Iridium Communications Inc.

6. Derivative Financial Instruments

The Company is exposed to interest rate fluctuations related to the Term Loan and Aireon Term Loan. The Company has reduced its exposure to fluctuations in the cash flows associated with changes in the variable interest rate by entering into offsetting positions through the use of interest rate hedges. This will reduce the negative impact of increases in the variable rate over the term of the derivative contracts. These contracts are not used for trading or other speculative purposes. The Company has not incurred, and does not expect to incur, any losses as a result of counterparty default.

Interest Rate Cap

In July 2021, the Company entered into an interest rate cap contract (the “Cap”), which had an effective date of December 2021. The Cap manages the Company’s exposure to interest rate movements on a portion of the Term Loan through November 2026. The Cap, as modified to date, currently provides the Company with the right to receive payment from the counterparty if one-month SOFR exceeds 1.436%. 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 September 30, 2026 and December 31, 2025.

The Cap, which was not affected by the expansion or the repricing of the Term Loan, 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 interest payments on the Term Loan. The effective portion of the Cap’s change in fair value is recorded in accumulated other comprehensive income. Any ineffective portion of the Cap’s change in fair value will be recorded in current earnings as interest expense.

Fair Value of Derivative Instruments

As of September 30, 2026 and December 31, 2025, the Company had an asset balance of $4.3 million and $17.0 million, respectively, for the fair value of the Cap and a liability balance of $0.6 million and $2.6 million, respectively, for the fair value of the Cap premium. Both the Cap and the Cap premium are recorded net within other assets on the condensed consolidated balance sheet.

During each of the three months ended September 30, 2026 and 2025, the Company incurred $0.8 million in interest expense for the Cap premium, and during each of the nine months ended September 30, 2026 and 2025, the Company incurred $2.5 million in interest expense for the Cap premium. Interest expense was reduced by $5.8 million and $7.4 million for the three months ended September 30, 2026 and 2025, respectively, and $17.0 million and $21.9 million for the nine months ended September 30, 2026 and 2025, respectively, for payments received related to the Cap.

Gains and losses resulting from fair value adjustments to the Cap are recorded within accumulated other comprehensive income within the Company’s condensed consolidated balance sheets and reclassified to interest expense on the dates that interest payments become due. Cash flows related to the derivative contracts are included in cash flows from operating activities on the condensed consolidated statements of cash flows. Over the next 12 months, the Company expects any gains or losses for cash flow hedges amortized from accumulated other comprehensive income into earnings to have an immaterial impact on the Company’s consolidated financial statements.

The following table presents the amount of unrealized gain or loss and related tax impact associated with the derivative instruments that the Company recorded in its condensed consolidated statements of operations and comprehensive income:

7. Equity Transactions

Preferred Stock

The Company is authorized to issue 2.0 million shares of preferred stock with a par value of $0.0001 per share. The Company previously issued 1.5 million shares of preferred stock, all of which have been converted to common stock. The remaining 0.5 million authorized shares of preferred stock remained undesignated and unissued as of September 30, 2026 and December 31, 2025. As of September 30, 2026 and December 31, 2025, there were no outstanding shares of preferred stock, as all previously designated and issued preferred stock was converted into common stock in prior periods.

Dividends

Stockholders are entitled to receive, when and if declared by the Company’s Board of Directors from time to time, 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 initiated a quarterly dividend. The Company paid dividends of $0.15 per share of common stock for each of the three months ended March 31, June 30 and September 30, 2026, resulting in total payments to stockholders of $49.0 million for the nine months ended September 30, 2026. The Company paid dividends of $0.14 per share of common stock for each of the three months ended March 31 and June 30, 2025, and a dividend of $0.15 per share of common stock for the three months ended September 30, 2025, resulting in total dividend payments for the nine months ended September 30, 2025 of $46.9 million. The Company’s liability related to dividends on common shares underlying unvested restricted stock units (“RSUs”) was $3.9 million and $3.5 million as of September 30, 2026 and December 31, 2025, respectively.

Share Repurchase Program

Since February 2021, the Company’s Board of Directors has authorized the repurchase of up to $1,500.0 million of the Company’s common stock. The most recent share repurchase program for $500.0 million through December 31, 2027, was approved in September 2024. On June 28, 2026, the Company’s Board of Directors terminated this share repurchase program in connection with entering into the Agreement and Plan of Merger with Rocket Lab (see Note 15).

The Company repurchased and subsequently retired 1.9 million and 6.8 million shares of its common stock during the three and nine months ended September 30, 2025, respectively, for a total purchase price of $50.0 million and $185.0 million, respectively, exclusive of $0.4 million and $1.5 million, respectively, of excise taxes incurred. The Company made no share repurchases in the nine months ended September 30, 2026, and, following the June 28, 2026 termination of the most recent program, does not have an active share repurchase program in place.

8. Revenue

The following table summarizes the Company’s services revenue:

The following table summarizes the Company’s engineering and support services revenue:

Approximately 36% and 46% of the Company’s accounts receivable balance at September 30, 2026 and December 31, 2025, respectively, were due from prime contracts or subcontracts with agencies of the U.S. government.

The Company’s contracts with customers generally do not contain performance obligations with terms in excess of one year. As such, the Company does not disclose details related to the value of performance obligations that are unsatisfied as of the end of the reporting period. The total value of any performance obligations that extend beyond one year is immaterial to the financial statements.

The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (contract assets), and deferred revenue (contract liabilities) on the condensed consolidated balance sheets. The Company bills amounts under its agreed-upon contractual terms at periodic intervals (for services), upon shipment (for equipment), or upon achievement of contractual milestones or as work progresses (for engineering and support services). Billing may occur subsequent to revenue recognition, resulting in unbilled accounts receivable (contract assets). The Company may also receive payments from customers before revenue is recognized, resulting in deferred revenue (contract liabilities). The Company recognized revenue that was previously recorded as deferred revenue in the amounts of $5.4 million and $15.4 million for the three months ended September 30, 2026 and 2025, respectively, and $32.2 million and $45.5 million for the nine months ended September 30, 2026 and 2025, respectively. The decreases to previously deferred revenue recognized during the three and nine months ended September 30, 2026 were due to the acquisition of Aireon Holdings (see Note 11).

As of September 30, 2026, contract assets were $27.8 million, included within other assets on the consolidated balance sheets. The increase in contract assets was primarily due to contract assets acquired as part of the Aireon acquisition. The Company has also recorded costs of obtaining contracts expected to be recovered in prepaid expenses and other current assets (contract assets or commissions), that are not separately disclosed on the condensed consolidated balance sheets. The commissions are recognized over the estimated usage period. The following table presents contract assets not separately disclosed:

9. Leases

Operating leases in which the Company was a lessor as of September 30, 2026 consisted primarily of hosting agreements with Aireon LLC (“Aireon”), through the Aireon Closing Date, and L3Harris Technologies, Inc. (“L3Harris”) for space on the Company’s satellites. These agreements provide for a fee that will be recognized over the estimated useful lives of the satellites, currently estimated to be approximately 17.5 years from their respective in-service dates. Lease income related to these agreements was $0.8 million and $3.1 million for each of the three months ended September 30, 2026 and 2025, respectively, and $7.0 million and $9.3 million for each of the nine months ended September 30, 2026 and 2025, respectively. The lease income decreased by $2.3 million in both the three and nine months ended September 30, 2026 due to the acquisition of Aireon. Lease income is recorded as hosted payload and other data service revenue within service revenue on the Company’s condensed consolidated statements of operations and comprehensive income.

L3Harris has prepaid all amounts owed to the Company pursuant to its hosting arrangement. The following table presents future income with respect to the Company’s operating lease with L3Harris in which it is the lessor existing at September 30, 2026, exclusive of the $2.3 million recognized during the nine months ended September 30, 2026, by year and in the aggregate, assuming that the lease continues:

10. Stock-Based Compensation

In May 2025, the Company’s stockholders approved the amendment and restatement of the Company’s 2015 Equity Incentive Plan (as so amended and restated, the “Amended 2015 Plan”). As of September 30, 2026, the aggregate number of shares remaining available for future grants under the Amended 2015 Plan was 10,288,264. The Amended 2015 Plan provides for the grant of stock-based awards, including nonqualified stock options, incentive stock options, restricted stock, RSUs, stock appreciation rights, and other equity securities to employees, consultants, and non-employee directors of the Company and its affiliated entities. The number of shares of common stock available for issuance under the Amended 2015 Plan is reduced by (i)one share for each share of common stock issued pursuant to an appreciation award, such as a stock option or stock appreciation right with an exercise or strike price of at least 100% of the fair market value of the underlying common stock on the date of grant, and (ii)1.8 shares for each share of common stock issued pursuant to any stock award that is not an appreciation award, also known as a “full value award.” The Amended 2015 Plan allows the Company to utilize a broad array of equity incentives and performance cash incentives in order to secure and retain the services of its employees, directors and consultants, and to provide long-term incentives that align the interests of its employees, directors and consultants with the interests of the Company’s stockholders. The Company accounts for stock-based compensation at fair value.

Restricted Stock Units

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 the RSUs is determined at the grant date based on the closing price of the Company’s common stock on the date of grant. The related compensation expense is recognized over the service period, or shorter periods based on the retirement eligibility of certain grantees, based on the grant date fair value of the Company’s common stock and the number of shares expected to vest. The fair value of the awards is not remeasured at the end of each reporting period. RSUs do not carry voting rights until the RSUs are vested, although certain unvested RSUs and vested but unsettled RSUs granted to non-employee directors are entitled to accrue dividend equivalent rights, and shares (including additional shares issuable upon satisfaction of any accrued dividend equivalent rights) are issued upon settlement in accordance with the terms of the award.

The following tables summarize the Company’s RSU activity:

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

Service-Based RSUs

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 may elect to receive their cash retainers, or a portion thereof, in the form of RSUs. An aggregate amount of approximately 131,000 and 81,000 service-based RSUs were granted to the non-employee members of the Company’s Board of Directors as a result of these payments and elections during the nine months ended September 30, 2026 and 2025, respectively, with an estimated grant date fair value of $2.6 million and $2.4 million, respectively.

During the nine months ended September 30, 2026 and 2025, the Company granted approximately 2,130,000 and 1,272,000 service-based RSUs, respectively, to its employees, with an estimated aggregate grant date fair value of $57.3 million and $38.9 million, respectively. The increase in service-based RSUs to employees resulted primarily from a change in executive compensation, a portion of which was previously granted in performance-based RSUs.

In 2026, the RSUs granted to executives were entirely for service and vest over five years, with 20% vesting on the first anniversary of the grant date and the remainder vesting ratably on a quarterly basis thereafter, subject to continued employment. Since 2024, the RSUs granted to employees for service, except for executive employees in 2026, 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. RSUs granted prior to March 2024 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 members of the Board of 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.

Performance-Based RSUs

In March 2025, the Company granted approximately 534,000 annual incentive, performance-based RSUs to the Company’s executives and employees (the “Bonus RSUs”), with an estimated grant date fair value of $16.9 million. Vesting of the Bonus RSUs was dependent upon the Company’s achievement of defined performance goals over the fiscal year. The Company records stock-based compensation expense related to performance-based RSUs when it is considered probable that the performance conditions will be met. The level of achievement of performance goals was determined by the compensation committee of the Company’s Board of Directors and substantially all of the Bonus RSUs granted in March 2025 vested in March 2026.

Additionally, in March 2025, the Company granted approximately 269,000 long-term, performance-based RSUs to the Company’s executives (the “Executive RSUs”), with an estimated aggregate grant date fair value of $8.5 million. Vesting of the Executive RSUs is dependent upon the Company’s achievement of defined performance goals over a two-year period (the year of grant and the following year). The vesting of the Executive RSUs granted in March 2025 will range from 0% to 200% of the number of shares underlying the Executive RSUs granted based on the level of achievement of the performance goals. If the Company achieves the performance goals 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, subject to the executive’s continued service as of the vesting date, which may be accelerated based on the retirement eligibility of the grantees. In March 2026 and 2025, approximately 52,000 and 23,000 shares underlying Executive RSUs granted in March 2024 and 2023, respectively, were forfeited as a result of performance targets not being fully achieved for the performance periods ended December 31, 2025 and 2024, respectively.

11. Acquisition of Aireon

On July 2, 2026, the Company acquired the 60.5% equity interest in Aireon Holdings that it did not previously own, resulting in the Company obtaining 100% ownership of Aireon. Aireon is the operator of the world’s only space-based Automatic Dependent Surveillance-Broadcast (“ADS-B”) air traffic surveillance system.

The acquisition date fair value of the business at the acquisition date was $523.8 million. The purchase price for the remaining 60.5% equity interest was $352.2 million. The transaction was accounted for as a business combination under the acquisition method of accounting in accordance with Accounting Standards Codification 805, Business Combinations. Since the Company held a 39.5% equity interest in Aireon immediately prior to the acquisition date and accounted for that investment under the equity method, the Company remeasured its previously held equity interest to its estimated fair value of $171.6 million as of the acquisition date and recognized a gain of $103.9 million in gain (loss) from equity method investments, net in the condensed consolidated statement of operations and comprehensive income for the three and nine months ended September 30, 2026.

The following table summarizes the acquisition date fair value of the business:

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date:

The purchase price allocation is preliminary as the Company is continuing to finalize the valuation of certain acquired intangible assets and other assets and liabilities assumed. The Company expects to finalize the purchase price allocation within the measurement period, which will not exceed one year from the acquisition date.

The following is a summary of preliminary identifiable intangible assets acquired and the related expected lives for the finite-lived intangible assets:

Goodwill of $167.2 million was recorded in connection with the Aireon acquisition, representing the excess of the purchase price over the fair value of the identifiable net assets acquired. Goodwill primarily represents Aireon’s future revenue and earnings potential, expected synergies, and the assembled workforce of Aireon. None of the goodwill is expected to be deductible for income tax purposes.

The Company incurred $14.9 million of acquisition-related costs that were expensed in the three and nine months ended September 30, 2026. These costs are included within selling, general, and administrative expenses in the condensed consolidated statements of operations and comprehensive income.

The amounts of revenue and earnings of Aireon included in the Company’s condensed consolidated statements of operations and comprehensive income (loss), including the effects of purchase accounting and excluding the impact of the Company’s remeasurement of its prior equity interest in Aireon Holdings, are as follows:

Supplemental Pro Forma Information (Unaudited)

The following unaudited pro forma data summarizes the results of operations for the periods indicated as if the acquisition of Aireon had occurred on January 1, 2025.

The unaudited pro forma financial information includes adjustments to reflect incremental amortization of acquired identifiable intangible assets, incremental depreciation resulting from fair value adjustments to property and equipment, related income tax effects, the acquisition-date remeasurement of the previously held equity interest, acquisition-related transaction costs and the elimination of intercompany transactions. The pro forma financial information does not reflect potential synergies or integration costs and is not necessarily indicative of the results that would have occurred or of future results.

12. Income Taxes

Income before income taxes and gain (loss) on equity method investments was $5.2 million and $50.7 million for the three and nine months ended September 30, 2026, respectively, while the income tax expense was $2.2 million and $14.1 million, respectively. The effective tax rate was 41.9% and 27.9% for the three and nine months ended September 30, 2026, respectively, which differed from the federal statutory rate of 21%, primarily due to acquisition costs, discrete tax expense associated with stock compensation and nondeductible executive compensation, partially offset by tax benefit from the deduction for foreign derived deduction eligible income and U.S. tax credits.

Income before income taxes and gain (loss) on equity method investments was $47.9 million and $111.4 million for the three and nine months ended September 30, 2025, respectively, while the income tax expense was $10.0 million and $19.6 million, respectively. The effective tax rate was 20.9% and 17.6% for the three and nine months ended September 30, 2025, respectively, which differed from the federal statutory rate of 21%, primarily due to a tax benefit from the deduction for foreign derived intangible income and U.S. tax credits, partially offset by discrete tax expense associated with stock compensation and nondeductible executive compensation.

13. Related Party Transactions

Prior to July 2, 2026, the Company held an approximate 39.5% equity interest in Aireon Holdings LLC (“Aireon Holdings”), which owns Aireon LLC (“Aireon”), and accounted for its investment under the equity method. On July 2, 2026, the Company acquired the remaining equity interests in Aireon Holdings, which became a wholly owned subsidiary of the Company (see Note 11).

Prior to the acquisition, the Company provided satellite hosting, power and data services, and administrative and support services to Aireon under various agreements. The Company recognized hosting fee revenue of zero and $2.3 million for the three months ended September 30, 2026, and 2025, respectively, and $4.6 million and $6.9 million for the nine months ended September 30, 2026 and 2025, respectively. Power and data service revenue was zero and $5.9 million for the three months ended September 30, 2026, and 2025, respectively, and $11.7 million and $17.6 million for the nine months ended September 30, 2026 and 2025, respectively. Amounts for 2026 reflect only transactions prior to the acquisition date.

As of December 31, 2025, receivables due from Aireon for power and data services and administrative and support services totaled $2.0 million and $0.3 million, respectively. Following the closing of the acquisition on July 2, 2026, transactions and balances between the Company and Aireon are eliminated in consolidation.

14. Net Income Per Share

The Company calculates basic net income per share by dividing net income attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period. 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) 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 following table summarizes the computations of basic and diluted net income per share:

15. Merger Agreement with Rocket Lab Corporation

On June 28, 2026, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Rocket Lab Corporation (“Rocket Lab”) pursuant to which the Company agreed to be acquired by Rocket Lab (the “Transaction”).

Subject to the terms and conditions set forth in the Merger Agreement, each issued and outstanding share of the Company’s common stock, other than as specified in the Merger Agreement, will be converted into the right to receive (i) $27.00 in cash and (ii) a number of shares of Rocket Lab’s common stock equal to the Exchange Ratio (as defined below). The “Exchange Ratio” will be the following: (i) if the Rocket Lab Common Stock Price (as defined below) is equal to or less than $67.50, then the Exchange Ratio will be 0.4000; (ii) if the Rocket Lab Common Stock Price is greater than $67.50 but less than $112.50, then the Exchange Ratio will be the quotient obtained by dividing $27.00 by the Rocket Lab Common Stock Price, rounded to four decimal places; and (iii) if the Rocket Lab Common Stock Price is equal to or greater than $112.50, then the Exchange Ratio will be 0.2400. “Rocket Lab Common Stock Price” is defined as the volume weighted average price per share of Rocket Lab’s common stock on the Nasdaq Global Select Market for the period of the ten consecutive trading days ending on and including the second full trading day prior to the First Effective Time (as defined in the Merger Agreement).

The Merger Agreement provides each of the Company and Rocket Lab with certain termination rights and, under certain circumstances, may require the Company to pay a $223.6 million termination fee.

The Transaction is expected to be completed by mid-2027, subject to the satisfaction of remaining customary closing conditions and interim operating covenants, including covenants that generally require the Company to conduct its business in the ordinary course consistent with past practice and subject the Company to restrictions on certain actions pending consummation of the Transaction.