Iridium Communications Inc. Q4 FY2025 earnings call

Key Points

• Achieved 2025 guidance with service revenue on target and OIBDA growth of 5%. Pro forma free cash flow was almost $300,000,000.
• Discussed four growth themes: narrowband IoT expansion, building on PNT lead, greater national security work with the U.S. government, and disrupting the aviation industry.
• In 2026, will introduce new services and products with over $200,000,000 revenue opportunity by decade end, including Iridium Certus GMDSS companion terminals, a new ASIC for Iridium PNT, Iridium NTN Direct, and a new IoT device.
• Recognized the value of spectrum and considered business alliances to maximize shareholder value. 2026 outlook includes service revenue flat to up 2% and OIBDA range $480,000,000 to $490,000,000 (impacted by incentive comp change).

In 2025, Iridium Communications Inc. achieved its guidance with service revenue on target, growing OIBDA 5% for the full year and pro forma free cash flow almost $300,000,000. For the fourth quarter of 2025, total revenue was $212,900,000, with operational EBITDA of $115,300,000. In the commercial business, service revenue was up 3%, with voice and data revenue up 4% due to a summer price increase, and commercial IoT revenue up 11%. Broadband revenue was $12,200,000, down 9% year-over-year. Hosted payloads and other data services were $13,400,000, up 13% year-over-year. Government revenue in the fourth quarter was $27,600,000. Subscriber equipment sales were $17,000,000, down year-over-year but expected to normalize at $80,000,000 to $90,000,000 annually. Engineering and support revenue was $37,100,000.

Guidance

• Service revenue for 2026 is guided to be flat to up 2%.
• OIBDA for 2026 is expected to be in the range of $480,000,000 to $490,000,000 due to the change in incentive compensation.
• Aim to delever from net leverage of 3.4 times OIBDA in 2025 to about 3 times by year end 2026, with a long-term goal to delever below 2 times.
• Dividend expected to increase, and share repurchase program is paused.

Risks

• Forward-looking statements are subject to risks outlined in SEC filings, including factors that could cause actual results to differ from forward-looking statements.
• Competitive pressures from new entrants in the satellite sector, which could impact market share and revenue.
• Uncertainty in the timing and impact of new growth initiatives, such as the rollout of new services and products.
• Dependence on government contracts and regulatory approvals, which could affect business operations and revenue.

Q: On the decision to make incentive compensation entirely in cash, why was this change made and is it permanent?

A: The change aligns with shareholder interests and more industry norms. It is a move to better align employees with shareholders, and while it affects year-over-year OIBDA comparisons, it is a permanent shift to fully cash-based incentive compensation starting in 2026.

Q: How do you rank the four growth areas and what role could M&A play in these areas?

A: The growth areas include narrowband IoT expansion, PNT lead, national security work, and aviation industry disruption. M&A could be considered in certain areas, such as IoT device development or partnerships, but specific details are not disclosed to maintain competitive advantage.

Q: What are the next big milestones to look for in D2D (Direct-to-Device) services?

A: Milestones include the introduction of the product in 2026, ongoing testing, engagement with chipset suppliers, and mobile network operators aligning with the service to ready it for commercial availability.

Q: What is the expected contribution of PNT to revenue in 2026?

A: PNT is built into the flat to 2% service revenue growth guidance, but there is potential upside. However, it is premature to include specific PNT revenue projections in the 2026 outlook as the timing of deployments is not entirely under control.

Q: When does the spending on a new constellation start and how does it relate to existing spectrum utilization?

A: Spending on a new constellation is expected to start around 2031-2035. Existing spectrum utilization is flexible, and the company can utilize a portion of its spectrum for new services like NTN Direct while maintaining existing services.