Iridium Communications (IRDM) 10-Q2021 Q2 Quarterly report

 

In December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”). This guidance amends certain aspects of the accounting for income taxes. Adoption of ASU 2019-12 on January 1, 2021 had no impact on the Company's consolidated financial statements and related disclosures.

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). The guidance provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions that reference London Inter-bank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued. ASU 2020-04 was further amended in January 2021 by ASU 2021-01 which clarified the applicability of certain provisions. Both ASU 2020-04 and ASU 2021-01 are currently effective prospectively for all entities through December 31, 2022 when the reference rate replacement activity is expected to have been completed. The guidance in ASU 2020-04 and ASU 2021-01 is optional and may be elected over time as reference rate reform activities occur. As of June 30, 2021, the Company has not yet modified any contracts nor adopted any expedients as a result of reference rate reform and is evaluating the impact this standard may have on its consolidated financial statements.

The Company evaluates assets and liabilities subject to fair value measurements on a recurring and non-recurring basis to determine the appropriate level to classify them for each reporting period. This determination requires significant judgments to be made by management of the Company. Fair value is the price that would be received from the sale of an asset or paid to transfer a liability assuming an orderly transaction in the most advantageous market at the measurement date. U.S. GAAP establishes a hierarchical disclosure framework which prioritizes and ranks the level of observability of inputs used in measuring fair value.

The fair value hierarchy consists of the following tiers:

The carrying values of the following financial instruments approximated their fair values as of June 30, 2021 and December 31, 2020: cash and cash equivalents, prepaid expenses and other current assets, accounts receivable, accounts payable, and accrued expenses and other current liabilities. Fair values approximate their carrying values because of their short-term nature. The Level 2 cash equivalents include money market funds, commercial paper and short-term U.S. agency securities. The Company also classifies its fixed income debt investments and derivative financial instruments as Level 2. The Company did not hold any Level 3 assets as of June 30, 2021 and December 31, 2020.

The fair values of the Company’s Level 2 estimates are based upon certain market assumptions and information available to the Company. In determining fair value, the Company uses a market approach utilizing valuation models that incorporate observable inputs such as interest rates, bond yields and quoted prices for similar assets.

For new leases, the Company will determine if an arrangement is or contains a lease at inception. Leases are included as right-of-use (“ROU”) assets within other assets and ROU liabilities within accrued expenses and other liabilities and within other long-term liabilities on the Company’s condensed consolidated balance sheets.

ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Certain leases contain variable contractual obligations as a result of future base rate escalations which are estimated based on observed trends and included within the measurement of present value. The Company’s leases do not provide an implicit rate. The Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The ROU asset also includes any lease payments made and excludes lease incentives. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

The Company has lease agreements with lease and non-lease components, which are generally accounted for separately. For certain leases, such as teleport network (“TPN”) facilities, the Company elected the practical expedient to combine lease and non-lease components as a single lease component. Taxes assessed on leases in which the Company is either a lessor or lessee are excluded from contract consideration and variable payments when measuring new lease contracts or remeasuring existing lease contracts.

The following table presents the Company’s cash and cash equivalents as of June 30, 2021 and December 31, 2020:

As of June 30, 2021, the Company's marketable securities consisted of only fixed income debt securities. The amortized cost of these securities amounted to $6.0 million and $7.6 million as of June 30, 2021 and December 31, 2020, respectively. The estimated fair value of these securities amounted to $6.0 million and $7.5 million as of June 30, 2021 and December 31, 2020, respectively. The gross unrealized gains and gross unrealized losses on these marketable securities were not material as of June 30, 2021 and December 31, 2020. All marketable securities are classified as Level 2 investments in the fair value hierarchy. The Company determined that any decline in fair value of these investments is temporary as the Company does not intend to sell these securities and it is not likely that the Company will be required to sell the securities before the recovery of their amortized cost basis.

The following table presents the contractual maturities of the Company's fixed income debt securities as of June 30, 2021 and December 31, 2020:

Both Aireon and L3Harris have made payments pursuant to their hosting agreements, and the Company expects they will continue to do so. The following table presents future income with respect to the Company’s operating leases in which it is the lessor existing at June 30, 2021, exclusive of the $10.7 million recognized during the six months ended June 30, 2021, by year and in the aggregate:

On November 4, 2019, pursuant to a loan agreement (as amended to date, the “Credit Agreement”) the Company entered into a $1,450.0 million term loan with Deutsche Bank AG (the “Term Loan”) and an accompanying $100.0 million revolving loan (the “Revolving Facility”). The Term Loan was issued at a price equal to 99.5% of its face value. While it initially bore interest at an annual rate of LIBOR plus 3.75%, with a 1.0% LIBOR floor, it was repriced in January 2021. It now bears interest at an annual rate of LIBOR plus 2.75%, with a 1.0% LIBOR floor, with a maturity date in November 2026. The interest rate on the Revolving Facility remains at LIBOR plus 3.75% with no LIBOR floor, and a maturity date in November 2024. Principal payments, which are payable quarterly and began on June 30, 2020, equal $16.5 million per annum (one percent of the full amount of the loan following the additional $200.0 million drawn on February 7, 2020, as noted below), with the remaining principal due upon maturity.

On February 7, 2020, the Company closed on an additional $200.0 million under its Term Loan. On February 13, 2020, the Company used these proceeds, together with cash on hand, to prepay and retire all of the indebtedness outstanding under the senior unsecured notes (the “Notes”), including premiums for early prepayment. The additional amount is fungible with the original $1,450.0 million, having the same maturity date, interest rate and other terms, but was issued at a 1.0% premium to face value. To prepay the Notes, the Company paid a call price equal to the present value at the redemption rate of (i) 105.125% of the $360.0 million principal amount of the Notes plus (ii) all interest due through the first call date in April 2020, representing a total call premium of $23.5 million, plus all accrued and unpaid interest to the redemption date. As a result of the prepayment, the Company also wrote off the remaining unamortized debt issuance costs, which resulted in a $30.2 million loss on extinguishment of debt during the three months ended March 31, 2020.

As of June 30, 2021 and December 31, 2020, the Company reported an aggregate of $1,628.8 million and $1,637.6 million in borrowings under the Term Loan, respectively. These amounts do not include $22.1 million and $24.0 million of net unamortized deferred financing costs as of June 30, 2021 and December 31, 2020, respectively. The net principal balance in borrowings in the accompanying condensed consolidated balance sheets as of June 30, 2021 and December 31, 2020 amounted to $1,606.7 million and $1,613.6 million, respectively. As of June 30, 2021 and December 31, 2020, based upon over-the-counter bid levels (Level 2 - market approach), the fair value of the borrowings under the Term Loan due in 2026 was $1,638.0 million and $1,647.9 million, respectively. The Company had not borrowed under the Revolving Facility as of June 30, 2021 and December 31, 2020.

The Credit Agreement restricts the Company’s ability to incur liens, engage in mergers or asset sales, pay dividends, repay subordinated indebtedness, incur indebtedness, make investments and loans, and engage in other transactions as specified in the Credit Agreement. The Credit Agreement provides for specified exceptions, including baskets measured as a percentage of trailing twelve months of earnings before interest, taxes, depreciation and amortization (“EBITDA”) and unlimited exceptions 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 also contains a mandatory prepayment sweep mechanism with respect to a portion of the Company’s excess cash flow (as defined in the Credit Agreement), which is phased out based on achievement and maintenance of specified leverage ratios. The Company’s mandatory excess cash flow prepayment, as specified in the Credit Agreement, was calculated to be $12.7 million as of December 31, 2020. Lenders have the right to decline payment. As such, the Company paid

$4.7 million to lenders who did not decline payment in May 2021. This amount counts towards the Company's required quarterly principal payments. The Credit Agreement permits repayment, prepayment, and repricing transactions.

The Credit Agreement contains no financial maintenance covenants with respect to the Term Loan. With respect to the Revolving Facility, the Credit Agreement requires the Company to maintain a consolidated first lien net leverage ratio (as defined in the Credit Agreement) of no greater than 6.25 to 1 if more than 35% of the Revolving Facility has been drawn. The Credit Agreement contains other customary representations and warranties, affirmative and negative covenants, and events of default. The Company was in compliance with all covenants as of June 30, 2021.

Total interest incurred, which includes amortization of deferred financing fees and capitalized interest, was $18.8 million and $23.5 million during the three months ended June 30, 2021 and 2020, respectively, and $42.6 million and $51.4 million during the six months ended June 30, 2021 and 2020, respectively. To reprice the Term Loan, the Company incurred financing costs of $3.6 million, which were expensed and are included within interest expense on the condensed consolidated statements of operations and comprehensive loss for the six months ended June 30, 2021. There were no such costs during the six months ended June 30, 2020. Amortization of deferred financing fees was $1.0 million and $0.9 million during the three months ended June 30, 2021 and 2020, respectively and $2.0 million and $1.8 million during the six months ended June 30, 2021 and 2020, respectively. Capitalized interest was $0.7 million and $0.8 million during the three months ended June 30, 2021 and 2020, respectively, and $1.3 million and $1.5 million during the six months ended June 30, 2021 and 2020, respectively. At each of June 30, 2021 and December 31, 2020, accrued interest was $0.2 million.

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

Hedge effectiveness of interest rate swap contracts is based on a long-haul hypothetical derivative methodology and includes all changes in value. The Company formally assesses, both at the hedge’s inception and on an ongoing quarterly basis, whether the designated derivative instruments are highly effective in offsetting changes in the cash flows of the hedged items. When the hedging instrument is sold, expires, is terminated or is exercised, or no longer qualifies for hedge accounting, or is no longer probable, hedge accounting is discontinued prospectively.

On November 27, 2019, the Company executed a long-term interest rate swap (“Swap”) effective through November 2021 to mitigate variability in forecasted interest payments on a portion of the Company’s borrowings under its Term Loan. On the last business day of each month, the Company receives variable interest payments based on one-month LIBOR from the counterparty. The Company pays a fixed rate of 1.565% on the Swap. The Swap carried a notional amount of $1,000.0 million as of June 30, 2021 and December 31, 2020.

The Company also entered into an interest rate swaption agreement (“Swaption”), for which the Company pays a fixed annual rate of 0.50%. The Swaption carried a notional amount of $1,000.0 million as of December 31, 2020. The Company sold the Swaption in May 2021 for $0.7 million. The Company will continue to pay the fee for the Swaption through November 2021. For this premium liability associated with the Swaption, the Company had a current liability balance of $2.1 million as of June 30, 2021. As of December 31, 2020, the premium liability was netted with the Swaption, for a fair value of $4.4 million which was recorded in other current liabilities.

At inception, the Swap and Swaption (collectively, the "swap contracts") were designated as cash flow hedges for hedge accounting. The unrealized changes in market value are recorded in accumulated other comprehensive loss and reclassified into earnings during the period in which the hedged transaction affects earnings. Over the next 12 months, the Company expects any gains or losses for cash flow hedges reclassified from accumulated other comprehensive loss into earnings to have an immaterial impact on the Company’s condensed consolidated financial statements.

As of June 30, 2021 and December 31, 2020, the Company had a current liability balance of $2.4 million and $5.2 million, respectively, for the fair value of the Swap recorded in other current liabilities.

During the three and six months ended June 30, 2021, the Company collectively incurred $2.1 million and $4.8 million, respectively, in net interest expense for the swap contracts. During three and six months ended June 30, 2020, the Company collectively incurred $2.7 million and $3.7 million, respectively, in net interest expense for the swap contracts. Gains and losses resulting from fair value adjustments to the swap contracts are recorded within accumulated other comprehensive loss within the Company’s condensed consolidated balance sheets and reclassified to interest expense on the dates that interest payments become due. Cash flows related to the swap contracts are included in cash flows from operating activities on the condensed consolidated statements of cash flows. The amount of unrealized gain related to the swap contracts that was recorded in comprehensive loss in the condensed consolidated statements of operations and comprehensive loss was $0.2 million for the three months ended June 30, 2021, net of an immaterial tax impact, and $1.1 million for the three months ended June 30, 2020, net of a $0.4 million tax impact. The amount of unrealized gain recorded in comprehensive loss was $4.1 million for the six months ended June 30, 2021, net of a $1.2 million tax impact. The amount of unrealized loss recorded in comprehensive loss was $10.8 million for the six months ended June 30, 2020, net of a $3.8 million tax impact.

In May 2019, the Company’s stockholders approved the amendment and restatement of the Company’s 2015 Equity Incentive Plan (as so amended and restated, the “Amended 2015 Plan”). As of June 30, 2021, the remaining aggregate number of shares of the Company’s common stock available for future grants under the Amended 2015 Plan was 10,468,376. The Amended 2015 Plan provides for the grant of stock-based awards, including nonqualified stock options, incentive stock options, restricted stock, restricted stock units (“RSUs”), stock appreciation rights and other equity securities to employees, consultants and non-employee directors of the Company and its affiliated entities. The number of shares of common stock available for issuance under the Amended 2015 Plan is reduced by (i) 1 share for each share of common stock issued pursuant to an appreciation award, such as a stock option or stock appreciation right with an exercise or strike price of at least 100% of the fair market value of the underlying common stock on the date of grant, and (ii) 1.8 shares for each share of common stock issued pursuant to any stock award that is not an appreciation award, also known as a “full value award.” The Amended 2015 Plan allows the Company to utilize a broad array of equity incentives and performance cash incentives in order to secure and retain the services of its employees, directors and consultants, and to provide long-term incentives that align the interests of its employees, directors and consultants with the interests of the Company’s stockholders. The Company accounts for stock-based compensation at fair value.

The fair value of stock options is determined at the grant date using the Black-Scholes option pricing model. The stock option awards granted to employees generally (i) have a term of ten years, (ii) vest over four years with 25% vesting after the first year of service and the remainder vesting ratably on a quarterly basis thereafter, (iii) are contingent upon employment on the vesting date, and (iv) have an exercise price equal to the fair market value of the underlying shares at the date of grant.

The Company historically granted stock options to newly hired and promoted employees, but now almost exclusively utilizes RSUs. The Company did not grant any stock options during the six-month periods ended June 30, 2021 and 2020.

The following tables summarize the Company's stock option activity for the six-month periods ended June 30, 2021 and 2020:

The RSUs granted to employees for service generally vest over four years, with 25% vesting on the first anniversary of the grant date and the remainder vesting ratably on a quarterly basis thereafter, subject to continued employment. The RSUs granted to non-employee directors generally vest in full on the first anniversary of the grant date. Some RSUs granted to employees for performance vest upon the completion of defined performance goals, subject to continued employment. The Company’s RSUs are classified as equity awards because the RSUs will be paid in the Company’s common stock upon vesting. The related compensation expense is recognized over the service period and is based on the grant date fair value of the Company’s common stock and the number of shares expected to vest. The fair value of the awards is not remeasured at the end of each reporting period. The awards do not carry voting rights until they are vested and released in accordance with the terms of the award.

The following tables summarize the Company’s RSU activity for the six-month periods ended June 30, 2021 and 2020:

The majority of the annual compensation the Company provides to members of its board of directors is paid in the form of RSUs. In addition, certain members of the Company’s board of directors elect to receive the remainder of their annual compensation, or a portion thereof, in the form of RSUs. An aggregate amount of approximately 39,000 and 58,000 service-based RSUs were granted to the Company’s directors as a result of these payments and elections during the six months ended June 30, 2021 and 2020, respectively, with an estimated grant date fair value of $1.6 million and $1.4 million, respectively.

During the six months ended June 30, 2021 and 2020, the Company granted approximately 461,000 and 683,000 service-based RSUs, respectively, to its employees, with an estimated aggregate grant date fair value of $19.2 million and $18.3 million, respectively.

During the six months ended June 30, 2021 and 2020, the Company granted approximately 2,000 and 10,000 RSUs to non-employee consultants that are generally subject to service-based vesting. The RSUs granted will vest 50% on the first anniversary of the grant date, and the remaining 50% will vest quarterly thereafter through the second anniversary of the grant date. The estimated aggregate grant date fair value of the RSUs granted to non-employee consultants during the six months ended June 30, 2021 and 2020 was $0.1 million and $0.2 million, respectively.

In March 2021 and 2020, the Company granted approximately 228,000 and 115,000 annual incentive, performance-based RSUs, respectively, to the Company’s executives and employees (the “Bonus RSUs”), with an estimated grant date fair value of $9.5 million and $3.1 million, respectively. Vesting of the Bonus RSUs is and was dependent upon the Company’s achievement of defined performance goals over the respective fiscal year. The Company records stock-based compensation expense related to performance-based RSUs when it is considered probable that the performance conditions will be met. Management believes it is probable that substantially all of the 2021 Bonus RSUs will vest. The level of achievement, if any, of performance goals

will be determined by the compensation committee of the Company’s board of directors and, if such goals are achieved, the 2021 Bonus RSUs will vest, subject to continued employment, in March 2022. Substantially all of the 2020 Bonus RSUs vested in March 2021 upon the determination of the level of achievement of the performance goals.

Additionally, in March 2021 and 2020, the Company granted approximately 110,000 and 144,000 long-term, performance-based RSUs, respectively, to the Company’s executives (the “Executive RSUs”). The estimated aggregate grant date fair value of the Executive RSUs was $4.6 million for the 2021 grants and $3.9 million for the 2020 grants. Vesting of the Executive RSUs is and was dependent upon the Company’s achievement of defined performance goals over a two-year period. The vesting of Executive RSUs will ultimately range from 0% to 150% of the number of shares underlying the Executive RSUs granted based on the level of achievement of the performance goals. If the Company achieves the performance goals, 50% of the number of Executive RSUs earned based on performance will vest on the second anniversary of the grant date, and the remaining 50% will vest on the third anniversary of the grant date, in each case, subject to the executive’s continued service as of the vesting date. During March 2021 and 2020, the Company awarded additional shares underlying performance-based RSUs to the Company’s executives for over-achievement of performance targets related to the Executive RSUs originally awarded in 2019 and 2018 in the amounts of 3,000 shares and 20,000 shares, respectively.

The Company is authorized to issue 2.0 million shares of preferred stock with a par value of $0.0001 per share. The Company previously issued 1.0 million shares and 0.5 million shares of preferred stock. The remaining 0.5 million authorized shares of preferred stock remain undesignated and unissued as of June 30, 2021 and December 31, 2020. As of June 30, 2021 and December 31, 2020, there were no outstanding shares of preferred stock, as all previously outstanding preferred stock was converted into common stock during prior periods, according to its terms.

In February 2021, the Company announced that its Board of Directors had authorized the repurchase of up to $300.0 million of its common stock through December 31, 2022. This time frame can be extended or shortened by the Board of Directors. Repurchases are made from time to time on the open market at prevailing prices or in negotiated transactions off the market. All shares are immediately retired upon repurchase in accordance with the board-approved policy. When treasury shares are retired, the Company’s policy is to allocate the excess of the repurchase price over the par value of shares acquired first, to additional paid-in capital, and then to retained earnings. The portion to be allocated to additional paid-in capital is calculated by applying a percentage, determined by dividing the number of shares to be retired by the number of shares outstanding, to the balance of additional paid-in capital as of the date of retirement.

The Company repurchased and subsequently retired 1.7 million and 3.3 million shares of its common stock during the three and six months ended June 30, 2021, respectively, for a total purchase price of $63.1 million and $122.5 million, respectively. No shares were repurchased during the year ended December 31, 2020. As of June 30, 2021, $177.6 million remained available and authorized for repurchase under this program.

The following table summarizes the Company’s services revenue for the three and six months ended June 30, 2021 and 2020:

The following table summarizes the Company’s engineering and support services revenue for the three and six months ended June 30, 2021 and 2020:

Approximately 26% and 35% of the Company's accounts receivable balance at June 30, 2021 and December 31, 2020, respectively, was due from prime contracts or subcontracts with agencies of the U.S. government.

The Company's contracts with customers generally do not contain performance obligations with terms in excess of one year. As such, the Company does not disclose details related to the value of performance obligations that are unsatisfied as of the end of the reporting period. The total value of any performance obligations that extend beyond a year are immaterial to the financial statements. The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (contract assets), and deferred revenue (contract liabilities) on the condensed consolidated balance sheets. The Company bills amounts under its agreed-upon contractual terms at periodic intervals (for services), upon shipment (for equipment), or upon achievement of contractual milestones or as work progresses (for engineering and support services). Billing may occur subsequent to revenue recognition, resulting in unbilled accounts receivable (contract assets). The Company may also receive payments from customers before revenue is recognized, resulting in deferred revenue (contract liabilities). The Company recognized revenue that was previously recorded as deferred revenue in the amounts of $10.2 million and $11.5 million during the three months ended June 30, 2021 and 2020, respectively, and $21.8 million and $24.0 million during the six months ended June 30, 2021 and 2020, respectively. The Company has also recorded costs of obtaining contracts expected to be recovered in prepaid expenses and other current assets (contract assets or commissions), that are not separately disclosed on the condensed consolidated balance sheets. The commissions are recognized over the estimated usage period. The following table presents contract assets not separately disclosed as of June 30, 2021 and December 31, 2020:

The Company calculates basic net income (loss) per share by dividing net income (loss) attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period. In periods of net income, diluted net income per share takes into account the effect of potential dilutive common shares when the effect is dilutive. Potentially dilutive common shares include (i) common stock issuable upon exercise of outstanding stock options, and (ii) contingently issuable RSUs that are convertible into shares of common stock upon achievement of certain service and performance requirements. The effect of potentially dilutive common shares is computed using the treasury stock method. The RSUs granted to members of the Company’s board of directors contain non-forfeitable rights to dividends and therefore are considered to be participating securities in periods of net income. As a result, the calculation of basic and diluted net income per share excludes net income attributable to the unvested RSUs granted to the Company’s board of directors from the numerator and excludes the impact of the unvested RSUs granted to the Company’s board of directors from the denominator.

The following table summarizes the computations of basic and diluted net income (loss) per share for the three and six months ended June 30, 2021 and 2020:

Due to the Company’s net loss position for the six months ended June 30, 2021, and both the three and six months ended June 30, 2020, all potential common stock equivalents were anti-dilutive and therefore excluded from the calculation of diluted net loss per share. Unvested performance-based RSUs were not included in the computation of basic and diluted net loss per share as certain performance criteria had not yet been satisfied. The following table presents the incremental number of shares underlying stock options and RSUs outstanding with anti-dilutive effects, for the three and six months ended June 30, 2021 and 2020:

Under two services agreements, the Company also provides Aireon with administrative services and support services, the fees for which are paid monthly. Aireon receivables due to the Company under these two agreements totaled $2.0 million and $2.3 million as of June 30, 2021 and December 31, 2020, respectively.

In December 2018, in connection with Aireon's entry into a debt facility, the Company and the other Aireon investors contributed their respective interests in Aireon into a new holding company, Aireon Holdings LLC, and entered into an amended and restated LLC agreement (the “Amended and Restated Limited Liability Company Agreement”). Aireon Holdings LLC holds 100% of the membership interests in Aireon LLC, which remains the operating entity. At each of June 30, 2021 and December 31, 2020, the Company's fully diluted ownership stake in Aireon Holdings LLC was approximately 35.7%, subject to certain redemption provisions contained in the Amended and Restated Limited Liability Company Agreement. In addition, pursuant to a debt facility for Aireon LLC provided by the Company and the other Aireon investors, the Company will participate pro-rata, based on its fully diluted ownership stake, in an investor bridge loan. As such, in December 2020, the Company invested $0.2 million in the Aireon LLC debt facility, which was subsequently repaid in June 2021. The Company’s maximum commitment under the investor bridge loan is $10.7 million.

You should read the following discussion along with our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, filed on February 11, 2021 with the Securities and Exchange Commission, or the SEC, as well as our condensed consolidated financial statements included in this Form 10-Q.

This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Such forward-looking statements include those that express plans, anticipation, intent, contingencies, goals, targets or future development or otherwise are not statements of historical fact. Without limiting the foregoing, the words “believe,” “anticipate,” “plan,” “expect,” “intend” and similar expressions are intended to identify forward-looking statements. These forward-looking statements are based on our current expectations and projections about future events, and they are subject to risks and uncertainties, known and unknown, that could cause actual results and developments to differ materially from those expressed or implied in such statements. These risks and uncertainties may be amplified by the COVID-19 pandemic and its potential impact on our business and the global economy. The important factors described under the caption “Risk Factors” in this report and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 filed on February 11, 2021 could cause actual results to differ materially from those indicated by forward-looking statements made herein. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

The COVID-19 pandemic and measures taken in response are currently affecting countries, communities and markets around the world. Like many other businesses, we started to see a slowdown in the final weeks of March 2020 as a result of the widespread economic shutdown. Our distributors have also experienced business and operational restrictions, which continue to limit their ability to visit customers, complete new installations, and close on new business opportunities, particularly internationally. This slowdown extended through 2020 and the first half of 2021, although we have seen significant recovery in some markets, most notably IoT. Other markets, including aviation and maritime, and some international areas continue to suffer significant effects from reduced activity during the pandemic. Aviation, in particular, has started to see recovery but may take years to recover to pre-pandemic levels. In other industries, such as maritime, the effects are significant, but vary greatly

by region and business model, and we expect that additional shutdowns will continue to impact our results of operations. The ultimate effects of the COVID-19 pandemic are difficult to assess or predict with certainty at this time but may include additional risks. For further information on the potential effects of the COVID-19 pandemic on our business, financial condition and results of operations, see “Part I, Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, filed with the Securities and Exchange Commission on February 11, 2021, as well as the “Risk Factors” section of this report below.