Q4 2023 Iridium Communications Inc Earnings Call

Good morning, and welcome to the Iridium fourth quarter 2023 earnings call. All participants will be in listen only mode should you need assistance. Please signal our conference specialist by pressing the star key followed by zero.

Operator: Good morning, and welcome to the Iridium fourth quarter 2023 earnings call. All participants will be in listen-only mode.

Operator: Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two.

After today's presentation there'll be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad to.

To withdraw your question. Please press Star then two.

Operator: Please note that this event is being recorded. I would now like to turn the conference over to Ken Levy, Vice President of Investor Relations. Please go ahead.

Please note that this event is being recorded.

I would now like to turn the conference over to Ken Levy Vice President of Investor Relations. Please go ahead.

Kenneth B. Levy: Thanks, Megan good morning, and welcome to Iridium as fourth quarter 2023 earnings call. Joining me on this morning's call are CEO, Matt Desch, and our CFO, Tom <unk> Patrick.

Kenneth B. Levy: Thanks, Megan. Good morning, and welcome to Iridium's fourth quarter 2023 earnings call. Joining me on this morning's call are CEO Matt Desch and our CFO Thomas Fitzpatrick. Today's call will begin with a discussion of our fourth quarter results, followed by Q&A. I trust you've had the opportunity to review this morning's earnings release, which is available in the Investor Relations section of Iridium's website. Before I turn things over to Matt, I'd like to caution all participants that our call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that are not historical facts and include statements about our future expectations, plans, and prospects. Such forward-looking statements are based upon our current beliefs and expectations and are subject to risks which could cause actual results to differ from those expressed in such forward-looking statements. Such risks are more fully discussed in our filings with the Securities and Exchange Commission.

Kenneth B. Levy: Today's call will begin with a discussion of our fourth quarter results followed by Q&A I Trust you've had the opportunity to review this morning's earnings release, which is available on the Investor Relations section of Iridium as website.

Speaker Change: Before I turn things over to Matt I'd like to caution all participants that our call may contain forward looking statements within the meaning of the private Securities Litigation Reform Act of 1095.

Speaker Change: Looking statements are statements that are not historical facts and include statements about our future expectations plans and prospects.

Matthew J. Desch: Such forward looking statements are based upon our current beliefs and expectations and are subject to risks, which could cause actual results to differ from forward looking statements.

Matthew J. Desch: Such risks are more fully discussed in our filings with the Securities and Exchange Commission our remarks today should be considered in light of such risks.

Kenneth B. Levy: Our remarks today should be considered in light of such risks. Any forward-looking statements represent our views only as of today, and while we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our views or expectations change. During the call, we'll also be referring to certain non-GAAP financial measures, including operational EBITDA, pro forma free cash flow, free cash flow yield, and free cash flow conversion. These non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles; please refer to today's earnings release and the investor relations section of our website for further explanation of these non-GAAP financial measures as well as the reconciliation to the most directly comparable With that, I will turn things over to Matt. Thanks, Ken. Good morning, everyone.

Matthew J. Desch: Any forward looking statements represent our views only as of today and while we may elect to update forward looking statements at some point in the future. We specifically disclaim any obligation to do so even if our views or expectations change.

Matthew J. Desch: During the call, we'll also be referring to start now to certain non-GAAP financial measures, including operational EBITDA pro forma free cash flow free cash flow yield and free cash flow conversion.

Matthew J. Desch: These non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles. Please refer to today's earnings release, and the Investor Relations section of our website for further explanation of these non-GAAP financial measures as well as a reconciliation to the most directly comparable GAAP measures with that let me turn things over to Matt.

Matthew J. Desch: Thanks, Ken good morning, everyone.

Matthew J. Desch: As you saw from our release this morning, we finished out 2023 very well. Service revenue and operational EBITDA both were strong, and we generated more than $300 million in pro forma free cash flow for the full year. That last point, growing cash flow, is the real storyline for Iridium. It supports growth and investment and allows us to return capital to shareholders through dividends and share buybacks. Since turning cash flow positive in late 2019 after completing our second generation constellation, Iridium has generated approximately $1 billion in free cash flow. And, as we discussed with you at our Investor Day in September, we expect to have the capacity for approximately $3 billion in shareholder returns between 2023 and 2030. In fact, Iridium returned more than $310 million to shareholders last year.

Matthew J. Desch: As you saw from our release. This morning, we finished out 2023, very well service revenue and operational EBITDA, both were strong and we generated more than $300 million in pro forma free cash flow for the full year.

Matthew J. Desch: That last point growing cash flow is the real storyline for iridium. It supports our growth and investment and allows us to return capital to shareholders through dividends and share buybacks.

Since turning cash flow positive in late 2019 after completing our second generation constellation Iridium has generated approximately 1 billion in free cash flow and as we discussed with you at our Investor Day in September we expect to have the capacity for approximately 3 billion in shareholder returns between 2023 and 2030.

Matthew J. Desch: In fact, iridium returned more than $310 million to shareholders last year.

Matthew J. Desch: As part of this program, we initiated a quarterly dividend, which paid $65 million to shareholders in 2023. And, as we announced in our 8K today, our board plans to increase the quarterly dividend to $0.14 per share starting in June. This will result in a full year increase of approximately 6% to Iridium's dividend in 2024. Our board has also authorized a billion dollars in share repurchases since February 2021. Of this amount, about two-thirds has been utilized, and a third, a bit more than $330 million, remained available at year-end 2023.

Matthew J. Desch: As part of this program, we initiated a quarterly dividend, which paid $65 million to shareholders in 2023, and as we announced in our 8-K today, our board plans to increase the quarterly dividend to <unk> 14 per share starting in June.

Matthew J. Desch: This will result in a full year increase of approximately 6% to iridium dividend in 2024.

Matthew J. Desch: Our board has also authorized a $1 billion in share repurchases since February 2021.

Matthew J. Desch: Of this amount about two thirds has been utilized in a third a bit more than $330 million remained available at year end 2023.

Matthew J. Desch: Iridium's ability to generate and grow free cash flow has been fueled by robust commercial service revenue. While equipment and engineering revenues can vary year to year, which they've been doing the last few years around the pandemic, commercial service revenue growth has proven quite resilient.

Matthew J. Desch: Iridium <unk> ability to generate and grow free cash flow has been fueled by robust commercial service revenue, while equipment and engineering revenues can vary year to year, which they've been doing the last few years around the pandemic.

Matthew J. Desch: Commercial service revenue growth has proven quite resilient.

Matthew J. Desch: If you look at our commercial service revenue since the completion of our second generation network in 2019, it has grown at an 8% CAGR. Meanwhile, subscriber growth has also been robust, growing at a compounded annual rate of about 15% over the same four-year period. 2023 marked our network's 25th year of operational service, which means we've had a lot of experience successfully navigating changing business environments and the evolving needs for satellite connectivity. The key reasons for our success have been Iridium's extremely reliable and truly global network, our globally allocated and coordinated L-band spectrum position, and, probably most important, our laser-like focus on personal communications and doing what others can't do as well as we can. Our network has become the cornerstone of communications for safety services and mission-critical applications. This reliability is what truly differentiates Iridium from other service providers.

Matthew J. Desch: If you look at our commercial service revenue since the completion of our second generation network in 2019, it has grown at an 8% CAGR.

Matthew J. Desch: Subscriber growth has also been robust growing at a compounded annual rate of about 15% over the same four year period.

Matthew J. Desch: 2023 marked our networks 25th year of operational service.

Matthew J. Desch: Which means we've had a lot of experience successfully navigating changing business environments and evolving needs for satellite connectivity the.

Matthew J. Desch: The key reasons for our success have been iridium is extremely reliable and truly global network are globally allocated and coordinated L band spectrum position and probably most important our laser like focus on personal communications and doing what others can't do as well as we can.

Matthew J. Desch: Our network has become the cornerstone of communications for safety services and mission critical applications.

Matthew J. Desch: This reliability is what truly differentiates iridium from or from other service providers.

Matthew J. Desch: In recent months investors have asked us about the impact that Sterling is making on the satellite industry and if we are being affected whether from the existing broadband service or from the direct to cell phone service that we're that they're in the early stages of developing.

Matthew J. Desch: In recent months, investors have asked us about the impact that Starlink is making on the satellite industry and if we are being affected, whether from the existing broadband service or from the direct-to-cellphone service that they're in the early stages of developing. Starlink has been very disruptive to the satellite industry, but we're fortunate that Iridium has carved our own unique path, which has allowed us to continue our growth, even with their entry, and we are confident that we will continue going forward. With regard to high-speed broadband, we've never really competed with the KU and KA band satellite operators on this front, and that remains the case with the entry of Starlink. We positioned Iridium Certus as a reliable companion to all of the VSAT offerings in maritime, and we're often a companion to Starlink installations as well. We also continue to be differentiated by our L-band spectrum's ability to support safety services in both maritime and aviation.

Matthew J. Desch: Sterling has been very disruptive to the satellite industry, but we're fortunate that iridium has carved our own unique path, which has allowed us to continue our growth even with their entry and we are confident that we will continue going forward.

Matthew J. Desch: With regard to high speed broadband we've never really competed with a K U K K a band satellite operators on this front and that remains the case with the entry of Sterling.

Matthew J. Desch: We positioned iridium service as a reliable companion to all of the VSAT offerings in maritime and we're often a companion to starlink installations as well.

Matthew J. Desch: We also continue to be differentiated by our L band spectrum <unk> ability to support safety services in both maritime and aviation.

Matthew J. Desch: That remains an important focus for us it's a long term niche where we'll continue to see growth at other broadband Leo services, including Sterling can address.

Matthew J. Desch: That remains an important focus for us. It's a long-term niche where we'll continue to see growth that other broadband LEO services, including Starlink, can't address. On the direct-to-device front, We're also following a unique path and expect to coexist with Starlink and others who are each delivering a very different service proposition to the market. Starlink is planning to offer a more regional solution using terrestrial cellular frequencies, which will need approval on a market-by-market basis.

Matthew J. Desch: On the direct to device front.

Matthew J. Desch: We're also following a unique path and expect to coexist with Starlink and others, who are each delivering a very different service proposition to the market.

Matthew J. Desch: Starlink is planning to offer a more regional solution using terrestrial cellular frequencies, which will need approval on a market by market basis.

Matthew J. Desch: Iridium, on the other hand, is planning to offer a standards-based solution that will leverage our existing global MSSL band frequencies. There are a lot of varying opinions about the potential size of the D2D market, but I think most would agree it could eventually be a sizable opportunity, though I think everyone is beginning to understand it will take a long time to really mature. We're now just in the very early stages of development, and we expect Iridium to be a core long-term player with a very strong offering. Being standards-based, we don't have to be first to market; we just have to be one of the best. And we've had success doing that in the mobile satellite industry since our founding. In the case of Direct-to-Device, we believe our plan, which we're calling Project Stardust, will be one of the most practical solutions because it's an incremental development on our very flexible and robust network. It won't require launching new satellites every few years and will be global from day one. It will use our existing spectrum position rather than relying on regulatory bodies for approval market-by-market.

Matthew J. Desch: Iridium on the other hand is planning to offer a standards based solution that will leverage our existing global MSS L band frequencies.

Matthew J. Desch: There's a lot of varying opinions about the potential size of the DVD market, but I think most would agree it could eventually be a sizeable opportunity, though I think everyone is beginning to understand it will take a long time to really mature.

Matthew J. Desch: We're now just in the very early stages of development and we expect iridium to be a core long term player with a very strong offering.

<unk> standards base, we don't have to be first to market. We just have to be one of the best and we've had success doing that in the mobile satellite industry since our founding.

Matthew J. Desch: In the case of director device, we believe our plan, which we're calling project startup will.

Matthew J. Desch: We will be one of the most practical solutions, because it's an incremental development on our very flexible and robust network.

Matthew J. Desch: It won't require launching new satellites every few years and will be global from day one.

Matthew J. Desch: It will use our existing spectrum position, rather than relying on rug regulatory bodies for approval market by market.

Matthew J. Desch: We're also focused on a very specific set of use cases for complementing terrestrial narrowband Iot and smartphone messaging, both of which will attract new partners like the mobile network operators to sell our services.

Matthew J. Desch: We're also focused on a very specific set of use cases for complementing terrestrial narrowband IoT and smartphone messaging, both of which will attract new partners like mobile network operators to sell our services. You probably know I'm a bit skeptical about the business case for D-to-D broadband from space. Not because I don't think there will be some user demand and interest, but because our experience at Iridium shows that a 2G or 3G-like service offering that only works outside or inconsistently inside buildings will not translate well into the mass market experience that customers now expect from a 5G, 6G world.

Speaker Change: You, probably know I'm a bit skeptical about the business case for <unk> broadband from space not because I don't think there will be some user demand and interest, but because our experience at iridium shows that a two G or three G. Like service offering that only work outside or inconsistently inside buildings will not translate well into the mass.

Speaker Change: Market experienced that customers now expect from a <unk> world.

Matthew J. Desch: We believe that the foundational capabilities and capacity of these D-to-D broadband networks will not attract the customer use or price premiums necessary to sustain the high ongoing capital costs for continued satellite replacement and network operations to deliver them, certainly not for many years and without massive continued investment, if at all. We believe that Iridium's Project Stardust strikes the right balance for a high-quality user experience and will be the kind of service that smartphone makers and MNOs will be proud to offer to their roaming customers at an affordable price. Iridium's strong position in IoT and use in small form factors in mobile devices also positions us well. We have an extensive partner ecosystem and are familiar with operating through this wholesale model and, most importantly, believe that Project Stardust will expand and extend our existing leadership in IoT to lots of new use cases and applications.

Speaker Change: We believe that the foundational capabilities and capacity of these DDD broadband networks will not attract the customer user price premiums necessary to sustain the high ongoing capital costs for continued satellite replacement and network operations to deliver them certainly not for many years and without massive continued investment if at all.

Speaker Change: Al.

Speaker Change: We believe that that iridium projects started to strike the right balance for a high quality user experience and will be the kind of service that smartphone makers in <unk> will be proud to offer to their roaming customers at an affordable price.

Speaker Change: Iridium strong position in Iot and Houston small form factors and mobile device also positions us well.

Speaker Change: We have an extensive partner ecosystem and are familiar with operating too that this wholesale model and most importantly believe that project start ups will expand and extend our existing leadership in Iot to lots of new use cases and applications.

Matthew J. Desch: So 2024 will be a year of investment for Iridium. We are increasing our spending on R&D a bit and moving forward in a few product areas that position us to capitalize on longer-term growth opportunities. We want to maintain our lead in traditional areas of growth like IOT, mid-band data, and U.S. government services, and we also plan to undertake initiatives that augment future business growth. Together, we believe these efforts will allow us to reach our long-term service revenue guidance of about a billion dollars in 2030. We highlighted our financial outlook and growth drivers during last fall's Investor Day, including how we expect incremental growth from voice, IoT, and broadband, which will complement our expanding relationship with the U.S. government. Initiatives, like many of our partners' mid-band service expansions this year, will drive new IoT and data applications in emerging industries like uncrewed aerial and maritime vehicles, and support higher-speed consumer products that can send pictures and other important Our partners are really excited about our new IoT transceiver that we'll finalize this year. It's natively IP and cloud-based and will enable even more compact designs for their applications.

Speaker Change: So 2024 will be a year of investment for iridium.

Speaker Change: We are increasing our spending on R&D, a bit and moving forward in a few product areas that position us to capitalize on longer term growth opportunities, we want to maintain our lead in traditional areas of growth like Iot mid band data and U S government services and we also plan to undertake initiatives that augment future business growth.

Speaker Change: Together, we believe these efforts will allow us to reach our long term service revenue guidance of about $1 billion in 2030.

Speaker Change: We highlighted our financial outlook and growth drivers during last falls in that Investor day, including how we expect incremental growth from voice, Iot and broadband, which will complement our expanding relationship with the U S government.

Speaker Change: Initiatives like many of our partners mid band service expansions. This year will drive new Iot and data applications and emerging industries like <unk>, <unk> and maritime vehicles and support higher speed consumer products that concern pictures and other important information for users on the move.

Speaker Change: Our partners are really excited about our new Iot transceiver that will finalize this year, it's natively IP and cloud based and will enable even more compact designs for their applications.

Matthew J. Desch: We're also excited to expand our safety service offerings in Maritime and Aviation in 2024. This is the year aviation will complete certification of Iridium's end-to-end safety offering using Iridium Certus technology. Iridium Certis will become the most cost-effective solution for cockpit voice and data solutions, delivering increased value through safety and analytics to airlines, business jets, and general aviation operators for the next generation of airspace.

Speaker Change: We're also excited to expand our safety service offerings in maritime and aviation in 2024.

Speaker Change: This is the year aviation will complete certification of the Iridium is end to end safety offering using iridium service technology.

Speaker Change: Iridium service will become the most cost effective solution for cockpit voice and data solutions delivering increased value through safety and analytics to airlines business jet in general aviation operators for the next generation of aerospace.

Speaker Change: On top of these items, we are investing in incremental R&D with project start ups.

Matthew J. Desch: On top of these items, we're investing in incremental R&D with Project Stardust because we believe it will position us well for standards-based narrowband IoT growth, by which I mean expanding the opportunities we are already addressing with our proprietary offering today and also help to expand our business to MNOs and others delivering services to smartphones, laptops, watches, and tablets. Together, these investments give us great confidence in Iridium's cash flow and growth plans through 2030, all themes we highlighted to you last September. Shifting gears a bit, I want to share an update on Iridium's constellation health. When we launched the Iridium NEXT Constellation between 2017 and 2019, we were required to make an initial estimate of the network's life. As a starting point, we pegged it to the manufacturer's assessed design life. However, we were, and are, hopeful to eventually get the same life from the Iridium NEXT constellation that our first network achieved. It ended up lasting over 20 years by the time it was retired. But we had no practical information at the time of launch to make our own assessment.

Speaker Change: Because we believe it will position us well for standards based narrow band Iot growth by which I mean, expanding the opportunities we are already addressing with our proprietary offering today and also help to expand our business to <unk> and others delivering service to smartphones laptops watches and tablets.

Speaker Change: Together these investments give us great confidence in iridium is cash flow and growth plans through 2030, all themes, we highlighted to you last September.

Speaker Change: Shifting gears a bit I want to share an update on iridium constellation health.

Speaker Change: When we launched the Iridium next constellation between 2017 in 2019, we were required to make an initial estimate of the networks life as a starting point, we pegged it to the manufacturers assess design life. However.

Speaker Change: However, we were and are hopeful to eventually get the same life from the Iridium next constellation that our first network achieved it ended up lasting over 20 years by the time it was retired.

Speaker Change: But we had no practical information at the time of launch to make our own assessment.

Matthew J. Desch: Based on the manufacturer's assessment, we've been using a 12-and-a-half-year useful life for accounting purposes since 2019. We re-evaluate that assessment periodically, and our most recent review in the fourth quarter prompted us to update the constellation's estimated life, which we now believe will perform well through at least 2035. That's great news and continues to support our expectations of a CapEx holiday through the rest of this decade. The updated assessment also reflects the successful launch of five additional spares in 2023 and the overall performance of the Constellation since its initial launch. These incremental data points led us to formally change our forecast for satellite life from 12 12 years to 17 12 years.

Speaker Change: Based on the manufacturer's assessment, we've been using a 12 and a half year useful life for accounting purposes since 2019.

Speaker Change: We reevaluate that assessment periodically and our most recent review in the fourth quarter prompted us to update the constellations estimated life, which we now believe will perform well through at least 2035.

Speaker Change: That's great news and continues to support our expectations of a capex holiday through the rest of this decade.

Speaker Change: The updated assessment also reflects the successful launch of five additional spares in 2023 and the overall performance of the constellation since its initial launch.

Speaker Change: These incremental data points lead us to formally change our forecast for satellite life from 12, and a half years to 17 and a half years.

Matthew J. Desch: While this change doesn't impact cash flow, it does have some accounting implications that Tom will discuss in detail, including impacts on how we recognize hosted payload service revenue and depreciation expense and the resulting effect on our operational EBITDA guidance. Overall, there are a lot of moving parts in our 2024 guidance. While we are still forecasting strong subscriber and service revenue growth, with our increased investments, our equipment shipments normalizing, and some challenges to comps from 2023, on the surface, 2024 doesn't look like a normal year of operational EBITDA growth. If you look deeper, though, our growth profile and overall outlook really haven't changed much. Tom will go through that analysis, along with a peek into 2025, where most of those one-time effects will normalize.

Speaker Change: While this change doesn't impact cash flow. It does have some accounting implications that Tom will discuss in detail, including impacts of how we recognize hosted payload service revenue and depreciation expense and the resulting effect on our operational EBIT guidance.

Tom: Overall, there are a lot of moving parts in our 2024 guidance, while we are still forecasting strong subscriber and service revenue growth with our increased investments our equipment shipments normalizing and some challenges to comps from 2023 on the surface 2024, it doesn't look like a normal year of operation.

Tom: <unk> EBIT growth.

Tom: If you look deeper, though our growth profile and overall outlook really hasnt changed much.

Tom: Tom will go through that analysis, along with a peek into 2025, where most of those onetime effects normalize.

Tom: To me the bottom line for Iridium continues to be free cash flow growth, which will continue in 2024 to support our ongoing investor friendly activities.

Matthew J. Desch: To me, the bottom line for Iridium continues to be free cash flow growth, which will continue in 2024 to support our ongoing investor-friendly activity. We expect share repurchases and dividends to continue, and we're as excited as we've ever been about business opportunities, growth, and cash flow we will generate. So I look forward to another exciting year for Iridium.

Tom: We expect share repurchases and dividends to continue and we are as excited as we've ever been about business opportunities growth and cash flow we will generate.

Tom: So I look forward to another exciting year for iridium.

Tom: So with that let me turn it over to Tom Tom.

Tom: Thanks, Matt and good morning, everyone.

Tom: With my remarks today, I would like to recap Iridium <unk> full year results for 2023 and provide some perspective on our fourth quarter performance and our change in accounting estimate to reflect the extended book life of our satellite constellation. This morning. We also released our outlook for 2024 and I'll provide some color here, especially.

Thomas J. Fitzpatrick: Thanks, Matt. Good morning, everyone. With my remarks today, I'd like to recap Iridium's full year results for 2023 and provide some perspective on our fourth quarter performance and our change in accounting estimate to reflect the extended book life of our satellite constellation. This morning, we also released our outlook for 2024, and I'll provide some color here, especially in the context of Iridium's longer-term growth expectations. As Matt noted, we increased the estimated useful life of our satellite constellation by an additional five years during the fourth quarter, which extends the life of our satellites to 17.5 years for accounting purposes. The updated Useful Life affirms our confidence in the health of our constellation and the duration of our CapEx holiday through 2030. However, the accounting change, which has been reflected in our fourth-quarter financial statements, has a couple of implications. First,

Tom: Really in context of iridium as longer term growth expectations as Matt noted, we increased the estimated useful life of our satellite constellation by an additional five years during the fourth quarter, which extends the life of our satellites to 17 five years for accounting purposes, the updated useful life affirms our confidence.

Tom: The health of our constellation and the duration of our Capex holiday through 2030, However, the accounting change, which has been reflected in our fourth quarter financial statements has a couple of implications.

Tom: First extending the time over which we depreciate the book value of our satellite reduces iridium depreciation expense by over $100 million per year.

Tom: This will have the impact of both increasing our net income and earnings per share.

Tom: Second the accounting update reduces the annual revenue, we recognize from our hosted payload contracts by spreading those fixed revenues over the satellite longer expected useful life.

Thomas J. Fitzpatrick: Extending the time over which we depreciate the book value of our satellites reduces Iridium's depreciation expense by over $100 million per year. This will have the impact of both increasing our net income and earnings per share. Second, the accounting update reduces the annual revenue we recognize from our hosted payload contracts by spreading those fixed revenues over the satellite's longer expected useful life. This extension of the estimated useful life had the impact of reducing hosted payload revenue by $2.3 million in the fourth quarter of 2023 as compared to prior quarters. Going forward, the change will cause annual service revenue to be approximately $9.1 million lower each year through 2029 than had we not updated the estimated useful life of our constellation. Hosted payload revenues will now be recognized through 2035 versus the previous schedule, which concluded in 2030.

Tom: This extension of estimated useful life at the impact of reducing hosted payload revenue by $2 3 million in the fourth quarter of 2023 as compared to prior quarters.

Tom: Going forward the change will cause annual service revenue to be approximately $9 1 million lower each year through 2029 than had we not updated the estimated useful life of our constellation.

Tom: Hosted payload revenues will now be recognized through 2035 versus the previous schedule, which concluded in 2030 as you can see this creates a comparability issue when considering our growth projection between 2023 and 2024 that we introduced today.

Tom: To assist investors with these changes and facilitate an apples to apples discussion.

Tom: Identify the effects of this accounting treatment on iridium to expected growth when I get to our guidance.

Thomas J. Fitzpatrick: As you can see, this creates a comparability issue when considering our growth projections between 2023 and 2024 that we introduced today. To assist investors with these changes and facilitate an apples-to-apples discussion, I will identify the effects of this accounting treatment on Iridium's expected growth when I get to our guidance. As for our full-year results, Iridium performed well in 2023. New contract wins, strong equipment sales, and favorable pricing all supported top-line growth. We delivered strong commercial service revenue growth and had another good year of subscriber addition. Pro forma free cash flow was $303 million in 2023. Iridium shareholders were the direct beneficiaries of this performance, as dividends and share repurchases totaled $311.8 million during the year.

Tom: As for our full year results Iridium performed well in 2023, new contract wins strong equipment sales and favorable pricing all supported topline growth. We delivered strong commercial service revenue growth and had another good year of subscriber additions pro forma free cash flow was 303.

Tom: In 2023.

Tom: Iridium shareholders are the direct beneficiaries of this performance dividends and share repurchases totaled $311 8 million during the year.

Tom: In the fourth quarter operational EBITDA rose, 7% from the prior years quarter to $114 million and total revenue grew to $195 million strength across all commercial service lines and continued growth in engineering and support offset reduced equipment sales within the commercial business we.

Thomas J. Fitzpatrick: In the fourth quarter, operational EBITDA rose 7% from the prior year's quarter to $114 million, and total revenue grew to $195 million. Strength across all commercial service lines and continued growth in engineering and support offset reduced equipment sales. Within the commercial business, we reported service revenue of $121.5 million in the fourth quarter, which was up 10% from a year ago. Revenue from commercial voice and data rose 12% from the prior year period and continued to reflect the benefits of the price increase we enacted earlier this year.

Tom: Our reported service revenue of $121 5 million.

Tom: In the fourth quarter, which was up 10% from a year ago.

Revenue from commercial voice and data rose, 12% from the prior year period and continued to reflect the benefit to the price increase we enacted earlier this year. This.

Tom: This discrete price actions, where it <unk> growth of 10% during the quarter and its been easily digested by our channel partners evidenced by continued subscriber growth in our voice business.

Tom: In commercial Iot personal satellite communications continued to fuel double digit revenue and subscriber growth.

Tom: Subscribers were up 18% from the year ago period, and we ended 2023 with more than 900000 personal satellite communications devices on our network.

Thomas J. Fitzpatrick: This discrete price action supported ARPU growth of 10% during the quarter and has been easily digested by our channel partners, evidenced by continued subscriber growth in our voice business. In commercial IoT, personal satellite communications continued to fuel double-digit revenue and subscriber growth. Subscribers were up 18% from the year-ago period, and we ended 2023 with more than 900,000 personal satellite communications devices on our network. We believe that more retail customers are just now becoming aware of satellite connectivity and that these low-cost consumer devices will fuel demand for satellite messaging and SOS services for years to come. As awareness of these consumer-friendly products grows, so too will new applications using Iridium's global network.

Tom: We believe that more retail customers are just now becoming aware of satellite connectivity and that these low cost consumer devices will fuel demand for satellite messaging and Sos services for years to come.

Tom: As awareness of these consumer friendly products grows so too do new applications using iridium <unk> Global network.

Tom: As Matt noted our Iot partners continue to invest in new retail focused products with new functionality supporting higher <unk>. We believe this market segment will serve as a catalyst for Iot revenue growth moving forward in.

Tom: In broadband we reported revenue of $114 6 million in the fourth quarter up 5% from the year ago period Iridium service continues to be adopted as a companion to VSAT services in maritime.

Thomas J. Fitzpatrick: As Matt noted, our IoT partners continue to invest in new retail-focused products. With new functionality supporting higher ARPUs, we believe this market segment will serve as a catalyst for IoT revenue growth moving forward. In broadband, we reported revenue of $114.6 million in the fourth quarter, up 5% from the year-ago period. Iridium service continues to be adopted as a companion to VSAT services in maritime.

Tom: We are however, also seen some competition from low cost VSAT alternatives impacting certain vessels, where iridium service serves as a primary satellite connection.

Tom: We expect lower billable usage on some vessels to pressure <unk> and in turn revenue growth rates in our broadband business for a few more quarters.

Tom: Once the lower usage rates normalize into our <unk> base, we expect revenue growth to accelerate on the back of subscriber gains the vast majority of iridium <unk> broadband customers are already using iridium service as a companion service. So this usage impact is limited and should normalize relatively quickly.

Thomas J. Fitzpatrick: We are, however, also seeing some competition from low-cost VSAT alternatives impacting certain vessels where Iridium service serves as a primary satellite connection. We expect lower billable usage on some vessels to pressure ARPU and, in turn, revenue growth rates in our broadband business for a few more quarters. Once the lower usage rates normalize into our ARPU base, we expect revenue growth to accelerate on the back of subscriber gains. The vast majority of Iridium's broadband customers are already using Iridium Service as a companion service, so this usage impact is limited and should normalize relatively quickly.

In all commercial subscribers grew 15% year over year with Iot now representing 80% of the total at year end up from 78% in the year ago period.

Tom: Revenue from hosted payload.

Tom: And other data service revenue rose to $15 2 million in the fourth quarter, principally due to higher precision location service revenues of which $2 million was nonrecurring and resulted from an updated estimate on a customer contract.

Tom: This increase was largely offset by the $2 $3 million impact on revenue recognition, resulting from the change in useful life of our satellites.

Thomas J. Fitzpatrick: In all, commercial subscribers grew 15% year-over-year, with IoT now representing 80% of the total at year-end, up from 78% in the year-ago period. Revenue from hosted payloads and other data service revenues rose to $15.2 million in the fourth quarter, principally due to higher precision location service revenues, of which $2 million was non-recurring and resulted from an updated estimate on a customer contract. This increase was largely offset by the $2.3 million impact on revenue recognition resulting from the change in useful life of our satellites. Government service revenue was stable in the fourth quarter at $26.5 million, reflecting the terms of our EMSS contract with the U.S. government.

Tom: Government service revenue was stable in the fourth quarter at $26 5 million, reflecting the terms of our MSS contract with the U S government.

Tom: Subscriber equipment, which reached record sales in 2022 and for much of 2023 decreased materially in the fourth quarter to $15 7 million.

Tom: While full year 2023 finished as the second highest equipment sales in company history, we expect demand for satellite handsets and other iridium hardware decreased materially in 2024 and normalize to be more in line with periods. Prior to 2022 before we and our competitors began to experience the effects of supply chain.

Tom: <unk> due to the pandemic.

Tom: Engineering and support revenue grew 74% from the prior year period to $31 1 million in the fourth quarter as Iridium ramped up worked with the space Development agency. While this work has lower margins than our commercial business lines. The SBA contract remains highly strategic and aligns iridium closely with the U S government's long term.

Thomas J. Fitzpatrick: Subscriber equipment, which reached record sales in 2022 and for much of 2023, decreased materially in the fourth quarter to $15.7 million. While full year 2023 finished as the second highest equipment sales in company history, we expect demand for satellite handsets and other iridium hardware to decrease materially in 2024 and normalize to be more in line with periods prior to 2022 before we and our competitors began to experience the effects of supply chain disruptions due to the pandemic. Engineering and support revenue grew 74% from the prior year period to $31.1 million in the fourth quarter as Iridium ramped up work with the Space Development Agency. While this work has lower margins than our commercial business lines, the SDA contract remains highly strategic and aligns Iridium closely with the U.S. government's long-term space priorities. Moving on to our 2024 outlook, we anticipate service revenue growth of between 4 and 6 percent in 2024 and are forecasting operational EBITDA of between $460 and $470 million. In order to appropriately evaluate our 2024 guidance, I want to highlight several factors that are relevant.

Tom: <unk> priorities.

Tom: Moving on to our 2024 outlook, we anticipate service revenue growth of between 4% and 6% in 2024, and our forecasting operational EBITDA of between $460 and $470 million.

Tom: In order to appropriately evaluate our 2024 guidance I want to highlight several factors that are relevant.

Tom: As I noted previously we increased the useful life estimate for our satellite constellation.

Tom: As of October one 2023.

Tom: Since we recognize the fixed portion of our hosted payload revenues over the life of the constellation. This had the effect of reducing in hosted payload revenue by $2 3 million in 2023.

Tom: It will also reduce 2024 revenues by $9 1 million, resulting in $6 8 million less of service revenue and EBITDA in 2024 compared to 2023, and if we had not updated our estimate to reiterate there is no operation or cash flow input packed from the change in our satellites estimated useful life.

Tom: <unk> only the length of time over which we recognize the fixed revenue.

Tom: For illustrative purposes at the midpoint of our 2024 guidance EBITDA would be $465 million.

Thomas J. Fitzpatrick: As I noted previously, we increased the useful life estimate for our satellite constellation as of October 1st, 2023. Since we recognize the fixed portion of our hosted payload revenues over the life of the constellation, this had the effect of reducing hosted payload revenue by 2.3 million in 2023. It will also reduce 2024 revenues by $9.1 million, resulting in $6.8 million less of service revenue in EBITDA in 2024 compared to 2023 than if we had not updated our estimates. To reiterate, there is no operation or cash flow impact from the change in our satellite's estimated useful life, only the length of time over which we recognize the fixed revenue. For illustrative purposes, at the midpoint of our 2024 guidance, EBITDA would be $465 million.

Tom: This would represent about $2 million in growth from the $463 1 million in EBITDA, we posted for 2023.

Tom: If we had used comparable useful life assumptions in both periods projected EBITDA growth in 2024 at the midpoint would have been $8 7 million, which we believe to be more representative of iridium as projected growth in 2024.

Tom: This rate of growth is still lower than we have been experiencing in recent years, owing to a few headwinds we experienced in 2024 that we do not expect to recur in 2025.

First as we've previously noted we expect equipment revenue and margins to revert to pre pandemic levels, which means we're forecasting a material decline in 2024 from 2023, we think the sales level. We're forecasting this year will be the baseline level, we'll see going forward second we recognized $3 five.

Thomas J. Fitzpatrick: This would represent about $2 million in growth from the $463.1 million in EBITDA we posted for 2023. If we had used comparable useful life assumptions in both periods, projected EBITDA growth in 2024 at the midpoint would have been $8.7 million, which we believe to be more representative of Iridium's projected growth in 2024. This rate of growth is still lower than we have been experiencing in recent years, owing to a few headwinds we will experience in 2024 that we do not expect to recover in 2025. First, as we have previously noted, we expect equipment, revenue, and margins to revert to pre-pandemic levels, which means we're forecasting a material decline in 2024 from 2023. We think the sales level we're forecasting this year will be the baseline level we'll see going forward. Second, we recognized a $3.5 million gain on a contract settlement in 2023, which will not recur in 2024.

Million dollar gain on a contract settlement in 2023, which will not recur in 2024, and finally as Matt discussed we are ramping up R&D spending in 2024 and support of our NB Iot initiative project startups. This.

Tom: This will add approximately $5 million to R&D compared to 2023, and we expect to maintain R&D spending on this initiative in 2025, though it should not represent a headwind in 2025 taken together, we estimate that these discreet items represent a headwind of about $20 million to our 2024 EBITA <unk>.

Tom: Cast.

Tom: When considering iridium as prospects for EBITDA in 2025, if we take the $8 7 million an apples to apples projected growth for 2024 over 2023, and then remove the estimated $20 million in nonrecurring headwinds we experienced in 2024, we believe our prospects are good for generating close to <unk>.

Tom: $500 million in EBITDA in 2025.

Tom: Other operational assumptions supporting our 2024 outlook, which I've not yet touched upon are as follows.

Tom: We expect lower growth in our commercial voice and data business than in 2023 as 2023 benefited from a price increase we expect our Iot business will remain strong demand for personal satellite communications as well as commercial applications remain the drivers here. This gives us confidence that 2024.

Thomas J. Fitzpatrick: And finally, as Matt discussed, we are ramping up R&D spending in 2024 in support of our NB-IoT initiative, Project Stardust. This will add approximately $5 million to R&D compared to 2023, and we expect to maintain R&D spending on this initiative in 2025, though it should not represent a headwind in 2025. Taken together, we estimate that these discrete items represent a headwind of about $20 million to our 2024 EBITDA forecast.

Tom: Will be another year of double digit revenue and subscriber growth.

We should also begin to see wider adoption.

Tom: I've already a mid band and benefit from the introduction of our new Iot transceiver late in the year.

Tom: I would be remiss not to touch on engineering and support which continues to benefit from contract work with the space Development Agency government engineering and support revenue will grow again in 2024, as we continue to build out the ground infrastructure and operation centers and start demand their operations for space forces new constellation.

Thomas J. Fitzpatrick: When considering Iridium's prospects for EBITDA in 2025, if we take the $8.7 million in apples-to-apples projected growth for 2024 over 2023 and then remove the estimated $20 million in non-recurring headwinds we're experiencing in 2024, we believe our prospects are good for generating close to $500 million in EBITDA in 2025. Other operational assumptions supporting our 2024 outlook, which I've not yet touched upon We expect lower growth in our commercial voice and data business than in 2023, as 2023 benefited from a price increase. We expect our IoT business will remain strong. Demand for personal satellite communications, as well as commercial applications, remain the drivers here.

Tom: Now this contract revenue can fluctuate from quarter to quarter.

Tom: Our 2024 outlook also incorporates a number of expense assumptions that that may be helpful. When updating your models.

Tom: We expect SG&A to remain relatively stable this year, even as we continue to add head count to support the SDA contract.

Tom: As Matt noted, we also anticipate higher research and development costs. This year up as much as 30% as we began our work on standards based solutions and continue to invest in product development initiatives.

Tom: As it relates to depreciation and amortization, we anticipate a decrease of over $100 million in 2024 due to the longer estimated useful life of our satellites.

Tom: You will note that 2023 was impacted by this change for one quarter equivalent to about $25 million in benefit compared to 2022, but you'll also recall that in the second quarter of 2023, we completed successful on orbit testing of five of our six ground spare satellites as we believe the construction in progress associated with.

Thomas J. Fitzpatrick: This gives us confidence that 2024 will be another year of double-digit revenue and subscriber growth. We should also begin to see wider adoption of Iridium Midband and benefit from the introduction of our new IoT transceiver late in the year. I would be remiss not to touch on engineering and support, which continues to benefit from contract work with the Space Development Agency. Government engineering and support revenue will grow again in 2024 as we continue to build out the ground infrastructure and operations centers and start to man their operations for Space Force's new constellation, though this contract revenue can fluctuate from quarter to quarter. Our 2024 outlook also incorporates a number of expense assumptions that may be helpful when updating your models.

Tom: The remaining ground spare satellite would no longer be used we wrote off to $37 5 million remaining in construction in progress for that satellite by recording accelerated depreciation expense, which more than offset the accounting change in the fourth quarter.

Tom: As I mentioned earlier, the prospective reduction in depreciation expense is entirely due to an accounting update and.

Tom: And we will have a positive impact on iridium GAAP earnings pushing both net income and earnings per share firmly positive into positive territory. Lastly, iridium now expect minimal cash taxes of less than $10 million per year from 2024 through 2026. This is new guidance for 25, and 26% and incorporates additional.

Thomas J. Fitzpatrick: First, we expect SG&A to remain relatively stable this year, even as we continue to add headcounts to support the SDA contract. As Matt noted, we also anticipate higher research and development costs this year, up as much as 30%, as we begin our work on standards-based solutions and continue to invest in product development initiatives. As it relates to depreciation and amortization, we anticipate a decrease of over $100 million in 2024 due to the longer estimated useful life of our satellites. You will note that 2023 was impacted by this change for one quarter, equivalent to about $25 million in benefit compared to 2022. But you'll also recall that in the second quarter of 2023, we completed successful on-orbit testing of five of our six ground spare satellites.

Tom: R&D credits and other attributes we expect to realize.

Pro forma free cash flow is expected to rise to about $309 million in 2024 at the midpoint of our EBITDA guidance, reflecting our continued growth in recurring revenue model.

Tom: We believe that pro forma free cash flow is a good measure of our business strength and investors should continue to track closely.

Tom: Moving onto our balance sheet as of December 31, 2023, Iridium had a cash and cash equivalents balance of approximately $72 million or cash balances ample to fund our operations and continues to anticipate the payment of quarterly dividends and expectations of share repurchases.

Tom: In the fourth quarter of 2023 Iridium retired approximately one 3 million shares of common stock at an average price of $38 71.

Tom: For the full year 2023, Iridium purchased four 8 million shares an average price of $51 40 for a total of $244 6 million.

Thomas J. Fitzpatrick: As we believed the construction in progress associated with the remaining ground spare satellite would no longer be used, we wrote off the $37.5 million remaining in construction progress for that satellite by recording accelerated depreciation expense, which more than offset the accounting change in the fourth quarter. As I mentioned earlier, the prospective reduction in depreciation expense is entirely due to an accounting update and will have a positive impact on Iridium's GAAP earnings, pushing both net income and earnings per share firmly into positive territory. Lastly, Iridium now expects minimal cash taxes of less than $10 million per year from 2024-2026.

Tom: This left us with an outstanding balance of $334 million at year end under our board approved authorization through December 31, 25, we will continue to execute on our buyback program balancing our objective for deleveraging with the desire to maximize return on investment.

Tom: In 2023, Iridium initiated a quarterly dividend and paid a total of $64 8 million to shareholders for the full year as Matt noted Iridium board expects to increase the dividend beginning in the second quarter of 2024 <unk>.

Tom: The approximate 6% annual increase to iridium as dividend in 2024 reflects our confidence in the company's business opportunities and prospects for continued strong free cash flow generation.

Thomas J. Fitzpatrick: This is new guidance for 2025-2026 and incorporates additional R&D credits and other attributes we expect to realize. Pro forma free cash flow is expected to rise to about $309 million in 2024 at the midpoint of our EBITDA guidance, reflecting our continued growth and recurring revenue model. We believe that pro forma free cash flow is a good measure of our business strength, and investors should continue to track close. Moving on to our balance sheet, as of December 31, 2023, Iridium had a cash and cash equivalents balance of approximately $72 million. Our cash balance is ample to fund our operations and continues to anticipate the payment of quarterly dividends and expectations of share repurchase. In the fourth quarter of 2023, Iridium retired approximately 1.3 million shares of common stock at an average price of $38.71. For the full year 2023, Iridium purchased 4.8 million shares at an average price of $51.40 for a total of $244.6 million.

Tom: Turning to Capex.

Tom: The Capex holiday period between 2020, and 2030 is an average of between 50 and $60 million per year. This remains our best estimate.

Tom: And you will not be uniform over the holiday period, our capex from 2020 through 2023 average just under $50 million exclusive of launch which is not maintenance capex, but rather a part of the construction cost of Iridium next.

Tom: We expect Capex to average closer to $60 million for the balance of the holiday period between 2024 and 2030.

Tom: We expect capex to be over $60 million in the next couple of years as we invest in new product development initiatives like project startups and network efficiency programs, we expect capex to trend below $60 million in the latter part of the decade, as we decrease maintenance spending in anticipation of our third generation constellation.

Tom: We closed 2023 with net leverage of three one times. So EBITDA. This was down from three two times a year earlier and includes the impact of our buyback activity and dividend.

Tom: We think iridium naturally de levers over time and expect to exit 2030 below two times leverage even after giving effect to our dividend program and all share back buybacks authorized by our board.

Tom: I also want to highlight iridium <unk> term loan, which we know will now mature in 2030, Youll recall that we extended the term by about four years in September and lowered the interest rate on the facility.

Thomas J. Fitzpatrick: This left us with an outstanding balance of $334 million at year-end under our board-approved authorization through December 31, 2025. We will continue to execute on our buyback program, balancing our objective for deleveraging with the desire to maximize return on investment. In 2023, Iridium initiated a quarterly dividend and paid a total of $64.8 million to shareholders for the full year.

Tom: Iridium also enjoys a favorable position on its interest rate cap, which hedges about two thirds of the term loan. We believe these instruments allow us to weather the current interest rate environment, and we'd look to extend our hedge as market opportunities present themselves.

Tom: Turning to our pro forma free cash flow, if we use the midpoint of our 2020 for EBITDA guidance and back off $76 million and net interest pro forma for our current debt structure approximately $69 million in capex for this year $5 million in cash taxes.

Thomas J. Fitzpatrick: As Matt noted, Iridium's board expects to increase the dividend beginning in the second quarter of 2024. The approximate 6% annual increase to Iridium's dividend in 2024 reflects our confidence in the company's business opportunities and prospects for continued strong free cash flow generation. Turning to CapEx, the CapEx holiday period between 2020 and 2030 is an average of between 50 and 60 million per year.

Tom: And $6 million in working capital inclusive of the appropriate hosted payload adjustment, we're projecting pro forma free cash flow of approximately $309 million for 2020 for these metrics would represent a conversion rate of EBITDA to free cash flow of 66% in 2024, and a yield of approximately seven 3%.

Tom: A more detailed description of each element of these calculations along with a reconciliation to GAAP measures is available in our supplemental presentation under events on our Investor Relations website, and closing iridium continues to execute well and deliver strong free cash flow growth, we feel good about our competitive position.

Thomas J. Fitzpatrick: This remains our best estimate, but spending will not be uniform over the holiday period. Our CapEx from 2020 through 2023 will average just under $50 million, exclusive of launch, which is not maintenance CapEx but rather a part of the construction costs of Iridium Next. We expect CapEx to average closer to $60 million for the balance of the holiday period between 2024 and 2030. We expect CapEx to be over $60 million in the next couple of years as we invest in new product development initiatives like Project Stardust and network efficiency programs. We expect CapEx to trend below $60 million in the latter part of the decade as we decrease maintenance spending in anticipation of our third-generation constellation.

Speaker Change: And as Matt noted, we will make some investments in 2024 to augment our opportunity set and drive new revenue growth through 2030 with that I'd like to turn the call over to the operator for the Q&A.

Speaker Change: We will now begin the question and answer session.

Speaker Change: Ask a question you May press Star then one on your telephone keypad.

Speaker Change: Using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.

Speaker Change: Our first question comes from Ric Prentiss with Raymond James. Please go ahead.

Ric Prentiss: Good morning, everybody.

Thomas J. Fitzpatrick: We close 2023 with net leverage of 3.1 times OEBDA. This is down from 3.2 times a year earlier and includes the impact of our buyback activity and dividends. We think Iridium naturally delivers over time and expect to exit 2030 with below two times leverage, even after giving effect to our dividend program and all share buybacks authorized by our board. I also want to highlight Iridium's term loan, which will now mature in 2030. You'll recall that we extended the term by about four years and in September and lowered the interest rate on the facility. Iridium also enjoys a favorable position on its interest rate cap, which hedges about two-thirds of the term loan.

Ric Prentiss: Good morning, Rick.

Ric Prentiss: Hey, Thanks for all that well, that's a lot of moving pieces and stuff to digest, but I appreciate all the details.

Ric Prentiss: First question I've got is.

Ric Prentiss: Obviously, the extension of the useful life was a $2 $3 million noncash.

Ric Prentiss: Noncash it within <unk> thought I also heard there was a $2 million nonrecurring benefit from a contract in the fourth quarter was that a cash payment or was that also a non cash item. It was the recognition of deferred revenue just to due to a change in circumstances regularly so think of it as cash.

Ric Prentiss: Alright.

Ric Prentiss: The dividend I appreciate the increase the dividend.

Ric Prentiss: We expected and planned by the board for <unk> is that what we should think of kind of the annual review of the dividend policy will be on like a <unk> basis, and why do it in <unk> versus like off of year end results.

Ric Prentiss: We were focused on the full year.

Ric Prentiss: Full year increase so we like the 6% increase in so that the easiest way to accomplish that was supposed to hit the second quarter with a penny.

Speaker Change: Okay makes sense.

Speaker Change: Then.

Speaker Change: On the project startup costs, I guess, David goes coming in here.

Thomas J. Fitzpatrick: We believe these instruments allow us to weather the current interest rate environment and would look to extend our hedge as market opportunities present themselves. Turning to our pro forma free cash flow, if we use the midpoint of our 2024 EBITDA guidance and back off $76 million in net interest pro forma for our current debt structure, approximately $69 million in CapEx for this year, $5 million in cash tax, and $6 million in working capital, inclusive of the appropriate hosted payload adjustment, we're projecting a pro forma free cash flow of approximately $309 million for 2024. These metrics would represent a conversion rate of EBITDA to free cash flow of 66% in 2024 and a yield of approximately 7.3%. A more detailed description of each element of these calculations, along with the reconciliation to gap measures, is available in a supplemental presentation under Events on our Investor Relations website.

Speaker Change: <unk>.

Speaker Change: What is the kind of expense and capex efforts that youre doing that will kind of lead to that investment what efforts to try or you're trying to pull off of that and is there a need to select partners or is the standard base mean, you just move that way. So just trying to understand what the startup project entails.

Speaker Change: Opex and Capex over the next couple of years.

Speaker Change: Yes, I mean, it's an incremental investment on our existing network.

It requires.

Speaker Change: Updating satellite software some new ground infrastructure in our gateway gateways.

Speaker Change: Gateways.

Speaker Change: And the standards based activity is really in the chipsets and we've already.

Speaker Change: Are pursuing that activity as well in discussions with.

Speaker Change: Chip manufacturers to include our band and.

Speaker Change: Into the into the standard which is a real big lift given that it's pretty close to others as well.

Speaker Change: So all of that activity I think we said at the announcement of Stardust a couple of weeks ago. We mentioned it was worth tens of millions of dollars kind of.

Operator: In closing, Iridium continues to execute well and deliver strong free cash flow growth. We feel good about our competitive position. And as Matt noted, we'll make some investments in 2024 to augment our opportunity set and drive new revenue growth through 2030. With that, I'd like to turn the call over to the operator for the Q&A. We will now begin the question and answer session. To ask a question, you may press star, then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys.

Speaker Change: Level of effort over a couple of years that's in.

Speaker Change: Incremental R&D and probably more so in incremental capital, which has all been sort of described.

Speaker Change: Day in our our guidance.

Speaker Change: Tom went through kind of most of that in terms of what what we expected that to mean between now and 2030.

Speaker Change: But in the big scheme of things not a real not a real big big.

Speaker Change: Kris and what we're doing on our because we have such a <unk>.

Ric Prentiss: To withdraw your question, please press star, then two. Our first question comes from Ric Prentiss with Raymond James. Please go ahead. Thanks. Good morning, everybody. Good morning, Rick.

Speaker Change: Flexible network today and.

Speaker Change: We also think it's well covered by sort of the market.

Speaker Change: Potential growth that it leads us I would say, particularly in narrowband Iot and all the use cases that it can expand and that sort of general area and as well obviously it puts us in a.

Ric Prentiss: Thanks for all that. Wow, that's a lot of moving pieces and stuff to digest, but I appreciate all the details. First question I've got is obviously the extension of the useful life was a $2.3 million non-cash hit in 4Q. I thought I also heard there was a $2 million non-recurring benefit from a contract in the fourth quarter. Was that a cash payment, or was that also a non-cash item?

Speaker Change: A really good position to provide.

Speaker Change: <unk> kind of services as well and there will be.

Speaker Change: Other.

Speaker Change: We're deep into partnership negotiations with a number we've gotten a lot of encouragement and support because we're one of the.

Thomas J. Fitzpatrick: It was the recognition of deferred revenue due to a change in circumstances, so think of it as cash. All right, the dividend. I appreciate the increase in the dividend expected and planned by the board for 2Q. Is that when we should think of kind of the annual review of the dividend policy will be on like a 2Q basis? And why do it in 2Q versus like off of year-end results?

Speaker Change: The only real leos doing this right now and so a lot of people really want to encourage and support us in that regard.

Speaker Change: So we're talking to everything from <unk>.

Speaker Change: Chipset manufacturers to smartphone.

Speaker Change: <unk> manufactures and and.

Speaker Change: Obviously, our partner basis quite interested in as well as as we evolve to.

Matthew J. Desch: We were focused on the full year increase, so we like the 6% increase, and so the easiest way to accomplish that was just to hit the second quarter with a penny. And then on Project Stardust, I guess David Bowie is coming in here, what is the kind of expense... CapEx efforts that you're doing that will kind of lead to that investment? What efforts are you trying to pull off on that, and is there a need to select partners, or is the standard-based approach that you just move that way? So just trying to understand what the Stardust project entails, OPEX and CapEx over the next couple of years. Yeah, I mean, it's an incremental investment in our existing network. It requires updating Satellite Software, some new ground infrastructure in our gateways, and the standards-based activity is really in the chipsets. We are pursuing that activity as well in discussions with chip manufacturers to include our band into the standard, which is a real big lift given that it's pretty close to others as well. So, all that activity, I think we said at the announcement of Stardust a couple weeks ago that it was tens of millions of dollars kind of level of effort over a couple years. That's in...

Speaker Change: To providing not just proprietary Iot technologies, but standard based Iot technologies long term so.

Speaker Change: Couple of years, but.

It's well underway.

Speaker Change: Okay.

Speaker Change: And I appreciate the.

Speaker Change: Thought of $500 million in EBITDA, and 25, given puts and takes of what might be a more normal one but the $1 billion.

Speaker Change: Service revenue target by 2030, how much does that.

Speaker Change: Assume and when would it assume kind of this.

Speaker Change: Project start us spending moving into being actually producing revenues.

Speaker Change: So we're not providing specific piece of that it will not really affect that.

Speaker Change: That amount much until later in this decade, we're really not expecting them to ramp up until.

Speaker Change: <unk> two or three years, so it won't be.

Speaker Change: That significant a portion of it but it is part of it.

Speaker Change: Great I appreciate all the color and information today, Thanks, guys stay well thanks Rick.

Speaker Change: Our next question comes from Simon Flannery with Morgan Stanley. Please go ahead.

Simon Flannery: Alright, Thank you very much good morning, Matt.

Simon Flannery: Just to come back to the extension of the useful life of the constellation is this purely an accounting exercise or have you reassess from an operational standpoint, I think a couple of times you've referenced the capex holiday through 2030, but there is there any sort of potentially extending that capex holiday as a result of this or is it just.

Matthew J. Desch: Incremental R&D and probably more so in incremental capital, which has all been sort of described today in our guidance. Tom went through kind of most of that in terms of what we expect that to mean between now and 2030. But in the big scheme of things, not a really big increase in what we're doing because we have such a flexible network today. And we also think it's well covered by sort of the market potential growth that it could lead us, I would say, particularly in narrowband IoT and all the use cases that it could expand in that sort of general area. And as well, obviously, it puts us in a really good position to provide D to D kind of services as well.

Simon Flannery: An accounting exercise.

Simon Flannery: We're not we're not extending it today I mean, our our guidance is really the.

Simon Flannery: Guidance through 2030, and Thats, what I still expect.

If our satellite constellation continues to perform well and we don't need to build a new network it could it could be extended.

Simon Flannery: It again beyond that.

Speaker Change: <unk> said, we got over 20 years out of our last constellation So 17 five.

Speaker Change: I hope it's still.

Speaker Change: At the lower end of what will ultimately end up getting.

Matthew J. Desch: And there will be others, you know, there are, we're deep into partnership negotiations with a number, we've gotten a lot of encouragement and support because we're one of the few, Only Real Leo is doing this right now, and so a lot of people really want to encourage and support us in that regard. So we're talking to everything from MNOs to... Chipset manufacturers, the smartphone manufacturers, and obviously, our partner base is quite interested as well as we evolve to providing not just proprietary IoT technologies but standard-based IoT technologies in the long term. So, a couple of years, but it's well under way.

Speaker Change: No right now we're not.

Speaker Change: We're not.

Speaker Change: Providing guidance to extend the capex holiday beyond that it certainly gives us confidence that we'll achieve that end.

Speaker Change: It's definitely possible that we could extend it again.

Speaker Change: Okay, and I guess.

Speaker Change: Opt to make that decision I don't know two years out three years out is that right.

Speaker Change: I mean, we really assess our constellation life every year. This year was the first year as we ran through it and we said it's been.

Speaker Change: Five years, if you will since we started.

Speaker Change: <unk> launched our satellites are performing much better than expected, we added five additional satellites and space to add even more.

Matthew J. Desch: And I appreciate the thought of $500 million in EBITDA in 2025, given puts and takes of what might be a more normal one. But the billion-dollar... Service Revenue Target by 2030? How much does that assume and when would it assume that kind of Project Stardust spending moving into actually producing revenue?

Speaker Change: In orbit spares and were expecting and really we couldn't deny that the simulations we were running werent pushing us.

Speaker Change: Two at least 2017 and a half years, even even beyond that so.

Speaker Change: Forced an update in the fourth quarter and all the implications that it had I mean, we will continue to do that every year probably around the fourth quarter is when we typically assess that and it.

Matthew J. Desch: We're not providing a specific piece of that. It will not really affect that amount much until later in this decade. We're really not expecting it to ramp up until, you know, the latter two or three years. So, you know, it won't be that significant a portion of it, but it is part of it. Great. Appreciate all the color and information today. Thanks, guys. Stay well.

Speaker Change: It could very well happen in the coming years as the network continues to perform this well we will we will have to update that again, but for now I think that would probably.

Speaker Change: Be the expectations for at least the next year or two.

Speaker Change: Great and then on the commercial broadband comments about.

Speaker Change: Some exposure from switching from our primary service to companion service can you just sort of size how much revenues are coming from use as a primary service that sort of usage exposure and is that really your main exposure within that commercial broke down to some of these new leos or is there other exposure and other.

Ric Prentiss: Thanks, Rick. Our next question comes from Simon Flannery with Morgan Stanley. Please go ahead. Great, thank you very much. Good morning.

Simon Flannery: Matt, just to come back to the extension of the Useful Life of the Constellation, is this purely an accounting exercise? Or have you reassessed from an operational standpoint? I think a couple of times you referenced the CapEx holiday through 2030. But is there any thought of potentially extending that CapEx holiday as a result of this? Or is it just an accounting exercise?

Speaker Change: Segments.

Speaker Change: That's the.

Speaker Change: Most of the exposure, we really see at this point.

Speaker Change: We're not we're switching.

Speaker Change: We were <unk>.

Speaker Change: Always a.

Speaker Change: We're primarily being used.

Matthew J. Desch: We're not extending it today. I mean, our guidance is really guidance through 2030, and that's what I still expect. Obviously, if our satellite constellation continues to perform well, and... We don't need to build a new network. It could be extended again beyond that. As I said, we got over 20 years out of our last constellation, so 17 and a half, I hope, is still, you know, at the lower end of what we'll ultimately end up getting. But, no, right now, we're not. We're not providing guidance to extend the CapEx holiday beyond that.

Speaker Change: Be careful use that word too many times as a companion service the majority of our <unk>.

Speaker Change: Our installations.

Speaker Change: Out there are as a companion to VSAT service.

Speaker Change: VSAT services, including Starling don't work when it when it storms.

Speaker Change: To be turned off in ports for regulatory purposes, often or other reasons certainly coverage in and we were.

Speaker Change: The majority of our installations have been used as a companion to the extent we are used as a primary we're seeing very low costs.

Matthew J. Desch: It certainly gives confidence that we'll achieve that, but it's definitely possible that we could extend it again. Okay, and I guess you have to make that decision, I don't know, two years out, three years out, is that right? Well, I mean, we really assess our constellation life every year. You know, this year was the first year we ran through it, and we said it's been..., five years, if you will, since we started launching it, and our satellites are performing much better than expected. We added five additional satellites in space to add even more in-orbit spares than we were expecting. And really, we couldn't deny that the simulations we were running weren't pushing us out to at least 17 and a half years, maybe beyond that.

Speaker Change: Starlink coming in are being offered particularly for say crew welfare and that sort of thing is.

Speaker Change: Is sort of taking over that usage.

Speaker Change: Those primary usage and they might in many cases switch over to a companion type application, but its in Finland.

Speaker Change: It's in the single digits, yes.

Speaker Change: I can size, if we see it Simon we see <unk>. If you look at full year <unk> in 2024 versus 23, we see.

Speaker Change: 5% to 10% down in 'twenty four from 'twenty, three but since it's finite Nf <unk>.

Speaker Change: And kind of a small number of vessels. We think it runs its course in 'twenty four and then we get back to growth sometime in 2000.

Matthew J. Desch: So it sort of forced an update in the fourth quarter and all the implications that it had. I mean, we'll continue to do that every year, you know, probably around the fourth quarter is when we typically assess that. It could very well happen in the coming years if the network continues to perform this well. We'll have to update that again, but for now, I think that would probably be the expectations for at least the next year or two. Great

Speaker Change: 25.

Speaker Change: Growth in ARPA.

Speaker Change: And then sorry growth in ARPA.

Speaker Change: Growth rates accelerated in 25, because youre just going to be you're going to have the subscriber gains and not the <unk> dilution.

Speaker Change: Okay, which we'll see in 'twenty four.

Speaker Change: Alright, alright, that's helpful. Thanks, a lot.

Speaker Change: Thanks Simon.

Speaker Change: Our next question comes from Walter Piecyk with <unk>.

Walter Piecyk: Please go ahead.

Walter Piecyk: Are you there.

Walter Piecyk: Are you on mute.

Walter Piecyk: Can you hear me now can you hear me now there you go about now.

Simon Flannery: And then on commercial broadband, the comments about some exposure from switching from a primary service to companion service. Can you sort of size how much revenues are coming from use as a primary service, that sort of usage exposure? And is that really your main exposure within that commercial broadband to some of these new Lios, or is there other exposure in other segments?

Walter Piecyk: In Barcelona.

Walter Piecyk: The $9 million from the accounting impact if I just.

Walter Piecyk: The simple math on the service revenue of 585 or so for 'twenty three that's 150 basis point impact to gross alright. So your mid 0.5.

Walter Piecyk: So even if you added that back our guide is effectively six 5% now so you've got that right.

Matthew J. Desch: That's the, that's the most exposure we really see at this point. We said we weren't we're switching. I mean, we were always a, we're primarily being used, I have to be careful to use that word too many times, as a companion service by the majority of our users in the world.

Speaker Change: Yeah, so that feels a bit slower.

Speaker Change: On services and then I think.

Speaker Change: But a lot of us thought would grow in this business. So is that just this <unk> thing that you referred to in the prepared comments.

Thomas J. Fitzpatrick: When it storms, they have to be turned off in ports for regulatory purposes, often, or other reasons, and certainly coverage. And we were, you know; the majority of our installations have been used as a companion. To the extent we are used as a primary, we're seeing very low costs. Starlink coming in, being offered particularly for, say, crew welfare and that sort of thing is sort of taking over that usage, that primary usage, and they might, in many cases, switch over to a companion type application. It's in the single digits. Yeah, no, so I can size it for you.

Speaker Change: There are other things you can comment there on that.

Speaker Change: Certainly the <unk> and broadband is a headwind that's influencing the service revenue, but if you think about our long term guide that we issued in 2021 for average high single digits 23 through 25.

Speaker Change: We are sitting on a nine seven in 'twenty three and so.

Speaker Change: Getting to high single digits, it seems pretty easy and we'll hit that will hit that long term guide. So the answer. Your question is yes. There is a there was a bit of a headwind from the broadband.

Simon Flannery: We see it, Simon, when you look at full year ARPU in 2024 versus 23, we see it, you know, five to 10% down in 24 from 23, but since it's finite and, and, and, you know, kind of a small number of vessels, we think it runs its course in 24, and then we get back to growth sometime in 2025. Growth in R2. Not necessarily growth in ARPU, but growth rates will accelerate in 2025 because you're just going to have subscriber gains and not ARPU dilution, which we'll see in 2024. Great. All right. That's helpful. Thanks a lot. Thank you very much.

Speaker Change: Kind of limited and going to its going to have data as I said.

Speaker Change: But we feel very good.

Speaker Change: I'm sorry, if I missed that can you repeat why why it's going to abate in 2000 and somehow gone now.

Speaker Change: Finite number of vessels, where were primary and we think that they will move they will they will convert to companion quickly because it's in their interest to.

Speaker Change: Because it's a cheaper solution and so it's a it's a small number of vessels dates and they're interested in we think that the <unk> runs its course through 'twenty four and settles in 'twenty five and then what Youll be left within 25 is just subscriber gains and flat ARPA.

Thomas J. Fitzpatrick: Thank you. Thank you. Our next question comes from Walter Pysyk with LightShut. Please go ahead. Are you there, Walt? Are you on mute?

Speaker Change: So that.

Walter Pysyk: Can you hear me now? There you go. How about now? I can't hear you. Sorry, I hadn't called in a long time.

Speaker Change: Subscriber equipment revenue slowdown that occurred understandable, obviously, given the backlog and yada yada all of the things that we talked about the last couple of quarters.

Walter Pysyk: I have the $9 million from the accounting impact. Use simple math on the service revenue, 585 or so for 23, that's a 150 basis point impact of growth, right? So you're mid.5, so even if you added that back, the guide is effectively 6.5%, no?

Speaker Change: Seem to be a pretty good predictor of the slower growth rate. So I guess I guess I'm curious on your subscriber equipment outlook for 2024, I guess, you said no more normalized levels. It was $16 million in the fourth quarter. So is this the run rate, 15% to 20 million that we're expecting for equipment revenue and then it does not.

Thomas J. Fitzpatrick: So- That's right, you got that right. Yeah, so that feels a bit slower on services that I think a lot of us thought you could grow in this business. So is that just this ARPU thing that you were referred to in the prepared comments? Are there other things you can comment on that element first?

Speaker Change: Is that an indicator of future service revenue growth, yes, we don't think so sell in lower we think we think we think growth in so the most pronounced <unk>.

Speaker Change: Kris in equipment revenues was in Iot the channel clearly ordered to have safety stock and we met that we met that challenge and enjoyed those revenues, but if you look at the time series data I look at the five years prior to 2022.

Walter Pysyk: Certainly, the ARPU in broadband is a headwind that's affecting service revenue, but if you think about our long-term guide that we issued in, you know, 2021 for average high single digits, 23 through 25, you're sitting on a 9.7 in 23, and so getting to high single digits seems pretty easy, and we'll hit that long-term guide. So the answer to your question is yes, there's a bit of a headwind from broadband. That's, you know, kind of limited, and it's going to abate, as I said, but we feel very good about it. I'm sorry if I missed that. Can you repeat why it's going to abate in 24 and somehow? Go ahead.

Speaker Change: Equipment revenues averaged under 90 million Bucks.

Speaker Change: They spiked to $135 million in 2023 is as this channel's kind of stuffing occurred.

Speaker Change: We think our prospects in Iot notwithstanding the material decline in equipment revenues in 2004 from from 23% and 23 from 22 are as strong as they've ever been.

Walter Pysyk: So there's a finite number of vessels where we're primary, and we think that's good. They will move, they will convert to companion quickly because it's in their interest to, because it's a cheaper solution, and so it's A, it's a small number of vessels, B, it's in their interest to, and we think that the ARPU runs its course through 24 and settles in 25, and then what you'll be left with in 25 is just subscriber gains and flat ARPU. So, the subscriber equipment revenue slowdown that occurred is understandable, obviously given the backlog and yada yada, all the things that we talked about in the last couple of quarters seem to be a pretty good predictor of this lower growth rate. So I guess I'm curious about your subscriber equipment outlook for 2024. I guess you said that at more normalized levels, it was 16 million in the fourth quarter.

Speaker Change: So our Iot.

Speaker Change: Prospects are really good and handset. Similarly, I mean, we were very clear in his we were enjoying.

Speaker Change: Record record.

Speaker Change: Record handheld set sales in 'twenty, three we were clear that and excuse me in 'twenty. Two we were clear that our competitor was stopped out and we were getting benefit of that well. They now have phones and we're back to a normal kind of competitive dynamic and normal levels of sales. So we think this equipment issue is going to run its course here. This year, it's going to be a headwind in <unk>.

Speaker Change: <unk> four that will abate in 'twenty, five and we'll get back to kind of more consistent with more longer term trends, but we do not think that it is.

Speaker Change: Leading indicators for softening in our in our.

Speaker Change: Sorry about that it sounds like it's going to take a couple of quarters at least in order for some of the stuff that kick back in in terms of a reacceleration right. It sounds like.

Speaker Change: One or two quarters, we're looking at 25 now in terms of a reacceleration of growth.

Walter Pysyk: So is this the run rate, 15 to 20 million that we're expecting for equipment revenue? And then isn't that an indicator of future service revenue growth? Yeah. We don't think so. Any lower?

Speaker Change: I think youre youre, taking two things that happened in saying they're correlated.

Speaker Change: Just because our.

Thomas J. Fitzpatrick: We think growth in – so the most pronounced decrease in equipment revenues was in IoT. The channel clearly ordered to have safety stock, and we met that challenge and enjoyed those revenues. But if you look at the time series data, look at the five years prior to 2022, equipment revenues averaged under $90 million.

Speaker Change: Well I'm not sure I'm following what you're doing there is not an acceleration really the growth rate as we said is continuing to happen 24 in 'twenty four.

Speaker Change: In the same way it was it was in 'twenty three so I don't know what the acceleration you're talking about really is and to be clear there isn't any.

Speaker Change: Hate to FLIR walk I am clear, while we were very clear in the Investor day in September that we were going to model for purposes of arriving at our $3 billion in capacity for shareholder returns through 2030, we werent hanging our hat on.

Thomas J. Fitzpatrick: They spiked to $135 million in 2023 as this channel kind of stuffing occurred. We think our prospects in IoT, notwithstanding the material decline in equipment revenues in 2024 from 2023 and in 2023 from 2022, are as strong as they've ever been. So our IoT prospects are really good. And Hans said similarly.

Speaker Change: Elevated equipment revenues, we were very.

Speaker Change: Yes.

Speaker Change: Clear that we saw equipment revenues coming down and that doesn't that doesn't do a thing to our $3 billion in projected capacity and shareholder returns.

Thomas J. Fitzpatrick: I mean, we were very clear in – as we were enjoying record, record hand, record handset sales in 22, we were clear that our competitor was stocked out, and we were getting the benefit of that. Well, they now have phones, and we're back to a normal kind of competitive dynamic and normal levels of sales. So we think this equipment issue is going to run its course here this year. It's going to be a headwind in 24 that will abate in 25, and we'll get back to consistent with more longer-term trends, but we do not think that it is a leading indicator for softening in our survey. It sounds like it's going to take a couple of quarters at least in order for some of this stuff to kick back in terms of a re-acceleration, right? It's not like, you know, one or two quarters.

Speaker Change: Understood.

Speaker Change: One last question on margins is that was that I haven't done the exact math on that is what we do some some math I'm trying to understand incremental gross margin in the fourth quarter on services, specifically and it looked like a depth is that because of that 2 million. One timer was basically a profit lifts.

Speaker Change: Gross profit revenue.

Speaker Change: It was that was normal service revenue.

Speaker Change: I don't think you'd make I wouldn't make much of that I mean, our operating leverage model remains very much intact.

Speaker Change: Okay. Thank you.

Speaker Change: Our next question comes from Edison, you with Deutsche Bank. Please go ahead.

Walter Pysyk: We're looking at 25 now in terms of a re-acceleration in growth. I don't. I think you're taking two things that happened and saying they're correlated. Just because our, well, I'm not sure I'm following what you're doing, there's not an acceleration really. The growth rate, as we said, is continuing to happen in 24 in the same way as it was in 23. So I don't know what this acceleration you're talking about really is.

Edison: Hey, Thanks, Ed and good morning, just one follow up on the <unk> side I.

Edison: I know youre not expecting material revenue contribution until later on but do we have an exchange side.

Edison: Operational timeline.

Edison: While we could get more partners announced when the first.

Edison: Maybe tax phones will be will be out there just trying to get a sense on.

Matthew J. Desch: To be clear, Walt, we were very clear at the investor day in September that we were going to model, and for purposes of arriving at our $3 billion in capacity for shareholder returns through 2030, we weren't hanging our hat on elevated equipment revenues. We were very, I thought, clear that we saw equipment revenues coming down, and that doesn't do a thing to our $3 billion in projected capacity in shareholder returns. Understand you know on one last question on margins, I haven't done the exact math on this, but we did some math on trying to understand incremental gross margin in the fourth quarter on services specifically, and it looked like a dip because that two million one-timer was basically a profitless Our next question comes from Edison Yu with Deutsche Bank. Please go ahead.

Edison: The operational ramp revenue.

Edison: The revenue contribution.

Edison: Well, we discussed during the announcement to start to us.

Edison: That we would.

Edison: Earliest that we'd be doing some testing would be 25 in the.

Edison: The earliest we would see.

Edison: The implementation would be in 2006.

Edison: We're still early.

Edison: Not really changing any views of that right now but.

Edison: But that's that's kind of haven't changed anything in the last couple of weeks since that time. So 26 would be the absolute earliest you would see that in terms of announcements and everything I mean, we will announce we will announce when it makes sense to announce it we don't usually just announcing for marketing purposes.

Edison: All the interests that we have will be more around what our partners want to say and that sort of thing to us it's more about building the capability and get it into operation.

Edison Yu: Hey, thanks and good morning. Just one follow up on the DVD side. I know you're not expecting material revenue contribution until later on. But do we have a sense on the operational timeline, as in when we could get more partners announced when the first, Maybe test phones will be up there. Just trying to get a sense on the operational ramp rather than just the revenue contribution. Well, we discussed during the announcement of Stardust that we would, you know, the earliest that we'd be doing some testing would be 25, and the earliest we would see implementation would be in 26, and I said that, you know, we're still early, you know, not really changing any views of that right now, but that's kind of, haven't changed anything in the last couple weeks since that time, so 26 would be the absolute earliest you would see that.

Speaker Change: Okay. Thanks.

Speaker Change: Thanks, Ed.

Speaker Change: Our next question comes from Chris Quilty with Quilty space. Please go ahead.

Chris Quilty: Thank you Tom I hate to harp on the equipment issue, but just looking at the inventories it looks like they were up.

Up about $20 million sequentially and more than two X year over year was that a reflection of how quickly it turned down and what have you done in terms of.

Chris Quilty: New order rate for product and do you expect.

Chris Quilty: Perhaps they have to do any discounting on a go forward basis on that or do you expect all the inventory you just clear the natural course.

Chris Quilty: We expected to clear in the natural course, we don't expect any discounting that was a conscious decision on our part to prevent a stock out if you look at our ads in our voice and data business in.

Chris Quilty: 2022.

Matthew J. Desch: In terms of announcements and everything, I mean, we'll announce them when it makes sense to announce them. We don't usually just announce things for marketing purposes, you know; all the interest that we have will be more around what our partners want to say and that sort of thing. To us, it's more about building the capability and getting it into operation. Great, thanks. Thanks, Ed. Our next question comes from Chris Quilty with Quilty Space. Please go ahead.

Chris Quilty: Those investments paid off handsomely for us and we expect the inventory to move down.

Chris Quilty: Frankly for in 'twenty, four and then down again in 'twenty five.

Chris Quilty: Great.

Chris Quilty: Shifting back to the aviation service certification for safety services.

Chris Quilty: Matt You said, you expect that certification that come through this year and I guess.

Is that front half of the year back half of the year and do you expect it to have impact on the growth in that product line.

Chris Quilty: Tom, I hate to harp on the equipment issue, but just looking at the inventories, it looks like they were up about 20 million sequentially and more than 2x year over year. Was that a reflection of how quickly it turned down, and what you have done in terms of new order rate, product, and you expect, perhaps, to have to do any discounting on a go-forward basis on that, or do you expect all the inventory to just clear? We expect it to clear in the natural course. We don't expect any price discounting.

Speaker Change: A secondary question to that is I do.

Speaker Change: Don't know have you ever done OEM installations or are these all aftermarket.

Speaker Change: So the safety program, which.

Speaker Change: Largely developed is entering into its certification phase right now where it starts flying on airlines, a whole whole trial program that sort of been.

Speaker Change: This is being scheduled right now with airlines agreeing to sort of fly it and demonstrated through most of this year, we expect to achieve the certifications later in the year and our partners manage really the installations, we don't do that.

Matthew J. Desch: That was a conscious decision on our part to prevent a stock out. If you look at our ads in our voice and data business in 2022, those investments paid off handsomely for us, and we expect the inventory to move down, frankly, in 24 and then down again in 25. I'm shifting back to the aviation service certificate, and I think Matt said you expected that certification to come through this year, and... Is that front half of the year, back half of the year, and do you expect it to have an impact on growth in that product line? And a secondary question to that is, I don't know, have you ever done OEM installations, or are these all...um, So the safety program, which is largely developed, is entering into its certification phase right now, where it starts flying on airlines. It's a whole trial program that is being scheduled right now with airlines agreeing to fly it and demonstrate it through most of this year. We expect to achieve the certifications later in the year, and our partners manage, really, the installations. We don't do that.

Speaker Change: It's our.

Speaker Change: The ones, who have channels into the airlines in particular for.

Speaker Change: These kinds of services like controller pilot data link and that sort of thing.

Speaker Change: You have channels to install these things on airliners aftermarket.

Speaker Change: As they are being built et cetera, and that that's a market. That's a model that we've been part of for the last <unk>.

Speaker Change: 15 to 20 years really and our narrow band product. This will really give us a whole new capability that they're excited about with higher speed services.

Speaker Change: We expect to see good transition.

Speaker Change: Over to that new.

Speaker Change: Service technology.

Speaker Change: In years.

Speaker Change: So it does it makes sense to either working with your OEM or a partner.

Speaker Change: Shooting for OEM installation.

Speaker Change: I'm not sure what you're referring to I mean factory installation.

Speaker Change: Other than aftermarket.

Speaker Change: Under.

Speaker Change: Thats expected.

Speaker Change: The people who.

Speaker Change: Who make Boeing and Airbus really one service in the cockpit.

Matthew J. Desch: It's the ones who have channels into the airlines, in particular for, you know, these kinds of services like ControllerPilot, Datalink, and that sort of thing, who have channels to install these things on airliners aftermarket, as they're being built, etc. And that, that's a mark, that's a model that we've been part of for the last. This revenue from the first teaspoon in 2015-2017 will bring revenue from 15 to 20 years really in our narrow band product. net cash flow from our network alternative cloud services. This will really give us a whole new capability that they're excited about with higher speed services, and we expect to see a good transition over to that new service technology in the coming time. So does it make sense to either work with the OEM or a partner? Shooting for an OEM installation. I'm not sure what you're referring to. Factory installation, rather than aftermarket. Yeah, I mean, that's expected.

And I'm expecting youll hear more about flying fit.

Applications of those as they adopt it.

Speaker Change: They both want iridium because it's more global is less expensive the antennas smaller the cost is.

Speaker Change: Better overall it is a preferred solution for the cockpit and.

Speaker Change: Manufacturers are extremely supportive of this whole effort. We're underway this is not something where.

Speaker Change: We're doing and pushing as much as there is a lot of pull in the market for it.

Speaker Change: Got you and one final question on DVD.

Speaker Change: Ed.

Speaker Change: Peer group companies competitors form a new mobile satellite services Association, it's it looks like it's primarily a viasat.

Inmarsat, driven I guess they did pull in.

Speaker Change: That an omni space on that also what was your rationale for not participating in that effort.

Speaker Change: Lack of knowledge of it.

Matthew J. Desch: You know, the people who make Boeing and Airbus really want Sirtis in the cockpit, and I'm expecting you'll hear more about line-fit applications of those as they adopt it. They both want Iridium because it's more global, it's less expensive, the antenna is smaller, the cost is better overall, it is a preferred solution for the cockpit, and manufacturers are extremely supportive of this whole effort we're undertaking. This is not something we're doing and pushing as much as there's a lot of pull in the market for it. And one final question on D2D, you had some.

Speaker Change: <unk>.

Speaker Change: I heard about it when you heard about it Mark actually reached out to me. This week and we have a call tomorrow to talk about it.

Speaker Change: You asked if we would want to join but I don't know much about even what it necessarily.

Speaker Change: <unk> to accomplish yet and I look forward to hearing more about it.

Speaker Change: I sort of assumed when I saw it as you did that it was the geo operators.

Speaker Change: Many of them, who don't have spectrum, who don't have satellite sort of capabilities or more spectrum.

Matthew J. Desch: Peer group companies, and competitors form a new Mobile Satellite Services Association. It looks like it's primarily, you know, Aviasat, Inmarsat driven, and OmniSpace on that also. What was your rationale for not joining it? lack of knowledge of it.

Speaker Change: Oriented.

Speaker Change: Any kind of band together to harmonize and market together to those people who may be able to use that spectrum since most of the people.

Speaker Change: Who announced that really don't have the money to build say standalone network for that way. So I'm interested in hearing more about it but obviously our strategy is pretty self contained right now we have our own system. Today, we have spectrum, we have the ability to implement.

Matthew J. Desch: I heard about it when you heard about it. Mark actually reached out to me this week, and we have a call tomorrow to talk about it. He asked if we would want to join, but I don't know much about even what it's necessarily seeking to accomplish yet, and I look forward to hearing more about it. I sort of assumed, when I saw it as you did, that it was the geo operators, many of them who don't have spectrum. I mean, who don't have satellite, you know, sort of capabilities or more spectrum, oriented to band together to harmonize and market together to those people who may be able to use that spectrum since most of the people who announced they really don't have the money to build, say, a standalone network for that wave. So I'm interested in hearing more about it, but obviously, our strategy is pretty self-contained right now. We have our own system today.

Start us our plans, but I'll certainly.

Speaker Change: Look forward to hearing more about it and seeing if our interest aligned in some ways.

Got you and one more final question, which is back to Iot.

Speaker Change: Have you seen any movement, you've talked about the UAV market.

Speaker Change: In the past several quarters should we expect to see some announcements around this year and how would that contribution look.

Speaker Change: Relative to the <unk> or number of units.

Speaker Change: Compared to the existing base.

Speaker Change: There's still an awful lot of activity in that space.

Speaker Change: More.

Speaker Change: Vars and.

Speaker Change: Service providers, who are who are developing solutions, we're testing things out and everything from industrial applications as well as delivery and other things who won.

Matthew J. Desch: We have Spectrum. We have the ability to implement, as Stardust, our plans, but I'll certainly look forward to hearing more about it and seeing if, you know, our interests align in some way. And one more final question, which is back to IoT. Have you seen any movement?

Speaker Change: A lightweight.

Speaker Change: Lower costs low power kind of command and control solution.

Speaker Change: Had a discussion yesterday.

Speaker Change: Number of <unk>.

Speaker Change: <unk> providers, which is interesting is kind of a new growth space as well, who have larger vehicles, who again want to use iridium for our global command and control ability for there.

Matthew J. Desch: You've talked about the UAV market for the past several quarters. We expect to see some announcements around this year. How would that contribute?

Matthew J. Desch: relative to the, you know, the ARPUs or number of sites like www.kenhub.com, you know, there's still an awful lot of activity in that space, more VARs and service providers who are developing solutions, who are testing things out, and everything from industrial applications as well as delivery and other things who want a lightweight, lower cost, low power kind of command and control solution. We just had a discussion yesterday, there are a number of HAPS providers, which is interesting, it's kind of a new growth space as well, who have larger vehicles and who again want to use iridium for our global command and control ability for their solutions as well. But I don't see a giant ramp up in necessarily at least coming through here quite yet.

Speaker Change: Their solutions as well, but I don't see it.

Ramp up in.

Speaker Change: Necessarily at least coming through here quite yet I mean, I certainly see a lot of interest in market activities market development activities.

Speaker Change: Solution development, but I don't have visibility to kind of win that will ramp so I don't have.

Speaker Change: I don't think its really going to be this year necessarily I think it's still still to come.

Speaker Change: Alright, Thank you everybody. Thanks.

Speaker Change: Thanks, Chris Thanks, Chris.

Speaker Change: Our next question comes from Louis Dipalma with William Blair. Please go ahead.

Louie Dipalma: Matt Tom and Ken Good morning, Hey, Louie Louie.

Louie Dipalma: Related to the <unk>.

Louie Dipalma: Previous question and discussion on spectrum you have discussed.

Matthew J. Desch: I mean, I certainly see a lot of interest in market activities, market development activities, and solution development, but I don't have visibility into kind of when that will ramp up, so I don't have a sense of, you know, I don't think it's really going to be this year necessarily, I think it's still to come. All right, thank you, everybody. Yep. Thanks, Chris. Our next question comes from Louis DiPalma with William Blair. Please go ahead. Matt, Tom, and Ken, good morning. Hey, Louie. Hey Louie.

Louie Dipalma: You are interested in acquiring more spectrum, if the opportunity arises and as it relates to project startups are you interested in forming regional backstrom partnerships to add capacity to your network at all similar to what Asps space mobile and <unk>.

Louie Dipalma: Starlink are doing with the cellular carriers.

Louie Dipalma: Well first of all what Theyre doing is sort of.

Louie Dipalma: Related to the previous question and discussion on spectrum, you discussed how you are interested in acquiring more spectrum if the opportunity arises, and as it relates to Project Stardust, are you interested in forming regional spectrum partnerships to add capacity to your network at all, similar to what AST, Space Mobile, and Starlink are doing with the cellular carriers? Well, first of all, what they're doing is sort of utilizing terrestrial spectrum, expensive terrestrial spectrum, in places where it's not approved. I think there's a lot to play out over the coming years.

Utilizing terrestrial spectrum.

Louie Dipalma: Expenses terrestrial spectrum in places, where it's not approved.

Louie Dipalma: And it hasnt been allocated or et cetera, and and specifically that's something that hasnt been approved by regulators and for which there will be a lot of I think.

Louie Dipalma: Lawsuits and other things to try to block it from people who don't.

Louie Dipalma: I don't have the opportunities in that spectrum, and I think there's a lot to play out over the coming years.

Matthew J. Desch: As a result of that, those are going to be highly regional kind of offerings at best. And really, our satellite system isn't equipped or... or planned to be able to kind of reuse terrestrial spectrum without, you know. Well, it wouldn't even be software, it would require hardware development and new satellites launched, and we have no interest in doing that.

Louie Dipalma: As a result of that those those are going to be highly regional kind of offerings at best.

Louie Dipalma: And really our our satellite system isn't equipped or.

Louie Dipalma: Our plan to be able to kind of reuse terrestrial spectrum.

Louie Dipalma: Without.

Louie Dipalma: Well, even it wouldn't even be software it would require hardware development and new satellites launched and we have no interest in doing that as I said I'm a.

Matthew J. Desch: You know, as I said, I'm a little skeptical about the business case for that anyway, for those people who have to do that and maintain the satellite systems that they have to do it. So I'm more interested in using MSS Spectrum. It's globally approved. It's allocated. It can be employed without regulatory requirements.

Louie Dipalma: A little skeptical about the business case for that anyway.

Louie Dipalma: For those people, who have to do that and maintain.

The satellite systems that they have to do it so I'm more interested in using MSS spectrum, it's globally approved its allocated it can.

Louie Dipalma: Can be employed without regulatory requirements.

Louie Dipalma: It keeps our our value proposition that's always been one of the reasons. We've been successful is that we that any customer who uses the product on our it doesn't have to worry about.

Matthew J. Desch: It keeps our value proposition that's always been one of the reasons we've been successful is that any customer who uses a product on ours doesn't have to worry about any partner, you know, about where their products are deployed in the world. It's an easier sell to the end consumer that they can use it anywhere as opposed to only in certain locations for certain things. So on that basis, I'm not really not very interested in sort of the terrestrial reuse model at all. I think the L and S band MSS model is really kind of the longer term view as to whether we need more spectrum for the future for our next generation. We have plans right now that reuse our existing spectrum in a next-generation system that we think will add lots of capacity as we launch a next-generation system out in the paper. Anyone that's sort of offering to partner or, or sell or leave spectrum at kind of any kind of any kind of what would make any kind of sense.

Louie Dipalma: Any partner about where their products are deployed in the world.

Louie Dipalma: It's an easier sell to the end and consumer that they can use it anywhere as opposed to only in certain locations for certain things. So.

Louie Dipalma: So on that basis Im not really not very interested in sort of the terrestrial reuse model at all I think the.

Louie Dipalma: Ellen S band MSS model is really kind of the longer term view.

Louie Dipalma: As to whether we need more spectrum for the future for our next generation, we have plans right now.

Louie Dipalma: Reuse our existing spectrum in a next generation system that we think will add.

Louie Dipalma: Lots of capacity as we launch a next generation system out in the.

Louie Dipalma: And out in the 2000 <unk> in 2000 <unk> that we'll do are so we don't necessarily need new spectrum, if it became available to us and everybody who has it today.

Louie Dipalma: <unk> believes its extremely valuable somehow so we'll see how that really plays out.

Louie Dipalma: They've got it for free and they're hoping to make money on sort of it and I don't see that Thats really right now that there are any.

Matthew J. Desch: So right now, we're not necessarily planning to do that, but we'll keep our eyes open for something where there might be a more reasonable approach available to us. That makes sense. And one other, the iPhone 14, I think, debuted in September 2022 with Satellite, and it's been in the market for a year and a half now. And the iPhone 15 came out a year later with Satellite.

Louie Dipalma: Anyone that sort of offering to partner or sell or lease spectrum, it kind of any kind of.

Louie Dipalma: What would make any kind of sense. So right now we're not necessarily planning to do that but we'll keep our eyes open for something where there might be a more reasonable approach available to us.

Louie Dipalma: Does that make sense and one other.

Louie Dipalma: The I phone.

14, I think debuted in September 2022 satellite and its been in the market for a year and a half now.

Louie Dipalma: <unk> 15 came out a year later with satellite has there been any impact from the iPhone.

Matthew J. Desch: Has there been any impact from the iPhone? Global Start Partnership on your consumer IoT business or your commercial voice business that you've been able to discern? Absolutely none, to be honest with you.

Louie Dipalma: Globalstar partnership on your ear consumer Iot business or your commercial voice business that you've been able to discern.

Speaker Change: Absolutely none to be honest with you.

Speaker Change: It seems too.

Matthew J. Desch: It seems to, you know, sort of been absorbed, I think, obviously, I think it had an effect on why a proprietary D2D solution that we had with Qualcomm sort of didn't take off more quickly because even the smartphone manufacturers really weren't seeing market share movement as a result of the capability. So yeah, it also said that it looks like, and I think I also deduced that it means it's going to take a little longer for sort of an effect of these solutions to really maybe impact the market at all right now because we're not really seeing that much of an impact right now on consumer products of any sort. Probably saw Bullet, you know, had challenges; they put a product in the market, and didn't didn't succeed.

Speaker Change: Sort of been absorbed I think obviously I think it had an effect that.

Our proprietary <unk> solution that we had with Qualcomm didn't take off more quickly because even the smartphone.

Speaker Change: Manufacturers really werent seen market share movement as a result of the capability.

Speaker Change: So yes. It also said that it looks like.

Speaker Change: I also deduce that it means it's going to take a little longer for sort of an effect.

Speaker Change: These solutions to really maybe impact the market at all right now because we're not really seeing that much of an impact right now on.

Speaker Change: Consumer products of any sort.

Speaker Change: Probably saw.

Speaker Change: Bullet had challenges they put our product in the market and didn't didn't succeed.

Matthew J. Desch: So it's really not making much of a move in terms of anything that we can do. Sounds good, though. Thanks, Matt. Thanks, everyone. Thanks, Louie. Our final question today comes from Hamed Khorsand with BWS Financial. Please go ahead. Hey, good morning. First off, could you talk about why you're spending more on R&D? I think that was a topic you discussed about two years ago. It seems like you're doing it again this year.

So it's really not.

Speaker Change: Much move in terms of anything that we can discern.

Speaker Change: Sounds good thanks, Matt and thanks, everyone. Thanks Louie.

Speaker Change: Our final question today comes from Hmong coarse sand with D. W. S financial Please go ahead.

Speaker Change: Hey, Good morning, just first off could you talk about why you're spending more on R&D I think that was a topic.

Speaker Change: It had about two <unk>.

Speaker Change: It seems like you're doing again this year is it competitive you fearing that the market is moving away from you because it feels like your capital structure is changing as well your operating structure.

Hamed Khorsand: Is it competitive? Are you fearing that the market is moving away from you? Because it feels like your capital structure is changing as well, your operating. Well, I think, as I mentioned in our results, Project Stardust is an incremental investment that we weren't expecting to make last year, assuming that a proprietary solution with Qualcomm was adopted in the market, but people decided they didn't want to buy Qualcomm's new chips and so preferred a standardized solution, and that isn't available. We would like to continue developing all I mentioned we're quite excited about, we didn't talk a whole lot about it, but you know, building a maritime service terminal that has all the regulatory capabilities built into it to even further solidify our position as a companion product.

Speaker Change: Well I think as I mentioned in our results projects started to US is an incremental investment that we werent expecting to make last year, assuming that a proprietary solution with Qualcomm was <unk>.

Speaker Change: Adopted in the market, but people decided they didn't want to buy qualcomm's, new chips, and so and prefer to standardized solution and that isn't avail.

Speaker Change: Available, we would like to continue developing all these new products and services that we.

Speaker Change: We mentioned.

Speaker Change: Mentioned.

Speaker Change: Quite excited about.

Speaker Change: Talk a whole lot about it but.

Speaker Change: Building a.

Speaker Change: Maritime service terminal that has all the regulatory capabilities into it even further solidify our position as a companion product it will have GM DSS.

Hamed Khorsand: It will have GMDSS, LRIT, and SSAS. Citadel Services, all in a single terminal, which would make it by far the most popular companion product in the marketplace for any kind of VSAT terminal. That's not something I want to slow down in any way so that we can just absorb with the same amount of R&D dollars a new investment in Project Stardust, nor do we want to slow down the development of our new IOT transceiver that we've been sort of building for a while and about which our partners are quite excited about. So I wouldn't say it's anything to do with competition, only a new opportunity to move into standards-based narrowband IOT that we decided to do kind of mid-year, late last year in 2023, and that's sort of adding, if you will, some shorter-term pressure on R&D and CAPAC.

Speaker Change: Sfas Citadel services, all in a single terminal, which would make it by far the most popular companion product in the marketplace for any kind of VSAT terminal.

Speaker Change: That's not something I want to slow down in any way. So that we can just absorbed with the same amount of R&D dollars, new investment and project startups, nor do we want to.

Speaker Change: Slow down the development of our new Iot transceiver that we've been we've been sort of building for a while and for which our partners are quite excited about so I wouldn't say, it's anything to do with competition only new opportunity to move into standards based.

Speaker Change: Narrowband Iot that we decided to do.

Speaker Change: Kind of.

Speaker Change: Mid year late last year in 2023, and that sort of adding if you will some shorter term pressure on R&D and capex.

Matthew J. Desch: Thank you. OK, I'm going to go. This concludes our question and answer session. I would like to turn the conference back over to management for any closing remarks. Well, thanks. We do have a busy conference schedule, I know, in the first quarter, so I'm sure we'll be seeing some of you in those places, and we look forward to... visiting with many of you over the next few weeks, so we'll see you also for the first quarter in a couple of weeks. So, thanks, take care. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Speaker Change: Okay, great. Thank you.

Amit: Okay Amit.

Speaker Change: This concludes our question and answer session I would like to turn the conference back over to management for any closing remarks.

Amit: Well. Thanks, we do have a busy conference schedule I know in the first quarter. So I'm sure we'll be seeing some of you in those places and we look forward to.

Amit: Busy with many of us over the next coming weeks. So we will see you also for the first quarter.

Coupled.

Amit: Weeks.

Speaker Change: Thanks take care.

Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Speaker Change: Yeah.