Iridium Communications Inc. (IRDM) FY 2023 MD&A

Item 7. 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.

Background

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 Business

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 low-earth orbit, L-band satellite network provides reliable, weather-resilient 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 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, 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. 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.

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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. 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. 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 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.

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. In May 2023, we launched five of our remaining ground spare satellites, bringing our total number of in-orbit spares to 14. 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.

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. 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. 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.

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. 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. 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. 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, 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. The Credit Agreement provides for specified exceptions, including baskets measured as a percentage of trailing twelve months of earnings before interest, taxes, depreciation and amortization, or EBITDA, and unlimited exceptions in the case of incurring indebtedness and liens and making investments, dividend payments, and payments of subordinated indebtedness, based on achievement and maintenance of specified leverage ratios. The Credit Agreement 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. 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

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event our net leverage ratio rises above 3.5 to 1. 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.

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. 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 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. 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.

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%). 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.

We also entered into an interest rate swaption agreement, or the Swaption, for which we paid a fixed annual rate of 0.50%. 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 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 was reclassified into earnings during the period in which the hedged transaction affected earnings. Due to the changes made to the Term Loan as a result of the July 2021 repricing, at that time, 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 November 2021 expiration date.

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. 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. Due to the prepayments on the Term Loan in the fourth quarter of 2022, we incurred a $1.2 million loss on extinguishment of debt for the write-off of the related unamortized debt issuance costs for the portion of the Term Loan that was prepaid. To reprice the Term Loan in 2021, we incurred third-party financing costs of $4.9 million. 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. The repricings of the Term Loan in 2021 resulted in a $0.9 million loss on extinguishment of debt, as we wrote off the unamortized debt issuance costs related to the lenders who were fully repaid in an exchange of principal.

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. Interest capitalized during the years ended December 31, 2023, 2022 and 2021 was $5.1 million, $2.6 million and $2.1 million, respectively. As of December 31, 2023 and 2022, accrued interest on the Term Loan was $1.0 million and $0.3 million, respectively.

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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.

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.

Critical 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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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.

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. 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. See Note 2 to the consolidated financial statements included in this report for further detail on the impact of this change.

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Comparison of Our Results of Operations for the Years Ended December 31, 2023 and 2022

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Commercial Service Revenue

(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, 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. 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. 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. 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. Hosted payload and other service revenue increased $0.8 million, or 1%, which is relatively consistent year over year. There were two offsetting items in the current year, primarily the one-time recognition of approximately $2.0 million of revenue related to an updated estimate on a customer contract, offset by a $2.3 million decrease in hosted payload revenue related to the change in the estimated useful lives of our satellites. As a result of this change in estimate, we expect that hosted payload revenue will decrease by approximately $9.1 million per year for the remainder of the estimated useful lives.

Government Service Revenue

(1)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 Enhanced Mobile Satellite Services, or EMSS, contract. Under the terms of this agreement, which we entered into in September 2019, authorized customers utilize specified Iridium airtime services provided through the U.S. government’s dedicated gateway. The fee is not based on subscribers or usage, allowing an unlimited number of users access to these services. Revenue for the year ended December 31, 2023 was unchanged from the prior year, in accordance with the contract.

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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. In 2024, we expect equipment sales to be lower than 2023 and more in line with periods prior to 2022, before we and our competitors began to experience supply chain disruptions due to the pandemic.

Engineering and Support Service Revenue

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. Based on the SDA contract, we expect engineering and support service revenue, as well as associated expenses, to be generally higher than in prior years throughout the life of the SDA contract.

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.

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

Cost of subscriber equipment includes the direct costs of equipment sold, which consist of manufacturing costs, allocation of overhead, and warranty costs.

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.

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.

Selling, General and Administrative

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 $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.

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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. As described above, we recorded accelerated depreciation expense of $37.5 million for our remaining ground spare satellite in the second quarter of 2023, following completion of on-orbit testing of our five newly launched spare satellites. This increase was offset in part by a decrease in depreciation expense of $25.5 million for the year ended December 31, 2023 due to the change in estimated useful lives of our satellites. 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. The increase in interest expense, net resulted primarily from the $14.7 million in fees expensed in connection with the refinancing of our Term Loan in September 2023 and an increase in the base rate of our Term Loan compared to the prior year period.

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. There were no losses for the year ended December 31, 2023 in connection with the refinancing of our Term Loan.

Other Income, net

Other income, net, was $4.0 million for the year ended December 31, 2023, compared to other expense, net, of $0.1 million for the prior year primarily as a result of a one-time customer contractual settlement which resulted in recognition of $3.5 million of other income in the fourth quarter of 2023.

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 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. 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.

Loss on Equity Method Investments

For the year ended December 31, 2023, our loss on equity method investments was $6.1 million, compared to a loss $1.5 million in the prior year. The increase in loss primarily reflects the increased duration the equity method investments were outstanding and the related portion of losses recorded on our those investments during each period.

Net Income

Net income was $15.4 million for the year ended December 31, 2023, compared to $8.7 million during the prior year. The change primarily resulted from the increase in income tax benefit, as noted above, offset in part by an increase in interest expense related to the fees paid for the refinancing of our Term Loan and the increased base rate.

Liquidity and Capital Resources

Our primary sources of liquidity are cash provided by operations, cash and cash equivalents and our Revolving Facility. 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. 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

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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.

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.

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.

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. 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. While we expect to continue the regular cash dividend program, any future dividends declared will be at the discretion of our Board of Directors and will depend, among other factors, upon our results of operations, financial condition and cash requirements, as well as such other factors our Board of Directors deems relevant.

Cash Flows - Comparison of the Years Ended December 31, 2023 and 2022

The following table shows our consolidated cash flows:

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. Cash flows related to changes in working capital decreased by approximately $38.7 million, primarily as a result of an increase in cash outflows for replenished finished goods and component inventory, including last-time buys, as well as lower cash inflows related to deferred revenue. These changes in working capital were offset by cash inflows for accounts receivable related to lower equipment sales. These changes were also partially offset by net income, as adjusted for non-cash activities, which increased by $8.9 million over the prior year. 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.

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. Going forward, we expect our capital expenditures to average approximately $60.0 million per year through 2030.

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Cash Flows from Financing Activities

Net cash used in financing activities for the year ended December 31, 2023 decreased $47.9 million compared to the prior year period primarily due to the $108.1 million decrease in net principal payments associated with the terms under the refinancing of our Term Loan, offset in part by the $64.8 million of common stock dividends paid in 2023, as described above.

Seasonality

Our results of operations have been subject to seasonal usage changes for commercial customers, and we expect that 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.