Iridium Communications (IRDM) 19 Oct 232023 Q3 Earnings call transcript

Good morning everyone. Welcome to the Iridium Communications' Third Quarter 2023 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions]. Please also note that this event is being recorded.At this I like to turn the floor over to Ken Levy, Vice President of Investor Relations. ahead. go please Sir,

morning, to Good XXXX third earnings call. and Jamie. Iridium's welcome quarter Thanks,

our this are to begin morning’s and on you've results me Joining call I Q&A. morning's Tom of over caution third trust Relations Securities Today's earnings followed on discussion of which by our XXXX. Iridium's an CEO, Fitzpatrick. of call that things this the all turn a to like will Investor meaning section opportunity with may had our quarter forward-looking review to CFO, available Litigation Desch; contain I'd Matt release, is I Matt, the of today statements call participants websiteBefore Reform within Act Private the

statements are future forward-looking the are forward-looking Forward-looking cause and Exchange risks results prospects.Such upon about based subject plans, with could actual statements and and differ our in statements and to our to are are expectations, expectations statements that Commission. filings Securities current not our are discussed from beliefs historical which more and fully Such risks, include statements. facts

financial Principles. me the earnings a accordance most with of for financial Relations cash well turn the including if website Please obligation be conversion. things statements change.During non-GAAP forma future, in be Accounting operational financial Matt. we to to expectations let non-GAAP in measures. further directly the to in Our our while are reconciliation and should measures specifically of not non-GAAP free EBITDA, may and With as Any yield update these disclaim flow even views Accepted only today's considered represent Investor views point prepared release that, GAAP of measures, refer over today section light as today risks. cash our also free of to explanation to we any referring or to measures cash comparable do elect as forward-looking flow so at remarks some the statements free flow, we'll forward-looking pro such and call, Generally our These

billion our Ken. for less morning, out a We we that I growth of Thanks, Investor remain grow Day our generate $X cash to XXXX where business annual that to flow about have generate our would month ability had joined remarks, cash approximately position and Investor by expectations about generate our will laid investors.For in ago, many this our may and the to -- highlight XXXX. through confidence shareholder excited meaningful revenues the revenues Iridium's service business Iridium revenue in capacity those and us ability we have not seven-year listen in objectives everyone. period.During about opportunities our than billion program, know grow subscribers. bullish our for and strong $X Good you business and during very returns opportunity the who to talked strategic our to I Day about and free

through of Iridium's the financial This broader business lines certainly our that strengthen. while number about results economic of leverage the to we support vectors and You to holiday.Despite in today. growth outlook a core market uncertainty expansion end upon based saw business strength the growth, ongoing stability is will CapEx our of decade continues our maintaining

to to a partners saw our pride has be in direct-to-device the business our rate our visible all you challenges on as made player core their government. performing, today's consumer Like competitive of particularly even four fighter, completed cash Adoption new operations Qualcomm program be allow business forecasting news need over capital grow program, that originally years slower this investors understand merge buy Day the more like payment that The that Board's organically our This financial today a for this commitment satellites engineering their Space the and what about with in where smartphones, Agency B, shareholders. without capability in we the interest and we to my focus also $XXX before of do lot they Iridium One added and DoD's deploy, me products.In war our and team drive only and a and the point and way best. all return do the grow weeks continues take ability on years and the to program. our coming as our growing with a results, applications extended a projected, lowered ability can platform than future by a last manufacturers Just but summer our the automobiles, well that Iridium are satellite another our is well.I by million growth expect to for September service also believe but flow. and industry and revenue, involvement to credit to the continued Investor new few we for partnership standout, so. area Day, also Qualcomm. our and business from to this expansion on light facility and with Repurchase growing XXXX.In capitalizing support continue other subscribers, of our remarks September ground of we with network you've the will Force's Term you of and program information keep Loan business the not be We significant which support see I'm year, will of in our dividend be supports should our the that execution with to refinancing prospects to ago, of revenues business meantime, would U.S. for heard our the the XXth or quarterly revenues commercial sure month free adding to maturity provide health Share capital continue the competitors.We will new returns lines Investor short in new my out do in in Development momentum been from XXXX.Given from we to as new as positions a to through past, your more on services strong is questions. earlier confidence I'll extended we prepared based which great is response authorization of Space LEO Proliferated Iridium's broadband Iridium's Iridium government-funded rapid efforts the in continue

Tom Tom? financials. me the review for to our of now a Let call turn over

and X% across from in third generating year's our and all engineering lines business driven XX% of million, updated started hit continued financial on $XXX.X key I'll quarter. commercial up third support and quarter, seeing quarter and prior providing total for business morning quarter. review close in metrics the well support XXXX strengthened quarter, Thanks, Then guidance revenue. and revenue prior revenues.Operational reflects million execute lines from commercial our Iridium EBITDA capital engineering our ongoing This a up the strength lines. Matt, color by and a I'll the some growth good to in by morning the the with of business the trends and get we're year's was the $XXX.X summarizing liquidity structure. our this we The position recap improvement everyone. record in and

how largely date, our quarter XX% benefit subscribers $XX.X by $XXX.X continued personal will revenue new of mix a voice the XX% communications. in year service On driven the from ARPU to of broad-based Growth third $X.XX and and demand $XX.X up we million. for million, was to shifting IoT and grew to business, expect momentum.Commercial with satellite we've million, XX% The been in was increase Revenue this To the side implemented revenue earlier ARPU million. rose data the the to pricing year. $X.X remain commercial pleased the with voice changes this in we commercial mid-XXs.In the reflected continue IoT, received price resulting this during quarter. from was been of has or prior that quarter quarter year

companion chain quarter, and supply equipment input U.S. to now service line primary.Hosting been year's facto been was was prior and in and be standard three-year subscribers VSAT by comparable We commercial with line subscribers, now seeing revenue $XX.X vessels revenue on We X.X million, from increases the last and in in expect down quarter, about quarter, million billable our issues $XX.X in XX% XX% XX% I've year-ago used of for record generates equipment be down in fighting by This account year. had year where service in the to inventory, expecting the million. sales our for are the trends growing IoT usage continue revenue equipment also for quarter like certain XX% reflecting partners a Government of it with the biggest relative of it full third of the the steady additions. adopted Certus XXX,XXX before, the $XXX last to for year we and average. now of at As for partners, XX,XXX the quarter, from lower consistent to resolved consumes.Commercial terms third updated from up sales XXX% maritime, we year.XXXX from data period. channel government.Subscriber subs to net IoT though represent quarter we hosting network last comparable year-ago the representing But another the million from contracts. third to with discussed fourth services down full business revenue $XX resources new service XX% with last being grew IoT grew Similar year's in plans million, not Iridium our fueled with was Certus XXXX. data history. was million this in our EMSS our the estimate Based at had revenue Iridium the was we quarter quarter consumer-oriented to one this a benefit broadband outlook. on the the as Contract period de from as we have commercial $XX.X equipment our users.Commercial that sales

for updated OEBITDA. sales is latest fully Our estimate estimate for XXXX our in equipment reflected

prior based with equipment more now While year and quarter is the be historical averages. be increase Development comments milestone upon engineering levels the but $XXX expect was million down be this highest Day. our and above record.Going the expect quarter the to to XX% updating Space for EBIDTA trends continue as through in upon fluctuate year.We for Engineering Based we're to line recent U.S. sales and from forward, the from the in will reflects compared last we we to execution and support third $XX.X our year, Agency October, revenue third at won moderate significantly government The XXXX, historical in we seeing results expect service quarter to to operational to to million work related year equipment $XX.X expect contract million that up to will to revenue XXXX with XXXX between into guidance quarter full and this revenue in approximately we're $XXX and remain million. on consistent sales our second period. normalized This growth ongoing year Investor achievements. our

cash You'll note first up we September of of was growth up to payments a as for cash for consistent to to a liquidity XX% equivalents program. year, has year-over-year continues to SG&A been in an board's and flow versus the the this repurchase capital share that XX, the and was XX% support confidence This source expectation million. XXXX, growing full our $XX.X and cash quarterly quarter and Iridium had quarter. SG&A year.Moving rates dividend be moderation throughout active with expect Iridium's of position continue in in balance our our X%

share billion incremental our common stock the now to holders $X.XX common purchased the price on about in our the a XX, we for has average at since XXXX.Iridium $XX on the million September continue end early per and approximately $X X.X a third approximately common in these also paid XXXX. in repurchase of $XXX.X $XX to share outstanding million at authorized cash of and program $XX.XX In will We million. shares their an quarter had million about of program execute capacity of X.X total at third authorization was OEBITDA down even repurchase quarter quarter. times program expects on July, a the of our approximately quarter, earlier, factoring third was started share This leverage dividend With when net activity. this buybacks X.X year of from the will in end of buybacks.Iridium's board dividend of return and times in

expectation times of is XXXX. share net decline the investor our net quarter dividends about and at expenditures current $XX on inclusive buybacks.As we two we below we day, Our expect as the million. for of quarterly OEBITDA leverage times three said expected third OEBITDA end to in be to to Capital leverage were exit XXXX,

and We expect between $XX annual $XX average capital million through million expenditures to XXXX.

million.These expenditures we a our OEBITDA flow considers a a of X%. free launch-related forma fall CapEx of hosted website.In we flow our to our million of balance off XX% to use these we Excluding relations and this almost increase about measures, closing, equipment remains to yield line $XX growth. rate years, is few investor forma than in of partnerships and with events GAAP approximately conversion payload adjustment, of prospects continues announced and Iridium’s $XXX and description EBITDA, in over detailed its for perform interest, on this net if many the working available million this along and inventory next a our XXXX, capital cash of should for year in long-term and well. costs, strong, back as A a excited strength projecting more more our very for XXXX in and we're metrics free the as the cash XXXX's ongoing under with appropriate pro the presentation flow reconciliation year, cash Demand million metrics, pro in services LBAN represent flow, capital, which $XX updated in declining business supplemental guidance free remain well cash midpoint forecast.Turning and the in $XX

and review strategic Tom? the of to the I'll for continue our back turn to things me call as our are Tom incredibly Q&ASo now capital operator position to that, We a return make our to investments.With shareholders to and financials. excited about a future fund are new in we good over the turn let projects for

[Operator Instructions]Our from from first Prentiss Ric question James. today Raymond comes

Good we info, questions. think directed in can directed everybody. quarter you so year? maybe been very you obviously and us slower couple $X device in previously come far to you Can I year-to-date expect A Qualcomm you how come predicted, this interested that morning, in -- you I than said understand but far Matt, us of to in has said update this help million know are as all $XX you mentioned it's million the and as year. much device

to you that. this? we're Tom, want No, take assembling just

don't to you Yes, $XX have it's the $X to in We'll the full Ric. quarter back with on I have double year. that. information,

Okay, that's fine.

expect We continue to in $X development revenues. Right. its to $XX

Right.

dark. in think Is to phone to side, model your royalties towards it to phone? the ships when try understand try enables it phone of customer the it and buys from OEM? the moving the the the Is and into timing when goes the this Just when chip we coming it? revenue? of as the Is the ability to the logistical then timing we As chip what's recognize that you

orders a used, revenue. revenue. we we device are Then on chip. of other when that's $X when that the tranche. milestone-related to okay. paid and the when is what network, Qualcomm per finally, revenue. That work is done, royalty development entitle usage for that it's the development entitle, revenues chip we've we Then Then $XX, That's The when our get there's element a

revenue, is the to entitlement Is or the going to be services? of part E&S rolling Okay. that

That's access, that Ric. services. of Think as

cash a and it, quarter. access Then balance That bit Monthly little came get for you Right. helps. when you thing, type then down charged usage. use your this

the sheet you production money to obviously, look the we should be think keep refi as How to your of kind the the, flow buyback? kind your business we did to cash run on hit much ability at the want free there. debt in what balance You and would stock of

$XX by was million comfortable $XX cash it buybacks. the We year quarter. quite down were We're of this $XXX the We end of at million. end there. from took balance share million

for though. are also voice seems competition's good to you How far business and as it's a able day, raise the as legacy tough business last comp service. to Obviously, and you on at the get still and is provide data versus you year. handsets to be Then it think grow revenues? in investor mentioned, and one runway I competition not the you've like in competitively got there the feeling that like because me year this legacy some the voice the going Okay. prices next to prices, past, data It sounds raised looking you're ability

Yes.

perform be. than very this to over the The better I which well, of certainly continues price think demonstrates continues with strength else's. We're well year, we expected positioned really increase offering anyone to there. business it certainly a our

that for to thing, and Push new all Given we've those added with us there, like Go well. products Talk the and in are that offerings vectors growth as

be terms continued right. It'll future. next in the year you're think see absolute So out to of but growth, growth going tough I you're year-over-year a in comp

next comes BWS. Our Hamed from question Khorsand from

Could Hey, expecting composition? QX? Did good Are change that to talk that IoT the in just change you customer anytime you soon? morning. about

solutions Given literally our period and could extensive change of some a thousands might stronger the summer there, contracts consistent and time heavy be it's and doesn't of very otherwise, It's perhaps quarter quarter. of to be consumer over little while There partners little and and very much the over that There's long quarter. history oil partners it's a talked space, gas just more are consistent. to potential hemisphere that but it's that outdoor, in certainly it have driver doing quarter in northern of experimentation hundreds with specific single perhaps in the really, new anything really past vectors quarter the some growth to transportation to the lots doesn't manifest area, energy in industries that of beyond. a into slightly and sort do.I've it from activity another, broad-based to or in over better drones systems particularly one about to in in something and itself a autonomous a but IoT we've segment whole, like seen that things on thing, quarter but equipment pretty base we

thought obviously the your strong be? Is that quarter. it on shrinkage is this expectation revenue side, just isn't supply equipment this Then enough this resellers as demand would because there's Okay. shrank out there or it your as

Yes, latter. The it is.

think reason I year was also not be be detail because while they as were year. supply out ever, slightly highest chains their to A equipment year that them is there. last second it's lot deliver needing a on than and going Tom just it's of of provided This able to both of our were in going of lower lower time. our last lot saw and really the that struggling to stock handsets we partners own and than

more see think you a demand a I and assuming weeks going out as was gave to our XXXX. more normalized ago, day forecast So as of what talked the rate of in demand through that's were we we normalized time, you're equipment we that investor over couple is a

Our next question comes Space. from Caleb Henry from Quality

Hi, guys.

Just because answered one of I most think mine already. have been question

kind for I'm why Qualcomm timeline mentioned you going it a adoption. you moving they gave if a updated bit you slower the little had they anticipated. as of little bit on clarity it wondering to any rollout, and an have slower than was Just was if that

and have specific We their a and with into expectations of really. are, handset the information. timelines the visibility what Not so don't No. not their suppliers lot the discussions

deploy As and decide will it come be. when to over plans the we've out phone that said manufacturers when to pretty information time, consistently

from from next Our comes question Yu Bank. Edison Deutsche

taking our Thanks Hey, questions. for good morning.

certainly think or the First, thoughts uptick I but continue it quarters. IoT know there? something going it last the ARPU do it's lumpy, flattish has you that's or is can the forward couple on that seems any been

The is just it's of fundamental function a trend mixed.

IoT, Our base. than personal the is rest are of communications in faster which subscribers, the growing

in the Summer tends it's in faster, those the of relate months, base grow reduce to cause $X ARPU have time.Increases rest our probably to to range, whereas be the And overall so and over quarter naturally is usage they this the higher going ARPU seasonality. higher. lower to a as

kind ability out of you will personal through where Countering of data to a and push that other You out grow That the personal have factor, will ARPU. over trend trends see settles IoT dilutive be have ARPU. each rest than IoT to fundamental and being the of new accretive ARPU within we'll you so is that continue have to to expect higher IoT in the of the to communications base What rolled be Think functionality we communications is we have with speeds. the two which pictures the would fight that's time. fundamental device. these faster

E&S and Understood. that sequential by Then move all on a to level second I driven well. a a question the just going is side. use Is nice, the this forward? There's as think, good SDA,

talking the you're in driver our Space first contract tranche up revenue. engineering to to Yes, biggest of that is years for ramping partner. into this work we're as and equipment network large terms that SDA. That's new of there Yes, further we and delivering support for software expect support come the with towards many expand well. and primarily a Agency's dynamics Development continue really General

core with of that term going has embedded the longer so that's to government as as of to is I and see do that grow. we trend. R&D the a continue But some kind the we I kind more of well you're growing government in work think around are think programs that also overall,

comes question Westpark Greg Capital. next Our from Mesniaeff from

Thank little you a in question. into in third quarter. bit to I'd drill the more like my for taking the SG&A increase down just

the are up it SG&A X% drivers you forward. said was going increase? driving got increase XX% that? and What's to the key of like it You What a

Right.

the lower through in and quarter reflect comps the and quarters that time our and run stock-based the we third at in the fourth headcount quarter expenses that they we expect and XXXX. would grew said be you're rate of the up the was X% -- first If in show of third. exactly the incurred that would we saying. kind increased by throughout the what only quarter, the kind a of lot results, in growth, that's XX% look actually knew rate We comparable the such as we grew Again, sequentially We through also Whereas were reiterated year on We that headcount XXXX our XX% in the last increased grew year XX%. full stock-based the comp be first you SG&A we well XXXX comp. at higher additional drivers as occurred up year. increases to XXXX that

for trend clarification. Do Thank you up? that you expect headcount to to continue

our growing. government we Well, lot probably which certainly profit a that part of to direct That's for charged fastest headcount the charge is is and the get for.

at workforce total direct charge the time. but Our it's mostly is this growing, in areas

from from Louie Instructions] comes [Operator next Our question William Blair. DiPalma

was that earlier quarter? was contract Thanks. of how services about involve in Iridium? LEO could task announced should the of one you with think SpaceX the wondering, investors think this opportunities and the first awarded for what I proliferated I type orders

operators five this. it's of years along the operator. called lot some supplier specifically the to the has Force mostly with if using There orders awardees, PLEO, create buy assign ask say, L-Band commercial Certus for every from suppliers our of potentials to and to and we've partners, that they next and opportunities industry were others. of do They've decided a We're government, specific $XXX of basically million with be over like awarded in the and service to them provider the only LEO all Band off to The thanks. that. The complicated apply, broadband Space like Yes, KU rest or I this been qualified, Starlink different and envelope think, had L-Band. task to KA that, one of is it XX for be and

as, contract places, that. of government broadband needed, indefinite easier needs purchase Ukraine expect uses. our draw will IDIQ, Certus make Iridium this delivery, for to we them, are and It other it against in in like case, indefinite places for can quantity So just whether they off

what and it us. it it them specific it where exactly make just from upside. So broadband be will it's an but about to It's be, will buy easier not will for

Great.

think there For for given relative we color XXXX. about would in levels? XXXX CapEx Tom, up ramped discussing how next I how hiring we there yet, any know XXXX previous year? be relative won't XXXX, not helpful. were the And in likely launches how be you SG&A to should think you How answer, but and satellite about should those it's any

be going any year, CapEx, there's is area not think. XX, in so our I in That will to guide XX be launch to XXXX. that

it's think on SG&A. February. XXXX We'll premature XXXX to our unveil when give that we I in guidance guidance do

prior leaning One this continuing was times Great. prior half you tick The leverage ratio? should up, half one. that range? times. and and the we think With about two How final three for year a and guidance rates between towards are a more times of the to interest three versus high end

we year, account everything see all exit Louie. taking an saying Yes, we right ourselves know. as That's we three this in. around so That's into we're

this the remarks. to and back questions, management gentlemen, team over I'd Ladies like closing and at time to the turn no floor any additional showing for

see available on our a in hasn't at a all to the usual we Well, you replay If But and great you couple Day look Day, of at that all. and and obviously a at little we conferences website, the is I results shorter encourage information forward that. anybody there had. you'll quarter and the Take the months. conversations fourth around, all to us all seen provided care, because Investor call than seeing we Investor see

conference presentation. for thank you we'll with call gentlemen, and and conclude today's joining. We Ladies that,

now may your You disconnect lines.