Q4 2020 Iridium Communications Inc Earnings Call
Thursday
good morning, everyone and welcome to the corporation fourth quarter 2020.
All participants will be available in those you need assistance something else.
Give me a second to ask questions about your recorded.
I'm going to call over to mister Ken Worth 20 me on this morning and will begin with a discussion of our results are trustees had an opportunity to ask you this morning too early for you, which is available on the investor relations section of the website before I turn things over to Matt. I'd like to cross it off with this call may contain forward-looking statements within the meaning of the private Securities litigation Reform Act of 95 that are not historical facts include statements about our future expectations places and process.
Search for making payments are based upon our current beliefs and expectations are subject to list which would cause actual results to differ from home security pin stage commission. My remarks today should be considered in light of such risks.
Represent our views and what we may like the update for the future months. Do I need to bring my gas? I need some measures are not prepared in accordance with generally accepted accounting principles. Please refer to the wage earnings release and we must relations section of our website for further explanation of his life the reconciliation to the most directly possible that message with that one.
Okay, I'm good morning. Everyone works hard to believe the last week. We celebrated the anniversary of the completion of the original Next program with the continued stronger and the delivery of of a number of exciting new services for our customers. In fact, we have a dozens of Warcraft partners and welcome more than $350,000 a month added to our network box Innovative new products to extend our leadership and i o t let me renege line and Cloud productivity with the reading public services in the second-set are very flexible already serviced higher speed data platform. And of course for ready in CMD, except for Mariners University reminder month transformation to a strong profitable growth and cash-flow Generator today our company generates over two hundred million in annual performance. We cash flow our net leverage off.
And we continue to drive double-digit.
I would go and do you have any for my updated network adapter but no fishing our Enterprise even a multiple in line with comparable growth-oriented strong pre-castro companies or different from the traditional Financial profile and competitive position or the other satellite company.
Why is it progress continued growth opportunity to see our board of directors was authorized on three hundred million share repurchase program which we announced in a press release last night with the first share repurchase authorization in the company's history and is indicative of the confidence that we have in our free cash flow and business opportunities. The program allows us to be opportune off the market while maintaining our gas a long-standing leverage Target to share this news of the signifies that are waiting in the living up to the president made to shareholders many years ago when you get there to share a vision and have the patience to see if that confused now be in a position to where we are in the process of planning our next month to be held in May.
Provide a longer-term view for the opportunity to see and they out the condenser returns. We expect to see if we could find it very interesting. What's your inbox invitation with virtual bank or reach out to camp for more details?
Another strong financial performance package need the account here. I'd like to extend my sincere thanks to the winning family including are more than 450 distribution of Technology Partners as their confidence energies dedication barbecue that supports our ongoing success overall. We finish twenty-twenty and even managed to reach our lower end of our original operation, either the guidance re-establish experience and having to the upgrade business is able to get back on track and broadband and the TV service appointment center in our gated satellite film business, even though we didn't see our usual seasonal summer ramp as well as the travel is for sales and subscribers altered in one of the 18th.
You also announced a number of new relationships and product launches in 2020, which should lead the conversation for new subscriber growth in the market for a new Partnerships and the equipment Market including another top form the original equipment manufacturing the Beltway and of course the GM BSS. I want you to get pin for anticipation of our American Partners in the customers near the end of the year. We also got a particular charm year with push to talk Global Enterprise and government customer care Department of new icon radio products allowing them to rapidly expand the reach of their DPT communication without the need to build out extensive local infrastructure on the ground wage you to leave relationships and product Market segment, which is allowing us to take market share as well as Thursday.
DTLR
124 natural performance. So I want to send the balance of my prepared remarks highlighting business strategy or you need Market position in our opportunity Preserve.
What is the line for 20 21 this morning? Preferably you continue to operate in the shadow of knowing the business office or confirming forcing many countries and the timeline from that fractionation is still unclear on YouTube should improve in 2021. It's unlikely to rebound the airport to level off remain in this climate. We also know that we take the truck service Revenue, Darion having reached the full run-rate of the closest to the cashier's office Industries like Aviation Maritime are also likely to persist in twenty Twenty-One, but will hopefully start using in the second half of this year with the recovery these assumptions ended up having to see if you still expect to generate good profitability in cash flow very naturally, you know, top-line growth and Improvement new car museums. It's pretty dead.
I'm in your will be rolling out a number of new services and devices along with our partners would open up new industry segment one long-term revenue streams.
The GM vehicle serviced in December 1st. 2018. I'm a reading now I got access to 50,000 required by maritime law to maintain are the primary targets for the service coverage in capability of our new GM vehicle will make the system an affordable option for the hundreds of thousands of smaller vessels. It may not be required to have GM vehicle equipment on board wage. I agree with you offering expensive market conditions are ringing of the provider of choice in 20 21 month and continue to see the adoption by Maritime customer Lounge.
How's the calendar bigger market share technology package for the majority of opinion?
Commercial Aviation continue to be an important market for them as well as with the global standard process for approving the living in service for the safety services. This will add to our with our Legacy Aviation are the internals off radiation Broadband installation will occur in 2021. We currently have eight different things actually developing products for different Aviation market for business Commercial Motorcraft light and collectively do you think it would make a bigger Revenue impact?
make light of the trunk to Michigan i o t during the second half
You also broken traditional satellite. Consumer-oriented Partners. We are rolling out new devices and features a great campaign customers. I still see i o t as a Cornerstone of a regional grocery store as our network is ideal for industrial and consumer iot services.
20-21 is also the year with me the first application fill out based on are we talked about over the past year and have them to customers with small and compact what a user send and receive data after thirty five times faster than our Legacy chance. It also levels a small load contacts with antennas with your I'm application will be growth opportunities in areas like Agriculture and transportation and drones as well as with the military First Responders and Priests and their time maybe about 20 partners and are developing products around the device and it's either current commercial products in the first half of the office lower-cost Maritime turn up watching the first half of this year as our partners interviews, no broadband options.
What will you be a service class of our Network that provides directional with a small compact which would have to be open American Market internals would be a great low cost to upgrade from Legacy of any open Port Terminal address the need for primary satellite services for smaller vessels and off and finally the US government continues to be an important partner that helps Drive Innovation on our Network. Our engineering work for data fees are indeed gave birth to your 2021 will be no exception of work on the VOD private Gateway is warm. Turn it on going to complete certain age 3 plus the final implementation of the original service this year.
That's completely up to have secure private access to the services which will drive incremental pay for your services.
We're having to work, want to recap in progress. They've had it for a year even considering the dramatic slowdown the air travel caused by the way.
Unlock 3-g commercial airlines and other over the past three months off to the civil aviation Department of Hong Kong and put their website and greatly expanded their relationship with the Acura is also note that the airport authority of India. I am in agreement with area the 2019 will complete all of the test from the certification work and began using Gary in Services operation on January 29th without their state of, Georgia.
19 ft covering more than $39 countries and are quite liberating revolutionising the aviation industry. I understand that they are also working for a number of you am season twenty-twenty and we'll be ready to grow a commercial travel or that will be covered over the next two to three years. Once AXA nations are more widespread in the same down across one closing over the last five years. We've grown operation are added 90% And we can send your vehicle to be the long-term effects of Mobility iot broadband and Safety Services. We do ourselves with complementary to the main Kam KU them being announced their divorce the small low cost of operating a very different Market Place in which we typically offer services regarding very high speeds off.
You brought the internet. Can you connect to your liking end up collaborating my building products and services will remain excited about the many business opportunities ahead the support free cash flow growth as well as the subscriber and revenue expansion so that all turn over to Tom for review of looking at your account page with my remarks today. I'd like to recap already in school year result for 2020 and provide some color on our performance in the theater. We all certainly nice our financial targets 4:20 a.m. This morning. So I'd like to walk through the key component screen that will provide additional perspective I discussing the revenue transfer you over. The next few years is Matt Newton delivered a month a year ago because dammit business held up remarkably well.
Let me get you to double-digit subscriber growth and games and operational. It's strong free cash flow characteristics are encouraged service. You have any model really stood out. I'm ready 202 million and one month free cash flow is twenty-twenty and reduced by nearly a turn.
Operation in back of the home and definitely strange air traffic volume and slowed installations and activations of marathons for those who may be new to our story to take away that Arabians underlying busy incredibly resilient people are Global Network of Partners the diversity of industries that we serve and our focus on mobile Communications and Safety Services in the fourth quarter of a hundred forty six point five million, which was up 5% from last year's possible. It's plugged the primarily attributed to higher wage traction red beans and potato business and an increase in contract engineering work with the US government.
operation
What you could probably six percent from Friars quarter to 84.8 million on the commercial side of our business will be the service revenue of 91.1 million the first quarter which is odd percent for the year ago with increased primarily reflected wrote a note to pay load and Broadband revenues, which more than offset a decline a commercial groups and data Revenue contributed with my team. Let me from commercial. It's like an impact Global usage commercial truck driver being destroyed the 20% rise and sub from years ago. It's twenty-twenty in the united knew that $150,000. I owe 2 subscribers. Communications as we've noted previously wanting to move consumer-oriented plans a relatively young yet remain interactive tools available.
Especially now that the network news sources. They use the man from the communication sector remain strong even in other markets and oil and gas money and you know commercial Broadband pregnant with nine point six million in the fourth quarter from 18% in the year ago. We continue to expect for on business business life. No accessibility objectives, remain challenging and endemic environment, you know, commercial subscribers. 14% year-over-year at your end iot subscribers rep 73% available commercial sell up from 69% a year ago. Let me from another day service is fourteen point four million, the fourth quarter of May 2nd you were here. It's a curse reflects the final contractual step up in our services at the end of the area government service Revenue be a 3% in fourth quarter for $25 a month.
Million reflecting the contractual terms of our contract with the US government during this period government subscribers. Also Google 14% $252,000 in life expectations subscriber equipment into a stronger to the bottom month of the year the Falcons like an eleven percent wise and Equipment Revenue to 18.9 million into a computer off maybe two or Twenty Twenty-One Outlook operation in the range of $365 credit off the key elements of thing with that record follows that commercial service rep needs to benefit from the rehab and it on the on ramp and Broadband Services. I assist you have any material faster and 21 and the 1% rate we experience in 2020.
Okay, and damage is responsible for an approximate $4000000 fall off.
Maybe issue related usage in twenty-twenty. You cannot expect to return twenty Twenty-One statements and usage will be so much higher than the answer is not a whole lot the back to me and the communication devices to remain strong, especially as products and the partners with double-digit subscriber bills, and I'd say within Broadband or any sort of continue to receive high marks from Channel partners and Drug deals.
independent
yep visibility to return to normal for the maritime. We still have the ability to access ship's or a partner's ability to remain cautious in our life discuss with the payment Revenue the approximately 37 million and twenty Twenty-One be on now. The area has reached its full contractual run-rate. I would know that life is twenty-twenty and benefited from about 3 million the true related to the Harris payment and it goes until everything several million will be a contributor to service Revenue the same government services. The terms of the contract are well-documented its full-year Revenue approximately $100 million twenty Twenty-One the contractions and September 15th.
I recently presented continue to walk right there after our call for an estimated cash tax rate.
Our outlets for approximately 3% service rep. I'd like to provide additional perspective in our service Revenue over the next few years. I do look out over the next five years and Target service Revenue increase my esteem twenty twenty-two and they pick up materials for the next three years the driver's of the accelerating growth 20 2125 a brief hold one material increasing the groceries of iridium service Broadband driven by a returning home in the maritime industry in our building Market is broadband service come into a new 2021.
You also get to the rate of adoption of logged in service by the doj and twenty twenty-three given the plan completion of the number of engineering upgrade to the government Gateway life expectancy increases i o t Revenue growth rate in twenty twenty-three to twenty-five within the broader adoption of already knew iot mid band transceiver buy more of our partners a good system the acceleration of growth of a commercial vehicle Data Business. Also coming to the availability of iridium transceiver this new transmission on your offer materially have to data speeds and our Legacy 2.4 kilobits per second offering it should drive incremental some functionality and subscriber growth positioned hierarchically.
Maybe order a balance sheet as of December 3rd 2020. We didn't have a cash-equivalent block.
30 down 270 million, we got successful transition to a strong generator free cash flow attached down to continue to grow even during the voting and birth to our previous position with a capital to our shareholders yesterday after we purchased program about the three hundred million dollars through the end of 2022. It programmed is management the latitude to buy back shares and we open market. It says the managers have in the home opportunities and free-cash-flow picture production. Our share repurchase program will be executed opportunistically balancing our objective for the leveraging with the desire to manage my return on investment.
Total contacts is about forty-five million dollars and twenty Twenty-One twenty-two or twenty-three calories Investment Banking product development to revert back to approximately $35 million while continuing to support Innovation and competitiveness a 2029. This is damn almost a full term from the new earlier and about to charge for more. The five point in time. He was in 2018 a very proud of the discipline yourself as well as I progress within an average score.
I want to be between 2 and 1/2 + 3 and 1/2 hour but you would you believe it's the business operations and capital planning a beautiful day, but we will be there on average Target by year end 2022 even after giving it back to the maximum three hundred million share BuyBacks off Target screen sooner summary of the pricing of our terminal next month's wage interest rate, which materially reduced or interested in the new rate is wide group of 275 basis points. It should resolve code 409 you're interested in a 16 million dollars in terms of our facility continue to allow them to renegotiate the market premium every six months based on favorable market conditions.
Twenty-twenty are performing that interesting approximately eighty nine million that interest for 2021 based upon the recent pricing at the terminal facility is off 20% off 170 million a backup seventy 1 million and that interest for a new debt structure 45 million and 1/2 x + 22 million + working capital inclusive of the appropriate home, you know, the judgment will not replace the on the free cash flow was approximately 232 million + 15% for 2020. This is the conversion rate in the past twenty 60% and twenty one representing. The year is approximately 2%
respect
Cash for apps and more detailed description along with the reconciliation to get measured is available in our supplemental participation under Advanced reservations website and are talking about leveraging that needs updated Lounge great facility rating by one notch to be a freelance week and closing twenty Twenty-One year for a Radio Shack variances are operating model it successfully Grew From cash flow. It's clear that the financial transformation and not not have spoken for many years has now been realized. I am very excited to be able to position to unlock additional value for our shareholders with that. I'd like to turn the call over to the operator computer.
Thursday if you are able to ask you please pickup the phone.
question today
just a moment Dodge home. Obviously. I'm not suggesting. They might have a a Target service Revenue multi-vitamin 10% of the service rep for you guys.
On a Thursday. Yeah, it's kind of had a floating game and it's the 2020. It's not going to retire 20-21 as I said in my prepared remarks. I received materially faster-growing then when we bought a 1% this year and month.
Yes, I need to talk about with each going three different levels and each one and one of the beginning of the year because of their involvement segments to it and they should start coming on that point. I just don't have a unique market area. We've always been very well off to you. How are you going back at the end of this year in terms of market dynamics in the market Taste of Home Cooking. This year. I'm very hopeful that kind of get back to it to see boring twenty twenty-two and it all the new products and services that they have taken off.
They can even go faster than we previously had so quickly I help you.
We haven't seen you guys. You guys are usually delivered last year of service. We have 23 or 25. We got still just twenty-three and twenty five hundred subject.
We're not a 3% close. The intention of that is going to be a lot higher than that truck drivers. It's going to be update on our service drive for very optimistic about that. We think we're the satellite play or to explain to the iot trend. We think we're slow communication with the blower for a very long time. I keeping all those factors when you go in and materially higher rate of growth in and twenty to twenty-five one of the month and more time for this month. There's a few I guess we haven't been able to get described probably as soon as I could be should you know, for example, you have a long-term
Future. I've been calling jolly Christmas from the station, you know, maybe very kind of strength and down more and more consumer devices. I think we can maybe spend a little bit more time talking about I think maybe, maybe I can get back to you.
Question for me when you said maybe it's a collaboration and some of the other translations out. There may be able to talk to you having some questions on the new problems that position.
You know, we are talking about you know, that's confusing for a lot of money in the machine and all that sort of thing for sharing more information on my life, you know, personal Communications and and the things that we decided to focus on the password for any of those companies to really complain to them. They don't even try so they were always going to be big but frankly has, you know often have a narrow band, from service that makes them even better and that's what we've been talking about with the server again, and they build out their Network.
No initial service that they always find a lot of value in issue in with our services is a compliment. So, I think I know you'll see the products coming for a couple of years as far as mobile. I've noticed that as well. I'm certainly a good deal with frankly. You have a lot of you know, me and our predecessor company with us trying to do with being way too complicated and hard it would require if you think that that we've got
Like thirty years ago. I've been hard you can kind of reaction that up an order of magnitude and maybe several lights going to try to accomplish wage. Maybe the science involved in developing a long time and you know, certainly interesting is they're able to, I think I think more the one you may have. Indicative of the market place right now in terms of them are being valued in considered by the market and then really get the time frame will be able to do it for the prices of them.
our next question comes from
Joe million dollars a year
panic
But the price that connects with all the the Regional emergency centers and provides information, but it really wasn't very cost-effective life. And and I'm wondering if you know the insurance companies and others might not be very attracted to encouraging you that already engine that service.
Okay. Thank you.
it's a voice and data terminal that would be $10 to $100 depending on how much on the fact that we know exactly what we are planning for sure will be you know, the describe the various plans specifically as it delivers that the minimum wage wage providing high-quality connection and obviously very much would like to get information from you about navigation issues and and safety issues whether whether issues and that sort of thing for so long
Thursday you said the previous question?
Okay.
What is a month-to-month basis? So what was it? What was the Cuban the article in 20 was the 4 million fell off of the relation to age of that through right? So model the the the mix something, you know the consumer but not not not be a cute kitten took from from Aviation.
bath products
Yep, so something to fall back 1 million.
Yeah. Oh, yeah, we have a number of different partners or something. We already have some products back yard know different different factors that are in a very small packages small intended. So this is the highest in the growing Market wage like connection with me and they control to Bose.
I'm holding right now because we like the additional speed they can get from it. And in the more often comments on top that we business. It's certainly interesting applications, you know across the whole bunch of different market segments for use of drones and coming back to you know in the next year to see if I could set up a foundation for life.
21
it does contribute to my office products and and restarting use and it's also attracted to you new partners to see if it might not have otherwise been using it or because you know, how would how would you guys for the application we transition from some other several players as well. Tell me what partner he's doing with all being away from home on the front of the network box where it's having water oreya finish light off.
Yeah. You want to really help apartment? Give me a business after and not have to invent things and that's it.
dead dead dead dead know I collected with you stronger our service services and and you can exchange from the open till
No, I could get home services.
Good morning, Matt Tom in in ten bucks for for either matter. Can you review where the the targeted performance specs of the new transceivers that package for me to or your partner's are expected to release over the coming years and I guess more important than speeds group of how small in the new transceivers video and will they be you know miniature enough to fit into something in the size or a Garmin inreach M. Yes.
1 p.m.
Now and I can go back to work for you. I'll get you have to be designed to the products. Now that receiver it doesn't seem to get along on the fence about other things around it. So that's the 97.72. It's roughly the size of a pack of playing cards next to each other so long, maybe a little bigger than your iPhone or Android or something and it provides a couple of seconds a couple very hard to imagine that's almost like a fraction the size of the main black black dog.
It's an IP connection up here. I can connection on and off our Network, you know, the previous month and transfer you to have any kind of dialogue and take 30 seconds to make connections. And that sort of thing will transfer data using sort of an instant on the way back home network. That's the foundation and a lot of product would be good on that product dead dead takeout from from that. She actually have no excuse but much smaller size of a $16 bucks, you know type song.
32 maybe in the field much faster than that, but very very small and very very small kind of but you could imagine would be perfect for an application again being IP is very glad. I'm not the network very efficient, especially using the software month. You're going to be very into that or from the radiator radiator or it's going to be specialized units did that develop wage would be very familiar color for a much better battery life and yet you know, they can be shrunk down to size bolt size would be very very worried available.
Sounds of the current month text messages everywhere. Are you saying that you know future Generations will also have a multimedia capabilities such faith in the middle of nowhere and how you can send you know, like a selfie that going to be possible the new technology package absolutely pictures certainly send much Richard stream that way where we do texts being out with friends or or Gmail information rather than completing a passion for that sort of liver dead.
These are all things that can be done from a much smaller device and efficiently.
DC volts in development a number of things around that that front different wage for myself and my partner is that excludes these new devices and and also they're going to be working on increasing the external Partners. I think if you need help getting the are from a long-term strategy to to license our technology and the water that Partners around bath products and Technologies into our accounting or business has it makes it easier for them to Thursday. We have that service. So we have some other available work in the time, right excited about the potential for dead.
Thank you.
Good morning song worshipping issues information from you at all. And how are your customers?
Well, I think you said on the lot even with with a lot of a lot of installers are unable to travel the travel restrictions or Sunday. We are partnered with centralized in Fallujah can't do the job descriptions of shipping and have the kids, you know, capricious and everything relaxing you want to be effective and then you go out a lot of a lot of care-taking and it just slows everything down that was dead.
Yes bank statements depending on what happened to be, you know, we are hearing from our partners because they are not operating anywhere close to the library would like to know if they have pretty big backyards. They just can't get the terminals on the ship. So they demand and desire for the product see it should slow down email and everything.
Okay.
Instructions in the very best phone number in Berkeley decline is honored all mix, you know, the ignition keys that we've talked about the previously but there might be climbing markers you the last date of usage anything else. I can do the number of subscribers interested in more than $1,000 off $200 off still showing the revenues are expanding the second half of operation dead.
The partners last year long, but I get back to normal all of our equipment took a picture of Transportation tracking devices in motion that sort of thing. I mean each of those market segments had their home and everything, but certainly. Like missing my partner was shut down and I'm not sure everybody try to figure out what to do, but they got back from the second half of the year.
Thank you.
Going to join us for more than 10 on that day, and we look forward to seeing you at the next month.
And with that will conclude today's conference call.