Iridium's Aireon gain lifts net income to $106.9 million as deal costs cut operating profit

Iridium Communications said third-quarter revenue rose 8% from a year earlier to $245.7 million and net income reached $106.9 million, or $0.98 per diluted share, after the July 2 purchase of Aireon put the aviation-surveillance business into its consolidated accounts. A year earlier net income was $37.1 million, or $0.35 a share. Operational EBITDA, the non-GAAP operating measure the company uses for debt covenants and budgeting, slipped to $135.6 million from $136.6 million.

Aireon's ADS-B data joins the consolidated income statement

Service revenue supplied 76% of the quarter's $245.7 million and grew 13% from a year earlier. Commercial service revenue was $159.9 million, up 16% from a year earlier, and hosted payload and other data service — the line that now carries Aireon's space-based ADS-B surveillance business — increased $22.7 million, or 121%. Government service revenue rose 2% from a year earlier to $27.6 million and accounts for 15% of service revenue. Equipment revenue slipped to $19.0 million from $21.5 million, and engineering and support was $39.2 million against $40.2 million.

The income statement shows what changed underneath those totals. A year ago Iridium booked a $734,000 loss on equity method investments; this quarter the same line produced a $103.9 million gain, which the release ties to the Aireon purchase and which the company strips out of its non-GAAP measure. The gain, not operations, is why net income rose to $106.9 million from $37.1 million. Subscribers kept growing: 2,696,000 billable accounts at September 30, up 6% from 2,542,000 a year earlier and from 2,627,000 at June 30.

Transaction costs and Aireon's cost base reshape operating income

The statement of operations, presented in thousands, shows selling, general and administrative expense at $74.94 million for the quarter against $35.51 million a year earlier, and total operating expenses of $214.12 million against $156.85 million. Operating income fell to $31,618 from $70,085. The reconciliation attributes part of that to $21,294 of transaction-related expenses, which the release defines as legal, advisory, severance and integration costs on strategic deals and which were absent a year earlier. Depreciation and amortization rose to $62,094 from $52,975 with the acquired assets.

Those items sit outside Operational EBITDA, which excludes transaction costs, the equity-method gain and share-based compensation. On that basis earnings were $135.6 million against $136.6 million, essentially flat, and the release attributes part of the gap to $4.5 million of higher incentive compensation expense after the switch to paying annual bonuses entirely in cash.

Leverage climbs as Aireon debt and a seller loan land

Gross debt stood at $2.2 billion and cash at $97.9 million on September 30, for net debt of $2.1 billion; at June 30 the company reported $1.6 billion of net debt and $184.2 million of cash. Net leverage rose to 4.2 times trailing twelve months Operational EBITDA from 3.3 times. Three pieces of the Aireon financing explain the move: $154.7 million of assumed Aireon debt maturing October 10, 2028; a $183.4 million interest-free loan from the sellers, due a year after closing, which deferred half the purchase price; and a $100.0 million revolver draw, of which $50.0 million was still outstanding. Capital expenditure was $27.4 million, including $2.2 million of capitalized interest.

A dividend step-up while Rocket Lab's purchase waits on regulators

Iridium paid $0.15 a share on September 30, $16.3 million in total, and plans to raise the quarterly dividend to $0.16 with the fourth-quarter payment, a 5.2% increase across the full year. The bigger variable is ownership: Rocket Lab agreed on June 28 to buy Iridium, stockholders approved the deal on September 24 with 99.6% of votes cast in favor — 81.4% of shares outstanding — and completion is targeted for mid-2027, subject to the remaining regulatory approvals.

“Last month’s stockholder approval for Rocket Lab’s acquisition of Iridium was an important milestone in creating a next generation space powerhouse,” chief executive Matt Desch said in the release.

On the government side, the U.S. Space Force exercised an option on September 11 to extend the EMSS contract through March 2027 at the same rate, and Iridium says it still expects a renewal in 2027. The release carries no revenue or earnings guidance and no call details; in July the company said it would not hold quarterly calls or update guidance while the transaction is pending. The next hard document is the Form 10-Q for the quarter, which the release says was filed October 20: it should show the purchase accounting behind the $103.9 million gain and the debt schedule behind the 4.2 times leverage figure.