Iridium Communications Inc Q4 2024 Earnings Call Transcript

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

Question: Edison Yu - Deutsche Bank - Analyst : Hey, good morning. Thank you so much for taking our questions. So first off, I want to get your kind of latest thinking on the landscape. Obviously, we've got some deals happening on the L-Band side potentially you alluded to the Starlink. Have any of the recent developments changed your thinking on the speed and what you're trying to do in DTD?

Question: Edison Yu - Deutsche Bank - Analyst : Understood. I want to ask a longer-term question on the potential next on the, -- next-gen constellation. I think that you may have made some comments at a recent industry conference about it. One perspective or what angle wanted to kind of maybe get your thoughts on is, have you entertained, or would you consider the possibility of perhaps having a partner or someone else kind of own or handle the CapEx of that future constellation? And then you would take on, obviously the operating role and the market or go to market role, but just this idea of trying to maybe offload the CapEx or the burden of that in the future for this next-gen constellation.

Question: Edison Yu - Deutsche Bank - Analyst : Great. Appreciate the color. Thanks.

Question: Simon Flannery - Morgan Stanley - Analyst : Thank you, good morning. Matt, thanks for all the updates on the D2D. Nice to see that we're heading towards trials here and commercial launch. Could you just give us a few signposts on when this should become impactful from a financial point of view? How do we think about the town? It sounds like you're not necessarily directly going for the voice market here, but more for an IoT perspective. So should we see much revenue benefit next year, or how do you think about the overall market opportunity that you're able to address with your products? And then Vince, just a housekeeping one for you. I think in the past on broadband and thanks for the guidance on '25, you'd sort of said the ARPU would stabilize, after, I think it was four or five quarters, something like that. It'd be great to understand just. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 13, 2025 / 1:30PM, IRDM.OQ - Q4 2024 Iridium Communications Inc Earnings Call Where are we in that sort of transition process to being removed as sort of from the sort of complementary, coming back to the complimentary from people who are using it for more broadband applications. Thanks.

Question: Simon Flannery - Morgan Stanley - Analyst : Is 250 still the kind of the base level we should be thinking about?

Question: Simon Flannery - Morgan Stanley - Analyst : Thanks a lot.

Question: Chris Quilty - Quilty Space - Analyst : Anyways, just to follow up on that maritime point, I think Starlink dropped their progress report at the end of last year, and they indicated something like 75,000 vessels attached, which is bigger than the actual VSAT market is, 40,000, 45,000. Are you seeing any opportunities with assuming those numbers are correct and there's a bunch of incremental vessels, pickups in the backup service, or is it your indication that whatever vessels they're landing are perhaps smaller leisure vessels that would not be an appropriate candidate for a backup service?

Question: Chris Quilty - Quilty Space - Analyst : On commercial voice, subs were down in the fourth quarter, which is an unusual, maybe it was down a little bit more, but what do you look at the prospects for 2025 and the growth drivers for the voice business? Is it still primarily a push to talk driver for that business or are there new services that will be offered?

Question: Chris Quilty - Quilty Space - Analyst : Right, and if I can ask one more, I stopped asking questions about Arion, so I'm happy to hear you guys, promoting it again. Obviously, the biggest missing customer there is the FAA. I don't think anybody knows what's going on in the FAA in the last couple of months, but can you give us maybe a rundown of how that transpired for a while you were testing with them and then the FAA sort of backed out, and what are the prospects for bringing them on a go forward basis.

Question: Chris Quilty - Quilty Space - Analyst : Good luck with that. Thank you.

Question: Ric Prentiss - Raymond James & Associates - Analyst : Hi, good morning, everybody. A couple of questions. One, we did see some stories popping out, I think it was yesterday, about a white hacker having some, success kind of breaking into the government network with you guys. Can you talk a little bit about what that story might be alluding to or what is going on with the government contract? I have a couple of follow-ups.

Question: Ric Prentiss - Raymond James & Associates - Analyst : Then following on Simon's, question on the non-terrestrial network and timing, how do you view the different kind of segments of what directive device, whether it's smartphones, tablets, cars, computers, how would you kind of think where the Iridium solution might play best as we think about the tan and the kind of the segments?

Question: Ric Prentiss - Raymond James & Associates - Analyst : Right, you've been doing this as long and longer than I in the satellite side, but you get that question a lot, will these satellite solutions actually be a replacement for wireless?

Question: Ric Prentiss - Raymond James & Associates - Analyst : I think, good to hear that directly. Last one for me, mentions to tell us any other M&A out there as we think about that billion-dollar source revenue target in 2030, what other M&A opportunities might be out there?

Question: Ric Prentiss - Raymond James & Associates - Analyst : Great, thanks guys.

Question: Hamed Khorsand - BWS Financial - Analyst : Hey, good morning. So the first question I had was, on this tell us topic, it's within the hosted payload. So does that, it went down sequentially. So it's not a linear growth kind of rate. So what is your outlook for '25 and, what's how is the latter as far as getting to your, projection of, I think it was $100 million in revenue for it. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 13, 2025 / 1:30PM, IRDM.OQ - Q4 2024 Iridium Communications Inc Earnings Call

Question: Hamed Khorsand - BWS Financial - Analyst : Okay, is that going to be the main source of growth in your services guidance or is there other moving pieces?

Question: Hamed Khorsand - BWS Financial - Analyst : Okay, my last question was, yeah.

Question: Hamed Khorsand - BWS Financial - Analyst : And my final question was, what is the comfort level as far as cash balance and what should we assume as far as your buyback activities is concerned?

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

Question: Colin Canfield - Cantor Fitzgerald - Analyst : Hey, thanks for the question. Could we maybe unpack a little bit, directed device constellation plans? I know you had said beyond 2030, is kind of the marker there, but maybe talk a little bit about how any plans interact with your $3 billion free cash flow targets and maybe even fleshing out a little bit of recent moves with respect to capitalization of R&D.

Question: Colin Canfield - Cantor Fitzgerald - Analyst : Sure, so the concept is you guys reaffirmed the free cash flow target, right, the view that out into 2030 you'll generate $3 billion of free cash flow, and there was some movement within the corner around kind of or we'll call it with the CapEx outlook with respect to capitalization of R&D. And so the question is how the new constellation plans interact with that $3 billion cash flow target. Thanks.

Question: Colin Canfield - Cantor Fitzgerald - Analyst : Got it. And then maybe unpacking the subscriber count mechanics a little bit. It seemed like the commentary suggested expansion beyond 2025 for revenue. So maybe just talk a little bit about the dynamics there that enable growth in that customer beyond 2025.

Question: Colin Canfield - Cantor Fitzgerald - Analyst : Got it. And then the last one for me, but maybe across commercial and government customers just discuss the kind of element of national security. It's a factor within that, and how customers are thinking about the market in terms of subsidizing, things that might be lower price or higher price when considering the importance of their we'll call it national or network security. Thank you.

Question: Colin Canfield - Cantor Fitzgerald - Analyst : Got it, thank you .

Question: Walter Piecyk - LightShed Partners - Analyst : Thanks, Matt. I first want to go back to Rick's question on the $100 billion, excuse me, the billion-revenue target in 2030. He framed that question as if acquisitions have to be a part of it to get to a billion dollars. Is that true or would acquisitions be incremental to the billion dollar 2030 revenue target? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 13, 2025 / 1:30PM, IRDM.OQ - Q4 2024 Iridium Communications Inc Earnings Call

Question: Walter Piecyk - LightShed Partners - Analyst : Okay, I guess I'm trying to ask the question this way, if as I mean, some analysts just forecast acquisitions in, I guess we used to do that in the old days with Cisco cause they would make regular acquisitions. But like, if you're trying to come up with the value of the company today, I can't assume acquisitions are going to occur. I don't know what the price is going to be, how it can impact the capital structure. So if I'm going to assume no acquisitions, should I not be assuming you hit a billion in revenue in 2030?

Question: Walter Piecyk - LightShed Partners - Analyst : Okay, and then on the government, line, yeah, -- I think there was a reference in terms of the guidance at least for growth there, maybe [MSA] misheard that, but I think you have a 7-year contract that's stepping down this year. So is the anticipation that there's new business coming in that's going to offset that or are you going to be more heavily weighted in the first half of the year, and then we'll see a step down in the second half and that 7-year contract hits it's kind of last 3 years.

Question: Walter Piecyk - LightShed Partners - Analyst : Got it. So then, -- so it sounds like it's going to be pretty stable across the, each quarter of the year to get to the growth overall in the year, there was also mention of maybe lower margins. When you put together the higher revenue with the lower margins, is, and you look at kind of what gross profit would be for government, does that mean there's growth or there's, -- or should there be contraction in gross profit? Like how much of a margin step down would there be this year in that segment in the context of gross profit contribution?

Question: Walter Piecyk - LightShed Partners - Analyst : And then just lastly on Arion, given your kind of bullishness about the outlook there, is there an operator? First of all, are you still in this kind of 27% equity stake in there and is there an opportunity to increase that stake with that company and then alternatively, Can you give us some, 10,000-foot level of, like, where are their finances today? Are they going to be in the capital markets, raising money to give us some mark on, where the market perception is of their value is today?

Question: Walter Piecyk - LightShed Partners - Analyst : So basically, restructure it so you don't get those the upcoming payments and then you jack that 27% up higher?

Question: Walter Piecyk - LightShed Partners - Analyst : I assume they're generating operating cash flow now they're just not to the point of distributing or giving distributions to the shareholders is that.

Question: Walter Piecyk - LightShed Partners - Analyst : Yeah, okay, 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. FEBRUARY 13, 2025 / 1:30PM, IRDM.OQ - Q4 2024 Iridium Communications Inc Earnings Call

Question: Greg Mesniaeff - Kingswood Capital - Analyst : Yes, thank you for taking my question. I want to circle back to the question of increased seasonality that you talked about more than once so far. Do you see that being really to a large extent, the function of your resellers, or is that a general customer trend that will continue, over time. And assuming it is, what will be the impact on the pricing of annual plans if more customers opt for the monthly options. Thanks.

Question: Greg Mesniaeff - Kingswood Capital - Analyst : You don't foresee any impact on pricing of annual plans to create an incentive to minimize that seasonality.

Question: Greg Mesniaeff - Kingswood Capital - Analyst : Got it. 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. FEBRUARY 13, 2025 / 1:30PM, IRDM.OQ - Q4 2024 Iridium Communications Inc Earnings Call

Question: Mathieu Robilliard - Barclays Capital - Analyst : Yes, good morning. Thank you for the presentation. I had a question about Spectrum. So recently we've seen a transaction in the L-Band, and I don't know if you looked at that opportunity or not, but I guess the question is broader. How do you feel about your spectrum assets? Clearly it doesn't seem to be a constraint today, but maybe tomorrow as you come up with a more powerful consolation or consolation with more capacity. So maybe if you could give us a bit of color on to how you think about your spectrum position and going forward.

Question: Mathieu Robilliard - Barclays Capital - Analyst : That's very clear. And if I can follow up on Spectrum, as you've showed, L-Band has some really valuable attributes for quite a number of customers, very reliable, notably, but I was wondering when we look at the pace of innovation in the sector currently, whether that unique attribute can't be competed away by more powerful satellites. For example, that make the signal even in other bands very secure. I realize there's a lot of regulatory approval. I mean, you don't put something in the cockpit without lots of testing, and these things take time, but I wonder how to think about that going forward.

Question: Mathieu Robilliard - Barclays Capital - Analyst : Thank you, that's very clear.