

• Expected life of options - The expected life of options granted to employees was determined from the simplified method.

• Risk-free interest rate - The yield on zero-coupon U.S.

Treasury strips was used to extrapolate a forward-yield curve.

This “term structure” of future interest rates was then input into a numeric model to provide the equivalent risk-free rate to be used in the Black-Scholes-Merton model based on the expected term of the underlying grants.

• Dividend yield - The Black-Scholes-Merton valuation model requires an expected dividend yield as an input.

The Company does not anticipate paying dividends during the expected term of the grants;

therefore, the dividend rate is assumed to be zero.

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

The Company last granted stock options in 2019.

A summary of the activity of the Company’s stock options is as follows:

Shares Weighted-

Exercise Price

Per Share Weighted-

Term (Years) Aggregate

(In thousands, except years and per share data)

Options outstanding at December 31, 2019 4,153 $ 8.78

Cancelled or expired ( 5 ) 20.17

Exercised ( 1,581 ) 8.14 $ 33,836

Forfeited ( 13 ) 18.17

Options outstanding at December 31, 2020 2,554 $ 9.10 3.94 $ 77,182

Cancelled or expired ( 3 ) 10.67

Exercised ( 857 ) 8.51 $ 31,544

Forfeited ( 13 ) 16.07

Options outstanding at December 31, 2021 1,681 $ 9.35 3.28 $ 53,698

Cancelled or expired ( 1 ) 8.28

Exercised ( 494 ) 7.83 $ 18,992

Forfeited ( 1 ) 18.35

Options outstanding at December 31, 2022 1,185 $ 9.97 2.64 $ 49,094

Options exercisable at December 31, 2022 1,177 $ 9.89 2.62 $ 48,851

Options exercisable and expected to vest at December 31, 2022 1,185 $ 9.97 2.64 $ 49,094

The Company recognized $ 0.5 million, $ 0.8 million and $ 1.0 million of stock-based compensation expense related to stock options in the years ended December 31, 2022, 2021 and 2020, respectively.

The total fair value of the shares vested during the years ended December 31, 2022, 2021 and 2020 was $ 0.6 million, $ 2.3 million and $ 1.4 million, respectively.

As of December 31, 2022, the total unrecognized cost related to non-vested options was less than $ 0.1 million.

This cost is expected to be recognized over a weighted-average period of 0.2 years.

Restricted Stock Units

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.

Each RSU represents the right to receive one share of common stock at a future date.

Historically, RSUs granted to employees for service generally vested 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.

Beginning with grants made in 2024, RSUs granted to employees for service will generally vest over three years, with 34% vesting on the first anniversary of the grant date and the remainder vesting ratably on a quarterly basis thereafter, subject to continued employment.

Some RSUs granted to employees for performance vest upon the completion of defined performance goals, subject to continued employment.

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

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, with the remaining 50% vesting quarterly thereafter through the second anniversary of the grant date.

The Company’s RSUs are classified as equity awards because the RSUs will be settled 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.

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The fair value of the awards is not remeasured at the end of each reporting period.

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 do not carry voting rights until the RSUs are vested, but certain unvested RSUs are entitled to accrue dividends, and shares are issued upon settlement in accordance with the terms of the award.

The following table summarizes the Company’s RSU activity:

RSUs Weighted-

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Outstanding at December 31, 2020

2,664 $ 18.96

Granted 913 $ 41.55

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Outstanding at December 31, 2021

2,550 $ 25.80

Granted 1,562 $ 40.21

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Outstanding at December 31, 2022

2,970 $ 31.60

Granted 1,184 $ 57.85

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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.

In addition, some members of the Company’s board of directors elect to receive their cash retainers, or a portion thereof, in the form of RSUs.

An aggregate amount of approximately 55,000 , 57,000 and 39,000 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, 2023, 2022 and 2021, respectively, with an estimated grant date fair value of $ 2.9 million, $ 2.2 million and $ 1.6 million, respectively.

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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.

In 2022, the Company’s compensation committee adjusted the Executive RSUs granted in 2022 to exclude contributions from its Russian subsidiaries, due to the uncertainties surrounding its Russian operations as a result of Russia's invasion of Ukraine and related sanctions.

The Company's compensation committee also approved the removal of a performance condition.

At the time of each modification, the Company determined achievement of the performance conditions of the Executive RSUs probable.

As such, the modifications did not result in incremental compensation expense.

If the Company achieves the performance goals for the Executive RSUs at the end of the two-year performance period, 50 % of the number of Executive RSUs earned based on performance will then vest on the second anniversary of the grant date, and the remaining 50 % will then 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 2022, the Company cancelled shares underlying performance-based RSUs to the Company’s executives for under-achievement of performance targets related to the Executive RSUs originally awarded in 2020 in the amount of 50,000 shares.

In March 2021 and 2020, 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 and 2018 in the amounts of 3,000 and 20,000 , respectively.

In March 2023, the Company awarded approximately 55,000 additional shares related to performance-based RSUs granted to the Company’s executives for over-achievement of performance targets for the Executive RSUs with a performance period that ended December 31, 2022.

In March 2022, the Company cancelled approximately 50,000 shares related to performance-based RSUs granted to the Company’s executives in 2020 for under-achievement of performance targets for the performance period that ended December 31, 2021.

In March 2021, the Company awarded approximately 3,000 additional shares related to performance-based RSUs granted to the Company’s executives in 2019 for over-achievement of performance targets for the performance period that ended December 31, 2020.

Stock Option Awards

The Company last granted stock options in 2019.

The fair value of stock options was determined at the grant date using the Black-Scholes-Merton option pricing model.

The following table summarizes the Company’s stock option award activity:

Shares Weighted-

Exercise Price

Per Share Weighted-

Term (Years) Aggregate

(In thousands, except years and per share data)

Options outstanding at December 31, 2020

2,554 $ 9.10 3.94 $ 77,182

Cancelled or expired ( 3 ) 10.67

Exercised ( 857 ) 8.51 $ 31,544

Forfeited ( 13 ) 16.07

Options outstanding at December 31, 2021

1,681 $ 9.35 3.28 $ 53,698

Cancelled or expired ( 1 ) 8.28

Exercised ( 494 ) 7.83 $ 18,992

Forfeited ( 1 ) 18.35

Options outstanding at December 31, 2022

1,185 $ 9.97 2.64 $ 49,094

Cancelled or expired ( 4 ) 10.25

Exercised ( 505 ) 7.84 $ 26,928

Options outstanding and exercisable at December 31, 2023

676 $ 11.55 2.39 $ 20,036

The total fair value of the shares underlying stock options that vested during the years ended December 31, 2022 and 2021 was $ 0.6 million and $ 2.3 million, respectively.

The total fair value of the shares underlying stock options that vested during the year ended December 31, 2023 was immaterial.

Equity Transactions

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Stockholders are entitled to receive, when and if declared by the Company’s Board of Directors from time to time, such dividends and other distributions in cash, stock or property from the Company’s assets or funds legally and contractually available for such purposes.

In December 2022, the Company’s Board of Directors approved a dividend of $0.13 per share, payable on March 30, 2023 to stockholders of record as of March 15, 2023.

As such, the Company accrued a liability of $16.6 million related to the unpaid dividend as of December 31, 2022.

This was the first declared dividend on the common stock of the Company.

In each of December 2022, May 2023, September 2023 and December 2023, the Company’s Board of Directors approved a dividend of $ 0.13 per share of common stock.

The dividends, which were paid on March 30, June 30, September 29 and December 29, 2023 to stockholders of record as of March 15, June 15, September 15 and December 15, 2023, respectively, resulted in total payments of $ 64.8 million during 2023.

The Company’s liability related to dividends on common stock was $ 1.3 million and $ 16.6 million as of December 31, 2023 and 2022, respectively.

Share Repurchase Program

In February 2021, the Company announced that its Board of Directors had authorized the repurchase of up to $ 300.0 million of its common stock through December 31, 2022.

In March 2022, the Company expanded the repurchase program to include up to an additional $ 300.0 million of its common stock through December 31, 2023.

Since February 2021, the Company’s Board of Directors has authorized the repurchase of up to $ 1,000.0 million of the Company’s common stock through December 31, 2025.

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

Repurchases are made from time to time on the open market at prevailing prices or in negotiated transactions off the market.

Repurchases may be made from time to time on the open market at prevailing prices or in negotiated transactions off the market.

The Company records share repurchases at cost, which includes broker commissions and related excise taxes.

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 6.8 million and 4.3 million shares of its common stock during the years ended December 31, 2022 and 2021, respectively, for a total purchase price of $ 257.0 million and $ 163.4 million, respectively.

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 4.8 million, 6.8 million and 4.3 million shares of its common stock during the years ended December 31, 2023, 2022 and 2021, respectively, for a total purchase price of $ 244.6 million, $ 257.0 million and $ 163.4 million, respectively, exclusive of $ 1.4 million of excise taxes incurred in the year ended December 31, 2023, with no such taxes incurred in the years ended December 31, 2022 and 2021, respectively.

In addition, in December 2023, the Company purchased 26,000 shares for $ 1.0 million, which were settled and retired in January 2024.

As such, these shares are recorded as treasury stock as of December 31, 2023.

As of December 31, 2023, $ 334.0 million remained available and authorized for repurchase under this program.

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

The following table summarizes the Company’s services revenue:

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Other contract costs $ 1,970 $ 2,255

and foreign components of income (loss) before income taxes are presented below:

The following table presents U.S.

and foreign components of income (loss) before income taxes:

Year Ended December 31,

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Total income (loss) before income taxes $ ( 4,747 ) $ 10,510 $ ( 28,888 )

The components of the Company’s income tax provision were as follows:

The following table summarizes the components of the Company’s income tax provision:

Year Ended December 31,

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Total income tax expense (benefit) $ ( 26,251 ) $ 292 $ ( 19,569 )

A reconciliation of the U.S.

federal statutory income tax expense to the Company’s effective income tax provision is below.

The following table presents a reconciliation of the U.S.

federal statutory income tax expense to the Company’s effective income tax provision.

Any amounts that do not have a meaningful impact on this reconciliation are not separately disclosed.

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(In thousands)

Expected tax benefit at U.S.

Expected tax expense (benefit) at U.S.

federal statutory tax rate

$ ( 997 ) $ 1,893 $ ( 6,067 )

State taxes, net of federal benefit 927 1,260 ( 9,094 )

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Total income tax expense (benefit) $ ( 26,251 ) $ 292 $ ( 19,569 )

The components of deferred tax assets and liabilities are as follows:

The following table presents the components of deferred tax assets and liabilities:

(In thousands)

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The 2017 U.S.

federal net operating loss carryforward, if unutilized, will expire in 2037.

federal net operating loss carryforward, if not utilized, will expire in 2037.

The Company believes that the 2017 U.S.

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The Company had deferred tax assets related to the state net operating loss carryforwards of approximately $ 59.2 million and $ 60.0 million as of December 31, 2023 and 2022, respectively, some of which expire as early as 2025.

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 $ 33.3 million and $ 32.6 million as of December 31, 2022 and 2021, respectively, against these deferred tax assets on its consolidated balance sheet.

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 $ 33.0 million and $ 33.3 million as of December 31, 2023 and 2022, respectively, against these deferred tax assets on its consolidated balance sheets.

The Company had deferred tax assets related to the foreign net operating loss carryforwards of approximately $ 0.5 million and $ 0.7 million, as of December 31, 2023 and 2022, respectively, that do not expire.

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The Company had approximately $ 32.3 million and $ 12.1 million of deferred tax assets related to research and development tax credits as of December 31, 2023 and 2022, respectively, that expire in various amounts from 2029 through 2043.

As of December 31, 2023 , the Company established a reserve of approximately $ 2.4 million on its estimate of R&D credits.

The Company had approximately $ 8.7 million and $ 5.2 million of deferred tax assets related to foreign tax credits as of December 31, 2023 and 2022, respectively, that expire in various amounts through 2033.

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 $ 0.5 million and $ 0.8 million as of December 31, 2022 and 2021, respectively.

Previously, the Company did not expect to utilize all of its foreign tax credits, resulting in the Company recording a partial valuation allowance of $ 0.5 million as of December 31, 2022.

There is no valuation allowance on foreign tax credits as of December 31, 2023 .

The Company has provided for U.S.

income taxes on all undistributed earnings of its significant foreign subsidiaries since the Company does not indefinitely reinvest these undistributed earnings.

The Company measures deferred tax assets and liabilities using tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

The Company recognizes the effect on deferred tax assets and liabilities of a change in tax rates in income in the period that includes the enactment date.

income taxes on all undistributed earnings of its significant foreign subsidiaries since the

Company does not indefinitely reinvest these undistributed earnings.

The Company measures deferred tax assets and liabilities

using tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be

recovered or settled.

The Company recognizes the effect on deferred tax assets and liabilities of a change in tax rates in income

in the period that includes the enactment date.

Uncertain Income Tax Positions

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and various state and foreign jurisdictions.

Significant judgment is required in evaluating tax positions and determining the provision for income taxes.

The Company establishes liabilities for tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes may be due.

These liabilities are established when the Company believes that certain positions might be challenged despite its belief that its tax return positions are fully supportable.

The Company adjusts these liabilities in light of changing facts and circumstances, such as the outcome of a tax audit.

Significant judgment is required

in evaluating tax positions and determining the provision for income taxes.

The Company establishes liabilities for tax-related

uncertainties based on estimates of whether, and the extent to which, additional taxes may be due.

These liabilities are

established when the Company believes that certain positions might be challenged despite its belief that its tax return positions

are fully supportable.

The Company adjusts these liabilities in light of changing facts and circumstances, such as the outcome of

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

There were no unrecognized tax benefits as of December 31, 2022 and 2021.

The Company had unrecognized tax benefits of approximately $ 2.4 million as of December 31, 2023 primarily due to additional U.S.

tax credits from prior periods.

There were no unrecognized tax benefits as of December 31, 2022.

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

As of December 31, 2023 and 2022, there were no interest and penalties on unrecognized tax benefits.

The following is a tabular reconciliation of the total amounts of unrecognized tax benefits which includes related interest and penalties:

Year Ended December 31,

(In thousands)

Balance at January 1, $ — $ —

Change attributable to tax positions taken in a prior period 2,162 —

Change attributable to tax positions taken in the current period 236 —

Balance at December 31, $ 2,398 $ —

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

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federal and state tax returns from 2011 to 2022 remain subject to examination by tax authorities and the Company’s foreign tax returns from 2017 to 2022 remain subject to examination by tax authorities.

The following is a tabular reconciliation of the total amounts of unrecognized tax benefits which includes related interest and penalties:

(In thousands)

Balance at January 1, $ — $ 537

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

Balance at December 31, $ — $ —

Net Income (Loss) Per Share

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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) contingent RSUs that are convertible into shares of common stock upon achievement of certain service and performance requirements.

Potentially dilutive common shares include (i) shares of common stock issuable upon exercise of outstanding stock options and (ii) shares underlying RSUs that are contingently issuable upon achievement of certain service and performance requirements.

The effect of potentially dilutive common shares is computed using the treasury stock method.

The computations of basic and diluted net loss per common share are set forth below:

The following table summarizes the computations of basic and diluted net loss per common share:

Year Ended December 31,

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Net income (loss) attributable to common stockholders per share - basic and diluted

$ 0.12 $ 0.07 $ ( 0.07 )

For the year ended December 31, 2022, 0.2 million unvested service-based RSUs were excluded from the computation of basic net income per share and not included in the computation of diluted net income per share, as the effect would be anti-dilutive, and 0.2 million unvested performance-based RSUs were not included in the computation of basic and diluted net income per share, as certain performance criteria have not been satisfied.

Due to the Company’s net loss position for the years ended December 31, 2021 and 2020 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:

There were no such shares for the year ended December 31, 2023.

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

The following table presents the incremental number of shares underlying stock options and RSUs outstanding with anti-dilutive effects:

Year Ended December 31,

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Aireon LLC and Aireon Holdings LLC

The Company’s satellite constellation hosts the Aireon system, which provides a global air traffic surveillance service through a series of automatic dependent surveillance-broadcast (“ADS-B”) receivers.

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’s satellite constellation hosts the Aireon ® system.

The Aireon system was developed by Aireon LLC, which the Company formed in 2011 and which received subsequent investments from several air navigation service providers (“ANSPs”) to provide a global air traffic surveillance service through a series of automatic dependent surveillance-broadcast (“ADS-B”) receivers on the Company’s satellites.

Aireon has contracted to offer this service to ANSPs, which use the service to provide improved air traffic control services over the oceans, as well as polar and remote regions.

Aireon also markets its data and services to airlines and other commercial users.

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

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

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

In June 2022, the Company entered into a subscription agreement with Aireon Holdings and invested $ 50.0 million in exchange for an approximate 6 % preferred membership interest.

The Company’s investment in Aireon Holdings is accounted for as an equity method investment.

The carrying value of the Company’s investment in Aireon Holdings was $ 48.8 million as of December 31, 2022.

The original investments by the Company were previously written down to a carrying value of zero.

At December 31, 2022 and 2021, the Company’s fully diluted ownership stake in Aireon Holdings was approximately 39.5 % and 35.7 %, respectively, and is subject to redemption provisions contained in the Aireon Holdings LLC Agreement.

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 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 $ 78.5 million had been paid as of December 31, 2022.

These fees will be recognized over the life of the satellites, or approximately $16.0 million per year.

Additionally, Aireon pays 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 of hosting fee revenue under the Hosting Agreement for each of the years ended December 31, 2022, 2021 and 2020.

The carrying value of the Company’s investment in Aireon Holdings was $ 44.6 million and $ 48.8 million as of December 31, 2023 and 2022, respectively.

The investments by the Company prior to June 2022 had previously been written down to a carrying value of zero.

At each of December 31, 2023 and 2022, the Company’s fully diluted ownership stake in Aireon Holdings was approximately 39.5 %, which is subject to partial future redemption under provisions contained in the Aireon Holdings LLC Agreement.

Under the agreements with Aireon, Aireon will pay the Company fees of $ 200.0 million to host the ADS-B receivers, of which $ 94.5 million had been paid as of December 31, 2023.

These fees are recognized over the estimated useful lives of the satellites, which is expected to result in revenue of approximately $9.3 million, following the change in estimate of the useful lives of the satellites that occurred in the fourth quarter of 2023.

The Company recognized $ 14.4 million of hosting fee revenue under the Hosting Agreement for the year ended December 31, 2023 and $ 16.1 million of hosting fee revenue for the years ended December 31, 2022 and 2021.

There were no receivables due under the Hosting Agreement as of December 31, 2023 and 2022.

The Company recorded power fee and data service fee revenue from Aireon of $ 23.5 million, $ 23.5 million and $ 23.9 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Additionally, Aireon pays power and data services fees of approximately $23.5 million per year, in the aggregate for the delivery of the air traffic surveillance data over the Iridium system.

The Company recorded $ 23.5 million of power and data service fee revenue from Aireon for each of the years ended December 31, 2023, 2022 and 2021.

During the year ended December 31, 2023, the Company recorded other income of $ 3.5 million related to a contractual settlement with Aireon.

This is a one-time payment that is not expected to recur.

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 at each of the years ended December 31, 2022 and 2021.

Aireon receivables due to the Company under these two agreements totaled $ 2.2 million at each of December 31, 2023 and 2022.

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

The Company’s maximum commitment under the investor bridge loan is $ 11.9 million.

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

No bridge loan amounts were outstanding as of December 31, 2023 or 2022.

In the first quarter of 2023, the Company entered into a stock purchase agreement with Satelles, Inc.

(“Satelles”) and invested $ 10.0 million, in addition to its previous equity investment in Satelles.

The Company’s fully diluted ownership stake in Satelles was approximately 19.5 % as of December 31, 2023, and the investment in Satelles is now accounted for as an equity method investment.

The carrying value of the Company’s investment in Satelles was approximately $ 21.8 million as of December 31, 2023.

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

6 unchanged sentences

Should events or circumstances prevent the manufacturer or the suppliers from producing the equipment or component parts, the Company’s business could be adversely affected until the Company is able to move production to other facilities of the manufacturer or secure a replacement manufacturer or an alternative supplier for such component parts.

Net property and equipment by geographic area was as follows:

The following table summarizes net property and equipment by geographic area:

(In thousands)

3 unchanged sentences

Total $ 2,195,758 $ 2,433,305

Revenue by geographic area was as follows:

The following table summarizes revenue by geographic area:

Year Ended December 31,

9 unchanged sentences

The Company’s distributors sell services directly or indirectly to end users, who may be located or use the Company’s products and services elsewhere.

The Company cannot provide the geographical distribution of end users because it does not contract directly with them.

The Company is exposed to foreign currency exchange fluctuations as foreign currency exchange rate movements create a degree of risk by affecting the U.S.

dollar value of sales made and costs incurred in foreign currencies.

The Company does not know the geographical distribution of end users because it does not contract directly with them.

The Company is exposed to foreign currency exchange fluctuations from sales made and costs incurred in foreign currencies.

Employee Benefit Plan

3 unchanged sentences

The Company’s matching contributions to the Plan were $ 4.3 million, $ 3.5 million and $ 3.5 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Subsequent Event

On February 2, 2024 , the Company’s Board of Directors approved a dividend of $ 0.13 per share payable on March 29, 2024 , to stockholders of record as of March 15, 2024 .

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