Iridium Communications Inc. Q2 FY2025 earnings call

• Revenue Guidance Adjustment: Service revenue growth outlook revised from 5%-7% to 3%-5% due to maritime broadband transitioning to companion service, voice subscriber reductions from canceled USAID funding, and delayed PNT revenue to 2026.
• Maritime Broadband: Transition to companion service is causing a 1 percentage point drag on service revenue growth, but remains a cash flow contributor.
• PNT and D2D: Strong interest in PNT with revenue moving to 2026. D2D service (Iridium NTN Direct) on track for 2026 launch, with partnerships like Syniverse to enable global rollout.
• Government Work: Strong relationship with U.S. government, new contracts, and growth in engineering/support revenue.
• Investments and Products: CapEx of $90 million for satellite software, ground infrastructure, and corporate HQ move. Focus on IoT, PNT, and D2D as key growth pillars.

Commercial Service: Service revenue was $128.8 million, up 2%, led by IoT growth at $44.8 million (+8% YOY). Voice and data revenue was $56.8 million, up 1% YOY. Commercial broadband revenue was $12.7 million, down 6% YOY due to maritime companion service transition. Posting and other data services were $14.5 million, up 1% YOY with PNT revenue contributing. Government Service: Revenue was $26.8 million, up modestly due to the EMSS contract step-up. Subscriber Equipment Sales: $19.5 million, down 15% YOY but expected in line with 2024. Engineering and Support: $41.9 million, up from $25.8 million YOY due to work with Space Development Agency and new U.S. contracts.

• Service revenue guidance revised to 3%-5% growth from prior 5%-7% due to various factors. - Operational EBITDA expected to grow midpoint of 5%. - Pro forma free cash flow projected over $300 million in 2025, with a conversion rate of OEBITDA to free cash flow of 61% and yield approaching 10%.

• Impact of maritime broadband transitioning to companion service on service revenue. - Delayed timing of PNT revenue to 2026. - Voice subscriber reductions from canceled USAID funding.

Q: On service revenue reduction guidance, where does ARPU for maritime stabilize and will impact continue into 2026?

A: Matt Desch said ARPU stabilization not defined, impact likely extends into 2026, but broadband is a solid foundation.

Q: Size of PNT revenue slip and cause?

A: Matt Desch said it's a small number, revenue moved to 2026 due to early stage of growth.

Q: Update on Aireon and FAA?

A: Matt Desch said Aireon data used for safety info, but FAA funding initially for replacing old facilities, not immediate Aireon deployment.

Q: IoT data line growth?

A: Vince O'Neill said double-digit growth expected in second half with specific events, Matt Desch noted strong IoT activity and new devices.

Q: PNT customer acquisition pattern?

A: Matt Desch said pricing diverse, starting with trials and expanding to larger volumes.

Q: Pace of revenue growth in second half?

A: Matt Desch said second half growth based on first half and guidance, next year building on current growth.

Q: New constellation plans?

A: Matt Desch said evaluating alternatives, including overlay network and new spectrum partnerships.

Q: T-Mobile launch impact?

A: Matt Desch said Iridium NTN Direct complements regional services with global coverage.

Q: Partner network expansion?

A: Matt Desch said focusing on larger partners, including mobile network operators, within SG&A envelope.

Q: Syniverse partnership?

A: Matt Desch said Syniverse helps roll out Iridium NTN Direct by connecting to cellular infrastructure.

Q: Government budget and PNT growth?

A: Matt Desch said PNT growth is step function, dependent on regional capabilities.

Q: Iridium moats?

A: Matt Desch said PNT service cost-effective, L-band and LEO advantages provide edge.

Q: SG&A and R&D?

A: Matt Desch said R&D down due to program shift, SG&A flat to low single-digit growth.

Q: GMDSS and ARPU?

A: Matt Desch said GMDSS terminals coming, stabilizing revenue as companion service.

Q: D2D and future services?

A: Matt Desch said D2D service beyond messaging, using 5G/6G standards for richer consumer experiences.

Q: Government opportunities like Golden Dome?

A: Matt Desch said discussions ongoing, but no specific contracts yet.

Q: Tariffs impact?

A: Vincent O'Neill said tariff impact less than $1 million this year, minimal overall.