Iridium Communications Inc at Deutsche Bank Leveraged Finance Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Aaron Watts - Deutsche Bank - Analyst : As you prepare to take the financial reins, how are you and Tom working to make this a seamless transition? And what should investors expect in terms of any notable changes in financial policies or strategies?

Question: Aaron Watts - Deutsche Bank - Analyst : Okay. So Matt has described 2024 as a bit of a transition year for Iridium. For the uninitiated, walk us through what's been accomplished this past year and how it positions the company for future growth in the years ahead.

Question: Aaron Watts - Deutsche Bank - Analyst : Okay. That's helpful backdrop there. Now, there's been a lot going on around the company. So I wanted to check the boxes on some current events. Back in April, you completed the acquisition of Satelles, which is a leading provider of positioning, navigation, and timing services. While I appreciate it's still early days, how is the integration going? And remind us your financial targets for the business.

Question: Aaron Watts - Deutsche Bank - Analyst : Okay, great. So let me go to the next event. In the second quarter, you repriced your term loan and reduced the spread you were paying by 25 basis points. You had a figure around $4 million in annual interest expense. And then in late July, you completed a $200 million add-on to your term loan B, with the proceeds expected to provide additional capacity for share repurchases. This took your gross leverage up though from 3.6 to 3.9 and also came with some adjusted leverage guidance for the future. Can you walk us through the motivation for increasing the debt load for buybacks and how the capital allocation shifts impact your leverage targets going forward?

Question: Aaron Watts - Deutsche Bank - Analyst : And then just remind us how much stock you've bought back to date and what remains on your authorization for the future. And I know you just had an adjustment there, if you can highlight that. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 24, 2024 / 6:20PM, IRDM.OQ - Iridium Communications Inc at Deutsche Bank Leveraged Finance Conference

Question: Aaron Watts - Deutsche Bank - Analyst : Okay. But clearly taking the leverage up temporarily indicates to me that you have some comfort in the business going forward.

Question: Aaron Watts - Deutsche Bank - Analyst : Okay. And on the business performance, during the second-quarter call you reiterated your full-year outlook for service revenue growth of between 4% and 6%, EBITDA between for $460 million, $470 million. You mentioned the $300 million of free cash flow. Any updates on that today? Or this is still the right range?

Question: Aaron Watts - Deutsche Bank - Analyst : Anything we should be thinking about as we look ahead to next year in terms of the components that go into free cash flow, such as CapEx or working capital, and maybe in particular cash taxes, which I believe were set to kind of ramp up going forward? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 24, 2024 / 6:20PM, IRDM.OQ - Iridium Communications Inc at Deutsche Bank Leveraged Finance Conference

Question: Aaron Watts - Deutsche Bank - Analyst : Okay. And I certainly don't want to overlook the capital expenditures and the story there. Your current constellation, and you mentioned this earlier, consists of, I think 66 primary satellites, 14 spares. Your primaries went up in 2019. You said they're performing better than your original expectations. When do you see starting to spend again on your next constellation and any goalposts around potential costs of that project relative to what you spent for your current line?

Question: Aaron Watts - Deutsche Bank - Analyst : Okay. Maybe this is on a related note, as you think about that next constellation, is there any need for the purchase of additional spectrum as you think about the business and how it's evolving?

Question: Aaron Watts - Deutsche Bank - Analyst : Okay. So one last current events item I wanted to cover. You've announced a couple of new contracts recently with your largest customer, the US government, including one with partner General Dynamics related to the SDA and another five -- new five-year deal that expands your relationship with the Space Force. What are the key takeaways here and how should we think about the financial impact of those new deals?

Question: Aaron Watts - Deutsche Bank - Analyst : Okay. So on the government. They are your largest customer; they account for over 20% of revenues. Your largest with them was a seven-year deal, $740 million fixed price contract that expires in 2026. What are you expecting in terms of competition for that contract as it comes up for renewal? There's clearly legacy competitors as well as newer entrants in the space. Is there a risk that the government might look to spread that business around, divvy up the opportunity? Or are you optimistic that Iridium can maintain sole-provider status on that front?

Question: Aaron Watts - Deutsche Bank - Analyst : Great. So the most frequent topic of discussion that we have with investors is around the competitive environment today and into the future, with Starlink obviously being the most disruptive across the space. Can you elaborate on that and how you think about your competitive moat across your various end-user application, including land, maritime, aviation, and other things, all you different touch points.

Question: Aaron Watts - Deutsche Bank - Analyst : And just one more question around this. So in aviation, for instance, Starlink just announced a deal with United to provide free WiFi in all its aircrafts. How do you think about them encroaching on that area? I know aviation's an area that you had kind of highlighted as a growth area for you in the future. Does that change that line of thought at all? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 24, 2024 / 6:20PM, IRDM.OQ - Iridium Communications Inc at Deutsche Bank Leveraged Finance Conference

Question: Aaron Watts - Deutsche Bank - Analyst : Okay. I want to make sure we cover direct to device. Can you talk about where you're at with that opportunity, what investments being made right now and what will be required, and what the timeline is for this effort to have a meaningful impact on revenue and profits?

Question: Aaron Watts - Deutsche Bank - Analyst : Okay. So perhaps we can end on this note. Clearly, there's a disconnect between your view on the opportunity and value of the company and where the market's currently pricing the stock. What do you think needs to happen to get investors on board to get them comfortable with the competitive threats we talked about, and the confidence the same comments that you have in the growth story?

Question: Aaron Watts - Deutsche Bank - Analyst : Yeah. Suzi, Vince, thanks so much for the time today. Very helpful.