Q3 2024 Iridium Communications Inc Earnings Call
Good day and welcome to the Iridium <unk> 'twenty 'twenty four third quarter earnings call.
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Speaker Change: Please note this event is being recorded.
Now I'd like to turn the conference over to Ken Levy, Vice President Investor Relations. Please go ahead.
Ken Levy: Thanks, Meghan good morning, and welcome to Iridium third quarter 2024 earnings call.
Joining me on this morning's call, our CEO, Matt Desch, and our CFO, Tom Fitzpatrick today's call will begin with a discussion of our third quarter results followed by Q&A I Trust, you've had an opportunity to review this morning's earnings release, which is available on the Investor Relations section of Iridium as website.
Ken Levy: 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.
Ken Levy: Forward looking statements are statements that are not historical fact and include statements about our future expectations plans and prospects.
Ken Levy: 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.
Ken Levy: 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.
Ken Levy: 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.
Ken Levy: 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.
Ken Levy: These non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles. Please refer to today's earnings release.
Ken Levy: And the Investor Relations section of our website for further explanation of these non-GAAP financial measures and a reconciliation to the most directly comparable comparable GAAP measures with that let me turn things over to Matt.
Matt: Thanks, Ken good morning, everyone.
Matt: As you saw on our press release. This morning, we delivered another strong quarter of revenue and subscriber growth and remain on track to achieve the higher end of our full year guidance.
Matt: We're also having a productive year of new product launches and good progress on strategic efforts like project startups, which are developing quickly.
We remain a very unique player in the satellite communications industry, having carved out a leadership position in Iot and mobility applications and are generating significant cash flow, while expanding into new markets like P. N T and standards based Iot indirectly device.
Matt: As another marker of our progress I want to highlight unlike most companies in the space industry that we are actively returning capital to shareholders in the third quarter, we returned $146 million to shareholders through dividends and our expanded share repurchase program.
Matt: In all we repurchased four 7 million shares, which reduced our outstanding share count by about 4%. That's a record number of shares retired for a single quarter since the inception of our buyback program.
Matt: We believe that our equity represents a compelling investment opportunity and plan to continue with this program in light of the board's authorization of an additional $500 million in September.
Matt: Iridium has now returned more than 1 billion of capital to shareholders through repurchases and dividends since the beginning of our shareholder friendly activities in 2021.
Matt: I continue to feel very good about iridium <unk> market position and our growing business opportunities.
Matt: We have been served well by continuing to grow and develop our ecosystem of global partners.
Matt: Day, we have more than 500 companies, which include resellers value added developers and equipment manufacturers, who build their solutions on our network because iridium is the best choice to connect their unique applications.
Matt: Iridium L band Cross link constellation remains the foundation of our success and it has the knowledge and deep domain expertise of these global partners that drives the virtuous cycle of feedback and innovation that attract new subscribers to our network.
Matt: I'm not sure that all investors understand this aspect of our business yet it remains a key ingredient of our go to market strategy that sets iridium apart from other satellite providers.
Matt: We've had a busy quarter in terms of announcements that reflect our vision and strategy for the future.
I'd like to take a moment to update you on a few of these as they add to iridium, reaching capabilities and will drive our growth in the coming years.
Matt: First iridium NTN direct.
Matt: Last month, we issued a press release with an update on project start to a service, which we will introduce in early 2026 as Iridium N T and direct and that program is making great progress.
Matt: <unk> always said that iridium would be an important player indirectly device and providing standards based Iot from space and we were excited to share that iridium satellite technology is slated to be included in the next release of the three G. P. P standard known as released 19.
Matt: This paves the way for Iridium L band frequencies and technology to be accessible via industry standard chipsets.
Matt: Released 19 is scheduled to be completed in the fourth quarter of next year and will serve as the backbone for our consumer oriented D. D D offerings for smartphones and Wearables and will also support inbound roaming of terrestrial narrow band Iot devices and applications onto our highly reliable truly global N V I O.
Matt: <unk> satellite network.
Matt: You may have seen our announcement last week with Nordic semiconductor who was working on the early integration of Iridium NTN direct into their standards based chips there.
Matt: They are a strategically important relationship for us and you'll hear announcements overtime from others, who are adopting iridium into their standards based hardware as well.
Matt: Second I wanted to highlight the introduction of garments, new enrich messenger plus in mid September.
Matt: This consumer satellite device Leverages, our new Iridium service Iot service called Iridium message messaging transport, what we call I N T for short.
Matt: And support sending photos and voice messages.
Matt: These new capabilities complement the two way texting and Sos services that consumers have come to rely on and are expected to expand usage and find even more users for garment all over the world.
Matt: With a battery life of up to 600 hours. This device as an example of another purpose built ruggedized weather resistant product that active recreational users look for and often plan their activities around.
Matt: We also believe that these expanded capabilities will be adopted by other commercial and government Iot users as our IMT technology, which has been integrated into our Iridium service Iot in mid band Transceivers will soon be available through more of our partners.
Matt: Third we also unveiled Iridium service GM DSS for Mariners, which will be supported by a new series of new by a series of new terminals coming to market this quarter.
Matt: These combined iridium <unk> broadband technology with three important and required a maritime safety and security services G. M. D. S. S L.
Matt: <unk>, which stands for long range identification and tracking and S. S. A S which is the ship security alert system the.
Matt: The combination of these capabilities within one terminal sets a new standard for cost efficiency and performance of Maritime safety and security solutions for vessels and neither of these critical network systems.
Matt: This will also continue to ensure that iridium is the preferred choice on chips to complement <unk> and Ku broadband connections.
Speaker Change: Fourth I want to acknowledge Iridium award of an upside contract from the space Development Agency, where we're working with general dynamics mission systems to manage and integrate ground infrastructure and operations across multiple satellite suppliers for Fda's, new proliferated Warfighter space architecture.
Speaker Change: With our most recent award the total value of our contract with USDA grows to approximately $400 million since inception of which $260 million or so remains to be recognized through 2029 with potential for additional opportunities in the future.
The increase in our scope of work on this multi year project supports our outlook for record engineering support revenues this year.
Speaker Change: Finally, I want to end with an update on Iridium PNT, we've made swift progress to integrate <unk> into our company since acquiring them in the second quarter.
Speaker Change: This acquisition makes iridium as the market leader in alternate PMT and allows us to address the growing threat to GPS signals by offering secure PMT to Datacenters maritime in building wireless systems in other market areas.
Speaker Change: Last month, our team was in Norway, showcasing our P&C capabilities at one of the industry's large public testing event erith.
Speaker Change: Iridium STL solution performed exceptionally well through a series of stage GPS jamming and spoofing attacks, demonstrating our technical leadership and readiness for the growing market for commercial and civil applications.
Speaker Change: Getting great feedback on our opportunity, especially since expanding the availability of this service to Europe and Asia.
Speaker Change: There is particular interest for maritime and other users around areas of geopolitical conflict, where daily jamming and spoofing are having real operational and economic impacts.
Speaker Change: Our partners are excited about the business opportunity offered by iridium to alternate Pn Tia and are having.
Speaker Change: Conversations with their customers to fortify GPS signals against the growing threat, they're seeing in their respective regions or deliver precision time more efficiently and cost effectively to indoor digital applications that need it.
Speaker Change: These activities.
Speaker Change: Underscore investments being made by Iridium and business partners today, which will drive our growth over the next decade and support adoption of our mission critical services by a broader set of industry and users.
Speaker Change: So we continue to be enthused enthusiastic about the new iridium products hitting the market as well as the new partnerships, we are adding to our ecosystem.
They support our long term growth objectives and guidance for generating $1 billion in service revenue by 2030.
Speaker Change: Before I turn the call over to Tom for a review of our financials.
Speaker Change: Note that this will be Tom's last earnings report at Iridium in light of his upcoming retirement at year end.
Speaker Change: He is turning the CFO reins over to Vince O'neill, who many of you already know.
Speaker Change: Vince by the way is also on hand with US today as part of this transition.
Speaker Change: We're fortunate and I have to say I'm very happy that Tom will be staying on the board to continue to provide his experience and financial wisdom that have helped to drive our success over the last 14 years Tom Thanks.
Tom: Thanks, Matt and good morning, everyone I'll get started by summarizing our key financial metrics for the quarter and providing some color on the trends we're seeing in our business slides now I'll recap. The 2024 guidance. We updated this morning and close with the review of our liquidity position and capital structure.
Tom: Iridium continued to execute well in the third quarter generating total revenue of $212 8 million up 8% from the prior year's quarter.
Tom: The improvement reflects ongoing growth in our commercial business lines and strength in engineering and support revenue.
Tom: Operational EBITDA hit a record $124 4 million in the third quarter with the majority of this growth driven by expansion in service revenue.
Tom: On the commercial side of our business service revenue was up 6% this quarter to $133 3 million with the increase reflecting ongoing momentum in Iot as well as new growth in hosted payload and other data services, primarily as a result of the <unk> acquisition.
Tom: Commercial voice and data revenue rose, 3% from last year's comparable quarter to $57 7 million. The increase was driven by subscriber growth as demand for iridium <unk> push to talk services remained healthy.
Tom: In commercial Iot, we continue to see good demand for personal satellite communications as well as our traditional industrial services revenue rose, 14% from the prior year quarter to $43 7 million in part reflecting the.
Tom: The two year contract, we signed earlier this year with a large fast growing partner.
Tom: As discussed previously.
Tom: This contract has the effect of materially increasing revenue from this customer in 2024 compared to 2023.
Tom: You will notice that net subscriber additions in Iot are down from last year's third quarter.
Tom: This decrease is due to a change at the same personal communications customer made as they simplified their available subscription plan.
Tom: Expected. This resulted in increased cancellations this quarter, a very low <unk> subscribers.
Tom: We expect this trend to continue for the next few quarters as this conversion unfolds, but to fully abate by the end of 2025, let.
Tom: Let me be clear this process will have no effect on Iot revenues in 2024, and 2025, because our revenues from this customer are contractual and not driven by subscriber levers.
Tom: Further contractual revenues for this customer in 2025 will increase materially from 2024, we.
Tom: We expect 2026 subscriber growth trends from this customer to return to levels experienced over the last couple of years as their customer.
Tom: <unk> felt a a more robust product portfolio.
Tom: Accordingly, we expect our 2026 revenues from this customer to further increase from 2025. We also expect this process to have a favorable impact on <unk> over this period.
Speaker Change: Commercial broadband held up well as it transitions to a safety and companion service, we reported $15 5 million in revenue during the quarter and all we added 70000 net new commercial subscribers during the quarter and commercial Iot subscribers continue to account for about 80% billable subscribers.
Speaker Change: Hosting and other data services revenue was $16 4 million this quarter up 9% from last year's comparable quarter.
Speaker Change: The increase was primarily due to new revenue from Iridium PNT, the time and location business, we acquired through the <unk> transaction in April we see a tremendous revenue opportunity with broader availability of iridium to alternative position navigation and timing service and believe this service will generate over $100 million in annual service revenue by <unk>.
Speaker Change: 130.
Speaker Change: In the third quarter, an increase in iridium PNT revenue helped to offset lower hosting revenue recognition something we've discussed previously which is entirely related to the extended useful life of our satellites.
Speaker Change: While the extension of the useful life has no bearing on cash flow. It does impact the time over which we recognize revenues from associated fixed price hosting contract.
Speaker Change: Government service revenue was also fractionally higher in the third quarter at $26 5 million, reflecting a step up in revenue under our MSS contract with the U S. Government on September 15. After this date the annual bill rate under the seven year contract rose to a $107 million from $106 million previously.
Speaker Change: Subscriber equipment was up 9% in the third quarter to $22 2 million I would note that this growth represents a stark turnaround from the year over year decline posted in the first half of 2024 and is reflective of more normalized demand in the channel. Following two years of heightened inventory buildup by customers.
Speaker Change: Which began to be drawn down in the second half of 2023.
Speaker Change: Such comparisons in the first half of 2024 were negative whereas comparisons in the second half will be positive with.
Speaker Change: With the volatility of supply chain constraints now behind US we believe buying activity will return to more typical levels based upon feedback from our partners. We expect an acceleration of year over year growth in the fourth quarter from what we experienced in the third quarter and.
Speaker Change: Engineering and support revenue was $30 7 million in the third quarter as compared to $25 2 million in the prior year period to 22% increase reflects our growing activity.
Speaker Change: With the U S government and increasing scope of work the space Development agency.
Speaker Change: Based upon our results through the third quarter.
Speaker Change: We are updating our full year guidance for service revenue.
Speaker Change: To growth of approximately 5% now expect operational EBITDA beat.
Speaker Change: Between $465 million and $470 million for the full year.
Speaker Change: Moving to our capital position as of September 30th Iridium had a cash and cash equivalents balance of $159 6 million.
Speaker Change: Iridium is growing cash flow has been a source of liquidity and continues to support our boards confidence in quarterly dividend payments and an active share repurchase program.
Speaker Change: The board's latest $500 million authorization in September our board has now authorized a total of $1 5 billion in buybacks program be started in early 2021.
Speaker Change: Rudy and paid a third quarter dividend of <unk> 14 per common share on September 30th and expects to return approximately $65 million of cash to shareholders in 2024 through dividends in the third quarter Iridium retired approximately $4 7 million shares of common stock at an average price of $27 48.
Speaker Change: This was the no shares we purchased during the quarter in our history and represented a reduction of about 4% of our outstanding shares this activity along with our new authorization.
Speaker Change: Radiant with an outstanding balance of $552 million.
Speaker Change: Under our board approved repurchase program as of September 32024, we continue to believe that Iridium equity offers a compelling investment opportunity between our dividend program, which started in 2023 and the commencement of our share repurchases in 2021, Iridium has already returned more than $1 billion to shareholders.
Speaker Change: As of September 30th.
Speaker Change: Iridium term loan balance was $1 8 billion Youll recall that we increased the balance on our term loan in July and relaxed our guidance for net leverage to support additional capacity for share repurchases. We ended the quarter with net leverage of approximately three five times EBITDA and expect net leverage to remain below four times to EBITDA through 2026.
Speaker Change: We continue to plan for iridium to net leverage to fall below two times EBITDA by the end of 2030.
Speaker Change: The rate at which we expect iridium to naturally Delever makes us comfortable with this long term guide notwithstanding the projected uptick in leverage in the near term.
Speaker Change: Capital expenditures in the third quarter.
Speaker Change: Were $18 6 million, we expect capital expenditures to be approximately $70 million in 2024, as we invest in new product development initiatives like Iridium NTN direct.
Speaker Change: Turning to our pro forma free cash flow, if we use the midpoint of our 2020 for EBITDA.
Speaker Change: And backlog $88 million and net interest pro forma for our current debt structure approximately $69 million in capex for this year $5 million in cash taxes, and 6 million in working capital inclusive of the appropriate hosted payload adjustment, we're projecting pro forma free cash flow of approximately $300 million for 2024.
Speaker Change: These metrics would represent a conversion rate of EBITDA to free cash flow of 64% in 2024, and a yield of about eight 9% a more detailed description of these cash flow metrics along with a reconciliation to GAAP measures is available in our supplemental presentation under events in our Investor Relations website before I conclude.
Speaker Change: My remarks, I'd like to acknowledge my plan to retire at the end of this year.
Speaker Change: Serving as Iridium CFO over the past 14 years has been the highlight of my 45 year career, it's brought immense professional satisfaction and the source of tremendous camaraderie and friendships.
Speaker Change: Provided more than just a few challenges happily the challenges were surmounted to make iridium the company. It is today.
Speaker Change: We'd like to thank Matt for being a wonderful role model visionary friend and partner and give credit to the immensely talented and committed iridium team that has allowed us to achieve great success Iridium spin second home to me and provided countless memories and experiences that I'll never forget for that thank you will be with the company through the end of the year as CFO I'm flattered.
Speaker Change: The Board has asked me to continue my service as a member of the board I want to acknowledge Vince O'neill, who is with us on the call today and you will take the reins as CFO to lead the company Vince and I have worked together for a decade and I'm fortunate to have had his talents to help guide. The many decisions. We've made on funding investment in capital spending from our work with the export credit funding.
Speaker Change: And the successful transition to our current capital structure and this has been a close competent and integral to iridium as financial success. He has done a masterful job of directing the scores of budgeting and forecasting plans that have allowed us to comfortably begin to return capital to shareholders welcome Vince.
Vince O'Neill: Thanks, Tom I really appreciate those won't comments and I'm honored to be Iridium next CFO and Matt and the board had given me this opportunity.
Vince: I'm really excited to get going and I believe that the future for iridium is full of opportunities.
Vince: I think that over the last few years have met most of you but for those of you who are less familiar with my background I've worked with Tom and Matt now for 10 years, and I feel very confident that we'll be able to build upon the financial success and strong track record.
Vince: <unk> been able to deliver.
Vince: I am fortunate to have been active in supporting Tom and both crafting and designing our financing strategy along with our share repurchase activities among other things.
Vince: Last number of years.
Vince: Part of the benefit of having a deep history with Matt Our board and our many business partners is that we see eye to eye on Iridium <unk> bright future and the many opportunities for continued growth as we look through the second part of the decade.
Speaker Change: With Toms retirement, I assume the CFO responsibilities with a strong knowledge and a detailed understanding of this company the satellite industry and established relationships to ensure an ongoing seamless transition.
Speaker Change: Finally, it would be remiss of me not to publicly acknowledge Tom's great financial leadership and direction. During my 10 year tenure here at Iridium I'll Miss him, but I do take solace from knowing that as a board member who will be very close at hand.
Speaker Change: Look forward to getting out and making more introductions and hearing more from our investors soon thanks Tom.
Speaker Change: I really can't say enough about Vince and our finance team I know that Vince will serve the company and shareholders interest as well as we make this transition to the new year with that I'll now turn the call back to the operator for 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.
We are using a speakerphone please pick up your handset before pressing the keys.
Speaker Change: If at any time. The question has been addressed and you would like to withdraw your question. Please press Star then two.
Speaker Change: At this time, we will pause momentarily to assemble our roster.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: The first question comes from Ric Prentiss with Raymond James. Please go ahead.
Ric Prentiss: Thanks, Good morning, everybody.
Ric Prentiss: Eric.
Ric Prentiss: Tom Congrats on the retirement news, but keeping on the border with launch over gosh, almost 20 years between Iridium and Centennial Vince wish you well as we work together in the future.
Speaker Change: Thanks, Greg.
Ric Prentiss: A couple of quick ones.
Speaker Change: First obviously raised the low end of the OIBDA guidance.
Speaker Change: The beat was pretty significant in the quarter talk to us about kind of how you looked at what you do.
Speaker Change: During the quarter versus what you are looking at for the year with just one quarter left and how is the spending trends on directed devices closer.
Speaker Change: We continue to invest in dress device you see it most notably in Capex, but you also see it in R&D Rick.
Speaker Change: I would say, it's going according to our plan, Matt If you would.
<unk>.
Speaker Change: It's moved faster than anything I think we've ever done here at iridium.
Speaker Change: Thing, where we pivoted.
Speaker Change: About this time last year, and we will deliver I think service within two years is pretty exceptional given that this is a.
Speaker Change: Kind of an end to end.
Re architecture of of of some of our systems and everything and so moving fast obviously that getting into released 19 was a really big deal.
Speaker Change: Really thinking that was probably going to be and released 20, which we would've had to kind of go pre standard with some of the services, but now will be able to.
Speaker Change: Have chipsets be ready about the time that we're looking to introduce that services and that's going to bode well for our commercial discussions as well, but I think this year has kind of turned out as we expected. It clearly see equipment is.
Speaker Change: Kind of doing exactly what we thought would be done I think Tom mentioned that it was.
Speaker Change: We told you it looks weird to be down but it's.
Speaker Change: Certainly.
Speaker Change: Look quite different going forward and.
Speaker Change: Strong other parts of our business really across the board.
Speaker Change: Okay second question is on service revenues.
Speaker Change: <unk> narrowed it down to say about 5% now on service revenue growth, but not I thought I heard you say something in the opening comments about.
Speaker Change: Strong quarter revenue in sub adds and maybe a high end of guidance what were you alluding to there.
Speaker Change: No.
Speaker Change: Separated those things I said, we had a strong quarter in the third quarter with revenue subscribers and that allowed us to.
Speaker Change: As we look into the fourth quarter to be able to raise the guidance to the midpoint of the guidance.
Speaker Change: He is referring to EBITDA guidance gotcha, Okay. Okay, Alright, cool and then I appreciate the color on the Iot trends on the customer changing subs, but not much revenue impact, but probably the biggest one of the line have you guys elaborate on the call here is top question, we get obviously competition you touched on it a little bit here.
Speaker Change: As people may be not familiar with.
Speaker Change: Satellites are spectrum, where iridium <unk> position can you help us just understand the competition from Sterling or other direct to device type solutions on your <unk>.
Speaker Change: Our business is the legacy voice and data the Iot the broadband we got wrong.
Speaker Change: There is definitely a lot of people we've talked to that don't understand the uniqueness of what iridium <unk>, but maybe just elaborate a little more on that for us.
Speaker Change: Yes.
Speaker Change: We really built our business over the last 25 years on being a truly global supplier of highly reliable.
Speaker Change: <unk> data services.
Yes.
Speaker Change: That isn't really changing with.
Speaker Change: The current expectations of director device, which youre going to be regional solutions.
Speaker Change: Coming over the coming years here that we will.
Speaker Change: That will support terrestrial service in six or seven countries perhaps.
Speaker Change: And expand the cellular footprint, which as you know.
Speaker Change: Somewhere little less than 15% probably buy.
By some percentage points, but it really doesn't change that.
Speaker Change: Currently not viewed as a global service and <unk>.
Speaker Change: And one that will be coming kind of.
Speaker Change: And a number of different ways I mean, you could see it really in the last couple of weeks.
Speaker Change: As hurricane Helene and Milton hit even as those services were.
Speaker Change: Some texting and Sos services might've been turned on we saw.
Speaker Change: 802, <unk> hundred percent increase in our services and I think that that will continue but the people who buy our services again are looking for a capability that works anywhere in the world seamlessly.
Speaker Change: Our Iot customers for example are not looking to.
Speaker Change: Kind of have.
Speaker Change: A technology that works in one country, but not in another country.
Speaker Change: We really do expect that.
Speaker Change: The fact that we have.
Speaker Change: This partner base of many hundreds of partners who've embedded our technology deeply into their service and now we're going to be able to use standard based solutions as well from us.
Speaker Change: That's going to continue to drive our growth and why we feel confident that.
Speaker Change: Our Iot and other businesses will continue to be strong and we can support the kind of growth rates, we're talking over the next six or seven years, even if there is there are some others.
Speaker Change: There are some other services that may fill in around the edges.
Speaker Change: A really expand the market I think in some ways, but.
Speaker Change: We're positioning ourselves with our narrowband Iot service, our iridium NTN indirect as being the glue really that serves.
Those devices over the whole world. So I think we will we will.
Speaker Change: Complement.
Speaker Change: Some of those new technologies coming forward, you could see us in a smartphone or a watch along with those technologies, where they might provide more functionality and a couple of countries, but people will want to use our technology because it will work in the oceans.
Speaker Change: It will work in markets that will never have the those capabilities.
Speaker Change: Great. Thanks, guys and again, Tom Congrats and enjoy.
Speaker Change: Yes.
Rick: Thanks, Rick.
Speaker Change: Rick.
Speaker Change: Our next question comes from Simon Flannery with Morgan Stanley. Please go ahead.
Simon Flannery: Great. Thank you very much good morning.
Simon Flannery: Congrats Tom and Vince and hold the best for the future.
Simon Flannery: Matt.
Perhaps just following up on that last comments, there and I think you alluded to this a little bit I think on the on the conference circuit you'd been talking perhaps about returning to.
Simon Flannery: Your run rate growth rates in 2025, I know, it's only October but any kind of thoughts around the drivers for next year, you've obviously when some new contracts here it'd be great to get more color on how the new FCA Award.
Simon Flannery: Closing over time.
Speaker Change: And then just a couple of questions on <unk>. If you could just elaborate on what's going on with broadband <unk> and voice harpoons that'd be great.
Speaker Change: Okay, well I mean, I don't think it's time to give.
Speaker Change: Precise guidance for 'twenty five we'll do that in February, but we've kind of given directional guidance for what we think will be next year and we still feel very very good about that.
Speaker Change: The comparable on certain things like equipment and other things will be much more favorable to us next year than they are this year because.
Speaker Change: Because we've kind of normalized on equipment, we believe and we believe that will continue and then adding adding additional contracts say engineering and support revenues makes that continues to be sort of at record levels for that as well.
Speaker Change: And really beyond that we still see strong.
Speaker Change: Demand going into next year for really across our business portfolio from voice and data with push to talk to our Iot services, where we've had a record year of new products introduced by our partners, which we all think will hit next year.
Speaker Change: You heard about the new products. We've introduced this year like service GM DSS. We have we have the service aviation product happening next year, we have our new Iot Transceivers all of those.
Speaker Change: Give us confidence that next year will be.
Speaker Change: Kind of a normal growth year, if you will across a lot of different fronts.
Speaker Change: In terms of <unk>, yes.
Speaker Change: Broadband <unk>.
Kind of down a little bit I think year over year, but thats really as it's been evolving as we expected to a companion service and fed with these new terminals come in this year that have that all in them I think we're going to be the preferred companion solution for all solutions, including Starlink Kuyper if it.
Speaker Change: Comes in and one web and everyone else I think there'll be putting.
Speaker Change: And L band Service terminal next.
Speaker Change: Next to those to support service when it rains in ports in markets, where they're not allowed to be turned on and many other places and I think that will.
Speaker Change: Well in the future and then.
Simon Flannery: Recent data voice and data I would characterize voice and data is firm Simon yes.
Speaker Change: Okay, Great and just one last one I think you called out the hotel is helping hosted payload can you just just give us a little bit more color on what the contribution was.
Simon Flannery: Well I mean.
Simon Flannery: Specifically, it's going to be in that line, we're calling that out specifically, but obviously we are integrating their revenues into our revenues. This year previously we had been a.
Simon Flannery: And have a wholesale supplier of a signal to them and sort of generated revenues only that way now.
Simon Flannery: With the.
Simon Flannery: With there.
Simon Flannery: Them being part of our.
Simon Flannery: Our company, we're now really a retail provider to markets around the world and we will be providing which is a higher revenue level and youll see that reflected in.
Simon Flannery: And the revenues that come through that line going forward.
Simon Flannery: I would say Simon is what we said about <unk>.
Simon Flannery: We got 5 million Bucks out of that in 2023, and we've said, we see that as a $100 million in 2030. If you look at hosted payload and other that line that that segment. The action in that line, it's going to be up relative to PMT, alright, and so youre going to see.
Growth on the progression from five to 100 and you should look for significant growth there in the years ahead.
Speaker Change: That's helpful. Thanks, a lot.
Speaker Change: Hosted payload is contractual that stop moving.
Speaker Change: All the actions will not be AT&T.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Edison <unk> with Deutsche Bank. Please go ahead.
Speaker Change: Hey, good morning, Thank you for taking our questions and congrats to Tom and then going forward.
Speaker Change: Thanks, Eddie Thank you.
Speaker Change: So just first question is a follow up to that last one on the on the our crew we noticed that the broadband <unk> actually improved a bit sequentially is that a good kind of run rate now for <unk>.
Speaker Change: That's probably seasonality right so.
Speaker Change: That's there's more there's more activity in northern hemisphere. So.
Speaker Change: I wouldn't.
Speaker Change: I wouldn't I wouldn't model it up sequentially into the fourth quarter.
Speaker Change: Okay got you.
And then on the I believe there is the new aviation service product should be should be wrapping up relatively soon and then any update on how that might contribute.
Speaker Change: The timelines contribution play for it.
Speaker Change: Well the good <unk> from it when it when it hits the market because commercial aircraft typically are our good producers.
Speaker Change: Flight safety data back and forth between air traffic controllers.
Speaker Change: In the cockpit as.
Speaker Change: As well as other.
Speaker Change: Important information.
Speaker Change: Going through trials right now for final certification.
Speaker Change: Several several suppliers of antennas those are.
Speaker Change: Kind of the product is being finalized if you will or or.
Speaker Change: Completed with customers, mostly this quarter and I think youre going to see it start to get on.
Speaker Change: Various aircraft next year, but like anything it will be.
Speaker Change: It will be slower start out because it takes some time, but I think it's going to be again the preferred solution for.
Speaker Change: Aviation safety services down the road.
Speaker Change: Given its size given the fact that it's truly global and serves even the polls.
Speaker Change: It's.
Speaker Change: Smaller than other solutions and.
It's going to be very reliable.
Speaker Change: <unk> solution, but it's also.
Speaker Change: There'll be on rotorcraft, and some general aviation and.
Speaker Change: Other aircrafts going forward as well.
Speaker Change: Understood.
Speaker Change: One wanted to check on the the comments made about the Iot customer I think you had said that it will it will grow in 2020 six just want to confirm that and any sense on sort of the magnitude.
Speaker Change: So yes. The 25 is contractual so we know that the 26 is an expectation given the significant increases to their product portfolio. We've said that we've seen net adds in respect to this customer going back to where they were in the past couple of years and so based on that we see 26 up again from 25% to 25 is known.
Speaker Change: It's contractual and Youll see that reflected in our guidance when we unveil it for before next year.
Speaker Change: Okay.
Speaker Change: Great. Thank you.
Our next question comes from Walter Piecyk with light shed. Please go ahead.
Thanks, Tom.
Walter Piecyk: You spent some time talking about this customer. So obviously this is a material customer and Iot.
Speaker Change: In terms of helping give color on net adds versus revenue, but you should also say that there is going to be.
Walter Piecyk: The words you were used were up materially in 2025.
Speaker Change: So if that's a large customer.
Speaker Change: On your earnings call you.
Speaker Change: Your guide I think for 'twenty, four and Iot was low teens, you'd look to be tracking more towards high teens at least for 2024.
Speaker Change: So if thats up materially is.
Speaker Change: Is that implying that there is an opportunity to accelerate growth further and Iot.
Subsequent years.
Speaker Change: Our guide our guide for this year was mid teens and it's looking like we'll beat that guide was unveiled early this year and it's looking like we'll beat it where I think were 19% through the third quarter materially means it's going to be up materially from what is in 'twenty for that's what that means for that specific that specifics I'll start we have abroad.
Speaker Change: Broad Iot portfolio customers and partners and obviously this bodes well for our continued growth in that sector, but it wasn't really trying to describe the whole the whole oh.
Speaker Change: Understood Alright.
Speaker Change: I would not model its our guide of <unk> I would not model. It wide of 19 that were that we've put up year to date. If that's your question.
Speaker Change: That was my question and is it.
Speaker Change: Sure.
Speaker Change: Just trying to try and go at it again, maybe not 19, but just to get a sense of Iot is this just a customer comment where you are trying to give more color on net adds or.
Speaker Change: Are you trying to make a broader comment about.
Speaker Change: The health of the Iot business.
Speaker Change: Well, we're not so health a variety of businesses strong it hasn't changed I think given the fact that the net adds were down this quarter, we thought it would.
Speaker Change: It'd be good to provide a little more color on why they were down.
Speaker Change: Activations across the board are still very strong we just had some day activations from a specific customer for a specific reason low RP customers due to them changing their plans with their customers in a way that we kind.
Speaker Change: Kind of designed and work with them too.
Speaker Change: As they transitioned their business and it's quite positive.
Speaker Change: It's kind of unusual given the net net adds sort of are lower but as we said it has no economic consequence really to our bottom line because overall, we have contractual revenues and they're stepping up over time, but I think I think.
Speaker Change: I think we have something like a 30% CAGR in personal communications over the last five years. So the health of that business is pretty observable.
Speaker Change: And we're all good.
Speaker Change: As we move into narrow band Iot 26, and 27%. So I think that that will even expand.
Speaker Change: The usage base.
Speaker Change: So youre going to see <unk> go up a little bit, but as we narrow band Iot I think we will probably add lower arps customers and their regard and maybe even drive subscribe to that.
Speaker Change: Yes.
Speaker Change: Got it and then on the hosted payload just to go back to that.
Speaker Change: The business that Youre getting it's layering on there now I assume is recurring revenue business and that again, given your $100 million target.
To continue to grow.
Speaker Change: Sequentially effectively right. So if you look at if I just looked at the first quarter. When you have your accounting change and where youre at now.
Speaker Change: We implies incremental.
Speaker Change: $10 million of revenue relative to I guess, the five run rate.
Speaker Change: That's kind of reflective of the growth rate to get you to the 100 million is what I'm thinking, but just to be clear I just wanted to verify.
Speaker Change: That tell US revenue that's layering on top of hosted payload line.
Speaker Change: Is this going to continue to build from there.
Speaker Change: There should not be lumpiness other than upward lumpiness in.
Matt.
Matt Our: The incremental revenue that tell us is going to be adding to that line I would say generally speaking that is right yes.
Speaker Change: Great. Thank you.
Matt Our: Sure.
Speaker Change: Your next question comes from Harvard Carson with B Ws. Please go ahead.
Howard Carson: Hi, Good morning, So first question Howard.
Speaker Change: This latest gnvs contract the bounce.
Speaker Change: Is that incremental.
Speaker Change: <unk> has been new services or is that purely replacing the old one and does the new contract actually use more of your services or is it just the same one.
Paying you more for the service.
Howard Carson: Are you talking about GM DSS or are you talking about our SDA contract with <unk>, which are two different acronyms.
Speaker Change: The Gms sorry.
Speaker Change: Okay.
Speaker Change: That's general dynamics mission systems.
So, yes, the new contract with with the space Development Agency.
Speaker Change: That really they are prime on.
Speaker Change: And we are providing a lot of the technology and operation support as we build Fda's, new ground network and we're going to operate their satellite systems for them out of a couple of new operation centers that are part of that as well as a lot of.
Speaker Change: International ground stations.
Speaker Change: The new contract added to that.
Speaker Change: They are delivering their network. It previously had planned to roll out their network and et cetera, what they call tranches, which they are numbered.
Speaker Change: The ground system, though is kind of been consolidated now going forward, where theyre not going to they don't really plan to.
Speaker Change: Introduce it in tranches.
Speaker Change: We've kind of consolidated the the evolution of that into sort of one contract now coffee from management.
Speaker Change: Integration contract.
Speaker Change: Which now as I've said.
Speaker Change: Our part seems to have grown to about $400 million of work, so far which is like $260 million left to go over the coming years, but we.
Speaker Change: We continue as we support this really important customer and again I reiterate we did this for strategic reasons because of our experience because <unk>.
Speaker Change: Our visibility into the customer for the future to help US stay current to give my incredible team, even more fun things to do.
Speaker Change: And to all of our strategic relationship with the customer all of that.
Speaker Change: Kind of bodes well for other opportunities as they continue to invest in this network in the future. So we don't expect this to be the last time, we we add to this area here at least that's not our plan.
Speaker Change: Okay.
Speaker Change: The other question was on the net additions in Iot is there any obvious changes as far as the end market customers concerned.
Or is it still the same relatively well.
Speaker Change: Well I think given that the technologies are improving.
Speaker Change: We're introducing our new Iot technology.
Speaker Change: Service Iot technology and Thats been.
Speaker Change: Adopted in things like the Garmin Messenger, plus and I expect you'll see it in other products going forward I think we're kind of.
Speaker Change: Expanding the use cases of personal communication devices. I mean, if you can send pictures and voice snippets. In addition to other.
Speaker Change: Other things I think that's very positive.
Speaker Change: In addition, youre going to see I think our new Iot Transceivers and other devices that.
Speaker Change: We want to send more data around.
Speaker Change: We have some really interesting.
Speaker Change: Use cases underway from a number of our partners as they seek.
Speaker Change: Seek to be the first to use our new.
Speaker Change: <unk> transceiver coming out this quarter so.
Speaker Change: So I think it is expanding the use cases more than anything else.
Speaker Change: And did you see that this past quarter.
Well.
Speaker Change: We really products are just now being introduced so it hasn't really hit our financials at all yet.
Speaker Change: Going forward.
Speaker Change: Okay. Thank you.
Speaker Change: Thanks, Amit.
Our next question comes from Chris Quilty with Quilty space. Please go ahead.
Chris Quilty: Thanks, Tom.
Speaker Change: Yeah, Matt speaking of new products I know you had talked earlier this year about the on the aviation side safety service certification and you've got a number of partners that are releasing products does it look like those will happen sort of in parallel or are we facing a situation.
Speaker Change: Where you may have certification, but not products or vice versa in the market and again, if you're still on track to get that certification this year and what sort of.
Speaker Change: Growth potential does that hold for you next year.
Matt Our: Still on track to get certification this year to get FAA approval that.
Speaker Change: That is followed.
Speaker Change: <unk>.
Speaker Change: In fact, there is even been.
Speaker Change: Some of our partners are starting to talk about the DSO approval of their terminals already in our listing those youll see advertisements for those in aviation magazines as they talk about.
Speaker Change: They are a new era of of.
Speaker Change: Services those are some some real big players I don't want to call them out because I don't know exactly what state we're in in terms of their announcements.
Speaker Change: Some of them have told us that they have pipelines of customers sort of waiting for it and I imagine that those will.
Speaker Change: Start rolling out.
Speaker Change: Being installed in 2025.
Speaker Change: Yes.
Speaker Change: It's going to grow I can't say exactly what the rate it will grow at this point, but it will all be positive and upward anyway from where we are today.
Speaker Change: We're everything so far has really been using our legacy safety products, which are narrow band and.
Speaker Change: Built around.
Speaker Change: No.
Speaker Change: Our older technology. These will all provide higher speed services.
Speaker Change: And expanded capabilities onto the flight decks of different aircraft.
Speaker Change: I do know that there are still other products that are are coming.
Speaker Change: Say later in 2025 that are not even the ones I'm talking about so.
Speaker Change: It's good to finally see the aviation.
Speaker Change: Spigot turned on how fast it's going to move I don't have a lot of visibility frankly into.
Speaker Change: Into.
Speaker Change: How many will be good news is those will be good <unk> customers.
Speaker Change: Got you.
Speaker Change: Is that entirely aftermarket or is there a line fit potential for those product lines.
Speaker Change: Both I think it's going to be initially aftermarket and but it will move into line fit.
Speaker Change: Definitely.
Speaker Change: Efforts underway to do that I, just don't know when those start line fit.
Speaker Change: Got you and so like aviation, it's been five years since the last Iridium next satellite was launched and Youre still.
Speaker Change: Pushing GM DSS.
Speaker Change: In terms of <unk>.
Speaker Change: Finally, moving towards that certification and getting the products out there that have the higher data rates can you talk about.
Speaker Change: Where you see that market going in terms of you know there's two.
Speaker Change: Two dynamics, one is you've got an upgraded product.
And really one competitor.
Speaker Change: But you also have the dynamic of Leo.
Speaker Change: Starlink, which is penetrating new vessels that historically have never had communications.
Speaker Change: And what are you doing to try to position yourself as the backup in that market.
Speaker Change: Yeah.
Speaker Change: So then youre speaking specifically maritime here.
Speaker Change: Our.
Speaker Change: We have been a companion service for quite a while I mean L band is.
Speaker Change: More robust in <unk> and Ku band.
Speaker Change: And bad weather.
Speaker Change: It has kind of regulatory advantages in certain markets, where ku and <unk> band terminals R. R.
Speaker Change: I have to be turned off often in ports for example, or near ports and other places so.
Speaker Change: There's been a long tradition of having an L band back up.
Speaker Change: And you're right. It traditionally has just been two players of us and Mark set in ourselves I would say, we have a bit of a competitive advantage now and that inmarsat being part of <unk> really is a competitor to most of those other.
Speaker Change: <unk> and Ku band and so most of the distribution.
Speaker Change: Channel is really don't want to we'd rather put us on next to a terminal so, but we're seeing ourselves being sold.
Speaker Change: With new Starlink terminals I expect when Typer hits, the market will be the preferred.
Speaker Change: Solution for type of terminals definitely for one web terminals as they move out in the market as we are today with many other ku and <unk> band. So I expect now that we have upgraded those terminals that companion terminal to also support the safety functions of the ship GM DSS.
Speaker Change: SSA us.
Speaker Change: That it's going to be even more compelling given.
Speaker Change: Given that you don't need a separate terminal for those regulatory safety functions, you can be a backup and provide the safety functions as well. So we think thats solidifies our.
Speaker Change: Leading market position as the.
Speaker Change: The terminal you have to have on the ship and the one you want to back up your broadband systems, and I think thats going to continue for a long time.
Speaker Change: Got you and final question for Tom.
Speaker Change: Back to the <unk>.
Speaker Change: Quarterly results here I'm, just a little confused because in.
In the maritime and the service Youre subs were down by 100 sequentially.
Speaker Change: We were sort of conditioned to believe that the subs that were dropping we're moving from.
Speaker Change: Very high <unk>, iridium only to Starlink and yet.
Speaker Change: You lost subs and the <unk> went up.
Speaker Change: Relative to expectations was there any one time items in there or any anything unusual in the quarter.
Speaker Change: It's two different drivers that sequential increase as I said is seasonality the leaking at the subs I mean, the channel is I would characterize it as not stable Carl I mean, theres a lot of partners that are dealing with the new reality and so I think thats affected our.
Speaker Change: Net add kind of profile, which should improve over time its going to be a question of how.
Speaker Change: How long it takes for normalcy returned to that market.
Speaker Change: Great. Thanks, Tom will we'll Miss you kind of.
Speaker Change: Vince.
Speaker Change: Thanks.
Speaker Change: I like that.
Qualification.
Speaker Change: Yeah.
Speaker Change: Our next.
Speaker Change: Churn comes from Louis Dipalma with William Blair. Please go ahead.
Good morning, and Tom and Vince Congratulations to you both.
Speaker Change: It's a pleasure to.
Louis Dipalma: Work with you over the past 13 years and.
Speaker Change: I guess, we're going to continue to work together is you are staying on the board.
Now navigate the company through the next generation constellation, which is great.
Speaker Change: My question.
Speaker Change: Some of the earlier questions as it relates to the.
Speaker Change: The broadband segment.
Speaker Change: As.
Speaker Change: The result, there were better than expected during the quarter and I think earlier this year.
Speaker Change: Matt and Tom you conveyed an expectation for broadband to return to growth in 2025 now I was wondering if this quarters results and the dynamics that have taken place reinforce that view.
Speaker Change: Well, we'll see what 25 holds when can talk more about that it's certainly encouraging to see.
Speaker Change: Where we are with that you said it was better than expected. It was better than you expected it wasn't better than what I expected I know that.
A lot of you assume the worst that somehow starlink was.
Speaker Change: As it's sort of.
Speaker Change: Ben.
Speaker Change: Not rumored, but others have kind of worried that it was sort of a.
Speaker Change: It is really hurt the ku and <unk> band providers as they've kind of disrupted that we said that we felt our position was pretty strong and intact as a companion to that service, but there was a transition around a small part of our business in which we were the primary user and we would take a few quarters to get.
Speaker Change: Through that end.
Speaker Change: I think thats been ongoing you see that.
Speaker Change: The effect has not been that dramatic to us and we feel pretty good about how we've positioned our business for the long term in that area to continue to.
Speaker Change: To be important players so.
Speaker Change: It's kind of unfolding the way, we thought and we never said that broadband was going to be a big part of our growth to 2030, we didn't even listed as one of the growth areas, but it's a solid part of our business. It's important one which we think we have a competitive advantage.
Speaker Change: B <unk> L band and <unk> certified and all that sort of thing so it's going to contribute to our results going forward.
Speaker Change: Great.
And one final one has business development activity picked up four so tell us.
Since you made the acquisition, especially with all the geopolitical conflicts and very active.
Speaker Change: Boosting of GPS signals can you just talk about what's happening to tell us.
Speaker Change: Yes.
Speaker Change: It's been recognized kind of internationally now as the only really solution that can fix some serious problems that are underway right now the other solutions out there kind of terrestrial at risk as well.
Speaker Change: So as I said, it's been tested it's been proven in a number of places and the activities are kind of through the roof, we're adding additional business development resources because of the opportunities.
Speaker Change: We've expanded its footprint they had only been selling it really pretty much in North America.
Speaker Change: Mainly because they were concerned about paying us for.
Speaker Change: Turning to signal on before they had paying customers in Europe, and Asia and we just when you realize we can turn that signal on right. Now. So that's just expanded the footprint of where it can be sold.
Speaker Change: But theres been advertisements for all over the world whether it's in <unk>.
Round, Ukraine, the Red Sea Myanmar. This a number of places if you look at the map are being actively jammed and spoofed all over the world and there is articles.
Speaker Change: In the newspapers about this problem and everyone is now looking for solutions and I think one of our big challenges just getting the word out that were there and ready so we need we need some more people.
Speaker Change: Have more partners now talking about this too.
Speaker Change: In industries like data centers and in wireless systems and.
Speaker Change: Electrical grid installations, but.
Speaker Change: It's ready now and cost effective.
Speaker Change: Many cases much more cost effective even then getting.
Speaker Change: Sort of precision time for digital digital services in buildings.
Speaker Change: We feel really bullish about the potential for it and yes. The activity has grown dramatically over the last six months.
Matthew Desch: So, it's great. Thanks, Matt, and thanks everyone. Thanks, Louie.
Speaker Change: Sounds great Thanks, Matt and thanks, everyone.
Speaker Change: Louie.
Unknown Executive: This concludes our question and answer session. I would like to share in the call back to management for any final remarks.
Speaker Change: This concludes our question and answer session I would like to turn the call back to management for any final remarks.
Thomas Fitzpatrick: Well, I will say it's been about 60 of these, Tom, that we've been through together. We've all been together, the analysts on the call, so certainly going to miss you on this call. I'm not going to let you get too far away, and you're still going to be my boss in the board, so I have to be nice to you. But I think you've all heard, Vince's little team, Irish Bros, here, and you'll hear more of it going forward. And we look forward to talking soon, and certainly as we get on our call in February here.
Speaker Change: Well I will say, it's been about 60 of these Tom that we've been through together.
Speaker Change: We've all been together the analysts on the call. So certainly going to Miss you on this call.
Im going to let you get too far away and Youre still going to be my boss in the board. So I have to be a nice deal.
Speaker Change: But I think you've all heard.
Speaker Change: Vince is lilting Irish brogue here and you'll see you'll hear more of it going forward and we look forward to.
Speaker Change: Talking soon and certainly as we get on our call in February here. So thanks for being part of this.
Unknown Executive: So, thanks all for being part of this.
Unknown Executive: The conference is now concluded. Thank you for attending today's presentation.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Unknown Executive: You may now disconnect. Thank you.
[music].