IRIDIUM COMMUNICATIONS INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-K)

A discussion regarding our financial condition and results of operations for the
year ended December 31, 2020 compared to the year ended December 31, 2019 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, 2020, as filed with the SEC on February 11, 2021.

Fund

We were initially formed in 2007 as GHL Acquisition Corp., a special purpose
acquisition company. In 2009, we acquired all the outstanding equity in Iridium
Holdings LLC and changed our name to Iridium Communications Inc.

Overview of our company

We are engaged primarily in providing mobile voice and data communications
services using a constellation of orbiting satellites. We are the only
commercial provider of communications services offering true global coverage,
connecting people, organizations and assets to and from anywhere, in real time.
Our unique L-band satellite network provides reliable communications services to
regions of the world where terrestrial wireless or wireline networks do not
exist or are limited, including remote land areas, open ocean, airways, the
polar regions and regions where the telecommunications infrastructure has been
affected by political conflicts or natural disasters.

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. This unique
architecture minimizes the need for ground facilities to support the
constellation, which facilitates the global reach of our services and allows us
to offer services in countries and regions where we have no physical presence.

We sell our products and services to commercial end users through a wholesale
distribution network, encompassing approximately 100 service providers, 285
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. 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.

At December 31, 2021 we had approximately 1,723,000 billable subscribers
worldwide, an increase of 247,000, or 17%, from approximately 1,476,000 billable
subscribers at December 31, 2020. We have a diverse customer base, including end
users in land-mobile, Internet of Things, or IoT, maritime, aviation and
government.

We recognize revenue from both the provision of services and the sale of
equipment. Service revenue represented 80% and 79% of total revenue for the
years ended December 31, 2021 and 2020, respectively. Voice and data and IoT
data service revenues have historically generated higher margins than subscriber
equipment revenue, and we expect this trend to continue. 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.

Service Agreements for Satellite Constellation Upgrade

In 2019, we completed the full replacement of our first generation satellites with our upgraded constellation at a cost of approximately $3 billion.

In June 2010, we executed a primarily fixed price full scale development
contract, or FSD, with Thales Alenia Space for the design and manufacture of
satellites for the upgraded constellation. The total price under the FSD was
$2.3 billion. Final payments under this contract were made during the second
quarter of 2019. These costs were capitalized as construction in progress within
property and equipment, net in the accompanying consolidated balance sheets.

To complete the upgraded constellation, we launched a total of 75 satellites
into low earth orbit using eight Falcon 9 rockets under two contracts with Space
Exploration Technologies Corp., or SpaceX, with a total price of $510.8 million.
Final payments to SpaceX for these launches were made during the second quarter
of 2019. These costs were capitalized as
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construction in progress in property, plant and equipment, net in the accompanying consolidated balance sheets. We shared a launch with GFZ German Research Center for Geosciences for which we received $29.8 million of them.

term loan

In November 2019, we borrowed our $1,450.0 million Term Loan with an
accompanying $100.0 million revolving loan available to us, or the Revolving
Facility. Both facilities are under a credit agreement with the lenders, or the
Credit Agreement. We used the proceeds of the Term Loan, along with our debt
service reserve account and cash on hand to repay in full all of the
indebtedness outstanding under a previous credit facility with a syndicate of
bank lenders guaranteed by Bpifrance Assurance Export S.A.S., or the BPIAE
Facility, as well as related expenses.

In February 2020, we borrowed an additional $200.0 million under our Term Loan
and used the proceeds and approximately $183.5 million of cash on hand to repay
in full all of the indebtedness outstanding under senior unsecured promissory
notes, or the Notes, including premiums for early repayment.

In January 2021 and July 2021, we repriced all borrowings outstanding under our
Term Loan and incurred third-party financing costs of $3.6 million and
$1.3 million, respectively. As repriced, the Term Loan bears interest at an
annual rate of LIBOR plus 2.50%, with a 0.75% LIBOR floor. All other terms of
the Term Loan remain the same as before the repricing, including maturity in
November 2026. The Revolving Facility bears interest at an annual rate of LIBOR
plus 3.75% (but without a LIBOR floor) if and as drawn, with no original issue
discount, a commitment fee of 0.5% per year on the undrawn amount, and a
five-year maturity. See   Note 7   to the consolidated financial statements
included in this annual report for further discussion of our Term Loan.

As of December 31, 2021, we reported an aggregate balance of $1,621.1 million in
borrowings under the Term Loan, before $23.1 million of net deferred financing
costs, for a net principal balance of $1,598.0 million outstanding in our
consolidated balance sheet. We have not drawn on our Revolving Facility.

Our Term Loan contains no financial maintenance covenants. With respect to the
Revolving Facility, we are required to maintain a consolidated first lien net
leverage ratio of no greater than 6.25 to 1 if more than 35% of the Revolving
Facility has been drawn. The Credit Agreement contains other customary
representations and warranties, affirmative and negative covenants, and events
of default. We were in compliance with all covenants under the Credit Agreement
as of December 31, 2021.

The Credit Agreement restricts our ability to incur liens, engage in mergers or
asset sales, pay dividends, repay subordinated indebtedness, incur indebtedness,
make investments and loans, and engage in other transactions as specified in the
Credit Agreement. The Credit Agreement provides for specified exceptions,
including baskets measured as a percentage of trailing twelve months of earnings
before interest, taxes, depreciation and amortization, or EBITDA, and unlimited
exceptions 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 permits repayment,
prepayment, and repricing transactions and requires quarterly principal payments
of 0.25% of the $1.65 billion principal amount as of February 2020. 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. As
of December 31, 2021, our leverage ratio was below the specified level, and we
were not required to make a mandatory prepayment with respect to 2021 cash
flows. As of December 31, 2020, our mandatory excess cash flow prepayment, as
specified in the Credit Agreement, was calculated to be $12.7 million. Lenders
have the right to decline payment. As such, we paid $4.7 million to lenders who
did not decline payment in May 2021 with respect to the 2020 cash flows. This
amount counted towards our required quarterly principal payments through
December 31, 2021.

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Derivative financial instruments

On November 27, 2019, we executed a two-year interest rate swap (the "Swap") to
mitigate variability in forecasted interest payments on a portion of our
borrowings under the Term Loan. We paid a fixed rate of 1.565% per annum on the
$1.0 billion notional amount of the Swap, which expired in November 2021. We
also entered into an interest rate swaption agreement (the "Swaption"), for
which we paid a fixed rate of 0.50% per annum on the $1.0 billion notional
amount. We sold the Swaption in May 2021 for $0.7 million but continued to pay
the fixed rate through the expiration of the Swaption in November 2021. 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 were recorded in accumulated other comprehensive income (loss) and
any remaining balance will be reclassified into earnings during the period in
which the hedged transaction affects earnings. As a result of the repricing of
the Term Loan in July 2021, we elected to de-designate the Swap as a cash flow
hedge. 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 remaining term, and
subsequent to de-designation, the changes in the valuation of the Swap were
recorded directly into earnings.

On July 21, 2021, we entered into an interest rate cap agreement (the "Cap")
that began in December 2021 upon the expiration of the Swap. The Cap manages our
exposure to interest rate movements on a portion of the Term Loan now that the
Swap has expired. The Cap provides the right for us to receive payment if
one-month LIBOR exceeds 1.5%. Beginning in December 2021, we began to pay a
fixed monthly premium based on an annual rate of 0.31% for the Cap. The Cap
carried a notional amount of $1.0 billion as of December 31, 2021.

The Cap is designed to mirror the terms of the Term Loan and to offset the cash
flows being hedged. We designated the Cap as a cash flow hedge of the
variability of the LIBOR-based interest payments on the Term Loan. The effective
portion of the Cap's change in fair value will be recorded in accumulated other
comprehensive income (loss) and will be reclassified into earnings during the
period in which the hedged transaction affects earnings. See   Note 8   to our
consolidated financial statements included in this report for further discussion
of our derivative financial instruments.

Senior Unsecured Notes

On March 21, 2018, we issued $360.0 million in aggregate principal under the
Notes, before $9.0 million of deferred financing costs, for a net principal
balance of $351.0 million in borrowings from the Notes. The Notes bore interest
at 10.25% per annum and were due to mature on April 15, 2023. Interest was
payable semi-annually on April 15 and October 15, beginning on October 15, 2018,
and principal would have been repaid in full upon maturity. As described above,
the Notes were redeemed in full on February 13, 2020.

Total interest on debt and loss on extinguishment

Total interest incurred includes amortization of deferred financing fees and
capitalized interest. To reprice the Term Loan in January 2021 and July 2021, we
incurred third-party financing costs of $3.6 million and $1.3 million,
respectively. 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. Total interest incurred during the years ended
December 31, 2021, 2020 and 2019 was $72.8 million, $99.2 million and $140.5
million, respectively. Interest incurred includes amortization of deferred
financing fees of $4.3 million, $3.8 million and $21.3 million for the years
ended December 31, 2021, 2020 and 2019, respectively. Interest capitalized
during the year ended December 31, 2021, 2020 and 2019 was $2.1 million, $3.2
million and $15.1 million, respectively. As of December 31, 2021 and 2020,
accrued interest on the Term Loan was $0.1 million and $0.2 million,
respectively.

As part of the repayment of our previous debt facility in November 2019, we
incurred a loss of approximately $111.7 million for the early extinguishment. In
February 2020, we incurred a loss of approximately $30.2 million for the early
extinguishment of the Notes. In July 2021, certain lenders did not participate
in the repricing of the Term Loan, described above. Those portions of the Term
Loan were replaced by new or existing lenders. This resulted in a loss of
approximately $0.9 million. These losses were recorded within other income
(expense) on our consolidated statements of operations and comprehensive income
(loss).

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Material trends and uncertainties

Our industry and our clientele have historically developed thanks to:

• demand for remote and reliable mobile communications services;

•a growing number of new products and services and associated applications;

•an extensive wholesale distribution network with access to diversified and geographically dispersed niche markets;

•increased demand for communication services by relief and relief organizations and emergency first responders;

•improving data transmission speeds for mobile satellite service offers;

•regulatory mandates requiring the use of mobile satellite services;

•a general fall in the prices of mobile satellite services and subscriber equipment; and

•the geographic expansion of the market thanks to the possibility of offering our services in other countries.

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 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 business gateway and primary satellite network operations center;

•competition from other mobile satellite service providers and, to a lesser extent, the expansion of terrestrial cellular telephone systems and related pricing pressures;

•acceptance of our products by the market;

•regulatory requirements in existing and new geographic markets;

•rapid and significant technological changes in the telecommunications industry;

•our ability to generate sufficient internal cash flow to repay our debt;

•dependency on our wholesale distribution network to effectively market and sell our products, services and applications;

•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.

Significant Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations
is based upon our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States,
or U.S. GAAP. The preparation of these financial statements requires the use of
estimates and judgments that affect the reported amounts of assets, liabilities,
revenue and expenses, and related disclosure of contingent assets and
liabilities. On an ongoing basis, we evaluate our estimates, including those
related to revenue recognition, income taxes, useful lives of property and
equipment, loss contingencies, and other estimates. We base our estimates on
historical experience and on various other assumptions that we believe to be
reasonable under the circumstances. Actual results may differ from these
estimates under different assumptions or conditions.

The accounting policies we believe to be most critical to understanding our
financial results and condition and that require complex and subjective
management judgments are discussed below. Our accounting policies are more fully
described in   Note 2   to the consolidated financial statements included in
this report.

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Revenue recognition

We sell services and equipment through contracts with our customers. We evaluate
whether a contract exists as it relates to collectability of the contract. Once
a contract is deemed to exist, we evaluate the transaction price including both
fixed and variable consideration. The variable consideration contained within
our contracts with customers may include discounts, credits and other similar
items. When a contract includes variable consideration, we evaluate the estimate
of the variable consideration to determine whether the estimate needs to be
constrained. Therefore, we include constrained consideration in the transaction
price only to the extent that it is probable that a significant reversal of the
amount of cumulative revenue recognized will not occur when the uncertainty
associated with the variable consideration or collectability is subsequently
resolved. Variable consideration estimates are updated at the end of each
quarter and collectability assessments are evaluated with new customers, or on
an ongoing basis if initially deemed not probable, and updated as facts and
circumstances change.

We sell prepaid services in the form of e-vouchers and prepaid cards. A
liability is established equal to the cash paid upon purchase for the e-voucher
or prepaid card. We recognize revenue from (i) the prepaid services upon the use
of the e-voucher or prepaid card by the customer and (ii) the estimated pattern
of use. We continually monitor the pattern of use for prepaid services. A change
in the estimated pattern of use may impact our revenue recognition. While the
terms of prepaid e-vouchers can be extended by the purchase of additional
e-vouchers, prepaid e-vouchers may not be extended beyond three or four years,
dependent on the initial term when purchased.

Revenue associated with some of our fixed-price engineering services
arrangements is recognized over time using costs incurred to date relative to
total estimated costs at completion to measure progress toward satisfying our
performance obligation. We recognize revenue on cost-plus-fixed-fee arrangements
to the extent of estimated costs incurred plus the applicable fees earned. If
actual results are not consistent with our estimates or assumptions, we may be
exposed to changes to earned and unearned revenue that could be material to our
results of operations.

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. Deferred tax assets and liabilities are recorded based upon
enacted tax rates for the period in which the deferred tax items are expected to
reverse. Changes in tax laws or tax rates in various jurisdictions are reflected
in the period of change. Significant judgment is required in the calculation of
our tax provision and the resulting tax liabilities as well as our ability to
realize our deferred tax assets. Our estimates of future taxable income and any
changes to such estimates can significantly impact our tax provision in a given
period. Significant judgment is required in determining our ability to realize
our deferred tax assets related to federal, state and foreign tax attributes
within their carryforward periods including estimating the amount and timing of
the future reversal of deferred tax items in our projections of future taxable
income. A valuation allowance is established to reduce deferred tax assets to
the amounts we expect to realize in the future. We also recognize tax benefits
related to uncertain tax positions only when we estimate that it is "more likely
than not" that the position will be sustainable based on its technical merits.
If actual results are not consistent with our estimates and assumptions, this
may result in material changes to our income tax provision.

Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation and
amortization. Property and equipment are depreciated or amortized over their
estimated useful lives. We apply judgment in determining the useful lives based
on factors such as engineering data, our long-term strategy for using the
assets, the manufacturer's estimated design life for the assets, laws and
regulations that could impact the useful lives of the assets and other economic
factors. In evaluating the useful lives of our satellites, we assess the current
estimated operational life of the satellites, including the potential impact of
environmental factors on the satellites, ongoing operational enhancements and
software upgrades. Additionally, we review engineering data relating to the
operation and performance of our satellite network.

We depreciate our satellites over the shorter of their potential operational
life or the period of their expected use. The appropriateness of the useful
lives is evaluated on a quarterly basis or as events occur that require
additional assessment. The upgraded satellites that have been placed into
service are depreciated using the straight-line method over their respective
estimated useful lives. If the estimated useful lives of our upgraded satellites
change, it could have a material impact on the timing of the recognition of
depreciation expense and hosted payload revenue.

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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. 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. During each year end, we evaluate the
useful lives of all assets under construction.

Comparison of Our Results of Operations for the Years Ended December 31, 2021
and 2020

                                                                   Year Ended December 31,
                                                               % of Total                                 % of Total                        Change
($ In thousands)                           2021                  Revenue                2020                Revenue              Dollars             Percent
Revenue:
Service revenue
Commercial                            $    388,104                      63  %       $ 362,208                      62  %       $ 25,896                     7  %
Government                                 103,887                      17  %         100,887                      17  %          3,000                     3  %
Total service revenue                      491,991                      80  %         463,095                      79  %         28,896                     6  %
Subscriber equipment                        92,071                      15  %          86,119                      15  %          5,952                     7  %
Engineering and support services            30,438                       5  %          34,225                       6  %         (3,787)                  (11) %
Total revenue                              614,500                     100  %         583,439                     100  %         31,061                     5  %
Operating expenses:
Cost of services (exclusive of
depreciation
and amortization)                           97,020                      16  %          91,097                      16  %          5,923                     7  %
Cost of subscriber equipment                53,376                       9  %          51,596                       9  %          1,780                     3  %
Research and development                    11,885                       2  %          12,037                       2  %           (152)                   (1) %
Selling, general and administrative        100,474                      16  %          90,052                      15  %         10,422                    12  %
Depreciation and amortization              305,431                      50  %         303,174                      52  %          2,257                     1  %
Total operating expenses                   568,186                      93  %         547,956                      94  %         20,230                     4  %
Operating income                            46,314                       7  %          35,483                       6  %         10,831                    31  %
Other income (expense):
Interest expense, net                      (73,906)                    (12) %         (94,271)                    (16) %         20,365                   (22) %
Loss on extinguishment of debt                (879)                      0  %         (30,209)                     (5) %         29,330                   (97) %
Other income (expense), net                   (417)                      0  %              33                       0  %           (450)               (1,364) %
Total other expense                        (75,202)                    (12) %        (124,447)                    (21) %         49,245                   (40) %
Loss before income taxes                   (28,888)                     (5) %         (88,964)                    (15) %         60,076                   (68) %
Income tax benefit                          19,569                       3  %          32,910                       5  %        (13,341)                  (41) %
Net loss                              $     (9,319)                     (2) %       $ (56,054)                    (10) %       $ 46,735                   (83) %



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Commercial Service Revenue

                                                                          Year Ended December 31,
                                                     2021                                                         2020                                                       Change
                                                  Billable                                                     Billable                                                     Billable
                             Revenue          Subscribers (1)           ARPU (2)          Revenue           Subscribers (1)           ARPU (2)          Revenue           Subscribers             ARPU
                                                                                         (Revenue in millions and subscribers in thousands)

Commercial services:
Voice and data              $ 175.6                  370              $      41          $ 168.6                   350              $      40          $   7.0                  20             $     1
IoT data                      110.9                1,193              $    8.58             97.0                   962              $    9.16             13.9                 231             $ (0.58)
Broadband (3)                  43.0                 13.2              $     288             36.0                  11.7              $     266              7.0                 1.5             $    22
Hosted payload and other
data                           58.6                         N/A                             60.6                          N/A                             (2.0)                      N/A
Total commercial services   $ 388.1                1,576                                 $ 362.2                 1,324                                 $  25.9                 252



(1)Billable subscriber numbers are shown as of the end of the respective 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.
Billable subscriber and ARPU data is not applicable for hosted payload and other
data service revenue items.
(3)Commercial broadband consists of Iridium OpenPort and Iridium Certus
broadband services.

For the year ended December 31, 2021, total commercial revenue increased $25.9
million, or 7%, primarily as a result of increases in IoT, broadband, and voice
and data revenue mainly driven by increases in billable subscribers. Commercial
IoT revenue increased $13.9 million, or 14%, from the prior year. The increase
in IoT revenue was driven by a 24% increase in IoT billable subscribers due to
continued strength in personal communications devices, as well as the lifting of
mobility restrictions that had been imposed due to COVID-19. The subscriber
increase effect on revenue was partially offset by a 6% reduction in IoT ARPU,
primarily due to the increased proportion of personal communication subscribers
using lower ARPU plans, countered in part by an increase in usage and ARPU by
aviation subscribers due to increases in air travel from the prior year.

Commercial broadband revenue increased $7.0 million, or 20%, from the prior
year, primarily 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. Commercial voice and data
revenue increased $7.0 million, or 4%, from the prior year, primarily due to an
increase in volume across all voice and data services. These increases were
offset in part by a decrease in hosted payload and other service revenue of $2.0
million, or 3%, compared to the prior year. This decrease was primarily due to a
one-time data billing settlement that resulted in recognition of $1.3 million in
the prior year period, plus the recognition of an additional $1.4 million of
hosting data service revenue in the prior year due to an updated estimate of
data service usage that did not recur in 2021.

Government Service Revenue

                                                             Year Ended December 31,
                                                 2021                                          2020                                      Change
                                                          Billable                                   Billable                                    Billable
                                   Revenue             Subscribers (1)          Revenue           Subscribers (1)           Revenue             Subscribers
                                                                    

(Revenues in millions and subscribers in thousands)

Government service revenue     $      103.9                          147       $ 100.9                          152       $     3.0                   (5)


(1)The billable subscriber numbers shown are at the end of the respective period.

We provide airtime and airtime support to U.S. government and other authorized
customers pursuant to our EMSS contract entered into in September 2019. Under
this agreement, authorized customers utilize specified Iridium airtime services
provided through the U.S. government's dedicated gateway. The fee is not based
on subscribers or usage, allowing an unlimited number of users access to these
services. The annual rate under the EMSS contract increased from $103.0 million
in the prior year to $106.0 million during the third quarter of 2021.

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Revenue from subscriber equipment

Subscriber equipment revenue increased $6.0 million, or 7%, to $92.1 million for
the year ended December 31, 2021 compared to the prior year, primarily due to an
increase in the volume of handset and IoT device sales, partially offset by a
decrease in the volume of Iridium Pilot and L-band transceiver device sales.

Engineering and Support Services Revenue

                    Year Ended December 31,
                       2021                 2020       Change
                               (In millions)

Commercial   $        4.6                 $  4.5      $  0.1
Government           25.8                   29.7        (3.9)
Total        $       30.4                 $ 34.2      $ (3.8)



Engineering and support service revenue decreased by $3.8 million, or 11%, for
the year ended December 31, 2021 compared to the prior year primarily due to the
episodic nature of contract work under certain government contracts.

Functionnary costs

Cost of services (excluding 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.

Cost of services (exclusive of depreciation and amortization) increased by $5.9
million, or 7%, for the year ended December 31, 2021 compared to the prior year,
primarily as a result of higher product support and network and satellite
operation costs. These costs were higher in the current year primarily due to
increased management incentive costs. This increase was partially offset by the
decrease in work under certain government engineering contracts, as noted above.

Cost of subscriber equipment

The cost of subscriber equipment includes direct costs of equipment sold, which include manufacturing costs, overhead allocation and warranty costs.

Cost of subscriber equipment increased $1.8 million, or 3%, for the year
ended December 31, 2021 compared to the prior year period primarily due to an
increase in volume of higher margin handsets and an increase in IoT device
sales, partially offset by a decrease in the volume of Iridium Pilot and L-band
transceiver device sales, as described above.

Research and development

Research and development expenses decreased by $0.2 million, or 1%, for the year
ended December 31, 2021 compared to the prior year period based on consistent
spending on device-related features for our network.

Selling, general and administrative expenses

Selling, general and administrative expenses that are not directly attributable
to the sale of services or products include sales and marketing costs as well as
employee-related expenses (such as salaries, wages, and benefits), legal,
finance, information technology, facilities, billing and customer care expenses.

Selling, general and administrative expenses increased by $10.4 million, or 12%,
for the year ended December 31, 2021, primarily due to higher management
incentive costs incurred in the current year. Management incentive costs were
higher in the current year based on improved results and were lower in the prior
year due to the impacts of the COVID-19 pandemic. The increase was partially
offset by a decrease in stock appreciation rights expense in the current year
resulting from changes in our stock valuation between the years. The increase
was also offset by a decrease in bad debt expense and favorable settlements
including social contribution tax credit received in the current year.

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Depreciation and amortization

Depreciation and amortization expense increased by $2.3 million, or 1%, for the
year ended December 31, 2021 compared to the prior year. The increase was
primarily due to software enhancements related to our Iridium Certus service
line that were placed into service during July 2021. We anticipate depreciation
and amortization to remain relatively consistent over the next several years.

Other Income (Expense)

Interest Expense, net

Interest expense, net, for the year ended December 31, 2021 was $73.9 million,
compared to $94.3 million for the prior year. The decrease resulted primarily
from a decrease in the annual interest rate on our Term Loan to LIBOR plus 2.5%,
with a 0.75% LIBOR floor, from an annual interest rate of LIBOR plus 3.75%, with
a 1.0% LIBOR floor, as a result of the repricing of our Term Loan in January
2021 and July 2021. The decrease in interest expense was offset in part by
$4.9 million of third-party financing costs paid in 2021, which were expensed as
incurred, in connection with the repricing transactions.

Loss on extinguishment of debt

Loss on extinguishment of debt was $0.9 million for the year ended December 31,
2021, compared to $30.2 million for the prior year. During July 2021, we
repriced our Term Loan and wrote off unamortized debt issuance costs related to
several lenders who did not participate in the repricing and whose portions of
the Term Loan were replaced by new or existing lenders. The loss on
extinguishment of debt in 2020 resulted from the write off of unamortized debt
issuance costs when we closed on an additional $200.0 million under our Term
Loan in February 2020 and used the proceeds, together with cash on hand, to
prepay all of the indebtedness outstanding under the Notes, including premiums
for early prepayment.

Income Tax Benefit

For the year ended December 31, 2021, our income tax benefit was $19.6 million,
compared to income tax benefit of $32.9 million for the prior year. Our
effective tax rate was approximately 67.7% for the year ended December 31, 2021
compared to 37.0% for the prior year. The decrease in income tax benefit was
primarily related to a decrease in loss before income taxes compared to the
prior year. If our current estimates change in future periods, the impact on the
deferred tax assets and liabilities may change correspondingly. See   Note 12
to our consolidated financial statements for more detail on the individual items
impacting our effective tax rate for the years.

Net loss

Net loss was $9.3 million for the year ended December 31, 2021, compared to net
loss of $56.1 million during the prior year. The improvement primarily resulted
from the $29.3 million decrease in loss on extinguishment of debt, the $20.4
million decrease in interest expense, net, and the $10.8 million increase in
total operating income partially offset by the $13.3 million decrease in income
tax benefit.

Cash and capital resources

Our current indebtedness consists exclusively of amounts outstanding under the
Term Loan, the terms of which are described above under the section captioned
"Term Loan."

As of December 31, 2021, we held non-cancelable purchase obligations of
approximately $32.0 million for inventory purchases with Benchmark Electronics,
Inc., or Benchmark, our primary third-party vendor. Our purchase obligations,
all of which are due during 2022, increased $18.5 million from 2020 primarily
due to increased demand and recovery from supply-chain constraints experienced
during 2021.

As of December 31, 2021, our total cash and cash equivalents balance was $320.9
million, and we had $100.0 million of borrowing availability under our Revolving
Facility. In addition to the Revolving Facility, our principal sources of
liquidity are cash, cash equivalents and internally generated cash flows. Other
than the purchase obligation noted above, our principal liquidity requirements
over the next twelve months are primarily required principal and interest on the
Term Loan, which we expect to be $16.5 million and, based on the current
interest rate, approximately $60.0 million, respectively, as well as capital
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expenditures of $45.0 million, working capital and potential share repurchases
under the share repurchase program described in   Note 10   to our consolidated
financial statements included in this report.

We estimate that our sources of liquidity will provide us with sufficient funds to meet our liquidity needs for at least the next 12 months.

Our significant long-term cash requirement is the repayment of the remaining principal amount under the term loan when it matures in 2026, which is expected to be $1,555.1 million. We expect to refinance this amount at or before maturity.

Cash Flow – Comparison of Years Ended December 31, 2021 and 2020

The following table presents our consolidated cash flows:

                                                    Year Ended December 31,
Statement of Cash Flows                              2021              2020          Change
                                                               (in thousands)

Net cash flow generated by operating activities $302,874 $249,767 $53,107
Net cash used in investing activities

           $     (36,382)     $  (46,470)     $ 10,088
Net cash used in financing activities           $    (182,469)     $ 

(188 186) $5,717

Cash flow from operating activities

Net cash provided by operating activities for the year ended December 31, 2021
increased $53.1 million from the prior year. Net loss, as adjusted for non-cash
activities, improved by $41.3 million over the prior year, primarily as a result
of improved profitability. Net cash from operating activities also increased
related to working capital changes of approximately $11.7 million. Cash flows
from working capital increased primarily as a result of a decreased payout on
management incentives in 2021 due to the COVID-19 impact on our 2020 financial
results as compared to our expectations at the time the management incentives
were originally established. Cash flows from working capital also increased as a
result of lower interest payments associated with the completed retirement of
the Notes in 2020 and the subsequent Term Loan repricing transactions in 2021.
These increases were offset by net cash outflows resulting from the timing of
customer collections and payments to vendors.

Cash flow from investing activities

Net cash used in investing activities for the year ended December 31, 2021
decreased $10.1 million from the prior year period due primarily to maturities
of marketable securities in the current year and purchases of marketable
securities in the prior year. The movement in marketable securities was offset
in part by a $3.5 million increase in capital expenditures. We continue to
expect our capital expenditures to average approximately $40.0 million per year
until 2029.

Cash flow from financing activities

Net cash used in financing activities for the year ended December 31, 2021
decreased $5.7 million compared to the prior year period primarily due to lower
net principal payments as we utilized our cash to pay down additional debt in
2020, offset by share repurchases we made in 2021. We repurchased and
subsequently retired 4.3 million shares of our common stock during the year
ended December 31, 2021, for a total purchase price of $163.4 million. The
combination of full repayment of the Notes and additional borrowings under the
Term Loan resulted in net payments of $193.8 million for the year ended
December 31, 2020 compared to net payments of $16.5 million for 2021. See   Note
7   to our consolidated financial statements included in this report for further
discussion of our indebtedness.

Seasonality

Our results of operations have been subject to seasonal usage changes for
commercial customers, and our results will be affected by similar seasonality
going forward. March through October are typically the peak months for
commercial voice services revenue and related subscriber equipment sales. U.S.
government revenue and commercial IoT revenue have been less subject to seasonal
usage changes.

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