Iridium Communications Inc Q3 2024 Earnings Call Transcript

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

Question: Ric Prentiss - Raymond James & Associates - Analyst : Thanks. Good morning, everybody. Hey and Tom congrats on the retirement news, but keeping on the board, we've known each other gosh, almost 20 years between Iridium and Centennial. Vince, wish you well as we work together in the future.

Question: Ric Prentiss - Raymond James & Associates - Analyst : A couple quick ones. First, obviously you raised the low end of the OEBITDA guidance. The beat was pretty significant in the quarter, talk to us about kind of how you looked at what you did in the quarter versus what you're looking at for the year with just one quarter left. And how is the spending trends on directed device personally?

Question: Ric Prentiss - Raymond James & Associates - Analyst : Okay. Second question is on service revenues. You narrowed it down to say about 5% now on service revenue growth. But Matt, I thought I heard you say something in the opening comments about strong quarter revenue and sub ads and maybe a high end of guidance. What were you alluding to there?

Question: Ric Prentiss - Raymond James & Associates - Analyst : I got you. Okay. Alright cool. And then appreciate the color on the IoT trends and the customer changing subs but not much revenue impact. But probably the biggest one on have you guys elaborate on the call here is top question we get obviously is competition, you touched on it a little bit here is as people may not familiar with satellites or spectrum or Iridium's position. Can you help us just understand the competition from Starlink or other direct to device type solutions on your different businesses, the legacy voice and data, the IoT, the broadband, the government. There's definitely a lot of people we talk to that don't understand the uniqueness of what it already embraced, but maybe just elaborate a little more on that for us.

Question: Ric Prentiss - Raymond James & Associates - Analyst : Thanks, guys. Again, Tom congrats and enjoy the next day.

Question: Simon Flannery - Morgan Stanley - Analyst : Great. Thank you very much. Good morning and congrats, Tom and Vince and all the best for the future. Matt, perhaps just following up on that last comments there and I think you alluded to this a little bit. I think on the conference circuit you've been talking perhaps about returning to your run rate, growth rates in 2025. I know it's only October but any kind of thoughts around the drivers for next year? You've obviously won some new contracts here. It would be great to get more color on how the new SDA award flows in over time. And then just a couple of questions on ARPU, if you could just elaborate on what's going on with broadband ARPU and voice ARPU, that would be great.

Question: Simon Flannery - Morgan Stanley - Analyst : Great and just one last one, I think you called out the Satelles helping hosted payload. Can you just give us a little bit more color on what the contribution was.

Question: Simon Flannery - Morgan Stanley - Analyst : That's helpful. Thanks.

Question: Simon Flannery - Morgan Stanley - Analyst : Thank you.

Question: Edison Yu - Deutsche Bank - Analyst : Thank you, Matthew. Thank you for taking our questions and congrats to the time events going forward.

Question: Edison Yu - Deutsche Bank - Analyst : So, just first question is a follow up to the last one. On the ARPU, we noticed that the broadband ARPU actually improved a bit sequentially. Is that a good kind of run rate now for 4Q.

Question: Edison Yu - Deutsche Bank - Analyst : Okay. Got you. And then on the -- I believe there's the new aviation service product should be rightly upload to be soon. Any updates on how that might contribute, the timeline contribution 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. OCTOBER 17, 2024 / 12:30PM, IRDM.OQ - Q3 2024 Iridium Communications Inc Earnings Call

Question: Edison Yu - Deutsche Bank - Analyst : Understood. And just last one, I wanted to check on the comments made about the IoT customer. I think you said that it will grow in '25 and '26? Just want to confirm that in any sense on sort of the magnitude?

Question: Edison Yu - Deutsche Bank - Analyst : Great. Thank you.

Question: Walter Piecyk - LightShed Partners - Analyst : Thanks, Tom. You spent some time talking about this customer. So obviously, this is a material customer in IoT in terms of helping to give color on net ads versus revenue. But you also said that there is going to be the words you use were up materially in 2025. So if that's a large customer, if you're actually noting it on your earnings call, your guide, I think, for '24 in IoT was low teens, you look to be tracking more towards high teens at least for 2024. So if that's up materially, is that implying that there's an opportunity to accelerate growth further in IoT in subsequent years?

Question: Walter Piecyk - LightShed Partners - Analyst : That was my question. And is it, just to try and go at it again, maybe not '19, but just to get a sense of IoT. Is this just a customer comment where you're trying to get more color on net adds? Or is -- are you trying to make a broader comment about the health of the IoT business?

Question: Walter Piecyk - LightShed Partners - Analyst : Got it. And then on the hosted payload just to go back to that. The business that you're getting that's layering on there now. I assume is recurring revenue business and that, again, giving you $100 million target is going to continue to grow sequentially, effectively, right? So if you look at -- if I just looked at the first quarter when you have the accounting change and where you're at now, it basically implies an incremental $10 million of revenue relative to I guess, the five run rates. That's kind of reflective of the growth rate to get you to the $100 million is what I'm thinking. But just to be clear, I just want to verify that Satelles revenue that's layering on top of hosted payload line is just going to continue to build from there. There should not be lumpiness other than upward lumpiness in that in the incremental revenue that Satelles is going to be adding to that line. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 17, 2024 / 12:30PM, IRDM.OQ - Q3 2024 Iridium Communications Inc Earnings Call

Question: Walter Piecyk - LightShed Partners - Analyst : Great. Thank you.

Question: Hamed Khorsand - BWS Financial - Analyst : Hi, good morning. So the first question I had was this latest GMDs contract that you've announced? Is that incremental as being new services, or is that purely replacing the old one? And does the new contract actually use more of your services or is it just the same one? But it's paying you more for the service?

Question: Hamed Khorsand - BWS Financial - Analyst : The GDMS, sorry.

Question: Hamed Khorsand - BWS Financial - Analyst : Okay. And my other question was on the net additions in IoT, is there any obvious changes as far as the end market customer is concerned? Or is it still the same relatively?

Question: Hamed Khorsand - BWS Financial - Analyst : And did you see that this past quarter?

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

Question: Chris Quilty - Quilty Space - Analyst : Thanks Tom, Matt, speaking of new products, I know you had talked earlier this year about the -- on the aviation side, safety service certification and you've got a number of partners that are releasing products. Does it look like those will happen sort of in parallel or are we facing a situation where you may have certification but not products or vice versa in the market? And again, you still on track to get that certification this year and what sort of growth potential does that hold for you next year? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 17, 2024 / 12:30PM, IRDM.OQ - Q3 2024 Iridium Communications Inc Earnings Call

Question: Chris Quilty - Quilty Space - Analyst : Got you. And is that entirely aftermarket? Or is there a line fit potential for those product lines?

Question: Chris Quilty - Quilty Space - Analyst : Got you. And so like aviation, it's been five years since the last Iridium next satellite was launched and you're still, pushing GMDSS in terms of finally moving towards the certification and getting the products out that have the higher data rates. Can you talk about where you see that market going in terms of -- there's two dynamics. One is, you've got an upgraded product and really one competitor for that, but you also have the dynamic of LEO or StarLink, which is penetrating new vessels that historically, have never had communications. And what are you doing to try to position yourself as the backup in that market?

Question: Chris Quilty - Quilty Space - Analyst : Got you. And final question for Tom. Back to the quarterly results here. I'm just a little confused because the in the maritime and the service, your subs were down by 100 sequentially. And we were sort of conditioned to believe that the subs that were dropping were moving from a very high ARPU Iridium only to StarLink and yet, you lost subs and the ARPU went up relative to expectations? Was there any one time items in there or any anything unusual in the quarter?

Question: Chris Quilty - Quilty Space - Analyst : Great. Thanks Tom. We'll, miss you kinda and be (inaudible)

Question: Louie DiPalma - William Blair - Analyst : Good morning and Tom and Vince, congratulations to you both. Tom, it was a pleasure to work with you over the past 13 years and I guess we're going to continue to work together as you are staying on the board to help navigate the company through the next generation constellation, which is great. My question echoes some of the earlier questions as it relates to the broadband segment as the results there were better than expected during the quarter. And I think earlier this year, Matt and Tom, you conveyed an expectation for broadband to return to growth in 2025. And I was wondering if, this quarter's results and the dynamics that have taken place reinforced that view.

Question: Louie DiPalma - William Blair - Analyst : Great. And one final one. Has business development activity picked up for Satelles since you made the acquisition, especially with all of the geopolitical conflicts and the very active like spoofing of GPS signals. Can you just talk about what's happening with Satelles?

Question: Louie DiPalma - William Blair - Analyst : Sounds great. Thanks Matt, and thanks everyone.