Iridium Communications Inc. Q3 FY2025 earnings call

• Matt Desch discussed the satellite industry changes, including the EchoStar Spectrum acquisition by Starling and its potential disruption. He emphasized Iridium's focus on unique specialized services, investment in Iridium NTN Direct, and opportunities in industrial-grade IoT, PNT, maritime, aviation, and autonomous systems. • Vince O'Neill reviewed financial results, noting operational EBITDA growth, service revenue trends, adjustments to service revenue and OEBITDA guidance due to PNT revenue timing, leverage position, dividend payment, and capital expenditures. He also highlighted trends in commercial lines of business and ongoing work with the U.S. government.

Operational EBITDA was up 10% in the third quarter to $136.6 million. Commercial service revenue: voice and data revenue rose 4% to $59.9 million; commercial IoT revenue totaled $46.7 million, up 7% year-over-year; commercial broadband was down 17% due to a non-renewed nonmaritime contract; hosting and other data services revenue was $18.7 million, up 14% year-over-year; government service revenue was up modestly to $26.9 million. Subscriber equipment sales were $21.5 million, down marginally from the prior year's quarter. Engineering and support revenue was $40.2 million, up from $30.7 million in the prior year period. For 2025, service revenue growth is forecasted at approximately 3%, and OEBITDA guidance is narrowed to between $495 million and $500 million.

• 2025 service revenue growth is forecasted at ~3% and OEBITDA guidance is between $495 million and $500 million. • Pro forma free cash flow for 2025 is projected to be about $304 million with a conversion rate of OEBITDA to free cash flow of 61% and a yield approaching 18%. • Pausing share repurchase program to emphasize strategic growth initiatives and continue deleveraging. • Expecting to generate at least $1.5 billion to $1.8 billion in total cash flows from 2026 through 2030.

• Increased competition in the satellite market due to new entrants like the EchoStar Spectrum acquisition, which could affect revenue. • Potential impact of new D2D services on revenue, especially in areas like IoT where competition may intensify. • Timing issues with PNT revenue realization, as initial projections were delayed due to external factors beyond Iridium's control.

Q: What is the time line for M&A actions and are you looking for different types of targets post recent events?

A: Matthew Desch said they have been looking at complementary areas, can't comment on specific timing, but will focus more on M&A going forward.

Q: Which business lines are insulated from competitive risk and which are most exposed?

A: Matthew Desch said no business is completely insulated, but areas like cockpit safety, maritime safety, PNT, industrial IoT, and government are relatively insulated due to barriers to entry and long-term relationships.

Q: What is the nature of the deal with Deutsche Telekom and the threat/opportunity of D2D for IoT?

A: Matthew Desch said the deal with Deutsche Telekom is roaming arrangements for their customers to roam onto Iridium's network, and D2D is a nascent market with multiple partners, seen as a net positive with market expansion potential.

Q: What is the timeline for chipsets and the Deutsche Telekom roaming partnership going live for narrowband nonterrestrial network solution?

A: Matthew Desch said chipsets will be available in 2026, and the service is planned to be available in 2026 with testing ongoing, likely in the latter half.