Iridium Communications Inc Q1 2025 Earnings Call Summary

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

Question: Richard Prentiss - Raymond James Ltd. (Canada) - Analyst : Good morning, everybody.

Question: Richard Prentiss - Raymond James Ltd. (Canada) - Analyst : I appreciate the color on tariffs. Obviously, a very fluid and volatile time. That really helps us understand it on the cost side. But it sounded like, Matt, if it's just the 10% tariff stuff, you would prefer not to raise prices to the customer at the time. But as we think longer term, any thoughts on what the tariffs would do to sub-growth or service revenue as an indicator?

Question: Richard Prentiss - Raymond James Ltd. (Canada) - Analyst : You're making the supply chain changes too to help mitigate some of that. Okay. The DOGE cuts and the government efficiency stuff might be a little more firm. Since you've seen some of those changes, we did note this quarter the government subs were down. Was that the USAID or was that on the commercial side? And what maybe drove the change in government subs?

Question: Richard Prentiss - Raymond James Ltd. (Canada) - Analyst : Okay. And Vince, you called out that we should expect some legacy voice and data price actions in the second half. Historically, every five years, you've increased it maybe 10%. Should we think this as kind of more in that low single-digit increases that might happen annually instead of just such a long wait, step-function long wait? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 22, 2025 / 12:30PM, IRDM.OQ - Q1 2025 Iridium Communications Inc Earnings Call

Question: Richard Prentiss - Raymond James Ltd. (Canada) - Analyst : Makes sense. The last one for me is, you touched on obviously the direct-to-device items. You might start seeing some service revenues, it sounds like in '26 as you go through the summer '25 trialing. But how should we think about how that ramps up? And

Question: Richard Prentiss - Raymond James Ltd. (Canada) - Analyst : Great. Thanks, everybody.

Question: Edison Yu - Deutsche Bank - Analyst : Good morning. Thanks for taking our questions. First just on the tariff situation, I know you called out the $3 million and $6 million to $7 million. Is that an impact for basically half the year? And then if they continue, we'd have to roll it through for the full year next year? Or what's the, I guess, assumption on the timing of when that hits?

Question: Edison Yu - Deutsche Bank - Analyst : Understood. Higher level question, obviously, a lot of geopolitical shifts happening. I think for the most part, we see a lot on the Ka-band side, especially in Europe, given the political developments. I guess, how do you see that or how do you think this could manifest, if at all, on the L-band MSS side? I realize it's much different market dynamics, but curious if you have any views there.

Question: Edison Yu - Deutsche Bank - Analyst : Understood. And just last quick one on aviation service, do we have a -- I guess what's the latest update there? Should we expect a ramp in the second half?

Question: Edison Yu - Deutsche Bank - Analyst : Great. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 22, 2025 / 12:30PM, IRDM.OQ - Q1 2025 Iridium Communications Inc Earnings Call

Question: Colin Canfield - Cantor Fitzgerald - Analyst : Matt, I thought your comment kind of comparing 2020, 2025, and 2008 was pretty prescient. So maybe if you could talk about kind of previous lessons and digging into lessons from 2008 around Iridium's product portfolio act as somewhat of a consumer defensive. And then maybe some commentary around 2020 and discussing the trends you saw there regarding consumer electronic (inaudible) relative to maybe the perception of a softening consumer environment.

Question: Colin Canfield - Cantor Fitzgerald - Analyst : Got it. And then maybe one exercise, but kind of the way that you think about true government exposure for the total business. I think a lot of folks look at the engineering line and they look at the pure play government contract line, but don't I guess particularly appreciate the level of government exposure on the civil side, public safety, stuff like that. So is there a rough way to think about what the total government exposure for the business is, not just direct to sales, but like what is the end the use case of all the products?

Question: Colin Canfield - Cantor Fitzgerald - Analyst : Yeah. Okay. And then lastly for me, but maybe conceptually talking through, I know this is still like early innings on all PNT, but conceptually talking through how you think about like pricing mechanics and pricing levers. I think that one of the things that people kind of focus on is the dynamic of assured access and how national security in this environment is very much kind of a priceless feature, right? So maybe talk about kind of what you're seeing from new adders in the government domain. How you think about that mechanic works relative to a jam environment? And then maybe like talking and trying to longer-form view the business of how you think of like the functionality of you're a hot versus cold environment, from a war fighting perspective.

Question: Colin Canfield - Cantor Fitzgerald - Analyst : Got it. Thank you for the color.

Question: Hamed Khorsand - BWS Financial - Analyst : Good morning. First off, I just want to see what kind of response you're seeing from your partners as far as equipment goes. Are they stocking more? Do they want to stock more? And what kind of level of conversation you've been having with them?

Question: Hamed Khorsand - BWS Financial - Analyst : And my other question was, as far as engineering revenue is concerned, this was the second quarter in a row with $37 million. Is that going to be the same going forward? I mean this revenue line used to be very lumpy. Could you just provide a little bit more details about that?

Question: Hamed Khorsand - BWS Financial - Analyst : Great. Thank you.

Question: Chris Quilty - Quilty Space - Analyst : Just to follow on to that last statement around the shift from build-out to service, does the margin profile or the -- I should just say the margin gross profit contribution change dramatically when you shift from build-out to service or does low margin build-out equal high margin but smaller service revenue? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 22, 2025 / 12:30PM, IRDM.OQ - Q1 2025 Iridium Communications Inc Earnings Call

Question: Chris Quilty - Quilty Space - Analyst : Okay. Great. Circling back -- sorry, one more question on equipment, customers have not been necessarily stocking inventory, but Vince, you guys kind of ran up your inventory which was historically like $30 million to $40 million even post-COVID, up to the $80 million to $90 million level in late '23 and it's kind of stayed at those levels. Does that inventory, and it's sort of comparative advantage of the tariffs you paid, become a use or source of cash, you work that down from the inventory? Or does the build-up of the 3PL in Europe sort of offset any inventory optimization you might drive?

Question: Chris Quilty - Quilty Space - Analyst : And one other sort of inventory hardware question. As you move to the NTN Direct, I mean, currently, you source chip, build board, sell to (inaudible) and bars that build stuff ostensibly as you move to an NTN model, does the need for hardware diminish or go away because these all become standard D2D or IoT devices that exist?

Question: Chris Quilty - Quilty Space - Analyst : Great. And final question just related to the safety services, both maritime and aero where you've picked up certifications last year. Is there any opportunity to sort of jump start customer adoption in those products? I think you would claim relative advantage relative to your one competitor on sort of hardware and throughput and whatnot. Or is that simply a market where customers don't replace existing terminals, you're really just selling into the new market of new things that are being configured and set up with the GMDSS or aviation safety services? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 22, 2025 / 12:30PM, IRDM.OQ - Q1 2025 Iridium Communications Inc Earnings Call

Question: Chris Quilty - Quilty Space - Analyst : Looking forward to it. Thank you.

Question: Mathieu Robilliard - Barclays - Analyst : Good morning. Thank you for the presentation. I had first one on the maritime and as you flagged in many quarters, there's a negative impact from the fact that you're losing some pure connectivity revenues. And I wanted to understand when exactly you expect that to disappear. Because when I look at the quarterly trends of things, it seems it was really a big impact in Q2 last year, a little bit in Q1, or rather it started then. And I was wondering if by Q3-Q4 this year, we could see a stabilization both in ARPU but also in terms of subscribers on that business line.

Question: Mathieu Robilliard - Barclays - Analyst : That's clear. So I guess if we think about maybe some contribution from IRO as you flagged earlier and some sort of stabilization, that's how you're happy to guide for, not a guidance, but to indicate in the previous quarter that broadband revenues would remain

Question: Mathieu Robilliard - Barclays - Analyst : Thanks. And then I had a second question on D2D. You made some comments at the beginning about what coverage, competing services, or new consolations could add to the current threshold coverage. And maybe I got that wrong, but I think you said 10 or 15 percentage points of increasing coverage which, if that's the case, I was surprised it's so low because I understand some of these constellations don't cover, say, the polls, but I would have thought it would be a much bigger extension of coverage for regular smartphones. Did I get your numbers right or is there something you'd want to add on that one? .

Question: Mathieu Robilliard - Barclays - Analyst : That's very clear. Thank you.

Question: Louie DiPalma - William Blair & Co. - Analyst : Matt, Vincent, and Ken, good morning. Should IoT subscribers turn positive later in 2025 after the cleanup is done?

Question: Louie DiPalma - William Blair & Co. - Analyst : Great. And should that contract stay fixed price going forward, is that the expectation?

Question: Louie DiPalma - William Blair & Co. - Analyst : Great. And secondly, should the main CapEx associated with NTN Direct be complete in 2025 in terms of the software updates and modifying your ground network?

Question: Louie DiPalma - William Blair & Co. - Analyst : Great. And one final one, are all of the 75 original Iridium NEXT satellites, do they all remain functional? And you previously extended the accounting useful life, but is there the potential sometime that you also extend the CapEx holiday?