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Item 7. Management’s Discussion and Analysis

2025-02-13 compared with 2024-02-15 · 81 added, 91 removed, 220 unchanged (44% of the section changed)

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A discussion regarding our financial condition and results of operations for the year ended December 31, 2023 compared to the year ended December 31, 2022 can be found in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of our Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the SEC on February 15, 2024.

We were initially formed in 2007 as GHL Acquisition Corp., a special purpose acquisition company.

In 2009, we acquired all the outstanding equity in Iridium Holdings LLC and changed our name to Iridium Communications Inc.

Overview of Our Business

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This unique architecture minimizes the need for ground facilities to support the constellation, which facilitates the global reach of our services and allows us to offer services in countries and regions where we have no physical presence.

In 2024, we acquired Satelles, Inc., or Satelles, a provider of highly secure, satellite-based position, navigation and timing (PNT) services that complement and protect GPS and other Global Navigation Satellite System, or GNSS, reliant systems.

Time synchronization and location data play an important role in the global economy, particularly for major industries supported by critical infrastructure, such as financial services, telecommunications, cyber-security and transportation.

We believe the acquisition of Satelles’s business could generate substantial growth in our service revenue, as well as incremental equipment and engineering services revenue over the coming years from both government and commercial customers.

See Note 12 to our consolidated financial statements included in this annual report.

We sell our products and services to commercial end users through a wholesale distribution network, encompassing approximately 110 service providers, 310 value-added resellers, or VARs, and 85 value-added manufacturers, or VAMs, who either sell directly to the end user or indirectly through other service providers, VARs or dealers.

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We also recognize revenue from our hosted payloads, principally from Aireon, including fees for hosting the payloads and fees for transmitting data from the payloads over our network, as well as revenue from other services, such as satellite time and location services.

Launch Services Agreements

During 2022, we entered into agreements with Space Exploration Technology Corp.

and Thales Alenia Space France for launch and related services, to launch up to five of our ground spare satellites.

The contract price under these agreements was approximately $40.0 million in the aggregate.

In May 2023, we launched five of our remaining ground spare satellites, bringing our total number of in-orbit spares to 14.

Following completion of successful on-orbit testing of the five launched satellites, we had no plans to use, develop or launch the remaining ground spare and wrote off the full amount remaining in construction-in-progress for that satellite by recording accelerated depreciation expense of $37.5 million during the second quarter of 2023.

On September 20, 2023, pursuant to an amended and restated credit agreement, or the Credit Agreement, we refinanced our previously existing term loan resulting in total borrowing of $1,500.0 million, which as amended and restated we refer to as the Term Loan.

We also have an accompanying $100.0 million revolving loan, or the Revolving Facility.

The Term Loan now bears interest at an annual rate equal to the Secured Overnight Financing Rate, or SOFR, plus 2.50%, with a 0.75% SOFR floor.

Term Loan and Revolving Facility

On September 20, 2023, pursuant to a credit agreement (or, as amended to date, the Credit Agreement), we refinanced our previously existing term loan resulting in borrowing of $1,500.0 million, or the Term Loan, issued at a price equal to 99.75%, and an accompanying $100.0 million revolving loan, or the Revolving Facility.

The maturity date of the Term Loan is in September 2030.

During the year ended December 31, 2024, we borrowed an additional $325.0 million under our Term Loan, comprised of $125.0 million on March 25, 2024 and $200.0 million on July 30, 2024.

The additional amounts borrowed are fungible with the original $1,500.0 million, and have the same maturity date, interest rate and other terms.

The additional $125.0 million was issued at a price equal to 99.875% of its face value, while the additional $200.0 million was issued at a price equal to 99.0% of its face value.

The proceeds from the March 2024 additional Term Loan were used for the acquisition of Satelles on April 1, 2024.

In April 2024, we drew down $50.0 million on our Revolving Facility for general corporate purposes, including the funding of repurchases of our common stock.

This amount was repaid with the expansion of the Term Loan in July 2024, and there were no amounts outstanding under the Revolving Facility as of December 31, 2024.

The remaining proceeds from the July 2024 additional Term Loan have been used for general corporate purposes, including share repurchases.

The Term Loan has been repriced on several occasions, most recently in June 2024, and currently bears interest at an annual rate equal to the Secured Overnight Financing Rate, or SOFR, plus 2.25%, with a 0.75% SOFR floor.

We typically select a one-month interest period, with the result that interest is calculated using one-month SOFR.

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

The maturity date of the Term Loan is in September 2030.

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

The Revolving Facility bears interest at an annual rate of SOFR plus 2.50% (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 we have 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.

Principal payments, payable quarterly, equal $18.3 million per annum, which is one percent of the full principal amount of the Term Loan, with the remaining principal due upon maturity.

The Revolving Facility bears interest at an annual rate of SOFR plus 2.25% (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 is reduced to 0.375% if we have a consolidated first lien net leverage ratio, as defined in the Credit Agreement, of less than 3.5 to 1.

The Revolving Facility has a maturity date in September 2028.

See Note 6 to the consolidated financial statements included in this annual report for further discussion of our Term Loan and Revolving Facility.

In the fourth quarter of 2022, we elected to prepay $100.0 million of principal on the previously existing term loan.

As of December 31, 2024, we reported an aggregate balance of $1,807.7 million in borrowings under the Term Loan, before $16.9 million of net deferred financing costs, for a net principal balance of $1,790.9 million outstanding in our consolidated balance sheet.

We have not drawn on our Revolving Facility.

Our Revolving Facility was undrawn as of December 31, 2024.

Our Term Loan contains no financial maintenance covenants.

With respect to the Revolving Facility, we are required to maintain a consolidated first lien net leverage ratio of no greater than 6.25 to 1 if more than 35% of the Revolving Facility has been drawn.

As of December 31, 2024, the aggregate exposure under the Revolving Facility was less than 35%.

The Credit Agreement contains other customary representations and warranties, affirmative and negative covenants, and events of default.

We were in compliance with all covenants under the Credit Agreement as of December 31, 2023.

The Credit Agreement restricts our 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, or 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 provides for specified exceptions, including baskets measured as a percentage of trailing

twelve months of earnings before interest, taxes, depreciation and amortization, or 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 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 also contains a mandatory prepayment sweep mechanism with respect to a portion of our excess cash flow (as defined in the Credit Agreement) in the

event our net leverage ratio rises above 3.5 to 1.

As of December 31, 2023, our leverage ratio was below the specified level, and we were not required to make a mandatory prepayment with respect to 2023 cash flows.

The Credit Agreement also contains a mandatory prepayment sweep mechanism with respect to a portion of our excess cash flow (as defined in the Credit Agreement) in the event our consolidated first lien net leverage ratio rises above 3.5 to 1.

Our mandatory excess cash flow prepayment, as specified in the Credit Agreement, was $28.6 million as of December 31, 2024.

This amount is scheduled to be paid in 2025 and will be applied towards our required quarterly principal payments.

As such, it was classified under current short-term secured debt in our consolidated balance sheet as of December 31, 2024.

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

We were in compliance with all covenants under the Credit Agreement as of December 31, 2024.

Derivative Financial Instruments

We previously entered into a long-term interest rate swap, or the Swap, to mitigate variability in forecasted interest payments on a portion of our borrowings under the Term Loan.

The Swap expired in November 2021.

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

We paid a fixed rate of 1.565% per annum on the Swap.

In July 2021, we entered into an interest rate cap agreement, or the Cap, that began in December 2021.

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

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 Cap, which was not affected by the refinancing of the Term Loan in September 2023 or the 2024 increases and repricing, is designed to mirror the terms of the Term Loan and to offset the cash flows being hedged.

We designated the Cap as a cash flow hedge of the variability of the SOFR-based interest payments on the Term Loan.

The effective portion of the Cap’s change in fair value is recorded in accumulated other comprehensive income (loss) and reclassified into earnings during the period in which the hedged transaction affects earnings.

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

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

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

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

We began paying a fixed monthly premium based on an annual rate of 0.31% for the Cap in December 2021.

The Cap carried a notional amount of $1.0 billion as of December 31, 2024 and 2023.

We also entered into an interest rate swaption agreement, or the Swaption, for which we paid a fixed annual rate of 0.50%.

We sold the Swaption in May 2021 for $0.7 million but continued to pay the fixed rate through the expiration of the Swaption in November 2021.

At inception, the Swap and Swaption were designated as cash flow hedges for hedge accounting.

The unrealized changes in market value were recorded in accumulated other comprehensive income (loss), and any remaining balance was reclassified into earnings during the period in which the hedged transaction affected earnings.

Due to the changes made to the Term Loan as a result of the July 2021 repricing, at that time, we elected to de-designate the Swap as a cash flow hedge.

Accordingly, as the related interest payments were still probable, the accumulated balance within other comprehensive income (loss) as of the de-designation date was amortized into earnings through the November 2021 expiration date.

See Note 7 to our consolidated financial statements included in this report for further discussion of our derivative financial instruments.

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

We incurred third-party financing costs of $2.3 million in connection with the expansion of the Term Loan in July 2024, $1.9 million related to the repricing of the Term Loan in June 2024 and $1.6 million in connection with the expansion of the Term Loan in March 2024, substantially all of which we expensed as incurred.

Due to the refinancing of the Term Loan in 2023, we incurred third-party financing costs of $15.9 million, of which $14.7 million was expensed.

Due to the prepayments on the Term Loan in the fourth quarter of 2022, we incurred a $1.2 million loss on extinguishment of debt for the write-off of the related unamortized debt issuance costs for the portion of the Term Loan that was prepaid.

To reprice the Term Loan in 2021, we incurred third-party financing costs of $4.9 million.

These costs were expensed and are included within interest expense on the consolidated statements of operations and comprehensive income (loss) for the years ended December 31, 2023, 2022 and 2021.

The repricings of the Term Loan in 2021 resulted in a $0.9 million loss on extinguishment of debt, as we wrote off the unamortized debt issuance costs related to the lenders who were fully repaid in an exchange of principal.

These costs are included within interest expense on the consolidated statements of operations and comprehensive income (loss).

Total interest incurred during the years ended December 31, 2024, 2023 and 2022 was $102.8 million, $102.3 million and $72.1 million, respectively.

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Interest expense, net (91,134) (11) % (90,387) (11) % (747) 1 %

Loss on extinguishment of debt — 0 % (1,187) 0 % 1,187 (100) %

Other income, net

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109,784 13 % (4,747) 0 % 114,531 2,413 %

Income tax benefit (expense) 26,251 3 % (292) 0 % 26,543 (9,090) %

Loss on equity method investments

(6,089) (1) % (1,496) 0 % (4,593) 307 %

Income tax (expense) benefit (12,259) (1) % 26,251 3 % (38,510) (147) %

Gain (loss) on equity method investments 15,251 2 % (6,089) (1) % 21,340 350 %

$ 112,776 14 % $ 15,415 2 % $ 97,361 632 %

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(3) Commercial broadband consists of Iridium OpenPort and Iridium Certus broadband services.

For the year ended December 31, 2023, total commercial service revenue increased $49.7 million, or 12%, primarily as a result of increases in voice and data, IoT, and broadband revenue mainly driven by increases in billable subscribers.

Commercial voice and data revenue increased $26.1 million, or 14%, from the prior year primarily due to an increase in ARPU resulting from certain price increases in access fees and an increase in volume across voice and data services.

Commercial IoT revenue increased $16.0 million, or 13%, compared to the prior year, driven by an 18% increase in IoT billable subscribers including continued strength in personal communications devices.

The subscriber increase effect on revenue was partially offset by a 6% reduction in IoT ARPU, primarily due to the shifting mix of subscribers using lower ARPU plans, including the increased proportion of personal communication subscribers.

Commercial broadband revenue increased $6.8 million, or 13%, compared to the prior year, due to the increase in broadband billable subscribers.

Hosted payload and other service revenue increased $0.8 million, or 1%, which is relatively consistent year over year.

There were two offsetting items in the current year, primarily the one-time recognition of approximately $2.0 million of revenue related to an updated estimate on a customer contract, offset by a $2.3 million decrease in hosted payload revenue related to the change in the estimated useful lives of our satellites.

As a result of this change in estimate, we expect that hosted payload revenue will decrease by approximately $9.1 million per year for the remainder of the estimated useful lives.

For the year ended December 31, 2024, total commercial service revenue increased $30.2 million, or 6%, primarily as a result of increases in IoT and voice and data services revenue.

Commercial IoT revenue increased $25.2 million, or 18%, compared to the prior year, driven by a 10% increase in IoT billable subscribers primarily in users of personal communications devices, and a new contract with a large customer executed in the first quarter of 2024.

Commercial voice and data revenue increased $6.9 million, or 3%, from the prior year primarily due to an increase in billable subscribers.

Commercial broadband revenue decreased $1.8 million, or 3%, compared to the prior year, due to a decrease in ARPU reflecting the increased prevalence of usage of our service as a companion service.

Hosted payload and other service revenue decreased $0.1 million, reflecting the quarterly year-over-year decrease due to the change in the estimated useful lives of our satellites made in the fourth quarter of 2023, offset in part by increases in other data service revenue including Satelles revenue.

Government Service Revenue

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The fee is not based on subscribers or usage, allowing an unlimited number of users access to these services.

Revenue for the year ended December 31, 2023 was unchanged from the prior year, in accordance with the contract.

Revenue for the year ended December 31, 2024 rose slightly reflecting a contractual step up in the EMSS contract on September 15, 2024.

Subscriber Equipment Revenue

Subscriber equipment revenue decreased $29.6 million, or 22%, to $105.1 million for the year ended December 31, 2023 compared to the prior year, primarily due to the expected decrease in sales volume of Short Burst Data devices, L-Band transceivers and handsets.

In 2024, we expect equipment sales to be lower than 2023 and more in line with periods prior to 2022, before we and our competitors began to experience supply chain disruptions due to the pandemic.

Subscriber equipment revenue decreased $13.7 million, or 13%, to $91.4 million for the year ended December 31, 2024 compared to the prior year, primarily due to a decrease in the volume of handset sales, offset in part by an increase in Short Burst Data sales.

The overall decrease was is in line with our previously announced expectations, as we returned to more normal levels after the supply chain disruptions due to the pandemic.

We expect equipment revenue in 2025 to be in line with 2024.

Engineering and Support Service Revenue

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Total $ 124.3 $ 101.1 $ 23.2

Engineering and support service revenue increased by $49.5 million, or 96%, for the year ended December 31, 2023 compared to the prior year primarily due to the increased work under certain government projects, predominantly the contract awarded by the Space Development Agency, or the SDA.

Based on the SDA contract, we expect engineering and support service revenue, as well as associated expenses, to be generally higher than in prior years throughout the life of the SDA contract.

Engineering and support service revenue increased by $23.2 million, or 23%, for the year ended December 31, 2024 compared to the prior year primarily due to the increased work under certain government projects, predominantly the contract awarded by the Space Development Agency, or the SDA, offset in part by decreases in commercial engineering projects.

We expect engineering and support service revenue to be higher in 2025 than in 2024.

Operating Expenses

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Cost of subscriber equipment includes the direct costs of equipment sold, which consist of manufacturing costs, allocation of overhead, and warranty costs.

Cost of subscriber equipment decreased $19.6 million, or 23%, for the year ended December 31, 2023 compared to the prior year period primarily due to the decrease in volume of device sales, as described above.

Cost of subscriber equipment decreased $14.0 million, or 21%, for the year ended December 31, 2024 compared to the prior year period primarily due to the decrease in volume of device sales, as described above, and decreased inventory component costs.

Research and Development

Research and development expenses increased by $4.1 million, or 25%, for the year ended December 31, 2023 compared to the prior year period based on increased spending on device-related features for our network.

Research and development expenses increased by $8.2 million, or 40%, for the year ended December 31, 2024 compared to the prior year period based on increased spending by Satelles since its acquisition and other device-related features for our network, including Project Stardust, which is our multi-year project to develop Iridium NTN DirectSM, our standards-based Narrowband-Internet of Things (NB-IoT) and Non-Terrestrial Network (NB-NTN) messaging and SOS capabilities for smartphones, tablets, cars and related consumer applications.

Selling, General and Administrative

Selling, general and administrative expenses that are not directly attributable to the sale of services or products include sales and marketing costs as well as employee-related expenses (such as salaries, wages, and benefits), legal, finance, information technology, facilities, billing and customer care expenses.

Selling, general and administrative expenses increased by $20.2 million, or 16%, for the year ended December 31, 2023, primarily due to personnel costs from increased headcount and higher employee stock-based compensation expense, increased marketing expenses and increased professional fees, offset in part by a decrease in stock appreciation rights expense in the current year resulting from a decrease in our stock valuation between the years.

Selling, general and administrative expenses increased by $24.5 million, or 17%, for the year ended December 31, 2024, primarily due to personnel costs from increased headcount and related costs, including higher employee stock-based compensation expense, increased expense from Satelles and related acquisition costs and certain costs that were previously recorded in cost of services, offset in part by a decrease in regulatory fees, decreased spending related to our channel partner conference which was held in the first quarter of the prior year and a decrease in stock appreciation rights expense in the current year resulting from a decrease in our stock valuation between the years.

Depreciation and Amortization

Depreciation and amortization expense increased by $16.5 million, or 5%, for the year ended December 31, 2023, compared to the prior year.

As described above, we recorded accelerated depreciation expense of $37.5 million for our remaining ground spare satellite in the second quarter of 2023, following completion of on-orbit testing of our five newly launched spare satellites.

This increase was offset in part by a decrease in depreciation expense of $25.5 million for the year ended December 31, 2023 due to the change in estimated useful lives of our satellites.

As a result of this change in estimate, we expect that depreciation expense will decrease by approximately $111.0 million per year for the remainder of the estimated useful lives.

Depreciation and amortization expense decreased by $116.9 million, or 37%, for the year ended December 31, 2024, compared to the prior year, primarily due to the change in estimated useful lives of our satellites during the fourth quarter of 2023 and the write-off of our final ground spare, that resulted in accelerated depreciation of $37.5 million in the second quarter of 2023.

We expect that depreciation expense will generally remain in line with 2024 depreciation expense for the remainder of the estimated useful lives.

Other Expense

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Interest expense, net, for the year ended December 31, 2024 was $91.1 million, compared to $90.4 million for the prior year.

The increase in interest expense, net resulted primarily from the $14.7 million in fees expensed in connection with the refinancing of our Term Loan in September 2023 and an increase in the base rate of our Term Loan compared to the prior year period.

Loss on Extinguishment of Debt

Loss on extinguishment of debt was $1.2 million for the year ended December 31, 2022 as a result of our election to prepay a total of $100.0 million, and the write-off the related unamortized debt issuance costs.

There were no losses for the year ended December 31, 2023 in connection with the refinancing of our Term Loan.

Interest expense, net in the current year reflects the higher average outstanding debt balance, offset in part by a $9.1 million decrease in repricing fees and the reduced interest rate in the current year.

Other Income, net

Other income, net, was $4.0 million for the year ended December 31, 2023, compared to other expense, net, of $0.1 million for the prior year primarily as a result of a one-time customer contractual settlement which resulted in recognition of $3.5 million of other income in the fourth quarter of 2023.

Other income, net, was $0.5 million for the year ended December 31, 2024, compared to $4.0 million for the prior year.

The prior year balance was primarily the result of a one-time customer contractual settlement which resulted in recognition of $3.5 million of other income in the fourth quarter of 2023.

Income Tax Benefit (Expense)

For the year ended December 31, 2023, our income tax benefit was $26.3 million, compared to income tax expense of $0.3 million for the prior year.

For the year ended December 31, 2024, our income tax expense was $12.3 million, compared to income tax benefit of $26.3 million for the prior year.

Our effective tax rate was approximately 11.2% for the year ended December 31, 2024 compared to 553.0% for the prior year.

The increase in income tax benefit is primarily related to the net impact of (i) pre-tax book loss in the current year compared to pre-tax book income in the prior year, (ii) an increase in estimated R&D credits, and (iii) an increased stock compensation tax benefit.

The decrease in income tax benefit is primarily related to the net impact of (i) pre-tax book income in the current year compared to pre-tax book loss in the prior year, (ii) a decrease in estimated R&D credits, (iii) an increased stock compensation tax expense, and (iv) a tax benefit for the Foreign Derived Intangible Income deduction.

If our current estimates change in future periods, the impact on the deferred tax assets and liabilities may change correspondingly.

See Note 13 to our consolidated financial statements for more detail on the individual items impacting our effective tax rate for the years.

Loss on Equity Method Investments

For the year ended December 31, 2023, our loss on equity method investments was $6.1 million, compared to a loss $1.5 million in the prior year.

The increase in loss primarily reflects the increased duration the equity method investments were outstanding and the related portion of losses recorded on our those investments during each period.

Gain (Loss) on Equity Method Investments

For the year ended December 31, 2024, our gain on equity method investments was $15.3 million, compared to a loss of $6.1 million in the prior year.

The gain in 2024 primarily reflects the acquisition of Satelles, as we recorded a $19.8 million gain on our pre-acquisition equity method investment in Satelles, offset in part by the portion of losses recorded on other equity method investments.

The prior year reflects the portion of losses recorded on equity method investments, including Satelles, during the period.

Net income was $112.8 million for the year ended December 31, 2024, compared to $15.4 million during the prior year.

The change primarily resulted from the increase in income tax benefit, as noted above, offset in part by an increase in interest expense related to the fees paid for the refinancing of our Term Loan and the increased base rate.

The improvement primarily resulted from the decrease in depreciation expense, an increase in revenues, and the gain on equity method investments, as noted above, offset in part by an increase in income taxes and an increase in operating expenses other than depreciation.

Liquidity and Capital Resources

Our primary sources of liquidity are cash provided by operations, cash and cash equivalents and our Revolving Facility.

At December 31, 2023, we had $1.5 billion of indebtedness, consisting exclusively of amounts outstanding under the Term Loan, the terms of which are described above under the section captioned “Term Loan.” We have additional borrowing available to us under our Revolving Facility of $100.0 million at December 31, 2023.

These sources are expected to meet our short-term and long-term liquidity needs, including annual payments for (i) required principal and interest on the Term Loan, which we expect

to be $15.0 million and, based on the current interest rate, approximately $80.0 million, respectively, (ii) capital expenditures of approximately $60.0 million, (iii) working capital, (iv) potential share repurchases, and (v) anticipated cash dividend payments to holders of our common stock.

As of December 31, 2023, our total cash and cash equivalents balance was $71.9 million, down from $168.8 million as of December 31, 2022.

The decrease was principally the result of $247.0 million in repurchases of our common stock, $73.5 million in capital expenditures and $64.8 million in dividends paid, offset by internally generated cash flows from operations.

At December 31, 2024, we had $1.8 billion of indebtedness, consisting exclusively of amounts outstanding under the Term Loan,

the terms of which are described above under the section captioned “Term Loan.” We have additional borrowing available to us under our Revolving Facility of $100.0 million at December 31, 2024.

These sources are expected to meet our short-term and long-term liquidity needs, including annual payments for (i) required principal and interest on the Term Loan, which we expect to be $33.1 million inclusive of the mandatory excess cash flow prepayment in 2025, and, based on the current interest rate, approximately $96.0 million, respectively, (ii) capital expenditures, of approximately $90.0 million in 2025 and moderating through the end of the decade, (iii) working capital, (iv) potential share repurchases, and (v) anticipated cash dividend payments to holders of our common stock.

As of December 31, 2024, our total cash and cash equivalents balance was $93.5 million, up from $71.9 million as of December 31, 2023.

The increase was principally the result of additional Term Loan borrowings in 2024, offset in part by an increase in share repurchases.

Contractual Obligations

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Our purchase obligations, all of which are due during 2025, decreased $12.2 million from the end of 2023 primarily due to recovery from supply chain constraints.

Our material long-term cash requirement is the repayment of the remaining principal amount under the Term Loan upon its maturity in 2030, which is expected to be $1,402.5 million, at that time.

Our material long-term cash requirement is the repayment of the remaining principal amount under the Term Loan upon its maturity in 2030, which is expected to be $1,702.8 million.

We expect to refinance this amount at or prior to maturity.

On December 8, 2022, our Board of Directors initiated a quarterly dividend.

In each of December 2022, May 2023, September 2023 and December 2023, our Board of Directors declared a quarterly cash dividend in the amount of $0.13 per share of common stock, which were paid in March, June, September and December 2023.

Total dividends paid in 2023 were $64.8 million.

For each quarter through March 2024, our Board of Directors declared and paid a quarterly cash dividend in the amount of $0.13 per share of common stock.

Beginning in June 2024, the Board of Directors increased the quarterly cash dividend to $0.14 per share of common stock for each quarter through December 2024.

Total dividends paid in 2024 were $64.7 million, while total dividends in 2023 were $64.8 million.

While we expect to continue the regular cash dividend program, any future dividends declared will be at the discretion of our Board of Directors and will depend, among other factors, upon our results of operations, financial condition and cash requirements, as well as such other factors our Board of Directors deems relevant.

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Cash Flows from Operating Activities

Net cash provided by operating activities for the year ended December 31, 2023 decreased $29.8 million from the prior year.

Cash flows related to changes in working capital decreased by approximately $38.7 million, primarily as a result of an increase in cash outflows for replenished finished goods and component inventory, including last-time buys, as well as lower cash inflows related to deferred revenue.

These changes in working capital were offset by cash inflows for accounts receivable related to lower equipment sales.

These changes were also partially offset by net income, as adjusted for non-cash activities, which increased by $8.9 million over the prior year.

Net income was adjusted for non-cash, positive adjustments, including depreciation expense associated with the write-off of the remaining spare satellite in the third quarter, and stock-based compensation expense, partially offset by non-cash deferred taxes.

Net cash provided by operating activities for the year ended December 31, 2024 increased $61.0 million from the prior year.

Cash flows related to changes in working capital increased by approximately $58.7 million, primarily as a result of changes in inventory, offset by corresponding decreases in accounts payable and accrued expenses.

In 2023, we replenished finished goods and component inventory, including last time buys.

These changes were partially offset by net income, as adjusted for non-cash activities, which decreased by $2.4 million over the prior year.

Net income in 2023 was adjusted for non-cash, positive adjustments, including depreciation expense associated with the write-off of the remaining spare satellite in the third quarter, and stock-based compensation expense.

Cash Flows from Investing Activities

Net cash used in investing activities for the year ended December 31, 2023 decreased $37.8 million from the prior year period primarily as a result of our $50.0 million investment in Aireon Holdings in 2022, compared to our $10.0 million investment in Satelles in 2023, offset in part by increased capital expenditures of $2.2 million, primarily related to payments for the launched ground spares.

Going forward, we expect our capital expenditures to average approximately $60.0 million per year through 2030.

Net cash used in investing activities for the year ended December 31, 2024 increased $97.1 million from the prior year period primarily as a result of our acquisition of Satelles on April 1, 2024, offset in part by a decrease in capital expenditures compared to the prior year.

We expect our capital expenditures to be $90.0 million in 2025 and moderate through the end of the decade.

Cash Flows from Financing Activities

Net cash used in financing activities for the year ended December 31, 2023 decreased $47.9 million compared to the prior year period primarily due to the $108.1 million decrease in net principal payments associated with the terms under the refinancing of our Term Loan, offset in part by the $64.8 million of common stock dividends paid in 2023, as described above.

Net cash used in financing activities for the year ended December 31, 2024 decreased $156.6 million compared to the prior year period primarily due to the additional $325.0 million in borrowings under the Term Loan, offset in part by increased repurchases of our common stock.

Our results of operations have been subject to seasonal usage changes for commercial customers, and we expect that our results will be affected by similar seasonality going forward.

March through October are typically the peak months for commercial voice services revenue and related subscriber equipment sales.

In December 2024, a large IoT customer began to phase out its annual retail pricing plans.

As a result, that customer’s annual billable subscribers will move to monthly plans, which we expect to increase seasonality in billable subscribers.

We expect revenue to remain unaffected due to the fixed-price nature of our contract with this customer for 2025.

government revenue and commercial IoT revenue have been less subject to seasonal usage changes.

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 7. Management’s Discussion and Analysis