Iridium Communications Inc

Good morning, everyone, and welcome to the Iridian Corporation's fourth quarter 2020 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please email a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star and then one. To withdraw your questions, you may press star and two. Please also note today's event is being recorded. At this time, I'd like to turn the conference call over to Mr. Ken Levy, Head of Investor Relations. Sir, please go ahead.

Thanks, Jamie. Good morning, and welcome to Aridam's fourth quarter 2020 earnings call. Joining me on this morning's call are our CEO, Matt Desch, and our CFO, Tom Fitzpatrick. Today's call will begin with a discussion of our Q4 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 Aridam's website. Before I turn things over to Matt, I'd like to caution all participants that our call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that are not historical fact and include statements about our future expectations, plans, and prospects. Such forward-looking statements are based upon our current beliefs and expectations and are subject to risks which could cause actual results to differ from forward-looking statements. 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. Any forward-looking statements represent our views only as of today, and while we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our views or expectations change. During the call, we'll also be referring to certain non-GAAP financial measures, including operational EBITDA, and pro forma free cash flow, free cash flow yield, and free cash flow conversion. These non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles. Please refer to today's earnings release and the investor relations section of our website for further explanation of these non-GAAP financial measures, as well as a reconciliation to the most directly comparable GAAP measures. With that, let me turn things over to Matt.

Thanks, Ken. Good morning, everyone. You know, it's hard to believe, but last week we celebrated the second anniversary of the completion of the Iridium Next program. They've been very productive years, too, with continued strong growth and the delivery of a number of exciting new services for our customers. In fact, we've added dozens of world-class partners and welcomed more than 350,000 net new subscribers to our network. We've launched innovative new products to extend our leadership in IoT, like the Iridium Edge line, and cloud connectivity with Iridium Cloud Connect. We've also rolled out groundbreaking services into new business segments, like our very flexible Iridium Certus higher speed data platform and, of course, Iridium GMDSS for mariners. Last week's anniversary reminds us that Iridium's transformation to a strong, profitable, and growing cash flow generator is complete. Today, our company generates over $200 million in annual pro forma free cash flow, Our net leverage has fallen dramatically, and we continue to drive double-digit subscriber growth and new revenues from our upgraded network. Investors have noticed this, too, pushing our enterprise to EBITDA multiple in line with comparable growth-oriented strong free cash flow companies, further differentiating Iridium from the traditional financial profile and competitive position of other satellite companies. In light of this progress, and the continued growth opportunities we see, our board of directors has authorized a $300 million share repurchase program, which we announced in a press release last night. This is the first share repurchase authorization in our company's history and is indicative of the confidence that we have in our free cash flow and business opportunities. The program allows us to be opportunistic if the markets are volatile while maintaining our path to longstanding leverage targets. I'm pleased to share this news as it signifies that Iridium is living up to the pledge we made to shareholders many years ago. For the investors who shared our vision and had the patience to see us execute, we're glad to now be in a position to reward your confidence. We are currently in the process of planning our next Analyst Day to be held in May. This event will allow us to provide a longer-term view for the growth opportunities we see and lay out the financial returns we expect Iridium to generate. I think you'll find it very interesting. Look to your inboxes for an invitation to this virtual event or reach out to Ken for more details. Turning to our 2020 results, I'm happy that Iridium delivered another strong year of financial performance. 2020 will forever be linked with the global pandemic, and I'm especially proud of how our team responded to meet the challenges of this unique year. I'd like to extend my sincere thanks to the Iridium family, including our more than 450 distribution and technology partners, as their competence, energy, and dedication are the fuel that supports our ongoing success. Overall, we finished 2020 on a strong note and even managed to reach the lower end of our original operational EBITDA guidance we established before the pandemic. While we did experience some revenue headwinds as a result of the outbreak, our IoT business was able to get back on track. We saw a steady growth in L-band broadband, and achieved decent performance in our data and satellite phone business, even though we didn't see our usual seasonal summer ramp as global travel was curtailed and subscribers altered their normal routines. We also announced a number of new relationships and product launches in 2020, which should lay the foundation for new subscriber growth in the IoT and maritime markets, like the expansion of our Iridium Edge line of finished IoT devices, new partnerships in the heavy equipment market, including another top 20 original equipment manufacturer in Cabelco, and of course, the rollout of Iridium GM DSS. This safety service launched to the great fanfare and anticipation of our maritime partners and their customers near the end of the year. We also had a particularly strong year with push to talk as global enterprise and government customers increased their deployments of new ICOM radio products, allowing them to rapidly extend the reach of their group PTT communications, without the need to build out expensive local infrastructure on the ground. Each of these relationships and products extends Iridium's reach into new market segments, which is allowing us to take market share as well as grow the overall size of the market with new products that lower the cost of entry for subscribers. Tom will go into more detail on our 2020 financial performance, So I want to spend the balance of my prepared remarks highlighting Iridium's business strategy, our unique market position, and our opportunity for growth. You've likely seen our guidance for 2021 in this morning's press release. We continue to expect to operate in the shadow of COVID during the first half of 2021, knowing that business and travel restrictions remain in force in many countries, and the timeline for mass vaccinations is still unclear. While seasonal usage should improve in 2021, it's unlikely to rebound to historical levels while we remain in this climate. We also know that we face a tough service revenue comp with Aerion having reached the full run rate of its hosted payload agreement this past year. Headwinds in industries like aviation and maritime are also likely to persist in 2021, but will hopefully start easing in the second half of this year with a global recovery. We've built these assumptions into our 2021 revenue forecast and still expect to generate good profitability and cash flow growth as we continue to naturally deleverage. Top-line growth should improve as the economy regains its footing. In the coming year, we will be rolling out a number of new services and devices, along with our partners that open up new industry segments and long-term revenue streams. To start, the GMDSS service that we launched in late December has already seen its first sales and terminal installations. This demonstrates that we've really broken the decades-long monopoly of the maritime safety industry and that Iridium now has access to 60,000 SOLAS-class vessels that are required by maritime law to maintain this L-band safety service. While these big ships are the primary targets for this service, the cost, coverage, and capability of our new GMDSS terminal make the system an affordable option for the hundreds of thousands of smaller vessels that may not be required to have GMDSS equipment on board. As a result, we think this new offering expands the market for GMDSS and positions Iridium as the provider of choice in 2021. Iridium Certus broadband terminals available from Intellion, Cobham, and TALIS continue to see steady adoption by maritime customers. As the challenges to equipment installation lift, we expect to see our broadband solution win bigger market share and increasingly be selected as the preferred technology for standalone L-band terminals as well as for the majority of VSAT companion installations. Commercial aviation continues to be an important market for Iridium. Some of our partners' Iridium Certus aircraft antennas are expected to finally be ready this year. We've seen good progress with several of them, as well as with the global standards process for approving Iridium Certus for cockpit safety services. This will add to our existing approvals with our legacy aviation narrowband terminals. While the first aviation broadband installations will occur in 2021, we currently have eight different antenna manufacturers developing products for different aviation markets like business, commercial, rotorcraft, and the like. And collectively, we think they will make a bigger revenue impact as we move into 2022. In light of the strong finish in IoT during the second half of 2020, we also forecast robust IoT growth in 2021 both in traditional satellite IoT areas, but also with our consumer-oriented partners who are rolling out new devices with features and price plans tailored to their niche customers. I still see IoT as the cornerstone of Iridium's growth going forward, as our network is ideal for industrial and consumer IoT services. 2021 is also the year we'll see the first Iridium Certus mid-band applications roll out based on our new Iridium 9770 modem. We've talked about this new device over the past year and have been testing it with beta customers. It's small and compact, letting users send and receive data up to 35 times faster than our legacy transceiver. It also leverages small, low-cost passive antennas, which are ideal for IoT applications. We see growth opportunities in areas like agriculture, transportation, and drones, as well as with the military, first responders, and for use in maritime and aviation applications. About 20 partners have adopted the Iridium 9770 so far and are developing products around the device, and we'll see their first commercial products roll out in the first half of this year. You'll also see some new lower-cost maritime terminals launch in the first half of this year as our partners introduce more broadband options. They'll be using a service class of our network that we call Iridium Certus 200, that provides bidirectional 176 kilobits per second service with a small, compact antenna, which fills a niche at the lower end of the L-band maritime market. These terminals will be a great low-cost upgrade for legacy Iridium open port terminals, address the needs for primary satellite services for smaller vessels, and also support many VSAT companion applications. And finally, the U.S. government continues to be an important partner that helps drive innovation on our network. Our engineering work for dedicated R&D and gateway upgrades has been expanding over the last few years with the DoD, and 2021 will be no exception. While this work on the DoD's private gateway is long-term and ongoing, we expect to complete certain upgrades like the final implementation of Iridium Certus this year. Once complete, the USG will have secure private access to Iridium Certus broadband and mid-band services, which will drive incremental pay-for-use services. Before I hand things over to Tom, I want to recap Aerion's progress as they've had a productive year, even considering the dramatic slowdown in air travel caused by the global pandemic. Aerion launched three new commercial data services in 2020 that will expand its customer base to airports, airlines, and other aviation stakeholders. Over the past three months, Aerion also announced new partnerships with the Civil Aviation Department of Hong Kong and Passeur Aerospace and greatly expanded their relationship with the FAA. I would also note that the Airports Authority of India, who signed an agreement with Arian in 2019, just completed all of its testing and certification work and began using Arian services operationally on January 29th with a vast airspace of the Indian Ocean. To date, Arian space-based ADSB services are now being deployed by 19 ASBs covering more than 39 countries and are quite literally revolutionizing the aviation industry. I understand that they are also working to close deals with a number of new ANSPs in 2021 and will be ready to grow as commercial air travel recovers over the next two to three years once vaccinations are more widespread and the pandemic recedes. So in closing, over the last five years, we've grown operational EBITDA at a 9% compound annual growth rate. And we continue to see a clear lane to be the long-term growth leader in L-band for satellite mobility, IoT, broadband, and safety services. We view ourselves as complementary to the many KA and KU-band LEO megaconstellations being announced or developed today. ARIM's L-band spectrum and small, low-cost, and highly mobile antennas operate in a very different market space than these new LEOs, which physically must offer services through large and very high-speed commodity broadband terminals. We expect Iridium will likely end up collaborating on dual-band products and services with several of them. Overall, we remain excited about the many business opportunities ahead that support free cash flow growth, as well as meaningful subscriber and revenue expansion. So with that, I'll turn it over to Tom for a review of our financials. Tom?