Iridium Communications Inc

Previous wording

This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Such forward-looking statements include those that express plans, anticipation, intent, contingencies, goals, targets or future development or otherwise are not statements of historical fact. Without limiting the foregoing, the words “believe,” “anticipate,” “plan,” “expect,” “intend” and similar expressions are intended to identify forward-looking statements. These forward-looking statements are based on our current expectations and projections about future events, and they are subject to risks and uncertainties, known and unknown, that could cause actual results and developments to differ materially from those expressed or implied in such statements. The important factors described under the caption “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed on February 15, 2024, could cause actual results to differ materially from those indicated by forward-looking statements made herein. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Current wording

This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Such forward-looking statements include those that express plans, anticipation, intent, contingencies, goals, targets or future development or otherwise are not statements of historical fact. Without limiting the foregoing, the words “believe,” “anticipate,” “plan,” “expect,” “intend” and similar expressions are intended to identify forward-looking statements. These forward-looking statements are based on our current expectations and projections about future events, and they are subject to risks and uncertainties, known and unknown, that could cause actual results and developments to differ materially from those expressed or implied in such statements. The important factors described under the caption “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed on February 15, 2024, as updated and supplemented by this Form 10-Q, could cause actual results to differ materially from those indicated by forward-looking statements made herein. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Previous wording

On April 1, 2024, we completed our acquisition of Satelles, Inc., or Satelles, a provider of satellite-based time and location services that complement and protect GPS and other GNSS systems. This acquisition is intended to support our long-term business objectives.

Current wording

On April 1, 2024, we acquired Satelles, Inc., or Satelles, a provider of satellite-based time and location services that complement and protect GPS and other GNSS systems. This acquisition is intended to support our long-term business objectives.

Previous wording

At June 30, 2024, we had approximately 2,413,000 billable subscribers worldwide, an increase of 273,000, or 13%, from approximately 2,140,000 billable subscribers as of June 30, 2023. We have a diverse customer base, with end users in land mobile, Internet of Things, or IoT, maritime, aviation and government.

Current wording

At September 30, 2024, we had approximately 2,482,000 billable subscribers worldwide, an increase of 246,000, or 11%, from approximately 2,236,000 billable subscribers as of September 30, 2023. We have a diverse customer base, with end users in land mobile, Internet of Things, or IoT, maritime, aviation and government.

Previous wording

For the three months ended June 30, 2024, total commercial services revenue increased $7.3 million, or 6%, from the prior year period primarily as a result of increases in IoT and voice and data service revenue. Commercial IoT revenue increased $7.0 million, or 20%, for the three months ended June 30, 2024, compared to the same period of the prior year, primarily driven by an 16% increase in billable subscribers, largely due to strength in personal communication devices and a new contract with a large customer executed in the first quarter of 2024. Commercial voice and data revenue increased $1.5 million, or 3%, for the three months ended June 30, 2024, compared to the same period of the prior year, due primarily to an increase in billable subscribers. These increases were partially offset by a decrease of $0.7 million, or 4%, in hosted payload and other data service revenue, primarily due to the change in the estimated useful lives of our satellites in the fourth quarter of 2023, offset in part by increases in other data service revenue including Satelles revenue. Increases in commercial services were also offset in part by a decrease of $0.5 million, or 4%, in commercial broadband revenue, due to a decrease in ARPU reflecting the increased prevalence of usage of the Company’s service as a companion service.

Current wording

For the three months ended September 30, 2024, total commercial services revenue increased $7.8 million, or 6%, from the prior year period primarily as a result of increases in IoT, voice and data, and hosted payload and other data service revenue. Commercial IoT revenue increased $5.2 million, or 14%, for the three months ended September 30, 2024, compared to the same period of the prior year, primarily driven by a 14% increase in billable subscribers, largely due to strength in personal communication devices. Commercial voice and data revenue increased $1.5 million, or 3%, for the three months ended September 30, 2024, compared to the same period of the prior year, due primarily to an increase in billable subscribers. Hosted payload and other data service revenue also contributed with an increase of $1.4 million, or 9%, primarily due to increases in other data service revenue, including Satelles revenue, that was not present in the prior year, offset in part by decreased hosted payload revenue recognition resulting from the change in the estimated useful lives of our satellites in the fourth quarter of 2023.

Previous wording

We provide airtime and airtime support to the U.S. government and other authorized customers pursuant to our Enhanced Mobile Satellite Services, or EMSS, contract. Under the terms of this agreement, which we entered into in September 2019, authorized customers utilize specified Iridium airtime services provided through the U.S. government’s dedicated gateway. The fee is not based on subscribers or usage, allowing an unlimited number of users access to these services. For the three months ended June 30, 2024, revenue was unchanged from the prior year period, in accordance with the contract.

Current wording

We provide airtime and airtime support to the U.S. government and other authorized customers pursuant to our Enhanced Mobile Satellite Services, or EMSS, contract. Under the terms of this agreement, which we entered into in September 2019, authorized customers utilize specified Iridium airtime services provided through the U.S. government’s dedicated gateway. The fee is not based on subscribers or usage, allowing an unlimited number of users access to these services. For the three months ended September 30, 2024, revenue was $26.5 million, consistent with the prior year. On September 15, 2024, the annual rate increased reflecting a contractual step up in the EMSS contract.

Previous wording

Subscriber equipment revenue decreased by $4.6 million, or 17%, for the three months ended June 30, 2024, compared to the prior year period, primarily due to a decrease in the volume of handset sales, offset in part by an increase in Short Burst Data® sales including chipsets. As previously disclosed, we expect 2024 equipment sales to be lower than in 2023 and more in line with periods prior to 2022.

Current wording

Subscriber equipment revenue increased by $1.7 million, or 9%, for the three months ended September 30, 2024, compared to the prior year period, primarily due to an increase in the volume of handset sales, offset in part by a decrease in Short Burst Data® sales. As previously disclosed, we expect 2024 equipment sales to be lower than in 2023 and more in line with periods prior to 2022.

Previous wording

Engineering and support service revenue increased by $5.2 million, or 25%, for the three months ended June 30, 2024 compared to the prior year period, primarily due to increased work under certain government contracts, 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 years prior to 2023 throughout the life of the SDA contract.

Current wording

Engineering and support service revenue increased by $5.5 million, or 22%, for the three months ended September 30, 2024 compared to the prior year period, primarily due to increased work under certain government contracts, 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 years prior to 2023 throughout the life of the SDA contract.

Previous wording

Cost of services (exclusive of depreciation and amortization) increased by $4.0 million, or 11%, for the three months ended June 30, 2024 compared to the prior year period, primarily as a result of the increase in work under certain government projects, including the SDA contract, as noted above.

Current wording

Cost of services (exclusive of depreciation and amortization) increased by $2.5 million, or 6%, for the three months ended September 30, 2024 compared to the prior year period, primarily as a result of the increase in work under certain government projects, including the SDA contract, as noted above.

Previous wording

Cost of subscriber equipment decreased by $2.2 million, or 13%, for the three months ended June 30, 2024 compared to the prior year period primarily due to the decrease in volume of handset sales, offset in part by an increase in Short Burst Data sales including chipsets, which was in line with the change in equipment revenue for the same period, as described above.

Current wording

Cost of subscriber equipment remained relatively flat for the three months ended September 30, 2024 compared to the prior year period primarily due to an increase in the volume of handset sales, offset in part by the decrease in Short Burst Data sales, which was in line with the change in equipment revenue for the same period, as described above. Subscriber equipment costs remained consistent, which did not align to the increase in subscriber equipment revenue primarily due to product mix and a decrease in inventory component costs.

Previous wording

Research and development expenses increased by $0.9 million, or 16%, for the three months ended June 30, 2024 compared to the prior year period, due to increased spending on device-related features for our network, including Project Stardust, which is our multi-year project to develop 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.

Current wording

Research and development expenses increased by $1.2 million, or 23%, for the three months ended September 30, 2024 compared to the prior year period, due to increased spending on device-related features for our network, including Project Stardust, which is our multi-year project to develop Iridium NTN Direct SM, 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.

Previous wording

Selling, general and administrative expenses increased by $9.4 million, or 25%, for the three months ended June 30, 2024 compared to the prior year period, due primarily to higher headcount costs, including equity compensation costs, and costs related to the acquisition of Satelles and certain costs that were previously recorded in cost of services.

Current wording

Selling, general and administrative expenses increased by $10.6 million, or 32%, for the three months ended September 30, 2024 compared to the prior year period, due primarily to costs related to the acquisition of Satelles, increased professional fees including stock appreciation rights expense in the current year resulting from changes in our stock valuation between the years, higher headcount costs, including equity compensation costs, and certain costs that were previously recorded in cost of services.

Previous wording

Depreciation and amortization expense decreased by $63.8 million, or 56%, for the quarter ended June 30, 2024 compared to the prior year period. In the second quarter of 2023, we wrote-off the full amount remaining in construction-in-progress for our final ground spare satellite, resulting in accelerated depreciation expense of $37.5 million. In the fourth quarter of 2023, we updated our estimate of the satellites’ remaining useful lives based on the health of the constellation, resulting in an extension of the useful lives from 12.5 years to 17.5 years and a reduction of quarterly depreciation expense as compared to periods prior to the fourth quarter of 2023. As a result of this change in estimate, we expect depreciation expense to be approximately $83.3 million lower for the full year 2024 as compared to the full year 2023.

Current wording

Depreciation and amortization expense decreased by $25.7 million, or 33%, for the quarter ended September 30, 2024 compared to the prior year period. In the fourth quarter of 2023, we updated our estimate of the satellites’ remaining useful lives based on the health of the constellation, resulting in an extension of the useful lives from 12.5 years to 17.5 years and a reduction of quarterly depreciation expense as compared to periods prior to the fourth quarter of 2023. As a result of this change in estimate, we expect depreciation expense to be approximately $83.3 million lower for the full year 2024 as compared to the full year 2023.

Previous wording

For the six months ended June 30, 2024, our income tax expense was $12.5 million, compared to income tax benefit of $10.7 million for the prior year period. The increase in income tax expense is primarily related to the impact of stock compensation tax expense and nondeductible executive compensation plus the increase in pre-tax book income in 2024 compared to 2023.

Current wording

For the three months ended September 30, 2024, our income tax expense was $6.0 million, compared to income tax benefit of $6.0 million for the prior year period. The increase in income tax expense was primarily related to the increase in pre-tax book income in 2024 as compared to 2023.

Previous wording

Net income was $32.3 million for the three months ended June 30, 2024, compared to a net loss of $30.7 million for the prior year period. The $63.1 million increase in net income was primarily the result of the $63.8 million decrease in depreciation expense, the $19.8 million gain related to the acquisition of Satelles and the $8.0 million increase in total revenue, offset in part by the $12.1 million increase in other operating expenses, $9.8 million increase in income tax expense and $5.1 million increase in interest expense.

Current wording

Net income was $24.4 million for the three months ended September 30, 2024, compared to a net loss of $1.6 million for the prior year period. The $26.1 million increase in net income was primarily the result of the $25.7 million decrease in depreciation expense, the $15.2 million increase in total revenue and the $10.4 million decrease in interest expense, net, offset in part by the $10.6 million increase in selling, general and administrative expense and the $12.0 million increase in income tax expense.

Previous wording

Comparison of Our Results of Operations for the Six Months Ended June 30, 2024 and 2023

Current wording

Comparison of Our Results of Operations for the Nine Months Ended September 30, 2024 and 2023

Previous wording

For the six months ended June 30, 2024, total commercial services revenue increased $16.6 million, or 7%, from the prior year period primarily driven by increases in IoT and voice and data service revenue. Commercial IoT revenue increased $14.6 million, or 22%, for the six months ended June 30, 2024, compared to the prior year period, driven by a 16% increase in IoT billable subscribers, largely due to strength in personal communication devices and a new contract with a large customer executed in the first quarter of 2024. Commercial voice and data revenue increased $4.0 million, or 4%, from the prior year period primarily due to an increase in billable subscribers. These increases were offset in part by a decrease of $1.7 million, or 6%, in hosted payload and other data service revenue compared to the prior year period, primarily due to the change in the estimated useful lives of our satellites in the fourth quarter of 2023, offset in part by increases in other data service revenue including Satelles revenue. Commercial broadband revenue decreased $0.3 million, or 1%, for the six months ended June 30, 2024, compared to the prior year period, due to a decrease in ARPU reflecting the increased prevalence of usage of the Company’s service as a companion service, which also partially offset the increases in IoT and voice and data revenue.

Current wording

For the nine months ended September 30, 2024, total commercial services revenue increased $24.5 million, or 7%, from the prior year period primarily driven by increases in IoT and voice and data service revenue. Commercial IoT revenue increased $19.8 million, or 19%, for the nine months ended September 30, 2024, compared to the prior year period, driven by a 14% increase in IoT billable subscribers, largely due to strength in personal communication devices and a new contract with a large customer executed in the first quarter of 2024. Commercial voice and data revenue increased $5.5 million, or 3%, from the prior year period primarily due to an increase in billable subscribers. These increases were offset in part by a decrease of $0.5 million, or 1%, in broadband revenue compared to the prior year period and a decrease of $0.3 million, or 1%, in hosted payload and other data service revenue compared to the prior year period. The decrease in hosted payload and other data service revenue was primarily due to decreased hosted payload revenue recognition resulting from the change in the estimated useful lives of our satellites in the fourth quarter of 2023, offset in part by increases in other data service revenue including Satelles revenue.

Previous wording

We provide airtime and airtime support to the U.S. government and other authorized customers pursuant to our EMSS contract. Under the terms of this agreement, which we entered into in September 2019, authorized customers utilize specified Iridium airtime services provided through the U.S. government’s dedicated gateway. The fee is not based on subscribers or usage, allowing an unlimited number of users access to these services. For the six months ended June 30, 2024, revenue was unchanged from the prior year period, in accordance with the EMSS contract.

Current wording

We provide airtime and airtime support to the U.S. government and other authorized customers pursuant to our EMSS contract. Under the terms of this agreement, which we entered into in September 2019, authorized customers utilize specified Iridium airtime services provided through the U.S. government’s dedicated gateway. The fee is not based on subscribers or usage, allowing an unlimited number of users access to these services. For the nine months ended September 30, 2024, revenue remained consistent with the prior year period. As noted above, the annual rate increased on September 15, 2024, reflecting a contractual step up in accordance with the EMSS contract.

Previous wording

Subscriber equipment revenue decreased $21.4 million, or 31%, for the six months ended June 30, 2024, compared to the prior year period, primarily due to a decrease in the volume of handset sales, offset in part by an increase in Short Burst Data sales. As previously disclosed, we expect 2024 equipment sales to be lower than in 2023 and more in line with periods prior to 2022.

Current wording

Subscriber equipment revenue decreased $19.7 million, or 22%, for the nine months ended September 30, 2024, compared to the prior year period, primarily due to a decrease in the volume of handset sales, offset in part by an increase in Short Burst Data sales. As previously disclosed, we expect 2024 equipment sales to be lower than in 2023 and more in line with periods prior to 2022.

Previous wording

Engineering and support service revenue increased $11.4 million, or 25%, for the six months ended June 30, 2024 compared to the prior year period, primarily due to increased work under certain government projects, including the SDA contract, offset in part by decreases in commercial engineering projects. As noted above, we expect engineering and support service revenue, as well as associated expenses, to be generally higher than in years prior to 2023 throughout the life of the SDA contract.

Current wording

Engineering and support service revenue increased $16.9 million, or 24%, for the nine months ended September 30, 2024 compared to the prior year period, primarily due to increased work under certain government projects, including the SDA contract, offset in part by decreases in commercial engineering projects. As noted above, we expect engineering and support service revenue, as well as associated expenses, to be generally higher than in years prior to 2023 throughout the life of the SDA contract.

Previous wording

Cost of services (exclusive of depreciation and amortization) increased by $13.9 million, or 19%, for the six months ended June 30, 2024, compared to the prior year period primarily as a result of an increase in work under certain government engineering contracts, including the SDA contract, as noted above, and higher satellite operation costs.

Current wording

Cost of services (exclusive of depreciation and amortization) increased by $16.3 million, or 14%, for the nine months ended September 30, 2024, compared to the prior year period primarily as a result of an increase in work under certain government engineering contracts, including the SDA contract, as noted above, and higher satellite operation costs.

Previous wording

Cost of subscriber equipment decreased by $15.4 million, or 36%, for the six months ended June 30, 2024, compared to the prior year period primarily due to the decrease in volume of handset sales, offset in part by an increase in Short Burst Data sales, which was in line with the change and expectations in equipment revenue for the same period, as noted above, and decreased inventory component costs.

Current wording

Cost of subscriber equipment decreased by $15.5 million, or 28%, for the nine months ended September 30, 2024, compared to the prior year period, primarily due to the decrease in volume of handset sales, offset in part by an increase in Short Burst Data sales, which was in line with the change and expectations in equipment revenue for the same period, as noted above, and decreased inventory component costs.

Previous wording

Research and development expenses increased by $4.2 million, or 44%, for the six months ended June 30, 2024, compared to the prior year period, due to increased spending on device-related features for our network, as noted above.

Current wording

Research and development expenses increased by $5.4 million, or 37%, for the nine months ended September 30, 2024, compared to the prior year period, due to increased spending on device-related features for our network, including Project Stardust, as noted above.

Previous wording

Selling, general and administrative expenses increased by $7.5 million, or 10%, for the six months ended June 30, 2024, compared to the prior year period, primarily due to higher headcount-related expenses, including equity compensation costs, as well as costs related to the acquisition of Satelles and certain costs that were previously recorded in cost of services, offset in part by a decrease in stock appreciation rights expense in the current year resulting from changes in our stock valuation between the years and decreased spending related to our channel partner conference which was held in the first quarter of the prior year.

Current wording

Selling, general and administrative expenses increased by $18.1 million, or 17%, for the nine months ended September 30, 2024, compared to the prior year period, primarily due to higher headcount-related expenses, including equity compensation costs, as well as costs related to the acquisition of Satelles and certain costs that were previously recorded in cost of services, offset in part by a decrease in stock appreciation rights expense in the current year resulting from changes in our stock valuation between the years and decreased spending related to our channel partner conference which was held in the first quarter of the prior year.

Previous wording

Depreciation and amortization expense decreased by $89.9 million, or 47%, compared to the prior year period primarily due to the change in the estimate of the useful lives of our satellites in the fourth quarter of 2023. Additionally, we wrote off our remaining ground spare satellite in the second quarter of 2023 following completion of on-orbit testing, which resulted in accelerated depreciation expense of $37.5 million. No write-offs occurred during the six months ended June 30, 2024.

Current wording

Depreciation and amortization expense decreased by $115.5 million, or 43%, compared to the prior year period primarily due to the change in the estimate of the useful lives of our satellites in the fourth quarter of 2023. Additionally, we wrote off our remaining ground spare satellite in the second quarter of 2023 following completion of on-orbit testing, which resulted in accelerated depreciation expense of $37.5 million. No write-offs occurred during the nine months ended September 30, 2024.

Previous wording

Interest expense, net increased $7.8 million for the six months ended June 30, 2024 compared to the prior year period, primarily due to the increase in the outstanding debt balance following the additional $125.0 million in Term Loan in March 2024 and the $50.0 million draw on the Revolving Facility in April 2024. Additionally, in June 2024, we repriced our Term Loan, which reduced the interest rate by 0.25 basis points. In connection with the additional debt and repricing, we incurred $3.5 million of fees that are included in interest expense, net.

Current wording

Interest expense, net decreased $2.6 million for the nine months ended September 30, 2024 compared to the prior year period, primarily related to the decrease in fees paid in connection with changes to the Term Loan. In September 2023, we paid $14.7 million of fees incurred in connection with our Term Loan refinancing. In 2024, we incurred $5.7 million of fees in connection with the additional debt and repricing, that are included in interest expense, net. These decreases in interest expense were offset in part by interest incurred on the increase in the average outstanding debt balance.

Previous wording

Other expense, net, was $0.6 million for the three months ended June 30, 2024, compared to other income, net, of $0.4 million for the prior year period. The variation was primarily the result of changes in foreign currency exchange rates.

Current wording

Other expense, net, was $0.3 million for the nine months ended September 30, 2024, compared to other income, net, of $1.0 million for the prior year period. The variation was primarily the result of changes in foreign currency exchange rates.

Previous wording

For the three months ended June 30, 2024, our income tax expense was $4.6 million, compared to income tax benefit of $5.2 million for the prior year period. The increase in income tax expense is primarily related to the impact of stock compensation tax expense and nondeductible executive compensation plus the increase in pre-tax book income in 2024 compared to 2023.

Current wording

For the nine months ended September 30, 2024, our income tax expense was $18.5 million, compared to income tax benefit of $16.7 million for the prior year period. The increase in income tax expense was primarily related to the impact of stock compensation tax expense and nondeductible executive compensation plus the increase in pre-tax book income in 2024 as compared to 2023.

Previous wording

For the six months ended June 30, 2024, our gain on equity method investments was $16.1 million, primarily as a result of the acquisition of Satelles, upon which we recorded a $19.8 million gain on our previously held equity method investment, as noted above. For the six months ended June 30, 2023, our loss on equity method investments was $2.8 million, reflecting the portion of losses recorded on equity method investments, including Satelles, during the period.

Current wording

For the nine months ended September 30, 2024, our gain on equity method investments was $15.7 million, primarily as a result of the acquisition of Satelles, as we recorded a $19.8 million gain on our previous equity method investment in Satelles, offset in part by the portion of losses recorded on other equity method investments. For the nine months ended September 30, 2023, our loss on equity method investments was $4.3 million, reflecting the portion of losses recorded on equity method investments, including Satelles, during the period.

Previous wording

Net income was $52.0 million for the six months ended June 30, 2024, compared to a net loss of $21.0 million for the prior year period. The $73.0 million improvement primarily resulted from the $89.9 million decrease in depreciation expense, the $19.8 million gain recorded as a result of the acquisition of Satelles and the $6.5 million increase in total revenue. These improvements were offset in part by the $23.2 million increase in income tax expense, $10.2 million increase in other operating expenses and the $7.8 million increase in interest expense.

Current wording

Net income was $76.4 million for the nine months ended September 30, 2024, compared to a net loss of $22.6 million for the prior year period. The $99.0 million improvement primarily resulted from the $115.5 million decrease in depreciation expense, the $21.7 million increase in total revenue and the $20.0 million increase in gain on equity method investments, primarily as a result of the acquisition of Satelles as described above. These improvements were offset in part by the $35.2 million increase in income tax expense and the $24.3 million increase in other operating expenses.

Previous wording

As of June 30, 2024, our total cash and cash equivalents balance was $63.5 million, down from $71.9 million as of December 31, 2023. While we took on additional borrowings under the Term Loan and Revolving Facility during the six months ended June 30, 2024, and generated cash flows from operations, we used cash to complete the acquisition of Satelles, repurchased approximately $154.8 million in our common stock, paid dividends of approximately $32.8 million, and invested $27.0 million in capital expenditures during the six months ended June 30, 2024.

Current wording

As of September 30, 2024, our total cash and cash equivalents balance was $159.6 million, up from $71.9 million as of December 31, 2023. While we borrowed an additional $325.0 million under the Term Loan during the nine months ended September 30, 2024, and generated cash flows from operations, we used cash to complete the acquisition of Satelles, repurchased $284.6 million in our common stock (including related taxes), paid dividends of $49.1 million, and invested $45.6 million in capital expenditures during the nine months ended September 30, 2024.

Previous wording

Pursuant to a credit agreement (as amended to date, the “Credit Agreement”), we previously entered into a term loan totaling $1,500.0 million (as so amended and restated, the “Term Loan”), issued at a price equal to 99.75%, and an accompanying $100.0 million revolving loan (the “Revolving Facility”). The maturity date of the Term Loan is in September 2030. On March 25, 2024, we closed on an additional $125.0 million under our Term Loan, using the proceeds to complete the acquisition of Satelles, Inc. on April 1, 2024. The additional amount borrowed is fungible with the original $1,500.0 million, and has the same maturity date, interest rate and other terms, but was issued at a price equal to 99.875% of its face value. 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 (“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. Principal payments, payable quarterly, are equal to approximately $16.3 million per annum (one percent of the full principal amount of the Term Loan following the March 2024 increase), with the remaining principal due upon maturity.

Current wording

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. Principal payments, payable quarterly, are equal to $18.3 million per annum (approximately one percent of the full principal amount of the Term Loan following the July 2024 increase), with the remaining principal due upon maturity.

Previous wording

As of June 30, 2024 and December 31, 2023, we had an aggregate of $1,616.9 million and $1,500.0 million, respectively, under the Term Loan. These amounts do not give effect to $15.9 million and $17.5 million, respectively, of net unamortized deferred financing costs. The principal balance in borrowings, net of the unamortized deferred financing costs, as of June 30, 2024 and December 31, 2023 amounted to $1,601.0 million and $1,482.5 million, respectively. As of June 30, 2024 and December 31, 2023, based upon recent trading prices (Level 2 - market approach), the fair value of our net borrowings under the Term Loan was $1,615.9 million and $1,506.6 million, respectively.

Current wording

As of September 30, 2024 and December 31, 2023, we had aggregate borrowings of $1,812.3 million and $1,500.0 million, respectively, under the Term Loan. These amounts do not give effect to $17.5 million of net unamortized deferred financing costs at the end of each period. The principal balance in borrowings, net of the unamortized deferred financing costs, as of September 30, 2024 and December 31, 2023 amounted to $1,794.8 million and $1,482.5 million, respectively. As of September 30, 2024 and December 31, 2023, based upon recent trading prices (Level 2 - market approach), the fair value of our net borrowings under the Term Loan was $1,782.9 million and $1,506.6 million, respectively.

Previous wording

In April 2024, we drew down $50.0 million on our Revolving Facility to fund repurchases of our common stock under our Share Repurchase Program. This amount remained outstanding at June 30, 2024. The Revolving Facility bears interest at an annual rate equal to SOFR plus 2.5% (but without a SOFR floor) if and as drawn, with no original issue discount, and a commitment fee of 0.5% per year on the undrawn amount, which was reduced to 0.375% in the first quarter of 2024 because we had 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.

Current wording

The Revolving Facility bears interest at an annual rate equal to SOFR plus 2.5% (but without a SOFR floor) if and as drawn, with no original issue discount, and a commitment fee of 0.5% per annum on the undrawn amount, which was reduced to 0.375% in the first quarter of 2024 because we had 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.

Previous wording

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 (“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 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, we were below the specified leverage ratio, and a mandatory prepayment sweep was therefore not required. The Credit Agreement permits repayment, prepayment, and repricing transactions.

Current wording

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 also contains an annual 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 as of the end of our fiscal year. As of December 31, 2023, we were below the specified leverage ratio, and a mandatory prepayment sweep was therefore not required. The Credit Agreement permits repayment, prepayment, and repricing transactions.

Previous wording

The Credit Agreement contains no financial maintenance covenants with respect to the Term Loan. With respect to the Revolving Facility, the Credit Agreement requires us to maintain a consolidated first lien net leverage ratio (as defined in the Credit Agreement) of no greater than 6.25 to 1 if more than 35% of the Revolving Facility has been drawn, which was the case as of June 30, 2024. The Credit Agreement contains other customary representations and warranties, affirmative and negative covenants, and events of default. We were in compliance with all financial covenants as of June 30, 2024.

Current wording

The Credit Agreement contains no financial maintenance covenants with respect to the Term Loan. With respect to the Revolving Facility, the Credit Agreement requires us 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 or subject to letter of credit exposure. As of September 30, 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 financial covenants as of September 30, 2024.

Previous wording

As of June 30, 2024, we had non-cancelable purchase obligations of approximately $9.0 million for inventory purchases with Benchmark, our primary third-party equipment supplier, a decrease of $11.5 million from the end of 2023 primarily due to recovery from supply-chain constraints. These purchase obligations are all due within the next twelve months.

Current wording

As of September 30, 2024, we had non-cancelable purchase obligations of approximately $10.9 million for inventory purchases with Benchmark, our primary third-party equipment supplier, which was a decrease of $10.6 million from the end of 2023 primarily due to recovery from supply chain constraints in prior years. These purchase obligations to Benchmark are due within the next twelve months.

Previous wording

Our only 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 $1,519.4 million. We expect to refinance this amount at or prior to maturity.

Current wording

Our only material long-term contractual cash requirement is the repayment of the remaining principal amount under the Term Loan upon its maturity in 2030, which is expected to be $1,711.9 million. We plan to refinance this amount at or prior to maturity.

Previous wording

Total dividends paid during the six months ended June 30, 2024 were $32.8 million. While we expect to continue regular cash dividends, which began in 2023, any future dividends declared will be at the discretion of our Board of Directors and will depend upon our results of operations, financial condition and cash requirements, as well as such other factors our Board of Directors deems relevant.

Current wording

Total dividends paid during the nine months ended September 30, 2024 were $49.1 million. While we expect to continue regular cash dividends, which began in 2023, any future dividends declared will be at the discretion of our Board of Directors and will depend upon our results of operations, financial condition and cash requirements, as well as such other factors our Board of Directors deems relevant.

Previous wording

Net cash used in investing activities for the six months ended June 30, 2024 increased by $82.4 million as compared to 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 average approximately $60.0 million per year through 2030.

Current wording

Net cash used in investing activities for the nine months ended September 30, 2024 increased by $89.1 million as compared to 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 average approximately $60.0 million per year through 2030.

Previous wording

Net cash used in financing activities for the six months ended June 30, 2024 decreased by $142.1 million compared to the prior year period primarily due to the additional $125.0 million in borrowings under the Term Loan and the $50.0 million in borrowings under the Revolving Facility, offset in part by increased repurchases of our common stock.

Current wording

Net cash used in financing activities for the nine months ended September 30, 2024 decreased by $232.2 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.