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What changed in Iridium Communications Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Iridium Communications Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+332 added−326 removedSource: 10-K (2024-02-15) vs 10-K (2023-02-16)

Top changes in Iridium Communications Inc.'s 2023 10-K

332 paragraphs added · 326 removed · 275 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

145 edited+14 added−19 removed195 unchanged
Biggest changeThis agreement, which became effective in April 2019, provides for a six-month base term and four one-year options, all of which have been exercised, for a total value of the contract to us of approximately $54 million. In September 2019, we were also awarded a five-year indefinite-delivery/indefinite-quantity gateway evolution contract managed by the U.S.
Biggest changeThe GMSS contract has been extended through March 31, 2024, as we negotiate a renewal of the agreement. In September 2019, we were also awarded a five-year indefinite-delivery/indefinite-quantity gateway evolution contract managed by the U.S. Space Force to enable ongoing innovation and enhancements for the U.S. government gateway. This contract has a total contract value to us of $76 million.
We provide voice and data communications services to businesses, the U.S. and foreign governments, non-governmental organizations, and consumers via our satellite network, which has an architecture of 66 operational satellites with in-orbit and ground spares and related ground infrastructure. We utilize an interlinked mesh architecture to route traffic across our satellite constellation using radio frequency crosslinks between satellites.
We provide voice and data communications services to businesses, the U.S. and foreign governments, non-governmental organizations, and consumers via our satellite network, which has an architecture of 66 operational satellites with in-orbit spares and related ground infrastructure. We utilize an interlinked mesh architecture to route traffic across our satellite constellation using radio frequency crosslinks between satellites.
Iridium Certus ® provides a platform for our partners to 2 develop specialized broadband and midband (a term we use to describe services between our legacy 2.4 Kbps narrowband and our 128 Kbps and higher broadband offerings) applications on our network.
Iridium Certus ® provides a platform for our partners to develop specialized broadband and midband (a term we use to describe services between our legacy 2.4 Kbps narrowband and 2 our 128 Kbps and higher broadband offerings) applications on our network.
In particular, we believe that competitive broadband, midband and narrowband data services through 5 Iridium Certus and satellite IoT services, where we are engaging large, global enterprises as long-term customers for data and telematics solutions, represent our greatest opportunities for service revenue growth. • Expand our target markets through the development of new products and services.
In particular, we believe that competitive broadband, midband and narrowband data services through Iridium Certus and satellite IoT services, where we are engaging large, global enterprises as long-term customers for data and telematics solutions, represent our greatest opportunities for service revenue growth. 5 • Expand our target markets through the development of new products and services.
We have representatives covering three regions around the world to better manage our 6 distributor relationships: the Americas, which includes North, South and Central America; Asia Pacific, which includes Australia and Asia; and Europe, the Middle East, Africa and Russia. We have also established a global service program to provide portside service for our maritime customers at major ports worldwide.
We have representatives covering three regions around the world to better manage our distributor relationships: the Americas, which includes North, South and Central America; Asia Pacific, which includes Australia and Asia; and Europe, the Middle East, Africa and Russia. We have also established a global service program to 6 provide portside service for our maritime customers at major ports worldwide.
Further, many enterprises and governments include mobile satellite services such as ours as part of their PACE plan (Primary/Alternate/Contingency/Emergency), to maintain communications continuity in case of terrestrial communication network outages. 9 • Public telephone infrastructure : Telecommunications service providers use our services to satisfy regulatory mandates and government expectations regarding the availability of communications services for rural populations currently not served by terrestrial infrastructure.
Further, many enterprises and governments include mobile satellite services such as ours as part of their PACE (Primary/Alternate/Contingency/Emergency) plan, to maintain communications continuity in case of terrestrial communication network outages. 9 • Public telephone infrastructure : Telecommunications service providers use our services to satisfy regulatory mandates and government expectations regarding the availability of communications services for rural populations currently not served by terrestrial infrastructure.
Many fishing vessels are required by law to carry terminals using approved mobile satellite services for tracking purposes as well as to monitor catches and to ensure compliance with geographic fishing restrictions. European Union regulations, for example, require EU-registered fishing vessels of over 15 meters to carry terminals for the purpose of positional reporting of those vessels.
Many fishing vessels are required by law to carry terminals using approved mobile satellite services for tracking purposes as well as to monitor catches and to ensure compliance with geographic fishing restrictions. European Union (EU) regulations, for example, require EU-registered fishing vessels of over 15 meters to carry terminals for the purpose of positional reporting of those vessels.
In the land mobile market, enterprises, governments, and individuals that want to maintain mobile IP and telephony connectivity for their operations while in remote areas without having to deploy ground-based infrastructure or expensive terminals utilize Iridium Certus.
In the land mobile market, enterprises, governments, and individuals that want to maintain mobile IP and telephony connectivity utilize Iridium Certus for their operations while in remote areas without having to deploy ground-based infrastructure or expensive terminals.
We maintain our licenses with Motorola Solutions pursuant to several agreements, which can be terminated by Motorola Solutions upon the commencement by or against us of any bankruptcy proceeding or other specified liquidation proceedings or upon our material failure to perform or comply with any provision of the agreements.
We maintain our licenses with Motorola Solutions pursuant to several agreements, any of which can be terminated by Motorola Solutions upon the commencement by or against us of any bankruptcy proceeding or other specified liquidation proceedings or upon our material failure to perform or comply with any provision of the agreements.
Commercial Services Postpaid Mobile Voice and Data Satellite Communications Services We sell our mobile voice and data services to service providers and VARs who in turn offer such services to end users, either directly or indirectly through dealers, using various packaged solutions such as seasonal or annual plans with differing price levels that vary depending upon expected usage.
Commercial Services Postpaid Mobile Voice and Data Satellite Communications Services We sell our mobile voice and data services to service providers and VARs who in turn offer such services to end users, either directly or indirectly through dealers, using various packaged solutions such as seasonal or annual plans with differing price 13 levels that vary depending upon expected usage.
Part of our strategy for the development of personal mobile satellite communications is to allow individuals to connect to our network in more ways, including from devices such as smartphones, tablets and laptops through our Iridium GO! ® and Iridium GO! exec TM devices or a variety of personal communication devices from VAMs and VARs like Garmin.
Part of our strategy for the development of personal mobile satellite communications is to allow individuals to connect to our network in more ways, including from devices such as smartphones, tablets and laptops through our Iridium GO! ® and Iridium GO! exec ® devices or a variety of personal communication devices from VAMs and VARs like Garmin.
In exchange for these services, we typically charge service providers and VARs a monthly access fee per subscriber, as well as usage fees for airtime resources consumed by their respective subscribers. 13 Prepaid Mobile Voice Satellite Communications Services We also offer mobile voice services to service providers and VARs through prepaid plans.
In exchange for these services, we typically charge service providers and VARs a monthly access fee per subscriber, as well as usage fees for airtime resources consumed by their respective subscribers. Prepaid Mobile Voice Satellite Communications Services We also offer mobile voice services to service providers and VARs through prepaid plans.
The IMO requires all vessels flagged by signatories to the International Convention for the Safety of Life at Sea, or SOLAS, over 300 gross tons and certain passenger vessels, irrespective of size, that travel in international waters 10 to carry distress and safety terminals that provide GMDSS services.
The IMO requires all vessels flagged by signatories to the International Convention for the Safety of Life at Sea, or SOLAS, over 300 gross tons and certain passenger vessels, irrespective of size, that travel in international waters to carry distress and safety terminals that provide GMDSS services.
Aireon Holdings holds 100% of the membership interests in Aireon LLC, which is the operating entity for the Aireon system. In June 2022, we entered into a subscription agreement with Aireon Holdings and invested $50 million in exchange for an approximate 6% preferred membership interest. We also hold a common membership interest.
Aireon Holdings holds 100% of the membership interests in Aireon LLC, which is the operating entity for the Aireon system. 20 In June 2022, we entered into a subscription agreement with Aireon Holdings and invested $50 million in exchange for an approximate 6% preferred membership interest. We also hold a common membership interest.
Iridium Certus is a multi-service platform that can deliver a range of services, from voice to a high-throughput L-band data connection, at a range of competitive price points, data speeds, and terminal dimensions to meet an expanding set of customer requirements.
Iridium Certus is a multi-service technology platform that can deliver a range of services, from voice to a high-throughput L-band data connection, at a range of competitive price points, data speeds, and terminal dimensions to meet an expanding set of customer requirements.
Our network design of 66 operational satellites uses an interlinked mesh architecture to transmit signals from satellite to satellite, which reduces the need for multiple local ground stations around the world and facilitates the global reach of our services.
Our network 4 design of 66 operational satellites uses an interlinked mesh architecture to transmit signals from satellite to satellite, which reduces the need for multiple local ground stations around the world and facilitates the global reach of our services.
This and other design elements provide flexibility that allows for rapid reconfiguration of grounding traffic from the satellites in the event of a space, antenna or ground routing anomaly and results in greater reliability 18 of our network.
This and other design elements provide flexibility that allows for rapid reconfiguration of grounding traffic from the satellites in the event of a space, antenna or ground routing anomaly and results in greater reliability of our network.
In these cases, the majority of our competitors’ customers require regional, not global, mobile voice and data services, so our competitors may present a viable alternative to our services. All of these regional competitors operate or plan to operate GEO satellites.
In these cases, the majority of our competitors’ customers only require regional, not global, mobile voice and data services, so our competitors may present a viable alternative to our services. All of these regional competitors operate or plan to operate GEO satellites.
As a result, we are the only mobile satellite services operator offering real-time, weather-resilient, low-latency services with true global coverage, including full coverage of the polar regions. 4 Our Competitive Strengths • Our Constellation.
As a result, we are the only mobile satellite services operator offering real-time, weather-resilient, low-latency services with true global coverage, including full coverage of the polar regions. Our Competitive Strengths • Our Constellation.
The user interface provides access to multiple communication services, including voice calling, SMS and SOS, allowing users to connect to a 15 talkgroup located in up to 10 customer-defined geographic regions worldwide.
The user interface provides access to multiple communication services, including voice calling, SMS and SOS, allowing users to connect to a talkgroup located in up to 10 customer-defined geographic regions worldwide.
We believe that local telephone companies currently are reluctant to invest in new switches, landlines and cellular towers to expand their networks in rural and remote areas due to high costs and limited usage.
We believe that local telephone companies currently are reluctant to invest in new switches, landlines and cellular towers to 21 expand their networks in rural and remote areas due to high costs and limited usage.
Our service providers include satellite service providers such as Marlink AS, Applied Satellite Technology Limited and Network Innovations, as well as some of the largest telecommunications companies in the world, including Telstra Corporation Limited, KDDI Corporation and Singapore Telecommunications Limited.
Our service providers include satellite service providers such as Marlink AS, Applied Satellite Technology Limited and Network Innovations, as well as some of the largest telecommunications companies in the world, including Telstra Limited, KDDI Corporation and Singapore Telecommunications Limited (Singtel).
In conjunction with our distributors, we also offer additional services that permit service providers and VARs to offer complete integrated solutions for prepaid calling, email and IP-based data communications.
In conjunction with our distributors, we also offer services that permit service providers and VARs to offer complete integrated solutions for prepaid calling, email and IP-based data communications.
We expect that the need for more efficient, cost-effective and safer fleet operations, as well as the imposition of regulatory mandates related to driver safety, such as drive-time monitoring, will increase demand for our services in this area. • Fixed-asset monitoring : Multinational corporations, such as oil-field service companies like Schlumberger Limited and ConocoPhillips Company, use our services to run applications that allow remote monitoring and operation of equipment and facilities around the globe, such as oil pipelines and offshore drilling platforms. • Asset tracking : Leveraging IoT applications developed by several of our distributors, companies use our services and related devices to track assets, including personnel, for logistics, theft-prevention and safety purposes.
We expect that the need for more efficient, cost-effective and safer fleet operations, as well as the imposition of regulatory mandates related to driver safety, such as drive-time monitoring, will increase demand for our services in this area. • Fixed-asset monitoring : Multinational corporations, such as oil-field service companies like Schlumberger Limited and ConocoPhillips Company, use our services through one of our service providers to run applications that allow remote monitoring and operation of equipment and facilities around the globe, such as oil pipelines and offshore drilling platforms. • Asset tracking : Leveraging IoT applications developed by several of our distributors, companies use our services and related devices to track assets, including personnel, for logistics, theft-prevention and safety purposes.
Our traffic is routed on a preplanned route between satellites to a predetermined satellite that is in contact with one of the Iridium teleport network, or TPN, locations.
Our traffic is routed on a preplanned route between satellites to a predetermined 18 satellite that is in contact with one of the Iridium teleport network, or TPN, locations.
For example, customers use Trimble Transportation’s solution to provide global communication to transportation assets, and the Department of Homeland Security Office of Enforcement and Removal uses Fleet Management Solutions’ IoT solution to transmit position, direction, speed and other data for management of its vehicle fleet. • Resource management : Our global coverage and data throughput capabilities support natural resource management applications, such as fisheries management systems.
For example, customers use Trimble Transportation’s solution to provide global communication to transportation assets, and the Department of Homeland Security’s Office of Enforcement and Removal uses Fleet Management Solutions’ IoT solution to transmit position, direction, speed and other data for management of its vehicle fleet. • Resource management : Our global coverage and data throughput capabilities support natural resource management applications, such as fisheries management systems.
Because a ground station may not be within view of a satellite, ORBCOMM’s services may have a significant amount of latency, which may limit their use in some mission-critical applications. It does not offer voice service or high-speed data services. We also compete with regional mobile satellite communications services in several geographic markets.
Because a ground station may not be within view of a satellite, ORBCOMM’s services may have a significant amount of latency, which may limit their use in some mission-critical applications. ORBCOMM does not offer voice service or high-speed data services. We also compete with regional mobile satellite communications services in several geographic markets.
VARs and VAMs such as Flightcell International Ltd., Garmin Services 11 Inc., Honeywell International, Inc., SkyTrac and Spider Tracks Limited incorporate Iridium products and services into their applications for these markets. • Unmanned Aerial Vehicles (UAVs) : Our small antennas and system designs support a wide range of UAV platforms.
VARs and VAMs such as Flightcell International Limited, Garmin 11 Services Inc., Honeywell International, Inc., SkyTrac Systems Limited, and Spider Tracks Limited incorporate Iridium products and services into their applications for these markets. • Unmanned Aerial Vehicles (UAVs) : Our small antennas and system designs support a wide range of UAV platforms.
We consider our employee relations to be good. Human Capital Resources Our company is made up of varied and creative teams, and we are committed to creating an innovative and inclusive environment where our employees are proud to work. We foster this sentiment by focusing on development, employee wellness and social responsibility.
We consider our employee relations to be good. Human Capital Resources Our company is made up of varied and creative teams, and we are committed to creating an innovative and inclusive environment where our employees are proud to work. We foster this goal by focusing on development, employee wellness and social responsibility.
LEO satellites from operators like Globalstar and ORBCOMM use an architecture commonly referred to as “bent pipe,” which requires voice and data transmissions to be immediately routed to ground stations in the same region as the satellite and can only provide real-time service when they are within view of a ground station, limiting coverage to areas near where they have been able to license and locate ground infrastructure.
Some LEO satellites without crosslink architecture from operators like Globalstar and ORBCOMM use an architecture commonly referred to as “bent pipe,” which requires voice and data transmissions to be immediately routed to ground stations in the same region as the satellite and can only provide real-time service when they are within view of a ground station, limiting coverage to areas near where they have been able to license and locate ground infrastructure.
We believe that demand for mobile communications devices operating outside the coverage of terrestrial networks, combined with our small, lightweight, durable handsets with true global coverage, will allow us to capitalize on growth opportunities among these users.
We believe that demand for mobile communications devices operating outside the coverage of terrestrial networks, combined with our small, lightweight, durable handsets with truly global coverage, will allow us to capitalize on growth opportunities among these users.
If our service providers or VARs provide our services through dealers, these dealers will often provide such services directly to the end user. Service providers typically purchase our most basic products and services, such as mobile voice services and related satellite handsets, and offer additional services such as voice mail.
If our service providers or VARs provide our services through dealers, these dealers will often provide such services directly to the end user. Service providers typically purchase our most basic products and services, such as mobile voice services and related satellite handsets, and offer additional services such as voicemail.
Our land mobile end users utilize our satellite communications services for: • Voice and data : Multinational corporations in various sectors use our services for business telephony, email and data transfer services, location-based services, broadband and to provide telephony services for employees in areas inadequately served by terrestrial networks.
Our land mobile end users utilize our satellite communications services for: • Voice and data : Multinational corporations in various sectors use our services for business telephony, email and data transfer services, location-based services, and broadband for employees in areas inadequately served by terrestrial networks.
We continuously monitor and upgrade our gateway and TPN facilities as necessary and also maintain an inventory of spare parts. When we do not have necessary spares in inventory or our spares become obsolete, we may rely on third parties to develop necessary parts.
We continually monitor and upgrade our gateway and TPN facilities as necessary and also maintain an inventory of spare parts. When we do not have necessary spares in inventory or our spares become obsolete, we may rely on third parties to develop necessary parts.
As part of the GMDSS service, navigational and meteorological information is distributed to vessels.
As part of the GMDSS service, navigational and meteorological information 10 is distributed to vessels.
Our Products We offer a broad array of voice and data products for customers that work worldwide. In most cases, our devices or an antenna must be located outside and within view of a satellite to be able to access our network. Satellite Handsets and Iridium GO! Our principal handset offerings are the Iridium 9555 and Iridium Extreme satellite handsets.
Our Products We offer a broad array of voice and data products that work worldwide. In most cases, our devices or an antenna must be located outside and within view of a satellite to be able to access our network. Satellite Handsets and Iridium GO! Our principal handset offerings are the Iridium 9555 and Iridium Extreme satellite phones.
Service providers and VARs pay us in advance for defined blocks of airtime minutes with expiration periods in various configurations, ranging from 30 days to two years and can be extended by the purchase of additional e-vouchers up to a maximum of three or four years.
Service providers and VARs pay us in advance for defined blocks of airtime minutes with expiration periods in various configurations, generally ranging from 30 days to two years, but which can be extended by the purchase of additional e-vouchers up to a maximum of three or four years.
We expect these devices to help us maintain our competitive position as premium offerings in the market due to their capabilities, mobility, reliability and global coverage. In addition to these devices, we offer variants of the Iridium 9555 handset and the Iridium Extreme handset that are qualified for sale to U.S. government customers.
We expect these devices to help us maintain our competitive position as premium offerings in the market due to their capabilities, mobility, reliability and global coverage. In addition to these devices, we offer variants of the Iridium 9555 satellite phone and the Iridium Extreme satellite phone that are qualified for sale to U.S. government customers.
We are operating under a multi-year, fixed-price contract with the U.S. government, which we refer to as our Enhanced Mobile Satellite Services, or EMSS, contract to provide specified satellite airtime services for an unlimited number of U.S. Department of Defense, or DoD, and other federal government subscribers.
We operate under a multi-year, fixed-price contract with the U.S. government, which we refer to as our Enhanced Mobile Satellite Services, or EMSS, contract to provide specified satellite airtime services for an unlimited number of U.S. Department of Defense, or DoD, and other federal government subscribers.
In addition, despite significant penetration and competition, terrestrial wireless systems do not cover a large majority of the earth’s surface and are focused mainly in those areas where people live, excluding oceans and other remote regions where ships, airplanes and other remote assets may travel or be located.
In addition, despite significant penetration and competition, terrestrial wireless systems do not cover a large majority of the earth’s surface and are focused mainly in those areas where people live, excluding oceans and other remote regions where ships, airplanes and other remote assets may be.
We believe that mobile satellite services will continue to experience growth driven by the increasing awareness of the need for reliable mobile voice and data communications services, the lack of coverage of most of the earth’s surface by terrestrial wireless systems, the continued development of the IoT, and the continued development of other innovative, lower-cost technology, such as applications integrating mobile satellite products and services into other devices, including embedding satellite capability into terrestrial smartphones.
We believe that mobile satellite services will continue to experience growth driven by the increasing awareness of the need for reliable mobile voice and data communications services, the lack of coverage of most of the earth’s surface by terrestrial wireless systems, the continued development of the IoT, and the continued development of other innovative, lower-cost technology, such as applications integrating mobile satellite products and services into other devices, including embedding standards-based satellite technology in smartphones and IoT devices.
We believe that we can expand our target markets by developing and offering a broader range of products and services, including a wider array of cost-effective and competitive broadband, midband, safety services, and IoT data services using Iridium Certus technology to complement and expand on our existing narrowband services.
We believe that we can expand our target markets by developing and offering a broader range of products and services, including a wider array of cost-effective and competitive broadband, midband, safety services, and IoT data services using our proprietary Iridium Certus technology to complement and expand on our legacy narrowband services.
Our VARs include ARINC Incorporated, Blue Sky Network, LLC, Garmin Services Inc., Gogo Business Aviation LLC, Komatsu Ltd, Kore Telematics Inc., MetOcean Telematics Limited, NAL Research Corporation and Zunibal S.A. We also sell our products to VAMs, who integrate our transceivers or chipsets into their proprietary hardware.
Our VARs include ARINC Incorporated, Beam Communications Pty Ltd., Blue Sky Network, LLC, Garmin Services Inc., Garmin International Inc., Gogo Business Aviation LLC, Komatsu Ltd, Kore Telematics Inc., MetOcean Telematics Limited, NAL Research Corporation, and Zunibal S.A. We also sell our products to VAMs, who integrate our transceivers or chipsets into their proprietary hardware.
Our legacy terminal, the Iridium Pilot, provides up to three independent voice lines and an internet connection for data communications of up to 134 Kbps, using our Iridium OpenPort service. We have discontinued the manufacture of the Iridium Pilot terminal but still support the Iridium OpenPort service.
Our legacy broadband terminal, the Iridium Pilot, provides up to three independent voice lines and an internet connection for data communications of up to 134 Kbps, using our Iridium OpenPort service. We have discontinued the manufacture of the Iridium Pilot terminal but still provide the Iridium OpenPort service.
The table below sets forth the percentage of our commercial voice and data traffic originating outside the United States for the last three years.
Traffic Originating Outside the United States Most of our voice and data traffic originates outside the United States. The table below sets forth the percentage of our commercial voice and data traffic originating outside the United States for the last three years.
We sell our products and services to commercial end users through a wholesale distribution network, encompassing approximately 85 service providers, approximately 285 value-added resellers, or VARs, and approximately 80 value-added manufacturers, or VAMs, which create and sell technology that uses the Iridium network either directly to the end user or indirectly through other service providers, VARs or dealers.
We sell our products and services to commercial end users through a wholesale distribution network, encompassing approximately 100 service providers, approximately 300 value-added resellers, or VARs, and approximately 85 value-added manufacturers, or VAMs, which create and sell technology that uses the Iridium network either directly to the end user or indirectly through other service providers, VARs or dealers.
The Iridium GO! exec has a modernized, sleek design with built-in color touch screen and speakerphone for mobile office connectivity and WiFi for access from smartphones or laptops within a range of up to 100 feet. The built-in battery provides up to 24 hours of standby and up to 6 hours of use.
The Iridium GO! exec has a sleek design with built-in color touch screen and speakerphone for mobile office connectivity and Wi-Fi for access from smartphones or laptops within a range of up to 100 feet. The built-in battery provides up to 24 hours of standby and up to 6 hours of use.
The two-way emergency SOS button initiates a phone call and an emergency message via SMS to GEOS, which then coordinates with local emergency responders. • Iridium Extreme PTT . The Iridium Extreme PTT enhances the Iridium Extreme with an intelligently designed push-to-talk mode, expanded speakerphone, reinforced PTT button, and extended capacity battery.
The two-way emergency SOS button initiates a voice call and an emergency text message via SMS to GEOS, which then coordinates with local emergency responders. 15 • Iridium Extreme PTT . The Iridium Extreme PTT enhances the Iridium Extreme with an intelligently designed push-to-talk mode, expanded speakerphone, reinforced PTT button, and extended capacity battery.
Globalstar’s service is available only on a multi-regional basis as a result of its “bent pipe” architecture, which requires that voice and data transmissions be routed from satellites immediately to nearby ground stations. This design requires the use of multiple ground stations, which are impractical in extreme latitudes or over oceans.
Globalstar owns and operates a fleet of LEO satellites. Globalstar’s service is available only on a multi-regional basis as a result of its “bent pipe” architecture, which requires that voice and data transmissions be routed from satellites immediately to nearby ground stations. This design requires the use of multiple ground stations, which are impractical in extreme latitudes or over oceans.
We are making our technology more accessible and cost-effective for our distribution partners to integrate by licensing our core technologies; by adding functionality, such as push-to-talk, or PTT, capability, which allows multiple users to participate in talk groups worldwide; by providing rugged, dependable devices and services; and by developing new services that take advantage of the capabilities of our global constellation.
We are making our technology more accessible and cost-effective for our distribution partners to integrate by licensing our core technologies; by adding functionality, such as push-to-talk, or PTT, capability, which allows multiple users to participate in talk groups worldwide; by providing rugged, dependable devices and services; and by developing new services that take advantage of the capabilities of our global constellation. • Continued growth in services provided to the U.S. government.
Broadband Data Devices Iridium Certus terminals are specifically designed for the maritime, aviation, land mobile or government markets and ultimately will offer a variety of significantly enhanced data speeds and antenna types. Iridium Certus terminals provide enterprise-grade broadband functionality alongside high-quality voice capabilities that can be used on a global basis.
Broadband Data Devices Iridium Certus terminals are specifically designed for the maritime, aviation, land mobile or government markets and offer a variety of enhanced data speeds and antenna types. Iridium Certus terminals provide enterprise-grade broadband data and high-quality voice capabilities that can be used on a global basis.
These VARs integrate our handsets, transceivers, high-speed data devices and Short Burst Data, or SBD ® , modems with other hardware and software to create packaged solutions for end users.
These VARs integrate our handsets, transceivers, high-speed data devices and SBD modems with other hardware and software to create packaged solutions for end users.
Voice and Data Modems We also offer a combined voice transceiver and data modem, which our distributors integrate into a variety of communications solutions that are deployed in different applications around the world. Our principal offering in this space is the Iridium Core 9523 L-band transceiver, which utilizes the transceiver core of our Iridium Extreme satellite handset.
Voice and Data Modems We also offer a combined voice transceiver and data modem, which our VAMs integrate into a variety of communications solutions that are deployed in different applications around the world. Our offering in this category is the Iridium Core 9523 L-band transceiver, which utilizes the transceiver core of our Iridium Extreme satellite handset.
Based on Aireon’s business plan and restrictions under Aireon’s debt facility, we do not expect this redemption of our ownership interest to occur for several years. The Aireon Holdings LLC Agreement provides for Aireon Holdings to be managed by a board of directors consisting of 11 members.
Based on Aireon’s business plan and restrictions under Aireon’s debt facility, we do not expect this redemption of our ownership interest to occur for several years. The Aireon Holdings LLC Agreement provides for Aireon Holdings to be managed by a board of directors consisting of 11 members, of which we have the right to nominate two directors.
Of these distributors, 58 sell primarily to U.S. and international government customers. Our distributors often integrate our products and services with other complementary hardware and software and have developed individual solutions targeting specific lines of business. We also sell airtime services directly to the U.S. government, including the DoD, for resale to other government agencies.
Our distributors often integrate our products and services with other complementary hardware and software and have developed individual solutions targeting specific lines of business. We also sell airtime services directly to the U.S. government, including the DoD, for resale to other government agencies.
Three of our VARs—CLS, MetOcean Telematics and Rock Seven—have developed applications for the fishing industry that enable regulatory compliance of fishing practices in a number of countries around the world. • Scientific data monitoring : The global coverage of our network supports many scientific data collection applications, including the Argo float program of the National Oceanographic and Atmospheric Administration, or NOAA, the Global Ocean Observation project Challenger, operated by Rutgers University, and anti-poaching programs run by the Smithsonian National Zoo & Conservation Institute, the Zoological Society of London, and Veterans Empowered to 12 Protect African Wildlife, or VETPAW.
Three of our VARs—Collecte Localisation Satellites (CLS), MetOcean Telematics Limited and Ground Control Technologies UK Ltd —have developed applications for the fishing industry that enable regulatory compliance of fishing practices in a number of countries around the world. • Scientific data monitoring : The global coverage of our network supports many scientific data collection applications, including the Argo float program of the National Oceanographic and Atmospheric Administration, or NOAA, the Global Ocean Observation project Challenger, operated by Rutgers University, and anti-poaching programs run by the 12 Smithsonian National Zoo & Conservation Institute, the Zoological Society of London, and Veterans Empowered to Protect African Wildlife, or VETPAW.
The fixed-price rate for the current year of the EMSS contract is $106 million, with increases thereafter up to $110.5 million for the final contract year ending in September 2026.
The fixed-price annual rate of the EMSS contract through September 2024 is $106 million, with increases thereafter up to $110.5 million for the final contract year ending in September 2026.
Ltd., Hyundai Doosan Infracore and AGCO Corporation, use our global IoT services to monitor their off-road heavy equipment in markets such as construction, mining, agriculture and forestry. • Fleet management : Our global coverage permits our products and services to be used to monitor the location of vehicle fleets, hours of service and engine telemetry data, as well as to conduct two-way communications with drivers around the world.
LTD and Appareo Systems LLC, use our global IoT services to monitor their off-road heavy equipment in markets such as construction, mining, agriculture and forestry. • Fleet management : Our global coverage permits our products and services to be used to monitor the location of vehicle fleets, hours of service and engine telemetry data, as well as to conduct two-way communications with drivers around the world.
We take responses from our employees seriously and use them to inform specific strategies every year tailored to both the entire company as well as specific teams. In 2022, we introduced an annual survey to understand what benefits are important to our employees and ensure that we are offering a competitive total rewards package.
We take responses from our employees seriously and use them to inform specific strategies every year tailored to both the entire company as well as specific teams. In addition to performing benchmarking, we also conduct an annual survey to understand what benefits are important to our employees and ensure that we are offering a competitive total rewards package.
U.S. government services, including engineering services, accounted for approximately 21% of our total revenue for the year ended December 31, 2022. Our reported U.S. government revenue includes airtime revenue derived from the EMSS contract and services provided through the GMSS contract, the gateway evolution contract, and other engineering and support contracts with the U.S. government.
U.S. government services, including engineering services, accounted for approximately 25% of our total revenue for the year ended December 31, 2023. Our reported U.S. government revenue includes airtime revenue derived from the EMSS contract and services provided through the GMSS contract, the gateway evolution contract, and other engineering and support contracts with the U.S. government, primarily the SDA contract.
Sales of our commercial services collectively accounted for approximately 60% of our total revenue for the year ended December 31, 2022. We also sell related voice and data equipment to our customers, which accounted for approximately 19% of our total revenue for the year ended December 31, 2022. In addition, we offer services to U.S. government customers, including the DoD.
Sales of our commercial services collectively accounted for approximately 62% of our total revenue for the year ended December 31, 2023. We also sell related voice and data equipment to our customers, which accounted for approximately 13% of our total revenue for the year ended December 31, 2023. In addition, we offer services to U.S. government customers, including the DoD.
With the introduction of the more powerful Iridium Certus terminals, we expect our distributors to focus on selling Iridium Certus and eventually upgrade many ships that have Iridium Pilot installed to Iridium Certus technology.
With the introduction of the more powerful Iridium Certus terminals, we expect our distributors to focus on selling Iridium Certus and to eventually upgrade ships with Iridium Pilot to Iridium Certus technology.
The other investors hold the remaining preferred membership interests resulting from their investments in Aireon for an aggregate purchase price of approximately $339 million. At December 31, 2022, our fully diluted ownership stake in Aireon Holdings was approximately 39.5%, up from 35.7% at December 31, 2021.
The other investors hold the remaining preferred membership interests resulting from their investments in Aireon for an aggregate purchase price of approximately $339 million. At each of December 31, 2023 and 2022, our fully diluted ownership stake in Aireon Holdings was approximately 39.5%.
We believe these markets and the new service providers, VAMs and VARs who join our network as a result of new product offerings represent an attractive opportunity for continued subscriber and revenue growth. • C ontinue to support Aireon in the execution of its business plan . Aireon, which we formed in 2011, is our primary hosted payload customer.
We believe these markets and the new service providers, VAMs and VARs who join our network as a result of new product offerings represent an attractive opportunity for continued subscriber and revenue growth. • C ontinue to support Aireon in the execution of its business plan .
U.S. government usage and commercial IoT usage have been less subject to seasonal changes. Services and Products At December 31, 2022, we had approximately 1,999,000 billable subscribers worldwide. Our principal services are mobile satellite services, including mobile voice and data services, high-speed data services, IoT services, hosted payload and other data services and engineering services.
U.S. government usage and commercial IoT usage have been less subject to seasonal changes. Services and Products At December 31, 2023, we had approximately 2,279,000 billable subscribers worldwide. Our principal services are mobile satellite services, including mobile voice and data services, IoT services, hosted payload and other data services and engineering services.
U.S. government services, including engineering services, accounted for approximately 21% of our total revenue for the year ended December 31, 2022.
U.S. government services, including engineering services, accounted for approximately 25% of our total revenue for the year ended December 31, 2023.
Year Ended December 31, 2022 2021 2020 Commercial voice traffic (minutes) 91 % 90 % 91 % Commercial data traffic (kilobytes) 78 % 74 % 72 % Our Network Our satellite network has an architecture of 66 operational LEO satellites in six orbital planes of eleven vehicles each in nearly circular polar orbits, in addition to in-orbit spares and related ground infrastructure, as well as ground spares.
Year Ended December 31, 2023 2022 2021 Commercial voice traffic (minutes) 91 % 90 % 90 % Commercial data traffic (kilobytes) 96 % 95 % 97 % Our Network Our satellite network has an architecture of 66 operational LEO satellites in six orbital planes of eleven vehicles, each in nearly circular polar orbits, in addition to in-orbit spares and related ground infrastructure.
GMDSS service using our network became available in 2020, and our partners offer maritime terminals that include GMDSS service capabilities to vessel operators. Aviation We are one of the leading providers of mobile satellite communications services to the aviation sector.
GMDSS service using our network became available in 2020, and our partners offer maritime terminals that include GMDSS service capabilities to vessel operators. Aviation We are one of the leading providers of mobile satellite communications services to the aviation sector, and we continue to see aviation as an area of potential revenue growth.
Fleet management companies, such as ID Systems, Mix Telematics, and Omnilink, use our service to provide distance drivers with reliable communications to their dispatchers and their destinations to coordinate changing business needs, and our satellite network provides continuous communications coverage while they are in transit.
Fleet management companies, such as I.D. Systems, Mix Telematics International (Pty) Ltd, and Omnilink Tecnologia S/A, use our service to provide distance drivers with reliable communications to their dispatchers and their destinations to coordinate changing business needs, and our satellite network provides continuous communications coverage while they are in transit.
ORBCOMM, which was acquired in 2022 by GI Partners, a private equity firm, also provides commercial services using a fleet of LEO satellites. Like Globalstar, ORBCOMM’s network also has a “bent pipe” architecture, which constrains its real-time coverage area. ORBCOMM’s principal focus is low-cost data and IoT services, where it directly competes with our IoT offerings.
ORBCOMM also provides commercial services using a fleet of LEO satellites. Like Globalstar, ORBCOMM’s network also has a “bent pipe” architecture, which constrains its real-time coverage area. ORBCOMM’s principal focus is low-cost data and IoT services, where it directly competes with our IoT offerings.
Our research and development expenses were $16.2 million, $11.9 million and $12.0 million for the years ended December 31, 2022, 2021, and 2020, respectively. Employees and Human Capital Resources Employees As of December 31, 2022, we had 658 full-time employees and 5 part-time employees, none of whom are subject to any collective bargaining agreement.
Our research and development expenses were $20.3 million, $16.2 million and $11.9 million for the years ended December 31, 2023, 2022, and 2021, respectively. Employees and Human Capital Resources Employees As of December 31, 2023, we had 760 full-time employees and six part-time employees, none of whom are subject to any collective bargaining agreement.
Under our EMSS contract, we provide Iridium airtime services, including unlimited global standard and secure voice, paging, fax, Short Burst Data ® , Iridium Burst ® , RUDICS and DTCS services for an unlimited number of DoD and other federal government subscribers.
Under our EMSS contract, we provide Iridium airtime services, including unlimited global standard and secure voice, paging, fax, Short Burst Data ® , or SBD ® , Iridium Burst ® , Router-Based Unrestricted Digital Interworking Connectivity Solutions (or RUDICs) and DTCS services for an unlimited number of DoD and other federal government subscribers.
We currently have four working groups to put these objectives into practice. Each working group has its own goals, stakeholder relationships, strategy and executive sponsorship. 22 Intellectual Property At December 31, 2022, we held 37 U.S. patents and one foreign patent. These patents relate to several aspects of satellite systems, global networks, communications services, and communications devices.
Each working group has its own goals, stakeholder relationships, strategy and executive sponsorship. 22 Intellectual Property At December 31, 2023, we held 38 U.S. patents and one foreign patent. These patents relate to several aspects of satellite systems, global networks, communications services, and communications devices.
Our IoT services are used for: • Personal tracking devices and location-based services : Several of our VAMs and VARs, such as Garmin, ACR Electronics, and Zoleo, market small, portable devices that provide personal tracking and data communications services to consumers and commercial end users. In addition, Iridium GO! and the Iridium Extreme handsets offer personal tracking and location-based services.
Our IoT services are used for: • Personal tracking devices and location-based services : Several of our VARs, such as Garmin Services Inc., ACR Electronics, and Zoleo, Inc., market small, portable devices that provide personal tracking and data communications services to consumers and commercial end users.
We hold a space station license for the launch and operation of our constellation, which expires February 23, 2032. Our U.S. gateway earth station and the U.S. government customer and commercial subscriber earth station licenses expire between February 2036 and March 2037. We must file renewal applications for earth station licenses between 30 and 90 days prior to expiration.
We hold a space station license for the launch and operation of our constellation, which expires February 23, 2032. Our U.S. gateway earth station and the U.S. government customer and commercial subscriber earth station licenses expire between February 2036 and March 2037.
Device Development and Manufacturing We contract with Cambridge Consulting Ltd. and other suppliers to develop our devices, with Benchmark Electronics Inc., or Benchmark, to manufacture most of our devices in a facility in Thailand, and with Hybrid Design Associates to manufacture a portion of our devices in the U.S.
Device Development and Manufacturing We contract with Cambridge Consulting Ltd. and other suppliers to develop our devices, with Benchmark Electronics Inc., or Benchmark, to manufacture most of our devices in a facility in Thailand, and with Verigon to manufacture a portion of our 17 devices in the United States.
We have licensed the Iridium Certus technology to a group of VAMs who have introduced products for the maritime and land mobile markets and are developing additional products for those markets as well as the aviation and government markets. Iridium Certus is ideal for maritime operational and safety services.
We have licensed the Iridium Certus technology to a group of VAMs who have introduced products for the maritime and land mobile markets and are developing additional products for those markets as well as the aviation and government markets. Iridium Certus is designed for maritime operational and safety services, combining the benefits of L-band with broadband and truly global coverage.
We separately report commercial Iridium Certus broadband revenue with Iridium OpenPort ® service revenue as commercial broadband revenue. Because there is considerable overlap in these sectors, we have combined our discussion of these revenue lines in this report, noting within the discussion where our broadband services contribute, particularly in maritime.
Because there is considerable overlap in these services, we have combined our discussion of these revenue lines in this report, noting within the discussion where our broadband services contribute, particularly in maritime.
Mobile satellite services are intended to meet users’ needs for connectivity in all locations where terrestrial wireless and wireline communications networks do not exist, do not provide sufficient coverage, or are impaired, including rural and developing 3 areas that lack adequate wireless or wireline networks, airways, ocean and polar regions where few alternatives exist, and regions where the telecommunications infrastructure has been affected by political conflicts or natural disasters.
Mobile satellite services are intended to meet users’ needs for connectivity in all locations where terrestrial wireless and wireline communications networks do not exist, do not provide sufficient coverage, or are impaired, including rural and developing areas that lack adequate wireless or wireline networks, airways, ocean and polar regions where few alternatives exist, and regions where the telecommunications infrastructure has been affected by political conflicts or natural disasters. 3 Government organizations, including military and disaster response agencies, non-governmental organizations, and industrial operations and support teams depend on mobile and fixed voice and data satellite communications services on a regular basis.
At December 31, 2022, we had approximately 1,999,000 billable subscribers worldwide, representing a 16% increase compared to December 31, 2021. Total revenue increased from $614.5 million in 2021 to $721.0 million in 2022. Industry We compete primarily in the mobile satellite services sector of the global communications industry.
At December 31, 2023, we had approximately 2,279,000 billable subscribers worldwide, representing a 14% increase compared to December 31, 2022. Total revenue increased from $721.0 million in 2022 to $790.7 million in 2023, representing a 10% increase. Industry We compete primarily in the mobile satellite services sector of the global communications industry.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThese services and devices aimed at individual consumers, such as location-based services, emergency services, satellite handsets, smartphones, and personal locator devices, may contain design and manufacturing defects. Defects may also occur in components and devices that we purchase from third parties or that our distributors offer.
Biggest changeFor example, we are working to enable satellite messaging and emergency services directly in smartphones and other devices using our services, which may dramatically increase the number of devices that use our services. These services and devices aimed at individual consumers, such as location-based services, emergency services, satellite handsets, smartphones, and personal locator devices, may contain design and manufacturing defects.
The provision of satellite-based services and products is subject to downward price pressure when capacity exceeds demand or as a result of aggressive discounting by some operators under financial pressure to expand their respective market share. In addition, we may face competition from new competitors, new technologies or new equipment, including proposed new LEO constellations.
The provision of satellite-based services and products is subject to downward price pressure when capacity exceeds demand or as a result of aggressive discounting by some operators under financial pressure to expand their respective market share. In addition, we may face competition from new competitors, new technologies or new equipment, including new and proposed LEO constellations.
We could face direct expenses related to a variety of enforcement 35 actions, government investigations, or litigation, and an interruption to our business and adverse publicity because of such enforcement actions, government investigations, or litigation.
We could face direct expenses related to a variety of enforcement actions, government investigations, or litigation, and an interruption to our business and adverse publicity because of such 35 enforcement actions, government investigations, or litigation.
Our capital structure and reliance on indebtedness can have several important consequences, including, but not limited to, the following: • If future cash flows are insufficient, we may not be able to make principal or interest payments on our debt obligations, which could result in the occurrence of an event of default under one or more of those debt instruments. • Our leverage level could increase our vulnerability to adverse economic and industry conditions. • Our indebtedness requires us to dedicate a substantial portion of our cash flow from operations to payments on our debt, thereby reducing the availability of our cash flow for operations and other purposes. • Our leverage level could make it more difficult for us to satisfy our obligations to our lenders, resulting in possible defaults on and acceleration of such indebtedness. • Our leverage level could place us at a competitive disadvantage compared to any competitors that have less debt or comparable debt at more favorable interest rates and that, as a result, may be better positioned to withstand economic downturns. • Our consolidated indebtedness has the general effect of reducing our flexibility to react to changing business and economic conditions insofar as they affect our financial condition .
Our capital structure and reliance on indebtedness can have several important consequences, including, but not limited to, the following: • If future cash flows are insufficient, we may not be able to make principal or interest payments on our debt obligations, which could result in the occurrence of an event of default under one or more of those debt instruments. 31 • Our leverage level could increase our vulnerability to adverse economic and industry conditions. • Our indebtedness requires us to dedicate a substantial portion of our cash flow from operations to payments on our debt, thereby reducing the availability of our cash flow for operations and other purposes. • Our leverage level could make it more difficult for us to satisfy our obligations to our lenders, resulting in possible defaults on and acceleration of such indebtedness. • Our leverage level could place us at a competitive disadvantage compared to any competitors that have less debt or comparable debt at more favorable interest rates and that, as a result, may be better positioned to withstand economic downturns. • Our consolidated indebtedness has the general effect of reducing our flexibility to react to changing business and economic conditions insofar as they affect our financial condition .
These security incidents could have a significant effect on our systems, devices and services, including system failures and delays that could limit network availability, which could harm our business and our reputation and result in substantial liability. Our satellites may collide with space debris or another spacecraft, which could adversely affect the performance of our constellation.
These security incidents could have a significant effect on our systems, devices and services, including system failures and delays that could limit network availability, which could harm our business and our reputation and result in substantial liability. 25 Our satellites may collide with space debris or another spacecraft, which could adversely affect the performance of our constellation.
If current or future distributors do not perform adequately, or if we are unable to locate competent distributors in particular countries and secure their services on favorable terms, we may be unable to increase or maintain our revenue in these markets or enter new markets, we may not realize our expected growth, and our brand image and reputation could be hurt.
If current or future distributors do not perform adequately, or if we are unable to locate competent distributors in particular countries and secure their services on favorable terms, we may be unable to increase or maintain our revenue in these 28 markets or enter new markets, we may not realize our expected growth, and our brand image and reputation could be hurt.
If we fail to repay such amounts, the lenders may foreclose on the assets we have pledged under the Term Loan, which includes substantially all of the assets of our domestic subsidiaries, including our principal operating subsidiary, Iridium Satellite. Certain provisions in the credit agreement governing our Term Loan limit our financial and operating flexibility.
If we fail to repay such amounts, the lenders may foreclose on the assets we have pledged under the Term Loan, which includes substantially all of the assets of our domestic subsidiaries, including our principal operating subsidiary, Iridium Satellite LLC. Certain provisions in the credit agreement governing our Term Loan limit our financial and operating flexibility.
If we fail to maintain such controls, it could result in a material misstatement of our financial statements that would not be prevented or detected on a timely basis, which could cause investors and other users to lose confidence in our financial statements. Item 1B. Unresolved Staff Comments None. 38
If we fail to maintain such controls, it could result in a material misstatement of our financial statements that would not be prevented or detected on a timely basis, which could cause investors and other users to lose confidence in our financial statements. Item 1B. Unresolved Staff Comments None.
In addition, 25 in the event of such a security incident, our customer contracts may not adequately protect us against liability to third parties with whom our customers conduct business. Although we have implemented and intend to continue to implement security measures, these measures may prove to be inadequate.
In addition, in the event of such a security incident, our customer contracts may not adequately protect us against liability to third parties with whom our customers conduct business. Although we have implemented and intend to continue to implement security measures, these measures may prove to be inadequate.
As a result of Russia’s invasion of Ukraine in February 2022, we have ceased shipments of equipment to Russia and made other adjustments to our operations in light of U.S. and international sanctions. Further, our sales in Russia are conducted in rubles and then translated to U.S. dollars in our financial results.
As a result of Russia’s invasion of Ukraine in February 2022, we ceased shipments of equipment to Russia and made other adjustments to our operations in light of U.S. and international sanctions. Further, our sales in Russia are conducted in rubles and then translated to U.S. dollars in our financial results.
The credit agreement governing our Term Loan contains covenants that place restrictions on, among other things, 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 specified transactions.
The credit agreement governing our Term Loan contains covenants that place restrictions on, among other things, our ability to: • incur liens, • engage in mergers or asset sales, • pay dividends, 32 • repay subordinated indebtedness, • incur indebtedness, • make investments and loans, and • engage in other specified transactions.
In addition, it is possible that our distributors’ devices could become the subject of a product recall as a result of a device defect. We do not maintain recall insurance, nor do we have control over our distributors’ devices, and any recall could have a significant effect on our financial results.
In addition, it is possible that our or our distributors’ devices could become the subject of a product recall as a result of a device defect. We do not maintain recall insurance, nor do we have control over our distributors’ devices, and any recall could have a significant effect on our financial results.
The loss or consolidation of any of these distributors, or a decrease in the level 28 of effort expended by any of them to promote our products and services, could reduce the distribution of our products and services as well as the development of new products and applications, which would negatively affect our revenue.
The loss or consolidation of any of these distributors, or a decrease in the level of effort expended by any of them to promote our products and services, could reduce the distribution of our products and services as well as the development of new products and applications, which would negatively affect our revenue.
These services and devices may be used in isolated and dangerous locations, including emergency response situations, and users who suffer property damage, personal injury or death while using such services or devices may seek to assert claims or bring lawsuits against us.
These services and devices could be used in isolated and dangerous locations, including emergency response situations, and users who suffer property damage, personal injury or death while using such services or devices may seek to assert claims or bring lawsuits against us.
We can offer no assurance that we will be able to obtain such intellectual property rights on commercially reasonable terms or at all. If we are unable to obtain such intellectual property rights on commercially reasonable terms, we may not be able to develop some new devices and services.
We can offer no assurance that we will be able to obtain such 27 intellectual property rights on commercially reasonable terms or at all. If we are unable to obtain such intellectual property rights on commercially reasonable terms, we may not be able to develop some new devices and services.
Our commercial satellite network traffic is supported by a gateway in Tempe, Arizona, as well as a gateway in Izhevsk, Russia for traffic within Russian boundaries, and we operate our satellite constellation from our satellite network operations center in Leesburg, Virginia.
Our commercial satellite network traffic is supported by a gateway in Tempe, Arizona, as well as a gateway in Izhevsk, Russia, for traffic within Russian boundaries, and we operate our satellite constellation from our satellite network operations center in 24 Leesburg, Virginia.
For example, we have in the past experienced quality issues and incorrect 27 market assessments in connection with the introduction of new products and services, and we may experience such issues in the future.
For example, we have in the past experienced quality issues and incorrect market assessments in connection with the introduction of new products and services, and we may experience such issues in the future.
Risks associated with the proposed expansion of our international operations include: • difficulties in penetrating new markets due to established and entrenched competitors; • difficulties in developing products and services that are tailored to the needs of local customers; • lack of local acceptance or knowledge of our products and services; • lack of recognition of our products and services; • unavailability of, or difficulties in establishing, relationships with distributors; • significant investments, including the development and deployment of dedicated gateways, as some countries require physical gateways within their jurisdiction to connect the traffic coming to and from their territory; • instability of international economies and governments; • effects of the ongoing COVID-19 pandemic, including on international economies, supply chains and travel; • changes in laws and policies affecting trade and investment in other jurisdictions; • exposure to varying legal standards, including data privacy, security and intellectual property protection in other jurisdictions; • difficulties in obtaining required regulatory authorizations; • difficulties in enforcing legal rights in other jurisdictions; • local domestic ownership requirements; • requirements that operational activities be performed in-country; • changing and conflicting national and local regulatory requirements; • foreign currency exchange rates and exchange controls; and • ongoing compliance with the U.S.
Risks associated with the potential expansion of our international operations include: • difficulties in penetrating new markets due to established and entrenched competitors; • difficulties in developing products and services that are tailored to the needs of local customers; • lack of local acceptance or knowledge of our products and services; • lack of recognition of our products and services; • unavailability of, or difficulties in establishing, relationships with distributors; • significant investments, including the development and deployment of dedicated gateways, as some countries require physical gateways within their jurisdiction to connect the traffic coming to and from their territory; • instability of international economies and governments; • effects of a global pandemic, such as COVID-19, including on international economies, supply chains and travel; • changes in laws and policies affecting trade and investment in other jurisdictions; • exposure to varying legal standards, including data privacy, security and intellectual property protection in other jurisdictions; • difficulties in obtaining required regulatory authorizations; • difficulties in enforcing legal rights in other jurisdictions; • local domestic ownership requirements; • requirements that operational activities be performed in-country; • changing and conflicting national and local regulatory requirements; • foreign currency exchange rates and exchange controls; and • ongoing compliance with the U.S.
Our current policy has a one-year term, which expires on December 8, 2023, and excludes coverage for all third-party damages relating to the 2009 collision of our satellite with a non-operational Russian satellite. The price, terms and availability of insurance have fluctuated significantly since we began offering commercial satellite services.
Our current policy has a one-year term, which expires on December 8, 2024, and excludes coverage for all third-party damages relating to the 2009 collision of our satellite with a non-operational Russian satellite. The price, terms and availability of insurance have fluctuated significantly since we began offering commercial satellite services.
Any of these developments could limit, delay or otherwise interfere with our ability to construct gateways or other infrastructure or network solutions around the world. Security and emergency services regulations in the U.S. and other countries may affect our ability to operate our system and to expand into new markets. Our operations are subject to regulations of the U.S.
Any of these developments could limit, delay or otherwise interfere with our ability to construct gateways or other infrastructure or network solutions around the world. Security and emergency services regulations in the United States and other countries may affect our ability to operate our system and to expand into new markets. Our operations are subject to regulations of the U.S.
In addition, we may lose distributors due to competition, industry consolidation, regulatory developments, business developments affecting our distributors or their customers, or for other reasons. In 2009, one of our largest competitors, Inmarsat, acquired our then largest distributor, Stratos Global Wireless, Inc., and in 2014, Inmarsat acquired Globe Wireless, one of our service providers.
In addition, we may lose distributors due to competition, industry consolidation, regulatory developments, business developments affecting our distributors or their customers, or for other reasons. In 2009, one of our largest competitors, Inmarsat (now Viasat), acquired our then largest distributor, Stratos Global Wireless, Inc., and in 2014, Inmarsat acquired Globe Wireless, one of our service providers.
If the magnitude or frequency of such problems increase and we are no longer able to provide a commercially acceptable level of service, our business and financial results and our reputation would be hurt and our ability to pursue our business plan would be compromised.
If the magnitude or frequency of such problems increases and we are no longer able to provide a commercially acceptable level of service, our business and financial results and our reputation would be hurt, and our ability to pursue our business plan would be compromised.
Similar rules may apply under state tax laws. If an “ownership change” were to occur, Section 382 of the Code would impose an annual limit on the amount of pre-ownership change net operating loss carryforwards and other tax attributes we could use to reduce our taxable income.
Similar rules may apply under state tax laws. If such an ownership change were to occur, Section 382 of the Code would impose an annual limit on the amount of pre-ownership change net operating loss carryforwards and other tax attributes we could use to reduce our taxable income.
Any failure on our part to implement new technology within our system may compromise our ability to compete. Our networks and those of our third-party service providers may be vulnerable to security risks.
Any failure on our part to implement new technology within our system may compromise our ability to compete. Our networks and those of our third-party service providers may be vulnerable to cybersecurity risks.
Recently, there have been reported a number of significant, widespread security attacks and breaches that have compromised network integrity for many companies and governmental agencies, in some cases reportedly originating from outside the United States. In addition, there are reportedly private products available in the market today that may attempt to unlawfully intercept communications made using our network.
Recently, there have been reported several significant, widespread security attacks and breaches that have compromised network integrity for many companies and governmental agencies, in some cases reportedly originating from outside the United States. In addition, there are reportedly private products available in the market today that may attempt to unlawfully intercept communications made using our network.
Factors affecting the trading price of our common stock may include: • failure in the performance of our satellites; • actual or anticipated variations in our operating results, including termination or expiration of one or more of our key contracts, or a change in sales levels under one or more of our key contracts; • failure of Aireon to successfully carry out its business plan or obtain expected financing; • failure to comply with the terms of the credit agreement governing our Term Loan; • sales of a large number of shares of our common stock or the perception that such sales may occur; • the dilutive effect of outstanding stock options and other equity awards; • changes in financial estimates by industry analysts, or our failure to meet or exceed any such estimates, or changes in the recommendations of any industry analysts that elect to follow our common stock or the common stock of our competitors; • impairment of intangible assets; • actual or anticipated changes in economic, political or market conditions, such as recessions or international currency fluctuations; • actual or anticipated changes in the regulatory environment affecting our industry; • changes in the market valuations of our competitors; • low trading volume; and • announcements by our competitors regarding significant new products or services or significant acquisitions, strategic partnerships, divestitures, joint ventures or other strategic initiatives.
Factors affecting the trading price of our common stock may include: • failure in the performance of our satellites; • actual or anticipated variations in our operating results, including termination or expiration of one or more of our key contracts, or a change in sales levels under one or more of our key contracts; • failure of Aireon to successfully carry out its business plan or obtain expected financing; • failure to comply with the terms of the credit agreement governing our Term Loan; • sales of a large number of shares of our common stock or the perception that such sales may occur; • the dilutive effect of outstanding stock options and other equity awards; • changes in financial estimates by industry analysts, or our failure to meet or exceed any such estimates, or changes in the recommendations of any industry analysts that elect to follow our common stock or the common stock of our competitors; • impairment of intangible assets; • actual or anticipated changes in economic, political or market conditions, such as recessions or international currency fluctuations; • actual or anticipated changes in the regulatory environment affecting our industry; • changes in the market valuations of our competitors; • low trading volume; and • announcements by our competitors regarding significant new products or services or significant acquisitions, strategic partnerships, divestitures, joint ventures or other strategic initiatives. 33 The trading price of our common stock might also decline in reaction to events that affect other companies in our industry even if these events do not directly affect us.
The U.S. government, through a dedicated gateway owned and operated by the DoD, has been and continues to be, directly and indirectly, our largest customer, representing 21% of our revenue for each of the years ended December 31, 2022 and 2021.
The U.S. government, through a dedicated gateway owned and operated by the DoD, has been and continues to be, directly and indirectly, our largest customer, representing 25% and 21% of our revenue for the years ended December 31, 2023 and 2022, respectively.
We currently rely on two manufacturers of our devices, including our mobile handsets, L-band transceivers and SBD devices. We also utilize sole source suppliers for some of the component parts of our devices.
We currently rely on a limited number of manufacturers of our devices, including our mobile handsets, L-band transceivers and SBD devices. We also utilize sole source suppliers for some of the component parts of our devices.
We provide satellite communications services in Russia through two local subsidiaries employing 35 people and authorized Russian service providers, using a dedicated gateway in Russia. In 2022, revenue from our operations in Russia represented approximately 2.1% of our total revenue, all of which was service revenue.
We provide satellite communications services in Russia through two local subsidiaries employing 36 people and authorized Russian service providers, using a dedicated gateway in Russia. In 2023, revenue from our operations in Russia represented approximately 1.8% of our total revenue, all of which was service revenue.
Further, depending on market conditions, investor perceptions of our company and other factors, we might not be able to obtain financing on acceptable terms, in acceptable amounts, or at appropriate times to implement any such transaction.
Further, depending on market conditions, investor perceptions of our company and other factors, we might not be able to obtain financing on acceptable terms, in acceptable amounts, or at appropriate times to implement any such transaction. Any such financing, if obtained, may dilute existing stockholders.
Further, a large number of such failures could shorten the 24 expected life of our constellation, which would increase our depreciation expense, or require us to launch our ground spare satellites or even replace our constellation sooner than currently planned, either of which would increase our projected capital expenditures.
Further, a large number of such failures could shorten the expected life of our constellation, which would increase our depreciation expense, or require us to replace our constellation sooner than currently planned, either of which would increase our projected capital expenditures.
In addition, any major business combination or similar strategic transaction may require significant additional financing, and our ability to obtain such financing may be restricted by the credit agreement governing our currently outstanding Term Loan.
In addition, any major business combination or similar strategic transaction may require significant additional financing, and our ability to obtain such financing may be restricted by the credit agreement governing our currently outstanding term loan with various lenders administered by Deutsche Bank AG, or the Term Loan .
Any such financing, if obtained, may dilute existing stockholders. 30 Spectrum values historically have been volatile, which could cause the value of our business to fluctuate. Our business plan is evolving, and it may in the future include forming strategic partnerships to maximize value for our spectrum, network assets and combined service offerings in the United States and internationally.
Spectrum values historically have been volatile, which could cause the value of our business to fluctuate. Our business plan is evolving, and it may in the future include forming strategic partnerships to maximize value for our spectrum, network assets and combined service offerings in the United States and internationally.
In addition, if and when funds are available following a planned refinancing of its credit facility, Aireon’s parent company, Aireon Holdings, is required to redeem a portion of our ownership interest for a payment of $120.0 million, and we would then retain a common ownership interest of approximately 27% in Aireon Holdings.
In addition, we currently hold a substantial ownership interest in Aireon’s parent company, Aireon Holdings, and, if and when funds are available following a planned refinancing of its credit facility, Aireon’s parent company, Aireon Holdings is required to redeem a portion of our ownership interest for a payment of $120.0 million.
We estimate that commercial data traffic originating outside the United States accounted for 78% and 74% of total commercial data traffic for the years ended December 31, 2022 and 2021, 29 respectively, while commercial voice traffic originating outside the United States accounted for 91% and 90% of total commercial voice traffic for the years ended December 31, 2022 and 2021.
We estimate that commercial data traffic originating outside the United States accounted for 96% and 95% of total commercial data traffic for the years ended December 31, 2023 and 2022, respectively, while commercial voice traffic originating outside the United States accounted for 91% and 90% of total commercial voice traffic for the years ended December 31, 2023 and 2022.
Our two largest distributors, Marlink Group and Garmin, together represented approximately 12% of our revenue for the year ended December 31, 2022, and our ten largest distributors represented, in the aggregate, 34% of our revenue for the year ended December 31, 2022.
Our two largest distributors, Marlink Group and Garmin, together represented approximately 10% of our revenue for the year ended December 31, 2023, and our ten largest distributors represented, in the aggregate, 27% of our revenue for the year ended December 31, 2023.
The interest rates at which we might secure additional financings may be higher than our currently outstanding debt instruments or higher than forecasted at any point in time, which could adversely affect our business, financial condition, results of operations and cash flows. • Market conditions could affect our access to capital markets, restrict our ability to secure financing to make planned capital expenditures and investments and pay other expenses, which could adversely affect our business, financial condition, cash flows and results of operations. 31 Further, despite our substantial levels of indebtedness, we and our subsidiaries have the ability to incur substantially more indebtedness, which could further intensify the risks described above.
The interest rates at which we might secure additional financings may be higher than our currently outstanding debt instruments or higher than forecasted at any point in time, which could adversely affect our business, financial condition, results of operations and cash flows. • Market conditions could affect our access to capital markets, restrict our ability to secure financing to make planned capital expenditures and investments and pay other expenses, which could adversely affect our business, financial condition, cash flows and results of operations.
As a result, a failure of one or more of our satellites, the occurrence of equipment failures and other related problems, or a failure of the planned launch of our spare satellites would constitute an uninsured loss and could harm our financial condition.
As a result, a failure of one or more of our satellites, the occurrence of equipment failures and other related problems would constitute an uninsured loss.
Any appreciation of the U.S. dollar against other currencies will increase the cost of our products and services to our international customers and, as a result, may reduce the competitiveness of our international offerings and make it more difficult for us to grow internationally. Pursuing strategic transactions may cause us to incur additional risks.
The prices for our products and services are typically denominated in U.S. dollars. Any appreciation of the U.S. dollar against other currencies will increase the cost of our products and services to our international customers and, as a result, may reduce the competitiveness of our international offerings and make it more difficult for us to grow internationally.
Complying with these restrictions may make it more difficult for us to successfully execute our business plan and compete against companies who are not subject to such restrictions. 32 Our Board of Directors may reduce, suspend or terminate our planned dividends.
Complying with these restrictions may make it more difficult for us to successfully execute our business plan and compete against companies who are not subject to such restrictions. Our Board of Directors may reduce, suspend or terminate our planned dividends. In December 2022, our Board of Directors initiated a quarterly dividend and declared a cash dividend on our common stock.
There can be no assurance we or our distributors will be able to detect and fix all defects in the services, hardware and software that we or our distributors sell.
Defects may also occur in components and devices that we purchase from third parties or that our distributors offer. There can be no assurance we or our distributors will be able to detect and fix all defects in the services, hardware and software that we or our distributors sell.
Further, our manufacturers and suppliers may cease production of our components or products or become capacity-constrained, or could face financial difficulties as a result of a surge in demand, a natural disaster or other event, including the impacts of the COVID-19 pandemic.
Further, our manufacturers and suppliers may cease production of our components or products or become capacity-constrained, or could face financial difficulties as a result of a surge in demand, a natural disaster or other event. For example, several of our suppliers experienced production delays as a result of the recent global silicon chip shortage.
Following each acquisition, Inmarsat essentially stopped promoting sales of our products and services, and they may further reduce their efforts in the future. Any future consolidation of our distributors would further increase our reliance on a few key distributors of our services and the amount of volume discounts that we may have to give those distributors.
Any future consolidation of our distributors would further increase our reliance on a few key distributors of our services and the amount of volume discounts that we may have to give those distributors.
Other factors that could affect the useful lives of our satellites include the quality of construction, gradual degradation of solar panels and the durability of components.
Other factors that could affect the useful lives of our satellites include the quality of construction, gradual degradation of solar panels and the durability of components. We do not have and have no plans to obtain in-orbit insurance.
As of December 31, 2022, we had $1,504.6 million of consolidated gross indebtedness.
As of December 31, 2023, we had $1,500.0 million of consolidated gross indebtedness.
These delays have increased our costs and reduced our sales of those products and use of the related services, and we expect these effects to continue into 2023. Any future delay in production or delivery of our products or components by our suppliers could similarly adversely affect our business.
As a result, we experienced delays in fulfilling some product orders and are evaluating replacement components and product changes. These delays increased our costs and reduced our sales of those products and use of the related services. Any future delay in production or delivery of our products or components by our suppliers could similarly adversely affect our business.
For example, the California Consumer Privacy Act, or the CCPA, went into effect on January 1, 2020, and gives California residents expanded rights to access and delete their personal information, opt out of certain personal information sharing and receive detailed information about how their personal information is used by requiring companies to provide new disclosures to California consumers (as that term is broadly defined) and provide such consumers new ways to opt out of certain sales of personal information.
For example, numerous U.S. states have adopted consumer privacy laws that gives residents expanded rights to access and delete their personal information, opt out of certain personal information sharing and receive detailed information about how their personal information is used by requiring companies to provide new disclosures to consumers and provide such consumers new ways to opt out of certain sales of personal information.
If our manufacturers or suppliers terminate their relationships with us, fail to provide equipment or services to us on a timely basis, or fail to meet our performance expectations, we may be unable to provide products or services to our customers in a competitive manner, which could in turn negatively affect our financial results and our reputation.
If our manufacturers or suppliers terminate their relationships with us, fail to provide equipment or services to us on a timely basis, or fail to meet our performance expectations, we may be unable to provide products or services to our customers in a competitive manner, which could in turn negatively affect our financial results and our reputation. 29 Our Russian operations have been and may continue to be affected by Russia’s invasion of Ukraine and related sanctions imposed in response, and we may in the future choose or be required to further limit or shut down those operations entirely.
We may pursue acquisitions, joint ventures or other strategic transactions from time to time. We may face costs and risks arising from any such transactions, including integrating a new business into our business or managing a joint venture. These risks may include adverse legal, organizational and financial consequences, loss of key customers and distributors, and diversion of management’s time.
Pursuing strategic transactions may cause us to incur additional risks. We may pursue acquisitions, joint ventures or other strategic transactions from time to time. We may face costs and risks arising from any such transactions, including integrating a new business into our business or managing a joint venture.
We 26 provide the majority of our services to the U.S. government pursuant to our GMSS, EMSS, and SDA contracts. We entered into these contracts in April 2019, September 2019, and June 2022, respectively.
We provide the majority of our services to the U.S. government pursuant to our GMSS, EMSS, and SDA contracts. We entered into these contracts in April 2019, September 2019, and June 2022, respectively. The GMSS contract had an initial term through September 2023 and has been extended through March 31, 2024, as we negotiate renewal of the agreement.
U.S. government budget decisions, including with respect to defense spending, are based on changing government priorities and objectives, which are driven by numerous factors, including geopolitical events and macroeconomic conditions, and are beyond our control. If the U.S. government terminates any or all of these agreements, we would lose a significant portion of our revenue.
Our relationship with the U.S. government is also subject to the 26 overall U.S. government budget and appropriation decisions and processes. U.S. government budget decisions, including with respect to defense spending, are based on changing government priorities and objectives, which are driven by numerous factors, including geopolitical events and macroeconomic conditions, and are beyond our control.
Government organizations, foreign military and intelligence agencies, natural disaster aid associations, and event-driven response agencies use our commercial voice and data satellite communications services. Accordingly, we may experience reductions in usage due to changing global circumstances. The prices for our products and services are typically denominated in U.S. dollars.
If any of these risks were to materialize, it could affect our ability to successfully compete and expand internationally. 30 Government organizations, foreign military and intelligence agencies, natural disaster aid associations, and event-driven response agencies use our commercial voice and data satellite communications services. Accordingly, we may experience reductions in usage due to changing global circumstances.
The GMSS contract continues through September 2023, the EMSS contract continues through September 2026, and the SDA contract provides for a two and a half year base term and up to five one-year options exercisable at the election of the U.S. government .
The EMSS contract continues through September 2026, and the SDA contract has a base term until January 2025 and up to five one-year options exercisable at the election of the U.S. government . The U.S. government may terminate these agreements, in whole or in part, at any time for its convenience.
Foreign Corrupt Practices Act, U.S. export controls, anti-money laundering and trade sanction laws, and similar international anti-corruption and trade laws in other countries. If any of these risks were to materialize, it could affect our ability to successfully compete and expand internationally.
Foreign Corrupt Practices Act, U.S. export controls, anti-money laundering and trade sanction laws, and similar international anti-corruption and trade laws in other countries.
If our stock, the market for other stocks in our industry, or the stock market in general experiences a loss of investor confidence, the trading price of our common stock could decline for reasons unrelated to our business, financial condition or results of operations. 33 Risks related to legal and regulatory matters Our business is subject to extensive government regulation, which mandates how we may operate our business and may increase our cost of providing services and slow our expansion into new markets.
If our stock, the market for other stocks in our industry, or the stock market in general experiences a loss of investor confidence, the trading price of our common stock could decline for reasons unrelated to our business, financial condition or results of operations.
Complying with these varying privacy and data security legal requirements could cause us to incur additional costs and change our business practices.
These laws may be interpreted, applied and enforced in conflicting ways from state to state and country to country and in a manner that is not consistent with our current business practices. Complying with these varying privacy and data security legal requirements could cause us to incur additional costs and change our business practices.
Aireon is our primary hosted payload customer, and we expect annual revenue to us from Aireon hosting, data services and power fees to be approximately $39.5 million.
Aireon, our primary hosted payload customer, may not successfully grow its business, which could reduce or eliminate the value of our agreements with, and ownership interest in, Aireon. Aireon is our primary hosted payload customer, and we expect annual revenue to us from Aireon hosting, data services and power fees to be approximately $32.6 million.
Further, operational control of our contracts has been moved from the Defense Information Systems Agency to the U.S. Space Force. In connection with this operational shift, changes in internal pricing and cost recovery have resulted in reduced subscribers under the EMSS contract.
In connection with this operational shift, changes in internal pricing and cost recovery have resulted in reduced subscribers under the EMSS contract. Lower subscriber use may negatively affect our ability to negotiate a renewal of the EMSS contract on favorable terms in 2026.
In Europe, the European Commission enacted the General Data Protection Regulation, or GDPR, which became effective in May 2018. The GDPR superseded prior EU data protection legislation, imposes more stringent EU data protection requirements, and provides for greater penalties for noncompliance.
In Europe, the European Commission enacted the General Data Protection Regulation, or GDPR, which since 2018 has imposed more stringent EU data protection requirements and provided for greater penalties for noncompliance. In addition, the interpretation of privacy and data protection laws and regulations regarding the collection, storage, transmission, use and disclosure of such information in some jurisdictions remains unclear.
We filed a petition for reconsideration opposing this waiver out of concern for the interference that we believe Ligado’s proposed operations would cause to our operations in adjacent L-band spectrum. Our petition remains pending.
We, along with a variety of other private parties and the National Telecommunications and Information Administration on behalf of federal government users, filed petitions for reconsideration opposing this waiver out of concern for the interference that we believe Ligado’s proposed operations would cause. These petitions remain pending.
If we do not generate sufficient cash flows, we may be unable to repay our Term Loan when it matures. We will need to repay our Term Loan in full at maturity in November 2026.
We will need to repay our Term Loan in full at maturity in September 2030.
Removed
We do not maintain in-orbit satellite insurance for our satellites, and do not plan to insure the launch of our remaining spare satellites, as a result of which we may be subject to increased costs. We obtained insurance for our satellites covering launch and in-orbit failures of our satellites for a period of twelve months from the date of launch.
Added
If the U.S. government terminates any or all of these agreements, we would lose a significant portion of our revenue. Further, operational control of our contracts has been moved from the Defense Information Systems Agency to the U.S. Space Force.
Removed
All of our satellites were launched more than twelve months ago, and we have no plans to purchase further in-orbit insurance. We also do not plan to purchase launch insurance for the planned launch of our remaining spare satellites.
Added
If we fail to comply with the terms of our U.S. government contracts, including applicable federal acquisition regulations, we may be subject to contract price adjustments, civil or criminal penalties, or debarment from future U.S. government contracts.
Removed
The U.S. government may terminate these agreements, in whole or in part, at any time for its convenience. Our relationship with the U.S. government is also subject to the overall U.S. government budget and appropriation decisions and processes.
Added
As a U.S. government contractor or subcontractor, we are subject to federal acquisition regulations, which govern, among other things, the allowability of costs incurred by us in the performance of U.S. government contracts. The pricing of some contracts, including the SDA contract, is based on estimated direct and indirect costs.
Removed
Lower subscriber use may negatively affect our ability to negotiate a renewal of the EMSS contract on favorable terms in 2026. Aireon, our primary hosted payload customer, may not successfully grow its business, which could reduce or eliminate the value of our agreements with, and ownership interest in, Aireon.
Added
The U.S. government is entitled to examine our cost records with respect to such contracts and to seek a downward adjustment to the price of the contract if it determines that we failed to furnish complete, accurate and current cost or pricing data in connection with the negotiation of the price of the contract.
Removed
For example, several of our suppliers have experienced production delays as a result of the global silicon chip shortage. As a result, we have experienced and expect to continue to experience delays in fulfilling some product orders and are evaluating replacement components and product changes.
Added
We may also be subject to government audits and to review and approval of our policies, procedures and internal controls for compliance with procurement regulations and other applicable laws.
Removed
Our Russian operations have been and may continue to be affected by Russia’s invasion of Ukraine and related sanctions imposed in response, and we may in the future choose or be required to further limit or shut down those operations entirely.
Added
If we do not comply with the terms of a contract or with regulations or statutes, we could be subject to downward contract price adjustments or refund obligations or could be assessed civil and criminal penalties or be debarred or suspended from obtaining future contracts for a specified period.
Removed
In December 2022, our Board of Directors initiated a quarterly dividend and declared a cash dividend on our common stock.
Added
Any such suspension or debarment or other sanction could have an adverse effect on our business. In addition, if we are unable to comply with security clearance requirements, we may be unable to perform these contracts or compete for other projects of this nature, which could adversely affect our revenue.
Removed
The trading price of our common stock might also decline in reaction to events that affect other companies in our industry even if these events do not directly affect us.
Added
For example, in 2023, we announced an arrangement with Qualcomm Technologies, Inc., or Qualcomm, to include our services on a processor for use in smartphones and act as our VAM and service provider with smartphone manufacturers. Although Qualcomm successfully developed and demonstrated the service, they were unable to market the processor successfully to smartphone manufacturers.
Removed
For example, we recently entered into an agreement with Qualcomm to enable satellite messaging and emergency services in smartphones using our services, which may dramatically increase the number of devices that use our services.
Added
As a result, Qualcomm elected to terminate our arrangement with them. This arrangement included large penalties had we marketed a similar technology with another partner; as a result, we expect a substantial delay in our ability to develop a similar service with a different third party.
Removed
In addition, the interpretation of privacy and data protection laws and regulations regarding the collection, storage, transmission, use and disclosure of such information in some jurisdictions remains unclear. These laws may be interpreted, applied and enforced in conflicting ways from country to country and in a manner that is not consistent with our current business practices.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeProperties We own or lease the facilities described in the following table: Location Country Approximate Square Feet Facilities Owned/Leased McLean, Virginia USA 30,600 Corporate Headquarters Leased Chandler, Arizona USA 197,000 Technical Support Center, Distribution Center, Warehouse and Satellite Teleport Network Facility Leased Leesburg, Virginia USA 40,000 Satellite Network Operations Center Owned Tempe, Arizona USA 31,000 System Gateway and Satellite Teleport Network Facility Owned Building on Leased Land Fairbanks, Alaska USA 4,000 Satellite Teleport Network Facility Owned Svalbard Norway 1,800 Satellite Teleport Network Facility Owned Building on Leased Land Izhevsk, Udmurtia Russia 8,785 System Gateway and Satellite Teleport Network Facility Leased Moscow Russia 2,158 Sales and Administration Offices Leased Punta Arenas Chile 3,200 Satellite Teleport Network Facility Owned Building on Leased Land Bishop’s Stortford United Kingdom 2,400 Sales Offices Leased
Biggest changeProperties The following table describes the facilities we own or lease: Location Country Approximate Square Feet Facilities Owned/Leased McLean, Virginia USA 30,600 Corporate Headquarters Leased Chandler, Arizona USA 197,000 Technical Support Center, Distribution Center, Warehouse and Satellite Teleport Network Facility Leased Leesburg, Virginia USA 40,000 Satellite Network Operations Center Owned Tempe, Arizona USA 31,000 System Gateway and Satellite Teleport Network Facility Owned Building on Leased Land Chandler, Arizona USA 24,000 Operations Office Space Leased Fairbanks, Alaska USA 4,000 Satellite Teleport Network Facility Owned Svalbard Norway 1,800 Satellite Teleport Network Facility Owned Building on Leased Land Izhevsk, Udmurtia Russia 8,785 System Gateway and Satellite Teleport Network Facility Leased Moscow Russia 2,158 Sales and Administration Offices Leased Punta Arenas Chile 3,200 Satellite Teleport Network Facility Owned Building on Leased Land Bishop’s Stortford United Kingdom 2,400 Sales Offices Leased

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings Neither we nor any of our subsidiaries are currently subject to any material legal proceeding, nor, to our knowledge, is any material legal proceeding threatened against us or any of our subsidiaries. Item 4. Mine Safety Disclosures Not applicable. 39 PART II
Biggest changeItem 3. Legal Proceedings Neither we nor any of our subsidiaries are currently subject to any material legal proceeding, nor, to our knowledge, is any material legal proceeding threatened against us or any of our subsidiaries. Item 4. Mine Safety Disclosures Not applicable. 41 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe following stock price performance graph shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, nor shall this information be incorporated by reference into any future filing under the Securities Act or the Exchange Act or any other document, except to the extent that we specifically incorporate it by reference into such filing or document. 40 Issuer Purchases of Equity Securities The following table presents our monthly share repurchases for the quarter ended December 31, 2022: Period (a) Total number of shares purchased (b) Average price paid per share (c) Total number of shares purchased as part of publicly announced plans or programs (d) Maximum dollar value of shares that may yet be purchased under the plans or programs October 1-31 164,725 $46.51 164,725 $179.6 million November 1-30 — $— — $179.6 million December 1-31 — $— — $179.6 million Total 164,725 $46.51 164,725 — On February 10, 2021, we announced that our board of directors had approved the repurchase of up to $300.0 million of our common stock through December 31, 2022.
Biggest changeThe following stock price performance graph shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, nor shall this information be incorporated by reference into any future filing under the Securities Act or the Exchange Act or any other document, except to the extent that we specifically incorporate it by reference into such filing or document. 43 Issuer Purchases of Equity Securities The following table presents our monthly share repurchases for the quarter ended December 31, 2023: Period (a) Total number of shares purchased (b) Average price paid per share (c) Total number of shares purchased as part of publicly announced plans or programs (d) Maximum dollar value of shares that may yet be purchased under the plans or programs October 1-31 255,843 $41.23 255,843 $375.1 million November 1-30 844,963 (1) $37.37 816,963 $344.6 million December 1-31 261,264 $40.37 261,264 $334.0 million Total 1,362,070 $38.67 1,334,070 — (1) Includes 28,000 shares purchased on November 20, 2023 at an average price of $37.01 per share by Matthew J.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is currently listed on the Nasdaq Global Select Market under the symbol “IRDM.” As of February 10, 2023, there were 136 holders of record of our common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is currently listed on the Nasdaq Global Select Market under the symbol “IRDM.” As of February 9, 2024, there were 135 holders of record of our common stock.
Stock Price Performance Graph The graph below compares the cumulative total return of our common stock from December 31, 2017 through December 31, 2022, with the comparable cumulative return of three indices, the S&P 500 Index, the Dow Jones Industrial Average Index and the Nasdaq Telecommunications Index.
The Board of Directors plans to increase the quarterly dividend to $0.14 per share starting with the second quarter 2024 dividend. 42 Stock Price Performance Graph The graph below compares the cumulative total return of our common stock from December 31, 2018 through December 31, 2023, with the comparable cumulative return of three indices, the S&P 500 Index, the Dow Jones Industrial Average Index and the Nasdaq Telecommunications Index.
In April 2022, the original February 2021 authorization was exhausted. In March 2022, our board of directors approved the repurchase of up to an additional $300.0 million of our common stock through December 31, 2023. All shares listed above were purchased under these authorizations in open market transactions. Item 6. [Reserved].
Desch, our chief executive officer, who may be deemed an affiliated purchaser. To date, our board of directors has authorized the repurchase of up to $1,000.0 million of our common stock through December 31, 2025. Except for the shares purchased by Mr. Desch, all shares listed above were purchased under these authorizations in open market transactions. Item 6. [Reserved].
Dividend Policy On December 8, 2022, our Board of Directors initiated a quarterly dividend and declared a cash dividend on our common stock of $0.13 per share. The dividend is payable on March 30, 2023, to stockholders of record as of March 15, 2023.
On February 2, 2024, the Board of Directors approved a dividend of $0.13 per share, payable on March 29, 2024 to holders of record as of March 15, 2024.
Future dividends will depend on our earnings, capital requirements, financial conditions and other factors considered relevant by the Board.
The liability related to dividends on common shares underlying unvested RSUs was $1.3 million as of December 31, 2023. We currently expect that comparable cash dividends will continue to be paid in the future, although future dividends will depend on our earnings, capital requirements, financial conditions and other factors considered relevant by the Board.
Added
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.
Added
In each of December 2022, May 2023, September 2023, and December 2023, the Company’s Board of Directors approved a dividend of $0.13 per share of common stock.
Added
The dividends, which were paid on March 30, 2023, June 30, 2023, September 29, 2023, and December 29, 2023, to stockholders of record as of March 15, 2023, June 15, 2023, September 15, 2023, and December 15, 2023, respectively, resulted in total payments of $64.8 million for the twelve months ended December 31, 2023.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeDuring each year end, we evaluate the useful lives of all assets under construction. 45 Comparison of Our Results of Operations for the Years Ended December 31, 2022 and 2021 Year Ended December 31, % of Total Revenue % of Total Revenue Change ($ In thousands) 2022 2021 Dollars Percent Revenue: Service revenue Commercial $ 428,721 59 % $ 388,104 63 % $ 40,617 10 % Government 106,000 15 % 103,887 17 % 2,113 2 % Total service revenue 534,721 74 % 491,991 80 % 42,730 9 % Subscriber equipment 134,714 19 % 92,071 15 % 42,643 46 % Engineering and support services 51,599 7 % 30,438 5 % 21,161 70 % Total revenue 721,034 100 % 614,500 100 % 106,534 17 % Operating expenses: Cost of services (exclusive of depreciation and amortization) 115,137 16 % 97,020 16 % 18,117 19 % Cost of subscriber equipment 86,012 12 % 53,376 9 % 32,636 61 % Research and development 16,218 2 % 11,885 2 % 4,333 36 % Selling, general and administrative 123,504 17 % 100,474 16 % 23,030 23 % Depreciation and amortization 303,484 43 % 305,431 50 % (1,947) (1) % Total operating expenses 644,355 90 % 568,186 93 % 76,169 13 % Operating income 76,679 10 % 46,314 7 % 30,365 66 % Other expense: Interest expense, net (65,089) (9) % (73,906) (12) % 8,817 (12) % Loss on extinguishment of debt (1,187) 0 % (879) 0 % (308) 35 % Loss on equity method investments (1,496) 0 % — 0 % (1,496) 100 % Other expense, net 107 0 % (417) 0 % 524 (126) % Total other expense (67,665) (9) % (75,202) (12) % 7,537 (10) % Income (loss) before income taxes 9,014 1 % (28,888) (5) % 37,902 (131) % Income tax benefit (expense) (292) 0 % 19,569 3 % (19,861) (101) % Net income (loss) $ 8,722 1 % $ (9,319) (2) % $ 18,041 (194) % Commercial Service Revenue Year Ended December 31, 2022 2021 Change Revenue Billable Subscribers (1) ARPU (2) Revenue Billable Subscribers (1) ARPU (2) Revenue Billable Subscribers ARPU (Revenue in millions and subscribers in thousands) Commercial services: Voice and data $ 193.1 397 $ 42 $ 175.6 370 $ 41 $ 17.5 27 $ 1 IoT data 125.0 1,448 $ 7.89 110.9 1,193 $ 8.58 14.1 255 $ (0.69) Broadband (3) 51.1 15.0 $ 302 43.0 13.2 $ 288 8.1 1.8 $ 14 Hosted payload and other data 59.5 N/A 58.6 N/A 0.9 N/A Total commercial services $ 428.7 1,860 $ 388.1 1,576 $ 40.6 284 (1) Billable subscriber numbers are shown as of the end of the respective period.
Biggest changeSee Note 2 to the consolidated financial statements included in this report for further detail on the impact of this change. 48 Comparison of Our Results of Operations for the Years Ended December 31, 2023 and 2022 Year Ended December 31, % of Total Revenue % of Total Revenue Change ($ In thousands) 2023 2022 Dollars Percent Revenue: Service revenue Commercial $ 478,454 61 % $ 428,721 59 % $ 49,733 12 % Government 106,000 13 % 106,000 15 % — 0 % Total service revenue 584,454 74 % 534,721 74 % 49,733 9 % Subscriber equipment 105,136 13 % 134,714 19 % (29,578) (22) % Engineering and support services 101,133 13 % 51,599 7 % 49,534 96 % Total revenue 790,723 100 % 721,034 100 % 69,689 10 % Operating expenses: Cost of services (exclusive of depreciation and amortization) 158,710 20 % 115,137 16 % 43,573 38 % Cost of subscriber equipment 66,410 8 % 86,012 12 % (19,602) (23) % Research and development 20,269 3 % 16,218 2 % 4,051 25 % Selling, general and administrative 143,706 18 % 123,504 17 % 20,202 16 % Depreciation and amortization 320,000 41 % 303,484 43 % 16,516 5 % Total operating expenses 709,095 90 % 644,355 90 % 64,740 10 % Operating income 81,628 10 % 76,679 10 % 4,949 6 % Other expense: Interest expense, net (90,387) (11) % (65,089) (9) % (25,298) 39 % Loss on extinguishment of debt — 0 % (1,187) 0 % 1,187 (100) % Other income, net 4,012 1 % 107 0 % 3,905 3,650 % Total other expense (86,375) (10) % (66,169) (9) % (20,206) 31 % Income (loss) before income taxes and equity in net earnings of affiliates (4,747) 0 % 10,510 1 % (15,257) (145) % 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 % Net income $ 15,415 2 % $ 8,722 1 % $ 6,693 77 % 49 Commercial Service Revenue Year Ended December 31, 2023 2022 Change Revenue Billable Subscribers (1) ARPU (2) Revenue Billable Subscribers (1) ARPU (2) Revenue Billable Subscribers ARPU (Revenue in millions and subscribers in thousands) Commercial services: Voice and data $ 219.2 408 $ 45 $ 193.1 397 $ 42 $ 26.1 11 $ 3 IoT data 141.0 1,709 $ 7.45 125.0 1,448 $ 7.89 16.0 261 $ (0.44) Broadband (3) 57.9 16.7 $ 305 51.1 15.0 $ 302 6.8 1.7 $ 3 Hosted payload and other data 60.3 N/A 59.5 N/A 0.8 N/A Total commercial services $ 478.4 2,134 $ 428.7 1,860 $ 49.7 274 (1) Billable subscriber numbers are shown as of the end of the respective period.
We provide voice and data communications services to businesses, the U.S. and foreign governments, non-governmental organizations and consumers via our satellite network, which has an architecture of 66 operational satellites with in-orbit and ground spares and related ground infrastructure. We utilize an interlinked mesh architecture to route traffic across the satellite constellation using radio frequency crosslinks between satellites.
We provide voice and data communications services to businesses, the U.S. and foreign governments, non-governmental organizations and consumers via our satellite network, which has an architecture of 66 operational satellites with in-orbit spares and related ground infrastructure. We utilize an interlinked mesh architecture to route traffic across the satellite constellation using radio frequency crosslinks between satellites.
We also recognize revenue from our hosted payloads, principally 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.
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.
We provide airtime and airtime support to U.S. government and other authorized customers pursuant to our Enhanced Mobile Satellite Services contract, or the 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.
We provide airtime and airtime support to 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.
Nonetheless, we face a number of challenges and uncertainties in operating our business, including: • our ability to maintain the health, capacity, control and level of service of our satellites; • our ability to develop and launch new and innovative products and services; • changes in general economic, business and industry conditions, including the effects of currency exchange rates; • our reliance on a single primary commercial gateway and a primary satellite network operations center; • competition from other mobile satellite service providers and, to a lesser extent, from the expansion of terrestrial-based cellular phone systems and related pricing pressures; • market acceptance of our products; • regulatory requirements in existing and new geographic markets; • challenges associated with global operations, including as a result of conflicts in or affecting markets in which we operate; • rapid and significant technological changes in the telecommunications industry; • our ability to generate sufficient internal cash flows to repay our debt; • reliance on our wholesale distribution network to market and sell our products, services and applications effectively; • reliance on a global supply chain, including single-source suppliers for the manufacture of most of our subscriber equipment and for some of the components required in the manufacture of our end-user subscriber equipment and our ability to purchase component parts that are periodically subject to shortages resulting from surges in demand, natural disasters or other events, including the COVID-19 pandemic; and • reliance on a few significant customers, particularly agencies of the U.S. government, for a substantial portion of our revenue, as a result of which the loss or decline in business with any of these customers may negatively impact our revenue and collectability of related accounts receivable.
Nonetheless, we face a number of challenges and uncertainties in operating our business, including: • our ability to maintain the health, capacity, control and level of service of our satellites; • our ability to develop and launch new and innovative products and services; • changes in general economic, business and industry conditions, including the effects of currency exchange rates; • our reliance on a single primary commercial gateway and a primary satellite network operations center; • competition from other mobile satellite service providers and, to a lesser extent, from the expansion of terrestrial-based cellular phone systems and related pricing pressures; • market acceptance of our products; • regulatory requirements in existing and new geographic markets; • challenges associated with global operations, including as a result of conflicts in or affecting markets in which we operate; • rapid and significant technological changes in the telecommunications industry; • our ability to generate sufficient internal cash flows to repay our debt; • reliance on our wholesale distribution network to market and sell our products, services and applications effectively; • reliance on a global supply chain, including single-source suppliers for the manufacture of most of our subscriber equipment and for some of the components required in the manufacture of our end-user subscriber equipment and our ability to purchase component parts that are periodically subject to shortages resulting from surges in demand, natural disasters or other events, including a global pandemic, such as COVID-19; and • reliance on a few significant customers, particularly agencies of the U.S. government, for a substantial portion of our revenue, as a result of which the loss or decline in business with any of these customers may negatively impact our revenue and collectability of related accounts receivable.
(2) Average monthly revenue per unit, or ARPU, is calculated by dividing revenue in the respective period by the average of the number of billable subscribers at the beginning of the period and the number of billable subscribers at the end of the 46 period and then dividing the result by the number of months in the period.
(2) Average monthly revenue per unit, or ARPU, is calculated by dividing revenue in the respective period by the average of the number of billable subscribers at the beginning of the period and the number of billable subscribers at the end of the period and then dividing the result by the number of months in the period.
Voice and data and IoT data service revenues have historically generated higher margins than subscriber equipment revenue, and we expect this trend to continue.
Voice and data, IoT data and broadband service revenues have historically generated higher margins than subscriber equipment revenue, and we expect this trend to continue.
We designated the Cap as a cash flow hedge of the variability of the LIBOR-based interest payments (now 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.
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.
Our accounting policies are more fully described in Note 2 to the consolidated financial statements included in this report. 44 Income Taxes We account for income taxes using the asset and liability approach. This approach requires that we recognize deferred tax assets and liabilities based on differences between the financial statement bases and tax bases of our assets and liabilities.
Our accounting policies are more fully described in Note 2 to the consolidated financial statements included in this report. 47 Income Taxes We account for income taxes using the asset and liability approach. This approach requires that we recognize deferred tax assets and liabilities based on differences between the financial statement bases and tax bases of our assets and liabilities.
We were in compliance with all covenants under the Credit Agreement as of December 31, 2022. 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.
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.
As of December 31, 2022 and 2021, accrued interest on the Term Loan was $0.3 million and $0.1 million, respectively. 43 Material Trends and Uncertainties Our industry and customer base has historically grown as a result of: • demand for remote and reliable mobile communications services; • a growing number of new products and services and related applications; • a broad wholesale distribution network with access to diverse and geographically dispersed niche markets; • increased demand for communications services by disaster and relief agencies and emergency first responders; • improved data transmission speeds for mobile satellite service offerings; • regulatory mandates requiring the use of mobile satellite services; • a general reduction in prices of mobile satellite services and subscriber equipment; and • geographic market expansion through the ability to offer our services in additional countries.
As of December 31, 2023 and 2022, accrued interest on the Term Loan was $1.0 million and $0.3 million, respectively. 46 Material Trends and Uncertainties Our industry and customer base have historically grown as a result of: • demand for remote and reliable mobile communications services; • a growing number of new products and services and related applications; • a broad wholesale distribution network with access to diverse and geographically dispersed niche markets; • increased demand for communications services by disaster and relief agencies and emergency first responders; • improved data transmission speeds for mobile satellite service offerings; • regulatory mandates requiring the use of mobile satellite services; • a general reduction in prices of mobile satellite services and subscriber equipment; and • geographic market expansion through the ability to offer our services in additional countries.
Management’s Discussion and Analysis of Financial Condition and Results of Operations A discussion regarding our financial condition and results of operations for the year ended December 31, 2021 compared to the year ended December 31, 2020 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, 2021, as filed with the SEC on February 17, 2022.
Management’s Discussion and Analysis of Financial Condition and Results of Operations A discussion regarding our financial condition and results of operations for the year ended December 31, 2022 compared to the year ended December 31, 2021 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, 2022, as filed with the SEC on February 16, 2023.
We sell our products and services to commercial end users through a wholesale distribution network, encompassing approximately 85 service providers, 285 value-added resellers, or VARs, and 80 value-added manufacturers, or VAMs, who either sell directly to the end user or indirectly through other service providers, VARs or dealers.
We sell our products and services to commercial end users through a wholesale distribution network, encompassing approximately 100 service providers, 300 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.
We have a diverse customer base, including end users in land-mobile, Internet of Things, or IoT, maritime, aviation and government. We recognize revenue primarily from both the provision of services and the sale of equipment. Service revenue represented 74% and 80% of total revenue for the years ended December 31, 2022 and 2021, respectively.
We have a diverse customer base, including end users in land-mobile, Internet of Things, or IoT, maritime, aviation and government. We recognize revenue primarily from the provision of services and the sale of equipment. Service revenue represented 74% of total revenue for each of the years ended December 31, 2023 and 2022.
At December 31, 2022, there was approximately $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, 2022.
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.
See Note 7 to the consolidated financial statements included in this annual report for further discussion of our Term Loan. In the fourth quarter of 2022, we elected to prepay $100.0 million of principal on the Term Loan.
See Note 7 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.
These costs were expensed and are included within interest expense on the consolidated statements of operations and comprehensive income (loss) for the year ended December 31, 2021.
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.
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 is approximately $40.0 million in the aggregate. We currently expect the launch to occur in mid-2023.
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.
Research and Development Research and development expenses increased by $4.3 million, or 36%, for the year ended December 31, 2022 compared to the prior year period based on increased spending on device-related features for our network.
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.
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 based on achievement and maintenance of specified leverage ratios, for, among other things, incurring indebtedness and liens and making investments, restricted payments for dividends and share repurchases, and payments of subordinated indebtedness.
The Credit Agreement 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.
These distributors often integrate our products and services with other complementary hardware and software and have developed a broad suite of applications for our products and services targeting specific lines of business. 41 At December 31, 2022 we had approximately 1,999,000 billable subscribers worldwide, an increase of 276,000, or 16%, from approximately 1,723,000 billable subscribers at December 31, 2021.
These distributors often integrate our products and services with other complementary hardware and software and have developed a broad suite of applications for our products and services targeting specific lines of business. 44 At December 31, 2023, we had approximately 2,279,000 billable subscribers worldwide, an increase of 280,000, or 14%, from approximately 1,999,000 billable subscribers at December 31, 2022.
As of December 31, 2022, we reported an aggregate balance of $1,504.6 million in borrowings under the Term Loan, before $17.4 million of net deferred financing costs, for a net principal balance of $1,487.2 million outstanding in our consolidated balance sheet. We have not drawn on our Revolving Facility. Our Term Loan contains no financial maintenance covenants.
As of December 31, 2023, we reported an aggregate balance of $1,500.0 million in borrowings under the Term Loan, before $17.5 million of net deferred financing costs, for a net principal balance of $1,482.5 million outstanding in our consolidated balance sheet. We have not drawn on our Revolving Facility. Our Term Loan contains no financial maintenance covenants.
The Cap manages our exposure to interest rate movements on a portion of the Term Loan through the maturity of the Term Loan in November 2026. The Cap is designed to mirror the terms of the Term Loan and to offset the cash flows being hedged.
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.
For the year ended December 31, 2022, total commercial revenue increased $40.6 million, or 10%, primarily as a result of increases in voice and data, IoT, and broadband revenue mainly driven by increases in billable subscribers.
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.
Government Service Revenue Year Ended December 31, 2022 2021 Change Revenue Billable Subscribers (1) Revenue Billable Subscribers (1) Revenue Billable Subscribers (Revenue in millions and subscribers in thousands) Government service revenue $ 106.0 139 $ 103.9 147 $ 2.1 (8) (1) Billable subscriber numbers shown are at the end of the respective period.
Government Service Revenue Year Ended December 31, 2023 2022 Change Revenue Billable Subscribers (1) Revenue Billable Subscribers (1) Revenue Billable Subscribers (Revenue in millions and subscribers in thousands) Government service revenue $ 106.0 145 $ 106.0 139 $ — 6 (1) Billable subscriber numbers shown are at the end of the respective period.
Contractual Obligations As of December 31, 2022, we held non-cancelable purchase obligations of approximately $56.9 million for inventory purchases with Benchmark, our primary third-party equipment supplier. Our purchase obligations, all of which are due during 2023, increased $24.9 million from the end of 2021 primarily due to increased demand and recovery from supply-chain constraints experienced during 2021.
Contractual Obligations As of December 31, 2023, we held non-cancelable purchase obligations of approximately $21.5 million for inventory purchases with Benchmark, our primary third-party equipment supplier. Our purchase obligations, all of which are due during 2024, decreased $35.4 million from the end of 2022 primarily due to recovery from supply-chain constraints.
Interest incurred includes amortization of deferred financing fees of $4.8 million, $4.3 million and $3.8 million for the years ended December 31, 2022, 2021 and 2020, respectively. Interest capitalized during the years ended December 31, 2022, 2021 and 2020 was $2.6 million, $2.1 million and $3.2 million, respectively.
Total interest incurred during the years ended December 31, 2023, 2022 and 2021 was $102.3 million, $72.1 million and $72.8 million, respectively. Interest incurred includes amortization of deferred financing fees of $4.0 million, $4.8 million and $4.3 million for the years ended December 31, 2023, 2022 and 2021, respectively.
Engineering and Support Service Revenue Year Ended December 31, 2022 2021 Change (In millions) Commercial $ 7.8 $ 4.6 $ 3.2 Government 43.8 25.8 18.0 Total $ 51.6 $ 30.4 $ 21.2 Engineering and support service revenue increased by $21.2 million, or 70%, for the year ended December 31, 2022 compared to the prior year primarily due to the increased work under certain government projects, primarily the contract awarded by the Space Development Agency, or the SDA.
Engineering and Support Service Revenue Year Ended December 31, 2023 2022 Change (In millions) Commercial $ 11.0 $ 7.8 $ 3.2 Government 90.1 43.8 46.3 Total $ 101.1 $ 51.6 $ 49.5 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.
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.
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 subscriber increase effect on revenue was partially offset by an 8% reduction in IoT ARPU, primarily due to the shifting mix of subscribers using lower ARPU plans, including the increased proportion of personal communication subscribers.
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.
These sources are expected to meet the short-term and long-term liquidity needs for (i) required principal and interest on the Term Loan, which we expect to be $16.5 million and, based on the current interest rate, approximately $80.0 million, respectively, (ii) capital expenditures of $75.0 million including expected costs in connection with the launch of ground spare satellites, (iii) working capital, (iv) share repurchases, and (v) anticipated payments under our cash dividend program.
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 52 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.
Cost of services (exclusive of depreciation and amortization) increased by $18.1 million, or 19%, for the year ended December 31, 2022 compared to the prior year, primarily as a result of increased work under certain government projects.
Cost of services (exclusive of depreciation and amortization) increased by $43.6 million, or 38%, for the year ended December 31, 2023 compared to the prior year, primarily as a result of increased work under certain government projects, including the SDA contract, as noted above.
Cost of subscriber equipment increased $32.6 million, or 61%, for the year ended December 31, 2022 compared to the prior year period primarily due to the significant increase in volume of all device sales, as described above.
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.
Loss on Extinguishment of Debt Loss on extinguishment of debt was $1.2 million for the year ended December 31, 2022, compared to $0.9 million for the prior year. During the fourth quarter of 2022, we elected to prepay a total of $100.0 million, and wrote off the related unamortized debt issuance costs.
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.
The increase in income tax expense was 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 decreased stock compensation tax benefit, and (iii) an increase in state tax expense primarily due to changes in state apportionment.
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.
Our material long-term cash requirement is the repayment of the remaining principal amount under the Term Loan upon its maturity in 2026, which is expected to be $1,455.1 million. We expect to refinance this amount at or prior to maturity.
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. We expect to refinance this amount at or prior to maturity. Dividends On December 8, 2022, our Board of Directors initiated a quarterly dividend.
The adjusted 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%. We began paying a fixed monthly premium based on an annual rate of 0.31% for the Cap in December 2021.
Prior to the amendment, we received payment under the terms of the Cap if one-month LIBOR exceeded 1.5%. 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, 2023 and 2022.
Based on the SDA contract, we expect engineering and support service revenue, as well as associated expenses, to increase in 2023 compared to 2022. 47 Operating Expenses Cost of Services (exclusive of depreciation and amortization) Cost of services (exclusive of depreciation and amortization) includes the cost of network engineering and operations staff, including contractors, software maintenance, product support services, and cost of services for government and commercial engineering and support service revenue.
Operating Expenses Cost of Services (exclusive of depreciation and amortization) Cost of services (exclusive of depreciation and amortization) includes the cost of network engineering and operations staff, including contractors, software maintenance, product support services, and cost of services for government and commercial engineering and support service revenue.
As of December 31, 2022, our total cash and cash equivalents balance was $168.8 million, down from $320.9 million as of December 31, 2021, principally as a result of the $257.0 million in repurchases of our common stock, $50.0 million investments in Aireon, repayments of our Term Loan, including $100.0 million of prepayments in 2022, and $71.3 million in capital expenditures, offset by internally generated cash flows from operations.
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.
Cash Flows from Investing Activities Net cash used in investing activities for the year ended December 31, 2022 increased $84.9 million from the prior year period due primarily to the $50.0 million investment in Aireon and increased capital expenditures, primarily related to the timing of payments for the launch of our remaining ground spares.
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.
The Revolving Facility now bears interest at an annual rate of adjusted SOFR plus 3.75% (but without an adjusted SOFR floor) if and as drawn, with no original issue discount, a commitment fee of 0.5% per year on the undrawn amount, and a maturity date in November 2024.
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.
Our effective tax rate was approximately 3.2% for the year ended December 31, 2022 compared to 67.7% for the prior year.
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. Our effective tax rate was approximately 553.0% for the year ended December 31, 2023 compared to 2.8% for the prior year.
The Term Loan now bears interest at an annual rate of adjusted SOFR (SOFR plus 0.10%) plus 2.50%, with a 0.75% adjusted SOFR floor. We typically select a one-month interest period, with the result that interest is calculated using one-month SOFR. All other terms of the Term Loan remain the same, including maturity in November 2026.
The 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. 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.
Dividends On December 8, 2021, our Board of Directors initiated a quarterly dividend and declared a quarterly cash dividend in the amount of $0.13 per share, to be paid on March 30, 2023.
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.
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), which is phased out based on achievement and maintenance of specified leverage ratios.
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 45 event our net leverage ratio rises above 3.5 to 1.
In December 2022, we modified the Cap to replace the LIBOR base rate with SOFR, consistent with the amendment to the Term Loan. With the replacement of LIBOR to SOFR, we receive a credit risk adjustment from the counterparty of 0.064%.
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%).
Commercial voice and data revenue increased $17.5 million, or 10%, from the prior year primarily due to an increase in volume across all voice and data services. Commercial IoT revenue increased $14.1 million, or 13%, compared to the prior year, driven by a 21% increase in IoT billable subscribers primarily due to continued strength in personal communications devices.
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.
As of December 31, 2022, our leverage ratio was below the specified level, and we were not required to make a mandatory prepayment with respect to 2022 cash flows. 42 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.
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.
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. In July 2021, we entered into an interest rate cap agreement, or the Cap, that began in December 2021, following the expiration of the Swap.
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 8 to our consolidated financial statements included in this report for further discussion of our derivative financial instruments.
We believe our liquidity sources will provide sufficient funds for us to meet our liquidity requirements for at least the next 12 months. 49 Cash Flows - Comparison of the Years Ended December 31, 2022 and 2021 The following table shows our consolidated cash flows: Year Ended December 31, Statement of Cash Flows 2022 2021 Change (in thousands) Net cash provided by operating activities $ 344,729 $ 302,874 $ 41,855 Net cash used in investing activities $ (121,267) $ (36,382) $ (84,885) Net cash used in financing activities $ (374,980) $ (182,469) $ (192,511) Cash Flows from Operating Activities Net cash provided by operating activities for the year ended December 31, 2022 increased $41.9 million from the prior year.
Cash Flows - Comparison of the Years Ended December 31, 2023 and 2022 The following table shows our consolidated cash flows: Year Ended December 31, Statement of Cash Flows 2023 2022 Change (in thousands) Net cash provided by operating activities $ 314,913 $ 344,729 $ (29,816) Net cash used in investing activities $ (83,487) $ (121,267) $ 37,780 Net cash used in financing activities $ (327,052) $ (374,980) $ 47,928 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.
We anticipate depreciation and amortization will increase upon the completion of the launch of our ground spares. Other Expense Interest Expense, net Interest expense, net, for the year ended December 31, 2022 was $65.1 million, compared to $73.9 million for the prior year. The decrease in interest expense, net was primarily a result of lower refinancing fees.
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. Other Expense Interest Expense, net Interest expense, net, for the year ended December 31, 2023 was $90.4 million, compared to $65.1 million for the prior year.
Selling, general and administrative expenses increased by $23.0 million, or 23%, for the year ended December 31, 2022, primarily due to higher management incentive costs incurred in the current year, including equity compensation costs and increased marketing and travel expenses incurred in the current year as compared to the prior year.
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. 51 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.
Net Income (Loss) Net income was $8.7 million for the year ended December 31, 2022, compared to net loss of $9.3 million during the prior year. The improvement primarily resulted from the $30.4 million increase in total operating income and the $8.8 million decrease in interest expense, net, partially offset by the $19.9 million increase in income tax expense.
Net Income Net income was $15.4 million for the year ended December 31, 2023, compared to $8.7 million during the prior year.
Subscriber Equipment Revenue Subscriber equipment revenue increased $42.6 million, or 46%, to $134.7 million for the year ended December 31, 2022 compared to the prior year, primarily due to an increase in the volume of all device sales. In 2023, the Company expects equipment sales in line with 2022’s level.
Revenue for the year ended December 31, 2023 was unchanged from the prior year, in accordance with the contract. 50 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.
Net income, as adjusted for non-cash activities, improved by $56.2 million over the prior year, primarily as a result of improved profitability and an increase in non-cash activities associated with an increase in stock-based compensation expense and deferred taxes. This was offset by a decrease in working capital of approximately $14.3 million.
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.
Removed
Term Loan In November 2019 and February 2020, we borrowed a total of $1,650.0 million in aggregate principal amount under a term loan with various lenders administered by Deutsche Bank AG, or the Term Loan, with an accompanying $100.0 million revolving loan available to us, or the Revolving Facility.
Added
In May 2023, we launched five of our remaining ground spare satellites, bringing our total number of in-orbit spares to 14.
Removed
Both facilities are under a credit agreement with the lenders, or the Credit Agreement. The Term Loan was repriced on multiple occasions and in December 2022 was amended to replace the original LIBOR base rate with SOFR.
Added
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.
Removed
The Revolving Facility was also modified to use adjusted SOFR as the base rate beginning December 30, 2022. All other material terms remain unchanged.
Added
Term Loan 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.
Removed
The Credit Agreement permits repayment, prepayment, and repricing transactions and requires quarterly principal payments of 0.25% (or $16.5 million per year), which began in June 2020.
Added
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.
Removed
The Cap carried a notional amount of $1.0 billion as of December 31, 2022 and 2021. See Note 8 to our consolidated financial statements included in this report for further discussion of our derivative financial instruments. Total Interest on Debt and Loss on Extinguishment Total interest incurred includes amortization of deferred financing fees and capitalized interest.
Added
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.
Removed
In February 2020, we used the proceeds of the Term Loan, together with cash on hand, to prepay and retire all of the indebtedness outstanding under then outstanding senior unsecured promissory notes, including premiums for early prepayment.
Added
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.
Removed
This resulted in a $30.2 million loss on extinguishment of debt during the year ended December 31, 2020, including the write off the remaining unamortized debt issuance costs. Total interest incurred during the years ended December 31, 2022, 2021 and 2020 was $72.1 million, $72.8 million and $99.2 million, respectively.
Added
Total Interest on Debt and Loss on Extinguishment Total interest incurred includes amortization of deferred financing fees and capitalized interest. 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.
Removed
During the construction period for our upgraded satellite constellation, assets under construction primarily consisted of costs incurred associated with the design, development and launch of the upgraded satellites, upgrades to our current infrastructure and ground systems and internal software development costs.
Added
Interest capitalized during the years ended December 31, 2023, 2022 and 2021 was $5.1 million, $2.6 million and $2.1 million, respectively.
Removed
We capitalized a portion of the interest on the BPIAE Facility during the construction period of the upgraded satellite constellation. Capitalized interest was added to the cost of the upgraded satellites. Once these assets were placed in service, they are depreciated using the straight-line method over their respective estimated useful lives.
Added
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 from 12.5 years to 17.5 years.
Removed
Commercial broadband revenue increased $8.1 million, or 19%, compared to the prior year, due to the increase in broadband billable subscribers and an increase in ARPU associated with the increase in the mix of subscribers utilizing higher ARPU Iridium Certus broadband plans. Hosted payload and other service revenue remained flat compared to the prior year.
Added
If our actual operational results are not consistent with our estimates and assumptions, however, we may experience further changes in depreciation and amortization expense that could be material to our results of operations.
Removed
The annual rate under the EMSS contract increased from $103.0 million to $106.0 million during the third quarter of 2021 and continues at that rate until the third quarter of 2024, which caused the increase of $2.1 million in 2022 compared to the prior year.
Added
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.
Removed
The percentage increase of subscriber equipment costs exceeded the percentage increase in subscriber equipment revenue primarily due to an increase in inventory component costs and customer mix.
Added
Hosted payload and other service revenue increased $0.8 million, or 1%, which is relatively consistent year over year.
Removed
We expect an approximate 20% increase in selling, general and administrative expenses in 2023 compared to 2022 associated primarily with higher incentive costs, including equity compensation costs and a larger workforce. Depreciation and Amortization Depreciation and amortization expense remained relatively flat compared to the prior year.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAccordingly, we have been and continue to be subject to interest rate fluctuations. Our Cap began in December 2021, which manages our exposure to interest rate movements on a portion of our Term Loan.
Biggest changeAccordingly, we have been and continue to be subject to interest rate fluctuations. Our Cap began in December 2021, which manages our exposure to interest rate movements on a portion of our Term Loan. In 2023, the Cap provided the right for us to receive payment from the counterparty if one-month SOFR exceeded 1.436%.
Accounts receivable are due from both domestic and international customers. We perform credit evaluations of our customers’ financial condition and record reserves to provide for estimated credit losses. Accounts payable are owed to both domestic and international vendors. 51
Accounts receivable are due from both domestic and international customers. We perform credit evaluations of our customers’ financial condition and record reserves to provide for estimated credit losses. Accounts payable are owed to both domestic and international vendors. 54
Accordingly, although the Revolving Facility bears interest at SOFR plus 3.75%, without a SOFR floor, if and as drawn, we are not currently exposed to fluctuations in interest rates with respect to our Revolving Facility. Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash and cash equivalents, as well as accounts receivable.
Accordingly, although the Revolving Facility bears interest at SOFR plus 2.5%, without a SOFR floor, if and as drawn, we are not currently exposed to fluctuations in interest rates with respect to our Revolving Facility. Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash and cash equivalents, as well as accounts receivable.
For every base rate increase of 25 basis points above the level of the Cap, we expect our annual interest expense to increase by an additional $1.5 million related to the unhedged portion of the Term Loan. 50 We have not borrowed under our Revolving Facility.
For every SOFR increase of 25 basis points above the level of the Cap, we expect our annual interest expense to increase by an additional $1.25 million related to the unhedged portion of the Term Loan. We have not borrowed under our Revolving Facility.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk We had an outstanding aggregate balance of $1,504.6 million under the Term Loan as of December 31, 2022. Under our Term Loan, we pay interest at an annual rate equal to adjusted SOFR (SOFR plus 0.10%) plus 2.50%, with a 0.75% adjusted SOFR floor.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk We had an outstanding aggregate balance of $1,500.0 million under the Term Loan as of December 31, 2023. Under our Term Loan, we pay interest at an annual rate equal to SOFR plus 2.50%, with a 0.75% SOFR floor.
As a result of the interest rate rising from the floor to the level of the Cap, we expect our annual interest expense to increase by approximately $12.0 million, or approximately $3.0 million per quarter.
(See Note 8 for further details on the changes to the Cap.) As a result of the interest rate rising from the floor to the level of the Cap, we expect our annual interest expense to increase by approximately $12.0 million, or approximately $3.0 million per quarter.
Removed
Throughout 2022, the Cap provided the right for us to receive payment from a counterparty if one-month LIBOR exceeded 1.5% on the $1 billion notional value of the Cap.
Removed
In December 2022, we modified the Cap to replace the LIBOR base rate with SOFR, consistent with the amendment to the Term Loan, and it now provides for us to receive payment from the counterparty if one-month SOFR exceeds 1.436%.
Removed
(See Note 8 for further details on the changes to the Cap.) In July 2022, the one-month base rate increased to over the level of the Cap.

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