Q4 2024 Iridium Communications Inc Earnings Call
Speaker Change: Good day and welcome to the Iridium Communications 2024 fourth quarter earnings conference call. All participants will be in listen-only mode.
Speaker Change: Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.
Speaker Change: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on your telephone keypad. To withdraw your question, please press star, then 2. Please note this event is being recorded.
Speaker Change: I would now like to turn the conference over to Ken Levy, VP of Investor Relations. Please go ahead.
Ken Levy: Thanks, Debbie. Good morning and welcome to Iridium's fourth quarter 2024 earnings call. Joining me on this morning's call are our CEO, Matt Desch, and our CFO, Vince O'Neill.
Ken Levy: Today's call will begin with a discussion of our fourth 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's website.
Ken Levy: Forward-looking statements are based upon our current beliefs and expectations and are subject to risk 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.
All right.
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.
Ken Levy: Please refer to today's earnings release 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 GAAP measures. With that, let me turn things over to Matt.
Thanks, Ken. Good morning, everyone.
Matt Desch: As you saw from our release this morning, we finished out 2024 on a strong note and are forecasting a return to more normal growth trends for 2025.
Matt Desch: Service revenue came in on target for 24 and operational EBITDA exceeded our full year projection, all while Iridium generated more than $300 million in pro forma free cash flow for the year.
Matt Desch: Robust free cash flow continues to be a point of differentiation as investors compare Iridium to other satellite companies.
Matt Desch: Not only does our strong cash flow support ongoing business investment, but it also allows us to make good on our commitment to return capital to shareholders.
Matt Desch: In the fourth quarter alone, Iridium returned approximately $140 million to shareholders through dividends and an expanded share repurchase program.
Matt Desch: Our buyback program retired more than 4 million shares, bringing the total shares retired in 2024 to almost 14 million shares.
Matt Desch: Since we initiated these shareholder-friendly activities in 2021, Iridium has retired close to 30 million shares of stock and returned over $1.2 billion of capital in dividends and share repurchases.
Matt Desch: We continue to feel very good about Irenium's market position and potential, as well as our ability to achieve the long-term guidance we shared during Investor Day in 2023 to deliver $1 billion in service revenue in 2030 and generate approximately $3 billion in free cash flow over that period.
AVA RAID
2024 was a transition year for our company.
Matt Desch: The modest OEBD and 5% service revenue growth we put up this year was a bit off of our normal trend, in part due to the comp from the voice and data price action taken in 2023, our need to rework our D2D offering, and the RevRec accounting impact of extending the estimated useful life of our satellites.
Matt Desch: We also had tough comps and equipment as we came back to normal ordering from partners after their stock up with supply chain concerns during the pandemic.
Matt Desch: But, having now cleared these headwinds, you should expect Iridium zoibita to start returning back to historical growth trends.
Speaker Change: On today's call, I'm happy to be accompanied by our new CFO, Vince O'Neill.
Speaker Change: Many of you have gotten to know Vince during his 10-plus years at Iridium leading our FP&A team, and it's been a seamless transition, and I know he'll continue the strong financial leadership that Tom instilled during his tenure.
Speaker Change: Iridium enters 2025 with momentum, a strong capital position, and strength relative to our L-Bank competitors. We have good visibility through our extensive partner ecosystem that gives us confidence in our near and long-term growth projections.
Speaker Change: I note there's been a recent rise in short interest in our shares.
Speaker Change: This appears to be part of a bearish bet on the broader satellite sector in the face of Starlink's aggressive pricing and adoption, particularly as it relates to their disruption of the VSAT market and entrance into the direct-to-device market.
Speaker Change: As I've highlighted before, iridium is complementary to Starling's effort in both of these areas.
Matt Desch: We are focused on safety and mission critical applications and operating completely different spectrum than Starlink, which provides our users with an important utility that Starlink cannot fulfill.
Matt Desch: In our opinion, bets against our growth seem misplaced, and while it's difficult to disprove a negative, continued good execution and delivering on growth will eventually win the day and differentiate Iridium even more from other satellite operators.
Matt Desch: Today we initiate a full year guidance for OEBDA and service revenue for 25 which continue to underscore our growth and business opportunities.
Matt Desch: While Vince will discuss the drivers supporting this outlook as well as our 2024 results, I'd like to touch upon the unusual looking decline in net subscribers in our IoT business from the third quarter.
Matt Desch: As we mentioned last quarter, a large commercial IoT customer on a fixed-price contract announced a change in their retail plans late in the third quarter.
Matt Desch: While these changes will not impact our revenue, we expect they will have the effect of reducing active subscriber numbers during 2025 and creating more seasonality in our IOT subscriber base each year.
Matt Desch: The customer continues to develop and introduce new products that rely on our network, which we expect to continue to contribute meaningfully to Iridium's commercial IoT growth.
Vince will cover this topic in greater detail.
Speaker Change: A key reason for Iridium's success has been our truly global network, our L-band spectrum position, and probably most important, the reliability of our network.
Speaker Change: These characteristics have come to define our brand and have set the standard for organizations involved in safety services and mission critical applications.
Speaker Change: In broadband, we've positioned Iridium Certus as a reliable companion to VSAT offerings, including Starlink. We're currently in a transition to being what we believe is the preferred L-band companion to VSAT on maritime ships.
Speaker Change: We've continued to differentiate our maritime offerings by doubling down on safety services.
Speaker Change: There's a near-term headwind as we address the transition from primary to backup service, but we're confident in our product positioning going forward.
Speaker Change: In late 2024, we introduced Iridium Service GMDSS for mariners, which combines our L-band and Prod-band technology with important and mandated maritime safety and security services.
Speaker Change: The combination of these capabilities into one terminal sets a new standard for cost, efficiency, and performance and helps to ensure that Iridium is the preferred choice on ships to complement KA and KU broadband connections.
Speaker Change: We've also enhanced functionality for land, mobile, and IoT users with the introduction of Iridium Certus Midband over the past year or so.
Speaker Change: This functionality has already been leveraged by our industrial partners in their products. We've had close to 30 new Iridium Certus 100 products come through our certification process so far across a variety of IoT and voice market applications.
Speaker Change: We've also introduced our next-generation IoT technology in 24, which we call Iridium Certus IoT, which provides faster speeds, direct connection to the Amazon cloud, and faster partner development.
Speaker Change: Iridium Certis IoT technology is being integrated into personal satellite communications devices like the inReach Messenger Plus, which launched in September, to facilitate the transmission of photos and voice messages for recreational users.
All these applications expand Iridium's utility and support higher ARPU.
Speaker Change: Beyond these traditional uses for our network, we continue to invest in partnerships, new technologies, and use cases.
Speaker Change: In 2024, we onboarded more than 30 new partners to our global ecosystem and certified more than 60 new partner applications on Iridium's network.
Speaker Change: These numbers are impressive. We do not invite partners into our ecosystem by chance, and their selection is a process that reflects their ability to bring new capabilities and customers onto our network.
We're also excited about our work on 3GPP standards.
Speaker Change: While the satellite industry remains in the early stages of development on D2D, we're making fast progress on our development of Iridium NTN Direct, supporting standards-based narrowband IoT connections that can be used in consumer and terrestrial IoT devices.
Speaker Change: We expect to be on live testing with pre-standards based chips from at least one supplier as early as this summer.
Speaker Change: This timeline will allow customers and partners to experience Iridium's D2D capabilities and support commercial launches in 2026.
Speaker Change: In our opinion, service coverage will remain the biggest challenge for early adopters of D2D services.
Speaker Change: Iridium is unique among other D2D players that we remain the only L-band satellite company with a LEO constellation in orbit today, a global allocation of spectrum, and a path to offer reliable, standards-based connectivity to end-user markets around the world.
Speaker Change: MNOs have told us that they expect to deliver multiple D2D and standards-based satellite IoT solutions to their customers, and we expect Iridium NTN Direct to be a key one on a global basis.
Speaker Change: As I said before, we don't have to be first to market, we just have to be one of the best, which we will be.
Speaker Change: Before I turn things over to Vince, I wanted to take a minute to touch upon the progress and strong market position that Ariane now occupies.
Speaker Change: Most of you know that Iridium helped create and owns a significant equity stake in this space-based aircraft surveillance company.
Speaker Change: The analyst community has been valuing our stake at about $2 per share going as far back as 2018.
Speaker Change: Since that time, Arian has continued to expand its leadership in aviation surveillance, signing new ANSP customers, and now has relationships representing over 40 countries that cover more than half the world's airspace.
Speaker Change: More importantly, however, Arian has broadened its market position to monetize its rich dataset of global in-flight data movements, aircraft movements.
Speaker Change: The company has invested in cloud-based data analytics and services to establish a strong position in the aviation analytics market.
Speaker Change: Arian has signed commercial data service agreements with companies like Airbus, Boeing, ForeFlight, GE Airspace, and others that integrate Arian's ADS-B data into airspace analytics platforms.
Speaker Change: This allows them to streamline workflows between flight planners and pilots and optimize flight paths and maintenance services to inform and enhance flight operations.
Speaker Change: In fact, commercial data analytics services represent a meaningful component of Ariane's business and has grown at a faster rate than the company's traditional surveillance business since 2019.
Speaker Change: For example, there have been significant increases in the frequency of GPS signal jamming and aircraft position spoofing, and the Ariane system can identify global hotspots, real-time jamming events, and provide aircraft tracking independent of GPS.
This will enhance safety for both ANSPs and airlines.
Speaker Change: Arian also continues to explore ways to leverage their unique data global data set to help solve some other operational and safety issues for the industry. One such problem is turbulence encounters that create significant safety and economic impacts to the aviation industry and flying public.
Speaker Change: Arian is currently working with the research community and commercial airlines to introduce a capability later this year that will identify and monitor turbulence events.
Speaker Change: Arian has fully rebounded from the headwinds associated with the pandemic, remains EBITDA positive, and continues to expand its service offering.
Speaker Change: Most recently, the company announced its plans to explore bringing space-based VHF services to the aviation marketplace. We're supporting them on that effort.
Speaker Change: I'm proud of Iridium's long-time involvement in Aerion and the leadership and forward thinking that Aerion's team has shown in the aviation market. It's another example of where Iridium's one-of-a-kind network has delivered value and is helping to foster global changes.
Speaker Change: So, as I look forward, 2025 will be a year of growth for Iridium. We will continue to invest in new products and services, return capital to our shareholders, and grow our partnerships and business.
Speaker Change: Perhaps most important to long-term investors, you will see Iridium invest in longer-term growth opportunities like Iridium NTN Direct and continue to generate strong free cash flow.
Speaker Change: So with that, let me turn it over to Vince for a review of our financial performance. Vince? Thanks, Matt, and good morning, everyone. With my remarks today, I'd like to recap Iridium's full-year results for 2024 and provide perspective on our fourth quarter performance.
Speaker Change: For full year 2024, Iridium exceeded its OEBD guidance, aided in part by service revenue growth and new government contract awards, and a return to more normalized demand for equipment.
Speaker Change: Pro forma free cash flow was $306 million in 2024, and shareholders remained the beneficiaries as we returned over $400 million through share repurchases, equivalent to 11% of our shares outstanding.
Speaker Change: including dividends, Iridium returned close to half a billion dollars to investors in 2024.
Speaker Change: In the fourth quarter, operational EBITDA rose 3% from the prior year's quarter to $117 million, and total revenue grew 9% to $213 million.
Speaker Change: Growth in service revenue was complemented by the return of equipment demand and expanding government contract awards which drove engineering and support revenue.
Speaker Change: Within the commercial business, we reported service revenue of $127.3 million in the fourth quarter, which was up 5% from a year earlier.
Speaker Change: Revenue from commercial voice and data rose 3% from the prior year period and reflected incremental market share gains in the APAC region where other LBAN service providers have experienced outages in recent years.
Speaker Change: These events underscore the importance of reliable, weather-resilient ALBAN service and highlight the durability of Iridium's one-of-a-kind network.
Speaker Change: Commercial IoT grew 15% in the quarter, in part fueled by personal communications, which remains a strong business for us. You will note that IoT subs were down $15,000 for the quarter. This was due to a personal communications customer changing its retail pricing plans.
Speaker Change: something that we previewed with you on our Q3 call and which Matt mentioned in his remarks.
Speaker Change: We saw a spike in deactivations from that customer in the fourth quarter as they started to phase out their annual plans, including plans that allow subscribers to toggle between active and inactive status on a monthly basis throughout the contract year.
Speaker Change: The number of inactive subscribers varied seasonally, but averaged about 250,000 over the last year.
Speaker Change: I think you'll see the impact of these changes over the next few quarters.
Speaker Change: Subscribers who previously used these annual plans are now expected to only be subscribers in months when they anticipate using the service.
Speaker Change: This means, going forward, you will see greater seasonality in our subscriber numbers from quarter to quarter versus prior year periods.
Speaker Change: I want to underscore that we attribute the decline in net subscribers in the fourth quarter directly to these plan modifications and do not believe that changes to subscriber numbers were a result of competition or other external factors.
Speaker Change: Iridium's IOT revenue with this large partner is fixed under the terms of our contract and the increase in subscriber seasonality will have no impact on our revenue in 2025.
Speaker Change: Gross activations remain strong in the fourth quarter, and we expect our 2026 revenues from this customer to further increase from 2025.
Speaker Change: In broadband, we reported revenue of $13.4 million in the fourth quarter, down 9% from the year-ago period, as ARPU reflected increased prevalence of Iridium's use as a companion service and the conversion of customers to other plans.
Speaker Change: For the full year, broadband revenue was down 3% and remained largely in line with our expectations.
Speaker Change: In all, commercial subscribers grew 9% year-over-year. IoT continued to represent the largest share of our user base at 81% of the total at year-end, up from 80% in the year-ago period.
Speaker Change: Revenue from hosted payload and other data services was up 2% in the fourth quarter to $15.4 million.
Speaker Change: The year-over-year increase reflected strong contributions from our new P&T service, despite a tough comp from a one-time benefit that drove growth in the prior year's quarter.
Speaker Change: Government service revenue rose in the fourth quarter to $26.8 million, reflecting a step up in our fixed-price EMSS contracts with the U.S. government, which occurred on September 15.
Speaker Change: Subscriber equipment increased 38% in the fourth quarter to 21.6 million after a period of prolonged volatility related to supply chain issues associated with the pandemic.
Speaker Change: As we had previously forecasted, full year 2024 marks a return to more normalized sales levels, following two consecutive years of record equipment sales for the company.
Speaker Change: We believe the Q4 improvement in equipment sales shows continued strong support for Iridium services.
Speaker Change: Engineering and support revenue grew 20% from the prior year period to $37.4 million in the fourth quarter, reflecting new contract awards and Iridium's growing work with the Space Development Agency.
Speaker Change: Our work with the SDA remains highly strategic and aligns Iridium closely with the U.S. government's long-term space priorities.
Thank you.
Speaker Change: Moving to our 2025 outlook, we anticipate service revenue growth of between 5% and 7% in 2025, and our forecasting OEBs are between $490 million and $500 million.
Speaker Change: Many of the factors that impacted our 2024 growth normalize as we move into 2025, allowing service revenue and OEBD growth to improve.
Speaker Change: To provide further context to our four-year guidance, I want to highlight some of the drivers that support our 2025 outlook.
Speaker Change: First, we continue to forecast ongoing subscriber and revenue growth for our voice business, as Iridium remains the gold standard in this business due to the reliability and global coverage of our network.
Speaker Change: In IoT, 2025 will be another year of revenue growth, in part owed to a step-up in our fixed-price contracts with our largest IoT customer.
Speaker Change: We anticipate double-digit revenue growth, even with added subscriber seasonality related to the pricing plan changes I noted earlier.
Speaker Change: IoT partners continue to invest in and roll out new devices featuring Iridium's mid-band technology.
Speaker Change: Over the last two years we have seen the introduction of a dozen or so products across the aviation, maritime, land mobile and government sectors.
Speaker Change: We expect these new products, as well as new consumer-orientated applications, will broaden Iridium's adoption across industries, attract new users, and drive higher IoT ARPU.
Speaker Change: In broadband, we expect revenue to remain at a level similar to 2024.
Speaker Change: Growth from our new Iridium Service GMDSS service will help to support revenue and additional market share gains, but the continued migration of customers to other plans will pressure ARPU in 2025.
Speaker Change: Hosted payload and other revenue should serve as another tailwind to 25 revenue as Iridium PNT gains traction with partners.
Speaker Change: This service has both civil and government applications, and is increasingly gaining attention from GPS-dependent organizations that are susceptible to the risks associated with signal spoofing and jamming.
Speaker Change: We expect equipment revenue in 2025 to be similar to sales in 2024. Margin, however, will be down modestly, as a one-time cost benefit realized in 2024 will not recur in 2025.
Speaker Change: Engineering and support continues to benefit from Iridium's growing contracts with the U.S. government and is expected to grow again in 2025.
Speaker Change: On the expense side of the equation, we will continue to support new service and product development.
Speaker Change: To begin, we expect SG&A growth rates to significantly decline to the mid-single digits as costs normalize following our acquisition of Citalis in 2024.
Speaker Change: R&D spending is expected to decline in 2025, as some major programs move into a more capital-intensive phase of development.
Speaker Change: We still expect CAPEX to moderate from here as we move closer to the end of the decade.
Speaker Change: Other operational assumptions supporting our 2025 outlook, which I've not yet touched upon, include depreciation expense, which after a couple of years of change will be relatively stable at 2024's level.
Speaker Change: Interest expense, based on our current projections, is expected to increase modestly year over year, reflecting the expansion of our credit facility in 2024.
Speaker Change: Iridium has a 1.5% interest rate cap in place to hedge $1 billion of exposure on our term loan through November 26.
Speaker Change: Iridium continues to expect minimal cash taxes of less than $10 million per year through 2026.
Speaker Change: When considering these items, we expect to generate between $490 million and $500 million in OEB during 2025.
Speaker Change: At the midpoint, a weaver of $495 million would represent 5% growth from 2024's reported number.
Speaker Change: Moving on to our balance sheet, as of December 31, 2024, Iridium had a cash and cash equivalence balance of approximately $94 million. Our cash balance is ample to fund our operations, and we anticipate continued payment of quarterly dividends and opportunistic share repurchases.
Speaker Change: In the fourth quarter of 2024, Iridium retired approximately 4.1 million shares of common stock at an average price of $29.64.
Speaker Change: For the full year 2024, Iridium purchased 14 million shares at an average price of $28.92 for a total of 403.8 million. This represents approximately 11% of Iridium's outstanding shares.
Speaker Change: This activity left Iridium with an outstanding balance of $430 million at year-end under our board-approved authorization through December 31, 2027.
Speaker Change: Since the inception of our buyback program in Q1 2021, we have repurchased almost $1.1 billion.
Speaker Change: We expect to continue to execute our buyback program, balancing our objective for deleveraging with the desire to maximize return on investment.
Speaker Change: In 2024, Iridium paid a total of $64.7 million through quarterly dividend payments to shareholders.
Speaker Change: Looking to 2025, we expect our board will increase the dividend to $0.15 per share starting in the third quarter, resulting in an increase of over 5% for the full year.
Speaker Change: the increase reflects management's continued confidence in the company's business opportunities and prospects for continued strong free cash flow.
Speaker Change: We closed 2024 with net leverage of 3.6 times OEBD. This was up from 3.1 times a year earlier and reflects additional issuance on our term loan to support TELUS acquisition and opportunistic share buybacks.
Speaker Change: We think Iridium naturally de-levers over time and expect to exit 2030 below two times net leverage, even after giving effect to our dividend program and all sharebacks authorized by our board.
Speaker Change: Turning to our pro forma free cash flow, if we use the midpoint over our 2025 OEBDA guidance.
Speaker Change: and back off $91 million in net interest pro forma for our current debt structure.
Speaker Change: Approximately $90 million in CapEx for this year, $6 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 $302 million for 2025.
Speaker Change: These metrics would represent a conversion rate of OEB to free cash flow of 61% in 2025 and a yield of over 10%.
Speaker Change: We continue to believe that pro forma free cash flow is a good measure of our business strength.
Speaker Change: A more detailed description of each element of these calculations, along with the reconciliations gap measures, is available in a supplemental presentation under Events on our Investor Relations website.
Speaker Change: As I begin my first year as Iridium CFO, investors should recognize the level of financial discipline and continuity that runs through this organization and our capital policies.
Speaker Change: Our team has planned for this year's transition, and I expect the stability of Iridium's business model that you've come to know through my predecessor will remain a consistency.
Speaker Change: I have great confidence in Iridium's business prospects and cash flow generation and look forward to discussing these topics with many of you during Iridium's upcoming conference appearances.
Speaker Change: With that, I'd like to turn the call over to the operator for Q&A.
Thank you.
Speaker Change: We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys.
Speaker Change: If at any time your question has been addressed, and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster.
Edison Yu: The first question comes from Edison Yu with Deutsche Bank. Please go ahead.
Speaker Change: I had to answer a lot of questions for a few days when totally expected situations.
Speaker Change: Situations sort of.
Speaker Change: And now perhaps there was other reasons for making that announcement, but it certainly wasn't wasn't technical.
Speaker Change: All the other things really are things, we've been anticipating for a long time, which is.
Speaker Change: Frankly.
Speaker Change: A feature of the satellite industry, you typically can figure out what's going to happen for <unk>.
Speaker Change: Quite a few years in advance which is why we've been able to navigate.
Speaker Change: So successfully really over time as we anticipated what others are going to do so our <unk> offerings. We believe are quite complementary to many of these others I know that many investors seem to think it's a zero sum game that every announcement means that somebody is winning.
Speaker Change: And somebody's, losing in our case, because our investment is.
Speaker Change: Modest and the gains, which we believe will happen from moving to a standards based <unk> kind of world as.
Speaker Change: Is significant we expect to.
Speaker Change: Have a really nice return going forward and.
Speaker Change: And we will fit very well and be complementary to many of these other solutions because as I said.
Speaker Change: The mobile network operators are really looking for multiple solutions to offer their customers and they like our global.
Speaker Change: Highly reliable approach and.
Speaker Change: And would love to have their customers roam onto our network.
Speaker Change: Understood I wanted to ask.
Speaker Change: A longer term question on the under potential Nextgen nextgen constellation.
Matt Desch: Matt you may have made some comments at a recent industry.
Speaker Change: Industry conference about it.
Speaker Change: One perspective, what angle wanted to maybe get your thoughts on is have you entertained or would you consider the possibility of perhaps having a partner or someone else kind of one or handle the capex of that future constellation.
Speaker Change: And then you would take on obviously the operating ROE in the.
Speaker Change: The market go to market role, but just this idea of trying to maybe offload the capex or the burden of that in the future for this next gen constellations.
Speaker Change: Well.
Speaker Change: I mean, we're open to all kinds of ideas and continue to talk to everyone in the industry about things Thats really a decision that.
Speaker Change: It doesn't make sense to make today, because it's really for something in the next decade.
As I've said in other calls before I think the cost of our next generation network will probably be less given all the investment the industry has made in <unk>.
Speaker Change: In satellite platforms I was at a small sat conference what I made that and there were of course I've got I've been rushed in center with people, who want to offer a lower cost buses.
Speaker Change: Lower cost launch services et cetera, and I think those will all.
Speaker Change: Be beneficial when we get around to doing that.
Speaker Change: And perhaps in the 2000 <unk>.
Speaker Change: I think our advantage here is really our ability to create businesses and.
Speaker Change: And the technology that we've employed has really been effective things like as I said developing area and are developing PNT services et cetera have been we've been an innovative organization and having control of the technology is an advantage.
Speaker Change: This isn't a commodity you don't just turn it over to someone else and sell services at low margins, we make very high margins as a result of kind of owning our own technology in our own spectrum.
Speaker Change: And I don't see that changing dramatically, but I'm open to other discussions, particularly around partnering with other constellation, there's perhaps the opportunity to make.
Speaker Change: To have our payload be a part of another constellation or utilize someone else's.
Speaker Change: Factory line.
Speaker Change: Four satellites to make it very low cost for us to off to where.
Speaker Change: Locator rejuvenate our constellation but.
Speaker Change: We already have ideas as I mentioned in that conference about some other things we'd like to do with the next generation constellation Some new services again that.
Speaker Change: Would make us quite.
Speaker Change: Competitive an interesting going out into the 2030 and 2040. So that's that's what we're thinking about and spending our time on.
Speaker Change: Great I appreciate the color.
Speaker Change: Thanks Eddie.
Speaker Change: The next question is from Simon Flannery with.
Speaker Change: Morgan Stanley. Please go ahead.
Simon Flannery: Thank you good morning.
Simon Flannery: Thanks for all the updates on the DTD.
Simon Flannery: Nice to see that we're heading towards trials here on commercial launch.
Speaker Change: Could you just give us a.
Speaker Change: Few signposts on when this should become impactful from a financial point of view, how do we think about the Tam it sounds like youre not necessarily directly going for the voice market here, but more for an Iot perspective, so should we see much net revenue benefit next year or how do you think about the overall market opportunity that you are.
Speaker Change: Able to address with your products and then Vince just a housekeeping one for you I think in the past on broadband and thanks for the guidance on 'twenty five.
Speaker Change: Set the <unk> would stabilize after I think it was four or five quarters something like that it would be great to understand just where are we in that sort of transition process to being removed as sort of.
Speaker Change: From the sort of complementary coming back to the complementary from people who are using it for more broadband applications.
Speaker Change: On <unk> I mean, we still expect that we will have a service commercially available.
Speaker Change: An early early 2026.
Speaker Change: Chip manufacturers are starting to line up to develop product for that time.
Speaker Change: But there will still be the implementation timeline for people to implement those into solutions too.
Speaker Change: Distribute those so I think it is going to have a small very small impact on 'twenty six but we will.
Speaker Change: Grow significantly and our plan has its showing.
Speaker Change: For the 2728, 2009 timeframe, starting to really ramp up and contributing materially to our Iot business.
Speaker Change: And other services.
Simon Flannery: The second part of it yes sure Simon.
Speaker Change: I know it in my remarks.
Simon Flannery: 25.
Simon Flannery: We obviously anticipate that we will gain market share with <unk>.
Simon Flannery: Our <unk> service as that launches into the market.
Simon Flannery: Our expectation is that we will continue to see some.
Simon Flannery: <unk> pressure in 'twenty, five, especially as more of the subscriber base.
Simon Flannery: <unk> towards a companion service so.
Simon Flannery: So our expectation is that Youll continue to see some of that play out in 'twenty five.
Simon Flannery: And it's $2 50 is still the kind of the base level, we should be thinking about.
Speaker Change: Yes, I think I think that's a good assumption Simon.
Simon Flannery: Okay, great. Thanks, Bob.
Simon Flannery: Next question is from Chris Quilty with Quilty analytics. Please go ahead.
Speaker Change: Goldman space Anyways, just to follow up on that Maritime point.
Chris Quilty: Starlink dropped their progress report at the end of last year, and I indicated something like 75000 vessels attached which is bigger than the actual VSAT market is 40 to 45000 are you seeing any opportunities with assuming those numbers are correct and there is a bunch of incremental vessels pick.
Chris Quilty: In the backup service or is it you are indicating.
Chris Quilty: Patient whatever vessels, they're landing or perhaps smaller leisure vessels that would not be an appropriate candidate.
Chris Quilty: Backup service.
Chris Quilty: It's a good question, Chris I'd say, there could be expanding the market a little bit.
Chris Quilty: Clearly I think the real advantages of a companion service or are in the larger.
Chris Quilty: Blue Ocean kind of vessels that end up in ports and places that they.
Chris Quilty: With.
Chris Quilty: <unk> service wouldn't operate very well R.
Chris Quilty: Our worry about really absolutely continuous services because they are there.
Chris Quilty: Our industrial kind of vessel so, but there are I think the market is demanding more connectivity elsewhere and our partners are really.
Chris Quilty: Packaging things up nicely, where we're kind of just part of the solution. So.
Chris Quilty: I think you might find this increases in.
Chris Quilty: Also GM DSS in general is really kind of expanding to smaller vessels. There is a real.
Chris Quilty: A real effort to make it available to all.
Chris Quilty: All kinds of vessels and we're making it a lot less expensive so it could be it could be expanding the market a bit yes.
Speaker Change: Got you and when commercial voice subs were down in the fourth quarter, which isn't unusual maybe it was down a little bit more but what do you look at the prospects for 2025 and the growth drivers for the voice business is it still primarily a push to talk driver for that business or are there new services that will be offered.
Speaker Change: It is it is primarily push to talk is the growth drivers. There I mean are we continue to sell.
Speaker Change: Voice hotspots, if you will go et cetera, but really it's PTT has really expanded really nicely in the last couple of years.
Speaker Change: So yes, I think I think that's the primary driver I think this continues to be a very foundational element of our business.
Speaker Change: A little seasonal so you see in the.
Speaker Change: In the northern Hemisphere.
Speaker Change: There is less activity in the winter and more activity in the summer I think you'll just see that naturally play out.
Speaker Change: Great and if I can ask one more I stopped asking questions about area. So im happy to hear you guys promoting it again.
Speaker Change: Obviously, the biggest missing customer there is the FAA.
Speaker Change: Don't think anybody knows what's going on in the FAA and more.
Speaker Change: Last couple of months.
Speaker Change: But can you give us maybe a rundown of how that transpired for a while you were testing with them and then the FAA sort of backed out and what are the prospects for bringing them on a go forward basis.
Speaker Change: Yes, the FAA eventually kind of told US look it's interesting technology, and we would love to deploy it but we are underfunded, we have a long list of things that we still need to do to modernize our network and.
Speaker Change: This is.
Speaker Change: Really not on the top of the list right now.
Speaker Change: Even though we felt it was pretty cost effective and made a big impact to them I think there is some more interest that's been generated recently certainly the crew.
Speaker Change: Crash here in D C.
Speaker Change: Helicopter in commercial aircraft.
Speaker Change: Bumped it a lot of discussion from the current administration about modernizing the FAA.
I noticed the department of Transportation Secretary, saying that there are technologies that were invented in the U S that haven't been deployed in the U S. It should be I thought that was practically an advertisement for ariane.
Speaker Change: Don't really know what will happen certainly not I don't think it'll be the same as many other agencies because you don't want to mess with air traffic control and safety too quickly, but I do think it creates more opportunities because I think theres going to be a strong focus on safety and modernization in area and is perfectly positioned for that.
Speaker Change: Well good luck with that thank you.
Chris Quilty: Thanks, Chris.
Speaker Change: The next question is from Rick Prentiss Prentiss with Raymond James. Please go ahead.
Rick Prentiss: Thanks, Good morning, everybody.
Rick Prentiss: Hey, Rick Hey, Hey couple of questions. One we did see some stories popping out I think it was <unk>.
Rick Prentiss: Yesterday.
Rick Prentiss: About a white hat after having some.
Rick Prentiss: Success kind of breaking into the government network that you guys can you talk a little bit about what.
Rick Prentiss: What's that story.
Rick Prentiss: Be alluding to or what was going on with the government contract a couple of follow ups.
Rick Prentiss: Yes, it was.
Rick Prentiss: I've seen that story.
Rick Prentiss: Recurring story, that's been kind of popping up every every couple of years ever since I think the first one we ever saw was back in 2015.
Rick Prentiss: It's really not news don't really understand sort of why it was being promoted in.
Rick Prentiss: <unk> discussed I don't know if people ever just do Google you would see that story.
Rick Prentiss: From the past.
Speaker Change: Our yes, our network is not encrypted by.
Speaker Change: By default, but all of our partners, including the government can encrypt traffic that they want to maintain and do so describing this as somehow of fundamental flaw our network was with sort of strange to me.
Speaker Change: Not not really news it doesn't affect anything we're doing is not somehow suddenly discovered everyone who works with us knows exactly how our network works.
Speaker Change: And all of the traffic.
Most a lot of the traffic over our network is encrypted and so it was a strange story as far as I was concerned.
Speaker Change: Okay and then following on Simon's question on the non terrestrial network.
Speaker Change: Timing.
Speaker Change: Jeffrey.
Speaker Change: Segments of what direct.
Speaker Change: Device, whether it's smartphones tablets or computers, how would you.
Speaker Change: Iridium solution might play best should we think about the Chan on Opentable will segments.
Speaker Change: Well, we've always had an advantage where.
Speaker Change: There has been no compromises on needing global coverage and so clearly that's that's going to be our hallmark.
Speaker Change: Starlink Asps those are regional solutions that do cellular infill in regional threshold markets.
Speaker Change: Right now.
Speaker Change: They still have interference and regulatory issues to overcome to really expand that beyond.
Speaker Change: <unk>.
Speaker Change: 10% of the Earth's surface. So you want to go on the Ocean do you want to go into Europe, you want to go into many other markets with your device, whether or your car or your watch those services aren't going to work.
Speaker Change: So again I think we're going to be complementary to those those are going to be really good solutions for certain markets, but.
Speaker Change: They're going to want something when they were on beyond those markets and that's really how iridium has always been positioned in the Iot space.
Speaker Change: People don't know if you make a tracking device and Iot tracking device and Youre using a standards based solution you don't know where it's going to end up in the world and you'd like if youre going to Rome to Rome to someone who will be there no matter, where you are and not a regional or.
Speaker Change: Unreliable partner, so I'm expecting that.
Speaker Change: Most of the mobile network operators will sign us up as a roaming partner and we will run to us or create some sort of.
Speaker Change: Messaging solutions around us that fit for their <unk>.
Speaker Change: Along with others for their.
Speaker Change: For their customers.
Speaker Change: Great even doing this as long and longer than on the salary side, but you get that question a lot will be satellite solutions actually be a replacement for wireless.
Speaker Change: Absolutely not.
Speaker Change: I would go back to my threshold days in the <unk> World I've been involved in cellular since the late eighties.
Speaker Change: There is no way that.
Speaker Change: Enough satellites could be put into the space.
Speaker Change: To be a primary service.
Speaker Change: Or will really replace anything.
Speaker Change: They may.
Speaker Change: Some of these bigger solutions like the ones that Starlink and <unk> are talking about it's not sterling solution of today, but maybe one in the future or an ASP.
<unk> eliminate a cell where you wouldn't have to put a cell tower in someplace I think they even describe it in that way, but those are really.
Speaker Change: Small expansions of the current 10% footprint that cellular has so.
Speaker Change: Maybe the cellular footprint will expand from 10 to.
Speaker Change: To 15% or whatever but it's not going to be much greater than that and I still think that.
Speaker Change: The rest of the world will be.
Speaker Change: Satellite.
Speaker Change: Sure.
Speaker Change: Not certainly the kind of service you are expecting from your you're five G. A <unk> phone.
Speaker Change: Good to hear that directly last one for me.
Speaker Change: You mentioned still tell us any other M&A out there as we think about that $1 billion.
Speaker Change: First revenue target in 2020, what other M&A opportunities might be helpful.
Speaker Change: So that's a tricky thing to talk about obviously.
Speaker Change: We do have aspirations that.
Speaker Change: That there could be things, obviously I've been pretty consistent about my strategy.
Speaker Change: It is to go after things, we can do better than anyone else that takes advantage of our network.
Speaker Change: <unk> uniqueness of our L band spectrum, and whatnot and I think that tell US last year was a good example of that.
Speaker Change: There is some other ideas we have I'll just leave it at that for now.
Speaker Change: I think they have to have good business cases.
Speaker Change: Have to demonstrate to investors that they would be accretive.
Speaker Change: Certainly.
Speaker Change: Long term.
And so that will be our criteria for selection.
Speaker Change: Great. Thanks, guys.
Speaker Change: Thanks, Rick.
Speaker Change: The next question is from Holmen.
Core sand with Dws. Please go ahead.
Speaker Change: Hey, good morning. So the first question I had was.
Speaker Change: On the <unk> topic within the hosted payload so does.
Speaker Change: It went down sequentially. So it's not a linear growth kind of rate. So what is your outlook for 'twenty five and whats how is the ladder as far as getting to your projections I think it was $100 million in revenue for it.
Speaker Change: So, yes, what I would say how many it is that.
Speaker Change: We did have a.
Speaker Change: Onetime nonrecurring event.
Speaker Change: In the prior year.
Speaker Change: While we don't break.
Speaker Change: P&C out separately, we've seen good growth in that in 'twenty, four and we expect that to continue in 'twenty five as well.
Speaker Change: Okay does that is that going to be the main source of growth in your services guidance or is there other moving pieces.
Speaker Change: So as you look at hosted payload and other the biggest moving piece in there will be will be P&C from quarter to quarter. There may be some other noise in there I would call it but the biggest single factor and there will be P&C.
Speaker Change: Okay and my last question was yes go ahead.
Speaker Change: We didn't talk as much about PNC will do that in future quarters, because it's one of the most active areas in our business right now.
Speaker Change: Really we're seeing a lot of new applications, we're seeing a lot of especially as we've expanded the geographical area in the sales team and.
Speaker Change: Im really really bullish about PMT for 'twenty five 'twenty six I think it's on the trajectory we're on.
Speaker Change: We're looking for it to be and I think youll see that pop out of that hosted payload and other category in the future.
Speaker Change: My final question was what is the comfort level as far as cash balance and what should we assume as far as your <unk>.
Speaker Change: <unk> activities concern.
Speaker Change: So I think like a random and operational cash balance I mean, we've talked in the past.
Speaker Change: Call it around $50 million to $60 million from quarter to quarter, I think we feel pretty comfortable operating with.
Speaker Change: That can obviously vary a bit but certainly at a level of around $50 million, we feel pretty comfortable.
Speaker Change: I think as you think about the repurchase activity as we go through.
Speaker Change: 25, and beyond I think the guardrails, there will obviously be leverage.
Speaker Change: But also managing to that cash balance so.
Speaker Change: As you think about 25%, that's how I would think about it in terms of sizing.
Speaker Change: Okay. Thank you.
Speaker Change: Thanks, Amit.
Speaker Change: The next question is from Colin Canfield with Cantor. Please go ahead.
Speaker Change: Okay. Thanks for the question.
Speaker Change: Good evening to unpack a little bit.
Speaker Change: Directly device task lesson plans I know you had said beyond 2030 is kind of the the marker there, but maybe talk a little bit about how any plans interact with your $3 billion free cash flow targets, and maybe cashing out of London.
Speaker Change: It moves with respect to the capitalization of R&D.
Speaker Change: Im sorry, Im not sure Im following your train of your question you said D. D. And then you said that 2000, <unk> or something like that I don't know what youre, referring to there.
Speaker Change: Sure sure.
Speaker Change: You guys reaffirmed the free cash flow target right the view that out into 'twenty, you'll generate $3 billion of free cash flow.
Speaker Change: And there was some movement within the quarter.
Speaker Change: Round kind of I'll call.
Speaker Change: Call it lift the capex outlook with respect to capitalization of R&D.
Speaker Change: So the question is how the new constellation class plans interact with that $3 billion of free cash flow target. Thanks, Paul. So it has nothing to do with new constellation plans. Those are things out beyond 2030, before we'd spend be spending money on a new constellation the.
Speaker Change: Money, we're spending right now that we're capitalizing where R&D is moving to capital is all software and ground based hardware to implement Iridium NTN director, what we called project Star Dust.
Speaker Change: We have basically a software based constellation and were upgrading it.
Speaker Change: Enhancing that we're improving it but we're not launching any new satellite. So this is all software and the satellites.
Speaker Change: And ground based systems.
Speaker Change: In conjunction with the work that chip manufacturers are doing too.
Speaker Change: To enhance the standard here so.
Speaker Change: Yes, we are investing a little bit more in the near term I think that's going to mitigate itself over time, because once we're kind of done with that that was an effort really in 24 and 25 is the sort of the maximum.
Speaker Change: Spending thats, a little bit why the Capex went up a bit this year I expect over time that that will kind of come back down a bit but thats really.
Speaker Change: That's really investments into.
Speaker Change: Roaming hardware.
Speaker Change: Standards base.
Speaker Change: Kind of gateway.
Speaker Change: As well as just satellite software upgrades.
Speaker Change: Got it okay.
Speaker Change: Got it and then maybe unpacking.
Speaker Change: Great substance subscriber count mechanics, a little bit.
Speaker Change: <unk> suggested.
Speaker Change: Beyond 2025 for revenue.
Speaker Change: Maybe just talk a little bit about the dynamics there the naval group.
Speaker Change: Growth in that and that customer beyond 2025.
Speaker Change: Yes.
Speaker Change: We're still seeing strong activations.
Speaker Change: From that customer and continue to see that it's been consistent all along with <unk>.
Speaker Change: We introduce these new pricing plans.
Speaker Change: Late in the third quarter.
Speaker Change: Really allow people to keep their service for the whole year and just use it when they wanted to use it. They know are going to we're going to see come.
Speaker Change: Customers deactivate, particularly here in the winter when there.
Speaker Change: When in the northern Hemisphere, where theyre not using as much in there we're expecting to see them activate more when it gets warm and they go up.
Speaker Change: And they are using their devices.
Speaker Change: Again that creates a little bit more volatility it means that.
Speaker Change: These subscribers, which most recently had been about 250000 by the way that's been sort of proportional as they've grown.
Speaker Change: Been growing numbers those are kind of kind of work themselves out of our network.
Speaker Change: Sort of overwhelmed because of the numbers.
Speaker Change: Some of our other subscriber numbers, but that will all be done once they kind of completely finished their transition to this monthly plans instead of annual plans.
Speaker Change: Again usage of the new devices, the investment that Theyre, making that's all been very positive. They expect to continue to have a larger and larger active.
Speaker Change: User base going forward and I'm expecting that that will.
Speaker Change: Mean more revenues.
Speaker Change: As usage.
Speaker Change: As the value of really the network to the subscribers grows but it does mean sort of a short term.
Speaker Change: Nominally here as those subscribers.
Speaker Change: Those seasonally inactive subscribers kind of get worked out of our our subscriber numbers.
Speaker Change: Got it and then last one for me, but maybe across.
Speaker Change: Commercial and government customers discuss the kind of element of National security, It's a factor within that.
Speaker Change: How customers are thinking about the market in terms of subsidizing.
Speaker Change: Things that might be lower priced or higher priced when considering the importance of their.
Speaker Change: I'll call it national or network security. Thank you.
Speaker Change: Yes, I'm not sure if youre, referring to that article or whatever again, I don't think thats an issue whatsoever in terms of our customer we have been.
Speaker Change: Working in the case of the U S government, but many other governments of the world.
Speaker Change: <unk> been embedded into so much part of the sort of the fabric of their solutions and are critical to sensor.
Speaker Change: Sensors et cetera.
Speaker Change: We've been we've been standardized into the future of say Blue force tracking of tracking things were a critical part of push to talk devices now to extend those beyond sort of.
Speaker Change: Regional sort of solutions to global areas, where.
Speaker Change: We're just involved in many different agencies et cetera, and I don't see any changes to that right now.
Speaker Change: I think we are.
Speaker Change: Quite cost effective or a great solution for that right now.
Speaker Change: We're not we're.
Speaker Change: We're not everything for example, I do think for example, Starlink and the equivalent Star Shield are going to be a great solution for them for broadband services, but again it doesn't do what we do and so we're going to be very complimentary of those and I think continue to expand our our capabilities in.
Speaker Change: Support for for many things going on there.
Speaker Change: Got it. Thank you appreciate the questions.
Speaker Change: The next question is from Walter Piecyk with light shed. Please go ahead.
Speaker Change: All right. Thanks, Matt I first want to go back to Rick's question on the 100.
Speaker Change: Milligan excuse me the $1 billion.
Speaker Change: Billion revenue target in 2030, the frame that question as those acquisitions.
Speaker Change: Part of it to get to $1 billion is that is that true or would acquisitions be incremental to the $1 billion.
Speaker Change: <unk> thousand 30 revenue target.
Speaker Change: Well when we made that target in 'twenty whatever it was 22003 2023, everybody reminding me seems forever.
Speaker Change: Acquisitions were a part of that and we implemented with the tell US for example already.
Speaker Change: I sort of anticipated that that could be part of it and we've even said so tell us will be $100 million of it but we didn't make it incremental at that point.
Speaker Change: It's possible that there would be incremental aspects if there were future acquisitions that we made.
Speaker Change: But we've been consistent in that tell us was part of that.
Speaker Change: That's what we said at the time.
Speaker Change: Okay, I guess I'm trying to ask the question this way.
Speaker Change: I mean, some analysts forecast acquisitions.
Speaker Change: Okay.
Speaker Change: I guess, we used to do that in the old days of Cisco because they would make regular acquisitions, but like if youre trying to come up with the value of the company today.
Speaker Change: <unk> acquisition is going to occur I don't know what the price is going to be.
Speaker Change: At the capital structure, so if I'm going to assume no acquisition sort of not be assuming you hit $1 billion.
Speaker Change: And revenue in 2030.
Speaker Change: I mean, I don't think that's a bad assumption I would tell you our internal plans to make that $1 billion without additional acquisitions.
Speaker Change: No.
Speaker Change: Would be fair to say, if we make additional acquisitions that would be incremental I would expect that certainly wouldn't do unless it was incremental to that.
Speaker Change: But yes.
Speaker Change: And then and then on the government.
Speaker Change: I think there was a reference.
Speaker Change: In terms of the guidance at least for growth there.
Speaker Change: It has certain misheard that but.
Speaker Change: I think you have a seven year contract it stepping down this year. So is the anticipation that there's new business coming in that's going to offset that or are you going to be more heavily weighted in the first half of the year.
Speaker Change: And then we will see a step down in the second half on that seven year contract hit that's kind of last three years.
Speaker Change: So first of all is that step up.
Speaker Change: That occurred it's only been step ups in that conference.
Speaker Change: Contract there is no step down.
Speaker Change: Got that contract.
Speaker Change: Is through I think later in 2006, so probably will be extended into 2007 as it has a provision to do.
Speaker Change: Final year, I think is $110 million, so thats up from.
Speaker Change: A little bit so there's no step downs and then we'll be we're already in the process of sort of talking to them about what.
Speaker Change: Another contract might look like.
Speaker Change: Sort of working back and forth about what that might be but certainly wouldn't expect that would be a step down either.
Speaker Change: Got it.
Speaker Change: So it sounds like it's very pretty stable across there.
Speaker Change: Each quarter of the year to get to the growth overall in the year. There was also mentioned maybe lower margins.
Speaker Change: When you when you put together the higher revenue with a lower margin.
Speaker Change: As you look to kind of what gross profit would be for government.
Speaker Change: Does that mean theres growth or are there or should there be contraction in gross profit like how much of a margin step down but there will be this year.
Speaker Change: In the context of gross profit contribution.
Speaker Change: The margin comment was more in relation to equipment and that was just a.
Speaker Change: A onetime benefit that.
Speaker Change: That we got in 'twenty four I think as you think about equipment margins and we've talked about this as as equipment.
Speaker Change: Revenue normalizes after.
Speaker Change: What we've seen in 'twenty two 'twenty three I think if you go back and look at prior equipment margins, you're probably in the ballpark of where we would expect to be so.
Speaker Change: So that's not going to have a big impact.
Speaker Change: It's really only equipment.
Speaker Change: Equipment gross margins on service is extremely high and we will remain extremely high.
Speaker Change: And.
Speaker Change: And as we grow revenues in the service revenue it just expands our gross profit.
Speaker Change: For margin.
Speaker Change: And then just lastly on area.
Speaker Change: Given your kind of bullishness about the.
Speaker Change: Outlook. There is that first of all are you still in this kind of 27% equity stake in there and is there an opportunity.
Speaker Change: To increase that stake with that company and then alternatively.
Speaker Change: Can you give us some.
Speaker Change: 10000 foot.
Speaker Change: Level of like where are their financials today or are there going to be in the capital markets raising money you could give us some mark on.
Speaker Change: We're the market perception is that their value is today.
Speaker Change: That's a good good question I mean, I don't want to get too far ahead of them on this but they are.
Speaker Change: Looking at kind of recapitalized or Theres, a lot of discussions amongst there.
Speaker Change: The rest of the industrial base about where the company is getting to there.
Speaker Change: We're getting to potential.
Speaker Change: Where there could be.
Speaker Change: Positives in terms of.
Speaker Change: Dividends or other.
Speaker Change: Cash flow kind of positive things to the Investor base and a couple of years that gets closer and closer here.
Speaker Change: Is it possible at the right price I would absolutely.
Speaker Change: I believe.
Speaker Change: Strongly in the future of <unk> and the potential for it to be an extremely high margin high.
Speaker Change: Cash flow producer.
Speaker Change: We're kind of part of the drag on that because there have to pay our hosting fees and our.
Speaker Change: And really if we could fix that together with the other investors.
Speaker Change: I would I would gladly take a larger share of that because I think it is going to pay off in a big way in a couple of years.
Speaker Change: Got it so basically restructure it so you don't get those.
Speaker Change: Ill coming payments, and then Jack that 27% up higher.
Yes.
Speaker Change: Okay.
Speaker Change: More important that that whatever we take delivers that percentage value to us going forward, we believe that that sort of.
Speaker Change: Value creation events getting closer and closer so I would take more.
Speaker Change: Certainly.
Speaker Change: A fix fix basis here it would have to be from someone else so anyway.
We're certainly not assumed are generating I assume theyre generating operating cash flow now theyre just not to the point.
Speaker Change: Distributing or giving distributions to the shareholders so that yes.
Speaker Change: They're paying us and they are paying us in service size and dollar of interest on hosting fees and that sort of thing.
Speaker Change: Okay. Thank you.
Speaker Change: Thanks, Paul.
Speaker Change: The next question is from Greg mezzanine.
Speaker Change: With Kingswood capital partners. Please go ahead.
Speaker Change: Yes. Thank you for taking my question.
Speaker Change: I wanted to circle back to the question of increased seasonality that you talked about more than once so far.
Speaker Change: Do you see that being really.
Speaker Change: And Todd.
Speaker Change: To a large extent the function of your resellers or is that a general.
Speaker Change: Customer trend that will continue.
Speaker Change: Time, and assuming it is what will be the impact on.
Speaker Change: On the pricing of annual plans, if more customers opt for the monthly options.
Speaker Change: Yes.
Speaker Change: So seasonality has always been a feature of our global network like ours, because there's more people and more activity in the northern hemisphere. The southern hemisphere. There is more traffic in the northern hemisphere than southern and so to the extent any body is using our network on a periodic basis for example.
Speaker Change: Recreational users they tip.
Speaker Change: Typically go more outside when it's warm and so.
Speaker Change: We've always seen our subscriber base sort of swell faster in the summer than the winter.
Speaker Change: In this specific case that we were talking about we're talking about one large.
Speaker Change: A customer who has a lot of subscribers, who now suddenly can't be on annual plans anymore and have to go to monthly plans and so were expecting that theyre going to be more on those monthly plans in the summer than they are in the winter that means it's going to be.
Speaker Change: Bit more.
Speaker Change: Seasonality to our subscriber base doesn't really affect our revenues are going to continue the overall kind of subscriber base. We think is going to continue to expand its just going to look weird for.
Speaker Change: Sure.
Speaker Change: A year, what kind of everybody moves from being able to.
Speaker Change: Stay on the stay on an annual plan and not use the network to only really paying for them.
Speaker Change: Use.
Speaker Change: So you don't foresee any impact on pricing of annual plans to create incentive too.
Speaker Change: Minimize that seasonality.
Speaker Change: This is just this is a retail strategy.
Speaker Change: That our partner has chosen to use to kind of simplify I think their plans. They believed that obviously overall they wouldn't do this unless this will continue to expand there.
Speaker Change: There are overall subscriber base and usage on the network. They have been very good at doing that in previous year. So I trust that they know what they're doing there.
Speaker Change: I don't think this has anything to do with sort of pricing in general or anything that's a that's a different discussion entirely and it certainly doesn't affect our relationship with them, which I said is fixed cost.
Speaker Change: We've done that together because as the portfolio expands it's just mix.
Speaker Change: It's a win win for both of Us.
Speaker Change: Got it thank you.
Speaker Change: Yes, Thanks, Greg.
Matt Desch: The next question is from Matt <unk> with Barclays. Please go ahead.
Matt Desch: Yes. Good morning, Thank you for the presentation.
Matt Desch: I had a question about spectrum.
Matt Desch: So recently, we've seen a transaction in the L band.
Matt Desch: I don't know if you looked at that opportunity, but I guess the question is broader.
Matt Desch: How do you feel about your spectrum assets.
Matt Desch: Clearly it doesn't seem to be a constrained today, but maybe tomorrow as you come up with some more powerful.
Matt Desch: <unk> completion with more capacity. So maybe if you could give us a bit of color on how you think about your spectrum position and going forward.
Matt Desch: Yeah, obviously, we we really value our our spectrum position, it's global it's.
Matt Desch: Most countries supported.
Matt Desch: It's been the foundation of our growth.
Matt Desch: We've mined a lot more capacity out of our our system over time and think with the right kind of network. When we start building the 2000 <unk>.
Matt Desch: Could mine a lot more capacity out of that existing spectrum position. So there is no.
Matt Desch: To us really requirement from our spectrum.
Matt Desch: Particularly since we don't aspire as you can tell we're not we're not a broadband player in general or more of a safety and.
Matt Desch: <unk>.
Matt Desch: Mission critical applications on the broadband side, so with the kind of services that we do is we're expanding the PNT.
Matt Desch: PMT has kind of unlimited capacity into <unk>, which is extremely efficient and capacity. We think we have.
Matt Desch: Plenty of capacity going.
Matt Desch: Way way out there.
Matt Desch: That being said.
Matt Desch: If there was some aspect of more more spectrum I mean that would.
Matt Desch: Allow the ability to.
Matt Desch: Consider new service areas, perhaps et cetera, we're always open to that we've talked to a number of others about.
Matt Desch: Partnerships or.
Matt Desch: Other aspects of it and we remain open to that but.
Matt Desch: Most people are extreme.
Matt Desch: Extremely proud of there.
Matt Desch: Their spectrum assets.
Matt Desch: They believe that they acquired the they got for free and they are trying to monetize in some ways and so there really isn't anything right now we're looking at and certainly wouldn't acquire spectrum Bert just for the sake of acquiring spectrum.
Matt Desch: That's very clear and if I can follow up on spectrum.
Matt Desch: As a as you've.
Matt Desch: Showed.
Matt Desch: L band has some really valuable attributes for quite a number of customers very reliable notably.
Speaker Change: But I was wondering when we look at the pace of innovation in the sector currently.
Speaker Change: Whether that's a unique attribute can be competed away by more powerful satellites for example that make the signal, leaving the other bands very secure I realize there's a lot of regulatory approval I mean, you don't put something in the cockpit.
Speaker Change: Without lots of testing and these things take time, but I wonder how to think about that going forward.
Speaker Change: Yes, thats a complicated long I'll be glad to spend more time with you on that.
Speaker Change: L. Band is is unique it is sort of able to be used in regulated safety services theres reasons for that because of its a primary allocation we control completely that spectrum, where for example, <unk> and ku, our shared bands and have to be.
Speaker Change: And are not primary use.
Speaker Change: Traditionally theres also a lot of other reasons why you wouldn't want a mixed safety and non safety services. So.
Speaker Change: While there is some that would love to.
Speaker Change: They offer their their broadband pipes for example for safety services for the cockpit. It's just really unlikely that's going to happen that the firewall is going to be breached or that.
Speaker Change: Regulatory agencies with move in those kind of direction. So L band is.
Speaker Change: Is really important frequency obviously.
Speaker Change: We have a.
Speaker Change: Our allocation is really critical to us, but I really I really don't think youre going to see anything certainly over the next 10 to 15 years and that and some other areas kind of up ending its unique capabilities.
Speaker Change: And obviously, we're doubling down to take advantage of those.
Speaker Change: Thank you that's very clear.
Matthew: Thanks Matthew.
Speaker Change: This concludes the question and answer session I would like to turn the conference back over to management for any closing remarks.
Speaker Change: Vince good job for you first one Matt you're over that thanks, everybody for joining us and glad to answer further questions overtime take care. Thanks, guys.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.