Iridium Communications Inc. Q2 FY2024 earnings call

• Completed acquisition of Satelles in Q2, making Iridium market leader in alternative PNT; expanded STL service to Europe and Asia.
• Work with U.S. Space Development Agency expanding, expected to drive record engineering support revenue in 2024.
• New 5-year EMSS contract with U.S. government, over 50% more revenue than previous contract.
• Repriced term loan saving $4M annual interest; drew on revolver for share buybacks; increased quarterly dividend to $0.14 per share.
• Certified 39 new partner devices in first half of 2024, matching 2023 full-year total.
• Developing Project Stardust for 3GPP standard narrowband IoT services to lower cost of end user devices.

Iridium's second quarter 2024 saw 5% service revenue growth. Commercial service revenue was up 6% to $126 million, with voice and data revenue rising 3% to $56.5 million. Commercial IoT grew 20% to $41.6 million. Commercial broadband fell 4% to $13.5 million. Net new commercial subscribers were 83,000. Government service revenue was stable at $26.5 million. Engineering and support revenue was $25.8 million in Q2, up from $20.6 million in the prior year. Equipment sales returned to normalized levels. Commercial IoT data subscribers now make up 81% of billable commercial subscribers.

• Service revenue growth expected 4%-6% in 2024.
• Operational EBITDA expected $460M-$470M in 2024.
• Affirmed 2024 guidance on service revenue and EBITDA.
• Net leverage guidance increased to below 4x EBITDA through 2026 to support share repurchases.
• Forecast service revenue to reach $1 billion by 2030.

• Dependence on government contracts and funding.
• Competition from Ka-band companies.
• Regulatory challenges affecting satellite operations and services.
• Impact of market conditions on subscriber growth and revenue.

Q: On service revenue guidance, any update from last quarter?

A: Satelles acquisition added less than 100 basis points, still comfortable with 4%-6% growth.

Q: Leverage increase for stock price?

A: Additional leverage exclusively for share repurchases, keeping below 4x EBITDA.

Q: IoT ARPU and competitive positioning?

A: New devices with higher speeds, global service advantage, real comfortable with IoT position.

Q: SG&A reclass and guidance?

A: Second quarter reclass made SG&A higher, will decrease sequentially.

Q: Aviation and other verticals in broadband?

A: Aviation safety business growing, few competitors, Maritime was only impact.

Q: Stardust program partners?

A: Working with partners on network implementation, many companies involved.

Q: Soraya outage impact?

A: Positive impact with Asia Pacific customers seeking alternate solutions.

Q: Aireon update?

A: Positive, expanding team, new products, working on global VHF service.